18 June 2024
Alasdair Smith is a UKTPO Research Fellow, a researcher within the Centre for Inclusive Trade Policy (CITP), Emeritus Professor of Economics and Former Vice-Chancellor at the University of Sussex.
The 2019 General Election focused on the one issue of Brexit, and Boris Johnson’s victory enabled the UK to leave the EU. The evidence analysed by UKTPO and many others since then has confirmed the general expectation among expert economists at the time that Brexit would have negative economic effects. And recent opinion poll evidence is that a majority of voters think Brexit was a mistake.
To say that Brexit was a mistake does not imply it could or should be simply reversed. Yet, it is reasonable to expect the political parties to address the issue in their current election campaigns.
The Labour Party’s ambition for the future EU-UK relationship is set out in two paragraphs in their manifesto published on 13 June:
“With Labour, Britain will stay outside of the EU. But to seize the opportunities ahead, we must make Brexit work. We will reset the relationship and seek to deepen ties with our European friends, neighbours and allies. That does not mean reopening the divisions of the past. There will be no return to the single market, the customs union, or freedom of movement.
Instead, Labour will work to improve the UK’s trade and investment relationship with the EU, by tearing down unnecessary [my emphasis] barriers to trade. We will seek to negotiate a veterinary agreement to prevent unnecessary border checks and help tackle the cost of food; will help our touring artists; and secure a mutual recognition agreement for professional qualifications to help open up markets for UK service exporters.”
A firm commitment to stay out of the EU for the next Parliament is surely wise. The UK-EU relationship has been bruised by the experience of the last 8 years. Rebuilding the relationship will take time and patience, and the opportunity to solidify the long-term relationship lies some way in the future. The incoming government faces formidable challenges in many areas and even a long-term plan to rejoin the EU would be a diversion from more immediate priorities.
Since there is no plan to rejoin, it follows that a new government must indeed seek to “make Brexit work”. It’s also right to aim for the removal of any unnecessary border checks and other barriers to trade that have damaged the UK economy.
This is a more positive and less dogmatic approach to the UK-EU relationship than the Conservative manifesto whose main concern is to rule out “dynamic alignment” to EU rules and “submission to the CJEU [the Court of Justice of the EU]”.
Dynamic alignment means sticking to EU rules even when they change. There’ s a strong case for dynamic alignment in many areas, to create a climate of regulatory predictability in place of the regulatory uncertainty and instability of recent years. In any case, firms have to satisfy EU regulations for products they sell in the EU. In many important sectors of the economy (like chemicals and motor vehicles) that means virtually all their production has to meet EU requirements, so separate UK regulations are a deadweight cost.
The Labour manifesto’s red lines are clearly drawn: “no return to the single market, the customs union, or freedom of movement”. The political pressure for such clear lines is understandable. However, they will constrain the objective of reducing border checks and other barriers to trade.
The European single market (which encompasses some non-EU countries like Norway) is the regulatory framework which removes barriers to trade within Europe. Members of the single market adopt common regulations, common processes for assessing conformity with these regulations, and a common legal framework under the umbrella of the CJEU. Members of the customs union similarly have a common policy towards goods imported from non-member countries. Checks on trade between EU countries are unnecessary.
However, if the UK remains outside the single market and the customs union, checks on UK exports to the EU are necessary to make sure that EU rules are satisfied. It’s not enough for UK producers to satisfy EU rules – their products still need to be checked for conformity. However much trust and goodwill are built up with our EU partners and no matter how much alignment there is with EU rules, the scope for removing “unnecessary” barriers to UK-EU trade may be frustratingly limited in practice.
The main political barrier to UK membership of the single market is, of course, the additional single market requirement for the free movement of labour. But post-Brexit restrictions on labour mobility between the EU and the UK has had adverse effects in many important UK sectors: including business services, agriculture, hospitality, social care, and the creative industries.
