The government has launched a review of how it will model the impact of potential trade deals on the economy to “enhance its trade negotiation capability”.
The UK, having left the EU on 31 January 2020, can now negotiate its own trade agreements as an independent trading nation.
It is already in talks with the EU, US, Japan, Australia and New Zealand.
What modelling is for
The Department for International Trade (DIT) uses economic modelling to prioritise which markets it pursues trade talks with.
The modelling helps negotiators to better understand which areas of the economy benefit most from deals, the interests of their international counterparts and where there is potential mutual benefit between the UK and its prospective partners.
According to the government announcement launching the review, DIT will look at the “development of cutting-edge models and analysis” for interpreting global trade flows and economic trends.
It will also assess how economies are affected by innovation, how trade effects investment and specialisation and the impact of the Coronavirus crisis.
Who’s who in the review
As part of the review, DIT will consult with a panel of academics led by Professor Tony Venables, the BP Professor of Economics at Oxford University.
An internal review will be led by DIT’s chief economist Richard Price, while also drawing on the expertise of other government departments including the Treasury.
What’s behind the review
Minister for trade Liz Truss said the review will support “our analysts, and their work supporting our trade negotiators as they seek to sign new free trade agreements”.
Dr Peter Holmes, a reader in economics at the University of Sussex, said the review will “guarantee the integrity of the analytical process” at DIT, ensuring they have autonomy to not be “pushed into producing results that simply support ministerial views”.
He said the review may look at how data from firms collected by the Office for National Statistics and HMRC can be combined with overall trade data. He also noted that the review may look at how DIT can enhance its real-time data analysis.
However, he added that nobody should expect a significant upgrading of the modelling already in place, saying the integrity of DIT analysis is already well recognised by the economics world.
“One very important part of the analysis will be to uphold what they do and guarantee the autonomy of their modelling,” he said.