With Britain’s departure from the European Union (EU) continuing to deliver seismic change across the trading landscape, Tom Kennedy, North East England Chamber of Commerce EU transition officer, says the Government must act with haste to secure new free trade agreements that will provide companies with fresh export opportunities and support the UK’s economic recovery from the COVID-19 pandemic
Trade policy rarely grabs the headlines.
The terms on which goods and services are exchanged internationally are rarely exciting, and free trade agreements that summarise them often comprise of reams of pages of dense legal text.
The EU-Japan free trade agreement stretches to more than 1800 pages – five times longer than Pride & Prejudice.
And, while the latter is one of the most popular book selections on Desert Island Discs, I have yet to hear anyone ask to take the ‘EU-Japan Economic Partnership Agreement’ to a deserted island.
Following the UK’s departure from the European Union, however, trade policy is in the spotlight.
For the first time since the UK joined the European Economic Community (EEC) 48 years ago, powers over trade policy – signing trade agreements, setting tariffs and handling trade disputes – will sit with Westminster and not Brussels.
Since 2019, the Department for International Trade (DIT) has been utilising these powers to negotiate trade deals.
Agreements we benefited from as EU members have been replaced, most notably with Japan, and negotiations have begun with the United States, Australia and New Zealand.
The UK has also begun the process of joining the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), an 11-member agreement that includes Vietnam and Malaysia. That all of this comes in addition to signing a trade agreement with the EU, shows just how busy DIT have been.
Liz Truss, Secretary of State for Trade, has spoken about the need to grow UK trade globally, and signing free trade agreements would be one way to do this, bringing benefits to the UK and the North East.
By lowering tariffs on goods moving between countries, harmonising standards such as environmental and labour regulations, and reducing non-tariff barriers including certain documentation requirements, free trade agreements make trade easier for both sides.
Whether the elimination of tariffs on UK imports reduces manufacturing costs, or harmonised standards reduce the overall paperwork burden, liberalising trade nevertheless lowers costs and makes UK products more competitive overseas.
While trade with other countries will never replace the EU, due to our strong historic and geographical relationship with Europe, growing trade across the world will still benefit the UK.
Diversifying UK trade and reducing reliance on the EU (circa 60 per cent of North East exports go to the EU) would add resilience to the economy.
In early 2020, while COVID-19 was wreaking havoc across Western Europe, trading so much with one bloc left the UK more vulnerable to trade disturbances than if a greater proportion of our trade was with Latin America, Africa or Asia, for example.
Agreements that help boost trade with these areas would help build in resilience, in case COVID-19 or another event were to disrupt trade on the continent.
Reducing barriers to trade can also play a part in the region’s coronavirus recovery.
Lowering tariffs on goods entering the UK will make them more affordable for consumers, many of whom will have been impacted by the pandemic’s economic repercussions, while UK exports being more competitive overseas will help boost the recovery.
As a region, the value of North East exports per capita is around 21 ten per cent higher than the national average, but the percentage of
North East firms that do export is low.
Across England, there are 29 exporters per 10,000 people, whereas in the North East, there are only 20 – the lowest level in England.
Expanding the export base and addressing issues that stop North East companies from exporting will be fundamental in levelling up and promoting growth.
Outside the EU, the UK no longer needs to reconcile its trade policy with 27 other nations and can instead tailor agreements to its strengths.
The Government can align trade policy with its ‘levelling-up’ agenda by prioritising agreements that reduce barriers and provide market opportunities in areas of strength for regions such as the North East.
For example, an agreement that lowered barriers and eliminated tariffs on machinery, chemicals and automotive exports, sectors
of strength for our region, would disproportionately benefit the North East.
Life outside of the EU will present significant challenges to businesses, as long-established trading relationships face disturbances.
It also presents the Government with the chance to present new opportunities to business, however.
Signing free trade agreements across the globe, tailored to UK economic needs and supporting export growth is one tangible way in which the Government can support a fair COVID-19 recovery and further the idea of Global Britain.