It’s understandable that the Labour manifesto rules out free movement, but notable that it is silent on the recent EU offer on youth mobility: proposals which emphatically do not imply freedom of movement (not least because they involve visa controls). These proposals would restore to young Europeans in the UK and the EU some of what they lost as a result of Brexit, and would also help address some of the problems of the sectors most affected by Brexit. Surely an incoming government should take a more positive approach to the EU offer.
Opinion poll evidence is that a clear majority of the UK electorate favour a return to EU-UK freedom of movement. A new government may find the political constraints changing quite quickly, so that rejoining the single market becomes thinkable.
A manifesto commitment not to rejoin the single market applies to the next Parliament but doesn’t stop the government from preparing to rejoin in the following Parliament. The path to re-entering the single market would in any case be a long one, probably via the European Free Trade Association (EFTA) into the European Economic Area (the EEA). This path requires preparation and negotiation.
That preparation should include addressing the fact that the single market requires free movement of labour not free movement of citizens. The UK could develop rules for a regime in which EEA citizens are not unconditionally free to come to the UK but are free to relocate to the UK (with their families) in order to work.
The Liberal Democrat manifesto, in contrast to the Labour manifesto’s red lines, makes a positive commitment to rejoining the single market:
“Finally, once ties of trust and friendship have been renewed, and the damage the Conservatives have caused to trade between the UK and EU has begun to be repaired, we would aim to place the UK-EU relationship on a more formal and stable footing by seeking to join the Single Market.”
Realistically, the timetable suggested by these words could well extend beyond the 4-5 years of the next Parliament. In this case, the difference between the Labour and LibDem manifestos may be presentational, rather than real. The single market issue will not go away, even if it cannot be settled before another general election at which a proposal to rejoin the single market could be put to the electorate.
Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.
Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.
Jessie Madrigal-Fletcher June 18th, 2024
Posted In: Uncategorised
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31 May 2017
Compiled by Fellows of the UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the sixth in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the SNP Manifesto mentions these important elements explicitly or implicitly. Following that, we offer a brief commentary on the treatment of trade policy in the manifesto. (more…)
Charlotte Humma May 31st, 2017
Posted In: UK - Non EU, UK- EU
Tags: ethical trade, Manifesto, Negotiations, Single Market, SNP, transparency
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26 May 2017
Compiled by Fellows of the UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the fifth in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the UKIP Manifesto mentions these important elements explicitly or implicitly. Following that we offer a brief commentary on the treatment of trade policy in the manifesto. (more…)
Tina Perrett May 26th, 2017
Posted In: UK- EU
Tags: Brexit, Customs Union, Exports, FTA, General Election 2017, trade, Trade agreements, UKIP
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24 May 2017
Compiled by Fellows of UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the fourth in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the Green Party Manifesto mentions these important elements explicitly or implicitly. Following that we offer a brief commentary on the treatment of trade policy in the manifesto.
A central aim of the Green Party is for the UK to remain in the EU, or at least in the single market. The former implies no change to current trade policies and hence little need to discuss them in the manifesto. Thus their coverage of trade policy beyond that with the EU is restricted to human rights and social and environmental conditions.
Katherine Davies May 24th, 2017
Posted In: UK - Non EU, UK- EU
Tags: Article 50, Brexit, Employment, Environment, freedom of movement, Green Party, human rights, Manifestos, Negotiations, Single Market
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19 May 2017
Compiled by Fellows of UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the third in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the Conservative Manifesto mentions these important elements explicitly or implicitly. Following that we offer a brief commentary on the treatment of trade policy in the manifesto. (more…)
Charlotte Humma May 19th, 2017
Posted In: UK - Non EU, UK- EU
Tags: Article 50, Brexit, Conservatives, Customs Union, FTA, Immigration, Negotiations, Single Market
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18 May 2017
Compiled by Fellows of UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the second in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the Liberal Democrats’ Manifesto mentions these important elements explicitly or implicitly. Following that we offer a brief commentary on the treatment of trade policy in the manifesto.
