MPs and industry leaders have been told that the UK needs to better integrate its approach to international trade with its domestic industrial strategy in order to encourage economic growth and to deliver a more coherent trade policy.
Experts, including IOE&IT director general Marco Forgione, were presenting evidence to the UK Trade & Business Commission, which is chaired by Hilary Benn MP.
The issues tackled in the committee were wide-ranging, also covering the negotiations for and utilisation of trade deals, relations with the EU and the UK’s place in world trade.
CPTPP and digital trade
Responding to Benn’s opening question about what the areas of success have been for UK trade policy in the three years following the UK’s departure from the EU, Forgione highlighted the speed at which the UK has moved to negotiate membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and acted to put digital trade at the heart of its wider strategy.
On the latter, he said the IOE&IT is keen to see what the implications will be of the government’s new ‘Target Operating Model’. With the new model, the government has said that it is aiming to take a digital approach to introducing remaining import controls on goods entering Britain from the EU, particularly sanitary and phytosanitary (SPS) checks.
“CPTPP has been highlighted as not having an immediate benefit, but in the future and longer term, there is significant potential for there to be benefits,” he said.
“The move by government to recognise that we need to move at pace to improve our border strategy and integrate digital trade as a fundamental part of policy is both an acknowledgement of a weakness and an attempt to put that right. We’d like to see the Target Operating Model published soon and see the implications of that.”
Regarding the UK’s approach to negotiating trade deals, he said “there could be a lot more done to ensure the voice of business is taken into consideration and used as part of that conversation”, adding that the regions and devolved nations in the UK should be better engaged.
Trade deal utilisation
Responding to a question from Professor L. Alan Winters, a director of the University of Sussex’s UK Trade Policy Observatory, about whether trade agreements are delivering on the UK’s trade policy priorities, Forgione highlighted research conducted by the IOE&IT last year that highlighted a lack of understanding among businesses about the benefits of the UK’s new deals.
“Trade agreements have the potential to deliver business opportunities but the business community is struggling to understand what these are, so there is significant work to be done around education”, he said, adding that “an engagement programme is needed across the full business spectrum”.
When asked by Winters about the pace at which the UK has previously tried to conduct trade negotiations, Forgione said that in rushing talks the government risks missing the mark on “how to communicate the deal so that it is fully utilised,” adding that it also risked “missing an opportunity to align systems and processes between the countries”.
Concerns over rushing negotiations were echoed by fellow committee panellist Dr Elitsa Garnizova from LSE Consulting’s Trade Policy Hub, who said the UK risked setting misguided precedents that would need to be followed in future trade deals.
Coherent strategy
Responding to a question from Dr Geoff Mackey, a fellow of the Institute of Directors, about how trade policy is currently created, Forgione highlighted the need for the country to integrate trade policy with domestic industrial strategy.
“The recent history of how trade policy has been developed has been questionable because of a lack of integration across government,” he said.
He said he was hopeful that the formation of the new Department for Business and Trade would “help address some of those issues but there has to be clear input and engagement from the regions and nations of the UK and a genuine engagement from businesses of all sizes”.
Professor Michael Gasiorek from the University of Sussex, who was also giving evidence, agreed and said that government should be consulting more with consumers and workers’ groups when developing policy.
EU relations
In response to a question from Claire Hanna, the SDLP MP for Belfast South, about whether the promotion of both trade with the EU and non-EU markets should be the handled by a single department, Forgione agreed with EY’s UK trade strategy and Brexit lead Sally Jones that it should, because there is “no conceptual difference” between the two.
Professor Clair Gammage, of the University of Essex Law School, said the “political nature of exiting the EU has clouded the fact that the EU is our closest partner”, adding that the UK should not be “ashamed” about this and that a “refreshed and resolved” approach to the challenges of Brexit would be welcome.
Shift in globalisation
Following a question from Dr Charles Rose, the chairman of Hainsford Renewable Energy, about whether UK trade policy needed to adapt to the changing geopolitical landscape, Gasiorek said “we’re not moving away from globalisation” but are “seeing a shift to a different form of globalisation.”
Noting the increased use of subsidies in the renewables sector and interventionist approaches in the semiconductor supply chain, he said it was “not clear how the UK is looking to respond to this”, noting that the UK could not compete on subsidies with the EU and US.
Jones agreed, saying the UK was “falling behind” by not publishing its strategies on semiconductors and for a carbon adjustment mechanism, such as the one being introduced by the EU.
Forgione highlighted that it was difficult for the UK to be coherent about such issues without having an “integrated strategy as to how to deal with trade”.
“We have an export strategy, but not an import strategy,” he said, adding that both need to link to domestic industrial strategy as well as foreign direct investment (FDI).
The UK’s place in a changing world
Addressing the UK’s position in a changing world, Forgione said that the anticipated launch of the Developing Countries Trading Scheme (DCTS) was to be welcomed, but that there needed to be “knowledge and understanding to make the most of the opportunities that exist”, highlighting a drop in UK business engagement with countries such as Nigeria.
He said the UK needed to separate its diplomatic approach from its practical business support, saying that government needs to understand “how we leverage not just our soft power, but the practical force of our investment capabilities”.