UK Trade Policy Hoves into View

By Shanker Singham

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The totality of UK trade policy is beginning to emerge. It is a trade policy that befits the world’s fifth biggest economy that has punched below its weight for too long.

The ideal world for international trade is vigorous multilateral liberalisation.  This is in fact what occurred from immediately after the second world war to the end of the Uruguay Round.  This encompassed almost fifty years of progressive liberalisation. That fifty years spawned the transnational company and the global supply chain in its modern form. Global trade flows took off. The amount of global trade that is intra-company trade exceeded the level of inter-company trade.  The resulting increase in import competition laid the foundation for a burst of innovation the like of which the world has never seen.

But we are now at a point where we have had twenty five years of comparative lack of progress. The big ambitions and dreams of the 1990s such as the Free Trade Area of the Americas or the ambition of the Singapore Round with its focus on dealing with the most pernicious of trade barriers, those behind the border and sheltered in domestic regulations lie unfulfilled. Even issues which the WTO set up for further discussion such as the built-in agenda in services which was only launched in 1994 has failed to yield anything of note. This twenty five year stasis means that most officials who are working on these issues around the world have not experienced the period of rapid growth and rapid barrier reduction at all. This will only get worse with more stasis.

The result is that there has been a profound failure of ambition in the WTO and in most trade ministries.  This lack of creative vision has hobbled the global trading system and with it the global economy.  Crises like the Global Financial Crisis and now Covid-19, have brutally exposed the system’s weaknesses.

But business moves on.  Where once, the GATT/WTO system was a high priority in corporate boardrooms it is now relegated to a “nice to have” agenda item, at the bottom of a very long list.  Large MNCs, themselves allowed to exist because of trade liberalisation will be forced to strong arm governments they don’t agree with.  This is bad in the long run as it simply means the rule of the strongest as opposed to the rules-based system, or the rule of law.

In the words that Robert Bolt placed in the mouth of Thomas More in A Man for All Seasons: ‘This country’s planted thick with laws from coast to coast, Man’s laws, not God’s, and if you cut them down– and you’re just the man to do it – do you really think you could stand upright in the winds that would blow then?’

There will be a time when even the strong need to rely on the rule of law – what happens when they no longer have weight?

Fortunately, UK trade policy is the needed expansive, game-changing and ambitious approach.  Recognising that the new platform agreement which will deliver the vision of a coalition of the willing group ready to push for further and deeper liberalisation, the UK has made it a critical objective to accede to the CPTPP.  When this was first announced, the usual suspects of naysayers and doommongers that populate the UK political landscape howled in protest that the UK is not a pacific nation.  But the Overton window on the CPTPP has clearly moved and its members are anxious for an economy of the weight of the UK to join.  Similarly howls of protest accompanied the US negotiations, completely ignoring the fact that the UK-US axis on trade, investment and a shared approach to market competition is a vital one for the global economy.  We are also seeing the beginnings of a Five Eyes Plus Japan trade and economic policy taking shape which is much more significant than ordinarily commercial and mercantilist thinking, but is expressive of a much wider foreign policy geo-political shift going on in the world. The UK, by virtue of its new position on global trade policy scene is acting as a powerful catalyst here. Any countries that, like CPTPP members share this commitment to free trade, market competition, and property rights protection and the rules-based economic order would be welcome to join it.

Finally, the UK seeks to punch above its weight. It is vital for the global economic system that it does so.

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