The central plank of the Liberal Democrats’ manifesto is remaining in the single market and the customs union. This implies no change to current trade policies and hence little need to discuss them in the manifesto. Thus their coverage of trade policy is rather sparse. (more…)
Charlotte Humma May 18th, 2017
Posted In: UK - Non EU, UK- EU
Tags: Brexit, Customs Union, FTA, Liberal Democrats, Negotiations, Single Market, tariffs, WTO
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16 May 2017
Compiled by Fellows of UKTPO
Brexit will leave many areas of UK policy open to change. International trade policy is among the most important of these for UK prosperity and also among the most immediate because the status quo cannot simply be extended. This is the first in a series of blogs reporting what the major political parties say about trade policy in their 2017 manifestos, as they become available.
The UK Trade Policy Observatory (UKTPO) has set out a series of issues that it believes should be considered in any election manifesto that might form the basis of the UK’s future trade policy. The table below checks whether or not the Labour Party Manifesto mentions these important elements explicitly or implicitly. Following that we offer a brief commentary on the treatment of trade policy in the manifesto.
Charlotte Humma May 16th, 2017
Posted In: UK - Non EU, UK- EU
Tags: Brexit, Environment, FTA, Labour, Manifesto, MRAs, social, Tarriff-free trade, Trade agreements, Transitional period, WTO
23 July 2024
Minako Morita-Jaeger is Policy Research Fellow at the UK Trade Policy Observatory, a researcher within the Centre for Inclusive Trade Policy (CITP) and Senior Research Fellow in International Trade in the Department of Economics, University of Sussex. She currently focuses on analysing UK trade policy and its economic and social impacts.
The UK is a services economy which accounts for 81% of output (Gross Value Added) and 83% of employment.UK services exports (£470 billion in 2023) are the world’s second largest after the US and 75% of its services exports are digitally delivered. The UK is ranked as world-leading in terms of data governance. Under the new Labour government, it is time to take the initiative on data flow governance at the global stage to achieve a sustainable and accountable digital environment. With the set back in the US negotiations on free data flows at the WTO, the UK can take the initiative to collaborate with the EU and Japan.
The EU-Japan EPA, which entered into force in 2019, lacked provisions on free data flows and personal data protection. This has now been addressed with the signing of the new protocol on 31 January this year which is incorporated into the EU-Japan EPA. The new EU-Japan protocol can be seen as game changers. First, they strike a balance between free data flows and legitimate public policy objectives. Under Article 8.81, measures that prohibit or restrict cross-border data flows, such as localisation requirements of computing facilities or network elements, are restricted. These provisions are similar to the existing digital trade provisions under FTAs/digital trade agreements led by the Asia-Pacific countries, such as the CPTPP.
Yet a significant difference with the Asia-Pacific style FTAs is the scope and definition of “legitimate public policy objective” (Art. 8.81.3 and its footnotes). The new protocol reflects the EU’s approach under the UK-EU Trade and Cooperation Agreement (TCA) which provides more detail compared to the Asia-Pacific led digital trade agreements.
Another striking difference is that personal data protection is set as a fundamental right. The provisions regarding cross-border data transfers go together with the new provisions regarding protection of personal data (Art. 8.82). The clause is comprehensive and could be seen as the highest standard among existing digital trade agreements, including the EU-UK TCA. It underlines the importance of maintaining high standards of personal data protection to ensure trust in the digital economy and to develop digital trade. Such deep commitments between the EU and Japan were enabled by ongoing policy dialogues, including the EU-Japan Digital Partnership Council.
An interesting aspect here is Japan’s policy journey on digital trade agreements, which reflects a shift from the US or Asia-Pacific style pro-trade approach to the EU-style human-centric approach. The starting point of Japan’s policy journey was the CPTPP e-commerce chapter (originally the TPP e-commerce chapter) which strongly reflected US tech-companies’ desire for a laissez-faire international digital environment. The agreement prioritises free data flows with a very narrow public policy space. Under the Japan-US Digital Trade Agreement (DTA), the Japanese government accepted the US approach, which leans even more towards business interests than the CPTPP.
