Whitehall not set up to do trade well says new report
The UK will need a “radical” shakeup of how it works when it takes control of trade policy. And it should prioritise the deals it already has as part of the EU.
Brexit is meant to be about taking back control. And that includes taking back control of trade policy. Whilst Britain has been in the EU, Britain has grown as a trading nation with the EU accounting for 53% of the UK’s imports and 47% of the UK’s exports. Britain not only enjoys tariff and non-tariff barrier free trade with the EU, it also benefits from the many trade deals the EU has.
UK Imports 2015
UK Exports 2015
When you look at total trade with the single market, which includes EU countries as well as those in the EEA plus Switzerland (who are in the European Free Trade Association) in the above figures, it accounts for 58% of the UK’s imports and 49% of the UK’s exports. You can find more statistics on who the UK does trade with at the Office for National Statistics.
Being “secretive” and “unwilling to make difficult trade-offs” are enemies of doing trade policy well
So will Brexit herald a series of new trade deals for Global Britain as Brexiteers suggest it will? A new report by the Institute for Government (IFG) suggests the country is “not even close to being ready to negotiate”. It said that despite the creation of new trade department, Whitehall still lacked the “necessary expertise”.
In a statement about their report, Jill Rutter, Brexit programme director for the IFG said that Whitehall’s standard ways of working such as being “secretive” and “unwilling to make difficult trade-offs” were not conducive to doing trade policy well.
Whitehall is not set up to do trade well. Not only does it currently lack the necessary expertise but its standard ways of working – generalist, secretive and unwilling to make difficult trade-offs – are all the enemies of doing trade policy well.
Ministers will find that taking back control of trade also means taking back responsibility for some very difficult political choices – and they need to be ready to make and justify them.
Jill Rutter, Brexit Programme Director at IFG
Funnily enough, “secretive” and “unwilling to make difficult trade-offs” sounds just like Theresa May!
As well as bringing in specialist trade negotiators, the IFG said the next government should give parliament a guaranteed vote on future trade deals and create an independent body on trade. The IFG also called on the next government to prioritise trade deals it already has as a member of the EU including those with Canada, Singapore, South Korea, Switzerland and Turkey.
And in another of its recommendations, the IFG said the government needed to recognise that “there is more to trade policy than trade deals”. The report added this was especially the case for financial services where “commercial diplomacy and regulatory cooperation” were key. For the UK, its trade in services is a valuable part of its economy.
According to the Office for National Statistics (ONS), the UK’s services exports to the EU were worth £96bn in 2015. However, such is the nature of the single market that economists believe the benefits will be difficult to replicate for services in any new trade deal. The National Institute for Economic and Social Research (NIESR) found that “most non-EU FTAs seem to be quite ineffective at reducing non-tariff barriers that are important for trade”. NIESR concluded that even if the UK were to agree new trade deals with a host of countries as well as with the EU, it would still not make up for the loss of single market membership.
The IFG also warned against the UK acting too rashly to agree new trade deals. Using the USA as an example, the report points out that whilst the USA can be “a swift negotiator”, it usually only acts quickly when its partners “adopt a strategy of capitulation masquerading as negotiation”.
On this point, we’re reminded of Theresa May’s visit to the White House soon after Donald Trump’s inauguration…