@Mistigri. Suppose you're right.
@Carolinesbeanies : out of goodwill, I'm going to respond to your most recent post now. But it would be great if you could return the favour and respond to our previous questions ...
Right, so here’s my reply to your post on entering into similar trade-related agreements that non-EU states currently have with the EU (let’s call them ‘Relevant Countries’ for the purposes of this post).
There are – I think – some 55 countries falling in the Relevant Country category. Many such countries have dozens of bilateral agreements and dozens of multilateral trade agreements with the EU that would need to be entered into with the UK and each Relevant Country. Such agreements, just to be clear focus on reductions in Non-Tariff Barriers which are the most relevant to trade today.
Interpreting your post …: You believe that the assurances received by Lord Mark Price – acting in his capacity as Trade Minister – from Relevant Countries are a positive thing.
My view:
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Such agreements with Relevant Countries currently reduce Non-Tariff Barriers. As such, they are helpful to getting closer to the nirvana of ‘free trade’, which we should all know by now does not exist other than perhaps within the EU’s Single Market.
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It is eminently sensible as a concept to try and copy-paste such agreements in a first instance and enhance later. Very pragmatic and quicker than redo-ing from scratch.
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Entering in similar agreements would not be a positive for the UK but merely manage the downside. In other words, we do not get anything more than we currently have. Rather, we ensure we don’t get less. On this basis, I agree that such assurances would be a ‘good’ thing (or - more accurately - ‘not negative’).
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I do not know of Lord Mark Price but I take him at his word that politicians in the Relevant Countries would have provided assurances. I don’t see why such countries would want to raise trade barriers with the UK, so it sounds to me credible and reasonable that he did receive such assurances … from all politicians he visited.
a. This is different than getting such reassurances from the trade technocrats, however. This lot are a different kettle of fish. Trade negotiators have agendas they want to push forward, especially from the US which is some 20% of our trade. We have seen this situation with Trump and Bombardier already …
b. My view is that once it comes down to talking turkey, however, the UK will experience delays from at least some Relevant Countries. Reasons for this:
i) opportunism from some countries such as, in particular, the US which is going to want to impose its regulatory standards on the UK to weaken the EU’s sphere of influence (see this testimony from Simon Lowe to Parliament here on the subject of a US-UK deal)
ii) some of these agreements are likely going to require amendment because they may have worked in the EU but don’t in the UK – eg content requirements for an item requiring 30% EU content for exports to South Korea won’t work if the export is now coming from the UK
iii) some countries appear to have indicated to the UK that they are wishing for ‘enhancements’ which will lead to further negotiation and therefore delays. Don't know if true but it sounds reasonable to expect this.
- There are also other practicalities slowing us down:
a. Staffing levels and experience at the DIT are low. We cannot process 55 countries, some of which have dozens of bilateral agreements with the UK all at once. Some Relevant Countries are also party to many multilateral agreements – unclear how this gets dealt with in a short timeframe, unicornesque promises notwithstanding
b. Low experience levels may lead the UK to want to deprioritise the negotiations with the US – the largest such Relevant Country – until we have cut our teeth on more willing and less influential and painful counterparties. There are good reasons to believe the US will be painful - Simon Lowe again here
c. In particular, DIT is going to rationally want and need to focus on the all-important relationship with the EU, given the relative importance to the UK economy. It’s amazing that we still don’t know what we want or should get out of this relationship. This will divert resources from dealing with Relevant Countries, sensibly so.
But I think it’s pretty clear if the EU relationship anything but SM and CU access would be strongly net negative for the UK – Rabobank report here.
d. Some such trade agreements will refer to EU regulatory standards, the EU being one of two large regulatory superpowers in relation to trade. How will the UK – without the relevant bodies to carry over such standards – apply such standards or even enter into them without having the institutions?
- According to Simon Lowe, we should all be reassured however. Trade agreements such as the ones we are talking about with Relevant Countries do not lead to big increases in GDP. As such, it seems reasonable to assume that we should not expect massive downside if we don’t enter into all such agreements immediately.
This is very different, however, to the situation with the EU. There, given the size of the UK’s trade exposure (esp in services), anything different to what we currently have will be damaging to the UK economy – Rabobank’s research piece concurs.
- There is a trade model called the Gravity Model which posits that countries tend to trade more with large economic entities that are close by than with smaller ones far away. This has been empirically proven to be the case. As such, one should not expect too much from a relationship with Australia or New Zealand or even the US given the inefficiencies - mainly moving people around - associated with such trading relationships. So we are back to needing to focus on the EU ...
In sum, whilst I would agree that such assurances provided to Lord Mark Price are ‘not negative’ (‘positive’ if you want to put a more salesy spin on it), I see significant risk in the execution.
As such, one should reasonably expect our trade position with Relevant Countries to be on balance worse than it is today, at least for a number of years. But thankfully, this would not lead to a massive downside GDP-wise.