Subsequently Japanese policy preference shifted more towards the EU’s human-centric approach. The Japan-UK Comprehensive Economic Partnership Agreement (CEPA) signed October 2020, which reflects both the CPTPP and the EU-UK TCA, could be seen as a first step in this direction.
Why the change? At the domestic level, data privacy regimes have been legally and institutionally strengthened over the last decade. At the international level, the Japanese government has been advocating the new norm of “Data Free Flow with Trust” from 2019 through G7, G20, OECD and beyond.[1] The Japanese government considers that the new EU-Japan protocol, incorporating the principle of “DFFT”, will contribute to a more balanced approach to digital trade and could become a model of a 21st century digital trade agreement.
In contrast, the UK’s policy journey has unfolded in the opposite direction (Figure 1). Other than the EU-UK TCA, the UK has tended to depart from the EU style digital governance approach. With the tilt to the Indo-Pacific, the UK has aligned itself more to the Asia-Pacific style market-driven approach to digital trade governance. The digital trade rules under the Australia-UK FTA, UK-New Zealand FTA, and Singapore-UK DEA are modelled on the CPTPP.
Indeed, the Conservative UK government’s efforts to reform of the UK data protection regime (Data Protection and Digital Information Bill), reflects a drift away from EU-style data governance. It has also enabled the UK to strike these digital trade deals. The reforms prioritised data-driven innovation with an ambition of making the UK an international data hub, but legal experts raised concerns over their ethical, social and legal implications.
The Labour Party manifesto was silent about digital trade governance, and the approach of the new government to digital trade is an important question as it will, in part, shape tomorrow’s world.
At the multilateral level, we have entered a new phase of negotiations. It seems that cross-border data flows provisions are being dropped from the on-going WTO Joint Statement Initiative (JSI) negotiations on e-commerce. This is because of the lack of support, if not opposition, from the US as it wants stronger tech regulation. Although there was not a consensus over the balance of free data flows and public policy objectives even before the US’s objections, the US’s position has proved a key obstacle to multilateral rules on data flows. Under such circumstances, promoting a new digital trade model like the EU-Japan new agreement and the UK-EU TCA could help mitigate US’s concerns over limited public policy space.
The quality of the UK’s data governance is ranked as world-leading according to the Global Data Governance Mapping Project. This means that the UK is well positioned to show the best practice to its trade partners while enhancing the trust side of digitisation and promoting digital trade at the bilateral, plurilateral and multilateral levels.
With the new UK government, there is an opportunity to revisit its role at the international level. Given that the Labour government values individual / human rights while promoting innovation, the UK could play an active role in forging a broader consensus on the balance between free data flows and public policy space. As part of it, it seems natural for the UK to collaborate with Japan and the EU to promote the balanced approach achieved under the EU-UK TCA and the EU-Japan EPA. This could help regain support from the US administration for the WTO negotiations and other international forums.
[1] As for “DFFT” and its relation with trade policy, see “Can trade policy enable “Data Free Flow with Trust?“
Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.
Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.
Jessie Madrigal-Fletcher July 23rd, 2024
Posted In: UK - Non EU, UK- EU
3 July 2024
Tom Arnold is a Researcher at the Heseltine Institute for Public Policy, Practice and Place at the University of Liverpool; Patrick Holden is a Reader in International Relations at the University of Plymouth; Peter Holmes is a Fellow of the UK Trade Policy Observatory and Emeritus Reader in Economics at the University of Sussex Business School; and Ioannis Papadakis is a Research Fellow at the Centre for Inclusive Trade based at the University of Sussex.
