A summary of the most important trade news stories from the past week. This summary is emailed to our subscribers every Monday morning, along with the latest comment and analysis from The Channel Group. If you would like to receive this direct to your inbox, you can sign up at the bottom of this article.
A round-up of the latest news on the UK’s future trade relationship with Europe. If, like me, you are getting somewhat weary of the debate and would prefer to wait until Theresa May outlines her negotiating stance, feel free to skip this section.
Transitional UK-EU trade deal essential
Transitional trade arrangements are necessary to avoid a “catastrophe for the EU”, Jean-Claude Piris, the head of the EU Council’s legal service from 1988-2010, has said. A UK-EU trade deal will take far longer than 2 years to negotiate, meaning that it is not likely to be completed before the UK leaves the EU in 2019, he noted.
He stated that a deal is likely to take 10 years to negotiate, but that he could see scope for a fast-tracked deal in only five. Nevertheless, there would still be a gap between Brexit and a deal coming into place. Mr Piris said that avoiding this ‘WTO gap’ is essential, as it would be a “catastrophe for the EU” if no transitional arrangements were in place. However, he said that it would be worse for the UK, as half of all trade is with the EU. This is a view reinforced by Chancellor Philip Hammond, having said that reverting to WTO rules would not be “the most favoured outcome”.
UK can’t leave single market
The head of the German motor industry association, Matthias Wissmann, has suggested that the negative effects of the UK leaving the single market will be too great, meaning that Theresa May is forced to seek a ‘soft Brexit’. This would mean that the UK would still contribute to the EU budget and would have to accept freedom of movement, two key issues on which the referendum campaign was fought.
Mr Wissmann noted the “deep interdependence” between the UK and EU, as well as Germany. He highlighted figures showing that half of new cars registered in the UK came from Germany and that 57% of British car exports are to the EU. “The hard Brexit preferred by Theresa May would have severe side effects,” he said. “A long period of uncertainty must be expected until new contracts are concluded. This can take years – a frightening perspective for investors.”
UK will leave single market
Junior Brexit minister, Robin Walker, has said that the UK will leave the single market when it leaves the EU. “As the UK is party to the EEA agreement only in its capacity as an EU member state, once we leave the European Union the EEA agreement will automatically cease to apply to the UK.”
The news was greeted by remain campaigners as the first sign of Theresa May’s Brexit negotiating strategy. However, it is important not to read too much into this, as the answer gives only a factual description of what will occur in the current circumstances. The answer makes no indication of what the British government will seek to gain from the Brexit negotiations.
DIT boosts UK investment
The Department for International Trade has brought in £15 billion of investment since the Brexit vote, according to Dr Liam Fox. Figures showed that 2,213 projects were backed by foreign investors in 2015-16, 11% higher than the previous year. The International Trade Secretary said that “clear vote of confidence in the UK”.
The statistics predict that the Government will meet its target of £983 billion in FDI for 2015-16. DIT highlighted Australian investment in a minerals refinery in Tees Valley, Danish investment in energy projects, and Chinese funding for modular homes.
UK trade data corrected
The ONS corrected the UK trade data, resulting in a smaller-than-reported current account deficit. The deficit – a measure of total imports against exports – reached a peak of 5.5 per cent of GDP in Q4 2015.
Q3 2015 GDP growth figures fell by 1.2 percentage points due to net trade, a revision down from a contribution of 0.7 points.
Use Brexit to steal UK trade says Trump aide
Donald Trump’s incoming commerce secretary, billionaire Wilbur Ross, has suggested that countries should use Brexit to steal trade from the UK. The US is the UK’s largest trade partner, after the EU as a whole, and Mr Ross would be tasked with striking a trade deal with the UK. His comments have raised fears that the US will not offer a straightforward and mutually beneficial agreement.
Britain should quit single market says Lord King
Former Governor of the Bank of England, Lord King, has said that the UK should be ‘self-confident’ about Brexit and leave the single market. Speaking on BBC Radio 4’s Today programme, he said: “I think the challenges we face mean it’s not a bed of roses, no one should pretend that, but … there are many opportunities and I think we should look at it in a much more self-confident way than either side is approaching it at present.
He described the EU as a ‘pretty unsuccessful’ union and said that the were ‘question marks’ about staying in the single market, noting that “there are real question marks about whether it makes sense to remain in the customs union”.
Trump threatens free trade
President-elect of the USA, Donald Trump, is reportedly considering implementing a universal import tariff on all imports. The tariff, supposedly of 10 per cent, signals a change in trade policy from the decades of work towards a global system of free trade, spearheaded by the USA.
An executive action by President Trump could not be blocked by Congress, which recently devolved powers to the President in order to reduce tariffs and sign FTAs.
The news follows the appointment of Peter Navarro, an ardent critic of Beijing, as head of the National Trade Council.
Royal Commonwealth Society director backs calls for a new HMY Britannia
The director of The Royal Commonwealth Society, Michael Lake, has backed calls for a new Royal Yacht Britannia. The Channel Group supports such an initiative, and Mr Lake confirmed that a new vessel would be a ‘smart move’. Writing in The Telegraph, he said;
“In years gone by the United Kingdom employed a floating ambassador in the form of HMY Britannia. In its 44 years of service, the yacht was a majestic symbol of national esteem and an iconic, photogenic focus for what would now be described as soft power. The passages of the Britannia and the ports she visited resulted in goodwill, business opportunities, influence and a reminder of the United Kingdom as a partner of choice.”
Year in a word: Protectionism
(Noun) Shielding domestic industries from foreign competition by imposing tariffs and/or erecting other barriers to free trade
Protectionism has been listed by the Financial Times as one of the 12 words that defined 2016. The election campaign of Donald Trump was littered with protectionist measures – promises to bring jobs back to the US from China and Mexico. The paper notes that the phenomenon is not new – in 2009 Barack Obama levied a 35% tariff on Chinese car tyres, ostensibly in order to save 1,200 jobs.
Barack Obama, who leaves office a proud free trader, in 2009 levied a 35 per cent tariff on imports of Chinese car tyres to protect American jobs. In 2012, the Peterson Institute for International Economics calculated that the move cost the US economy $1.1bn ($900,000 per job) and resulted in a net loss of 2,500 jobs across the economy.
Best of Elsewhere:
- It’s time to make an urgent case for the new global economy (Quartz)
- “A trade war with China will not be easily won, and any victories could be the Pyrrhic kind.” (FT)
- Donald Trump threatens the resilience of world trade (FT)
- Threat to Globalisation (Business Insider)
- TPP: How Obama traded away his legacy (HuffPo)
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Before this, he worked for GlaxoSmithKline and as a theatre producer. Thomas enjoys playing cricket, cycling, and reading.