New trade deals won’t make up for single market loss
Even if post-Brexit Britain agreed new trade deals with the EU and a range of other countries, research suggests that it won’t make up up for reduced trade from leaving the single market.
New research suggests that even if Britain was able to agree new trade deals with non-EU countries, it would not make up for the loss in trade from no longer being part of the EU’s single market. A new trade deal with the EU would also do little to counteract the significant loss in trade to Britain outside the single market. The research was conducted by the National Institute of Economic and Social Research (NIESR) and reported in its blog by economist Dr Monique Ebell.
In a speech last month, Theresa May outlined the government’s 12-point negotiating plan. It included leaving the single market in favour of immigration control and leaving the jurisdiction of the European Courts of Justice (ECJ). The speech hailed a “global Britain” that, outside the customs union, would be able to agree new trade deals with other countries. It’s these two points that NIESR focussed its research around by looking at the projected long-term impacts of them on UK trade.
Loss in EU trade outside the single market
NIESR’s research found that outside of the single market, there would be a “long-term reduction in total UK trade of between 22% and 30%, depending on whether the UK concludes an FTA with the EU or not.” The prime minister has said that whilst Britain would leave the single market, they would negotiate a new free trade deal (FTA) with the EU to maintain as much access as possible. However, the research shows that even with a FTA, UK trade would still experience a significant loss.
Increase in trade with BRICS countries and Anglo-American countries
The research also looked at potential long-term trade increases should Britain conclude FTAs with BRICS countries (Brasil, Russia, India, China and South Africa) and Anglo-American countries (USA, Canada, Australia and New Zealand). NIESR estimated that the trade increase from FTAs with all BRICS countries would be small at just over 2%. Meanwhile, they estimate that the trade increase from FTAs with all Anglo-American countries would be less than 3%.
Altogether, Dr Ebell’s analysis estimates that the combined impact of leaving the single market and agreeing FTAs with the EU, BRICS countries and Anglo-American countries would lead to “a long-term reduction of £94.8 bn in UK goods trade and of £91.5 in UK services trade”. However, NIESR notes that the estimates from the research are “long-term impacts that may take 5 to 10 years or more to materialise.”
Estimates are based on the UK concluding “average” FTAs with both EU and non-EU countries. Researchers calculate the average using data from “a large number of trade agreements.”
In her blog post, Dr Monique Ebell writes “this stark difference reflects that the single market is a very deep and comprehensive trade agreement aimed at reducing non-tariff barriers.” She adds that “most non-EU FTAs seem to be quite ineffective at reducing the non-tariff barriers that are important for services trade.”
Ebell’s last point is especially significant given the importance of the UK’s trade in services.
You can find more on the research and Ebell’s analysis of it at niesr.ac.uk.
New and quick trade deals possible but UK will have less “negotiating heft”
Meanwhile, the former ambassador to the EU Sir Ivan Rogers has told MPs that outside of the bloc, it will be possible for the UK to negotiate new trade deals more quickly. However, he also warned that Britain will have less leverage because it won’t be coming to the table with the size and scale of the EU’s market. He argued that whilst Britain will gain the advantages of “speed and nimbleness”, it would lose the “negotiating heft” of being part of a wider bloc.
The advantage of being in the EU is not speed or nimbleness…. it’s the size of the market. Why are the Canadians or South Koreans or other parties interested in the EU market? It’s the size and scale.
Sir Ivan Rogers was giving evidence to a House of Commons committee on UK-EU relations. The Guardian’s politics live blog covered the meeting. You can see more on it there on watch footage of the committee meeting at parliamentlive.tv.