Freeports have been a central part of the UK Government’s regional development policy over the last five years. The 2019 Conservative Party manifesto pledged to create “up to ten Freeports around the UK”,[1] emphasising their potential to create new jobs and additional income streams for local government. They were also promoted as key to improving the UK’s international trade prospects following its exit from the European Union. UK government has specified three economic objectives for Freeports: to establish them as hubs for global trade and investment; to promote regeneration and job creation; and to create hotbeds for innovation.[2]
Despite this, Freeports have not featured strongly in the current general election campaign. The 2024 Conservative manifesto includes a promise to “create more Freeports and Business Rates Retention zones”, emphasising their potential to create new jobs and provide additional income streams to local government.[3] While the opposition Labour Party pledges to develop Local Growth Plans aligned to national industrial strategy, there is no mention of Freeports.
The UK Freeport programme looks likely to continue in some form, regardless of the outcome of the election. The 2023 Autumn Statement extended tax relief funding for English Freeports from 2026 to 2031, meaning Freeport operators and occupiers will benefit from reliefs on stamp duty, business rates and employer national insurance until this ‘sunset date’. Nevertheless, several concerns will need to be addressed by the next government. This piece sets out the key issues for Freeports over the coming months and years, and suggestions for improving on the current model.
In April 2024, the House of Commons Business and Trade Committee published the findings of its inquiry into the performance of Freeports and investment zones in England, to which some authors of this article contributed evidence.[4] The report summarises the benefits and limitations of the UK Freeport model, highlighting evidence which suggests:
Despite these concerns, we argue that the UK Freeport experiment should not be abandoned, but may need modification. Given the limitations of the customs benefits associated with Freeports, the government should focus on the role they can play as part of an active, place-based industrial strategy. While Freeports have been portrayed as a central element of the government’s ‘Levelling Up’ regional development policy, the relationship with broader government objectives on key national issues such as net zero is unclear.
This confusion is partly a result of the dual purpose of the current UK Freeport model, which aims to both boost international trade and operate as traditional Special Economic Zones with a focus on attracting jobs and regenerating ‘left behind’ places. Aligning Freeports more closely with national policy targets and providing greater certainty about the purpose of regional policy could help to clarify their purpose. This could be particularly significant in places which continue to face acute socio-economic problems following the mass decline of industry in the second half of the 20th century.
To achieve this, we highlight five areas for improvement in the current government’s strategy for Freeports.
Align with other special economic zones. In addition to Freeports, there are two other main special economic zone (SEZ) programmes currently operational in the UK: Investment Zones (introduced in 2023, with 13 across the UK); and Enterprise Zones (introduced in 2011 and expanded in 2016, with 48 across England only). The presence of three different types of SEZ presents complexities for local government in attracting investment and developing industrial strategy, particularly in areas where all three are present (such as Liverpool City Region). As part of a broader industrial strategy, the government should be clear about the purpose of each SEZ and where possible align governance of SEZs under a single accountable body (such as a Mayoral Combined Authority. Where appropriate SEZs could be merged to create clusters with complementary activities – comprising universities, ports and dynamic SMEs. There is particular potential to align Freeport activity with national and local objectives to achieve net zero carbon emissions, particularly through decarbonisation of freight transport.
Assess the value of customs benefits. The government should review whether customs reliefs are worth retaining or should be wound down to save money and time for local authorities and to allow more focus on the place-based industrial policy elements of the programme. Policies and funding could be focused more narrowly on other Freeport priorities such as improving infrastructure and upskilling local workers. The UK Freeport model should be understood more accurately as a type of SEZ rather than a focus on international trade.
Enhance governance. The Business and Trade Committee report recommends that accountability for Freeports should be held by a single leader, in the form of an elected ‘metro mayor’. This can offer clarity for businesses, the public and other stakeholders. However, only three English Freeports are currently located in areas with a mayoral combined authority (East Midlands, Liverpool City Region and Teesside). For Freeports without an elected mayor, it is less clear who the single accountable figure should be, but local authority leaders may be most appropriate for this role. While Freeports should be enabled to exercise flexibility in shaping policies to align with local aims and objectives, the UK government should retain overall scrutiny of the Freeport programme in England.
Improve transparency. While fears about the disconnection of UK Freeports from democratic accountability are exaggerated, public concern is understandable given the shortage of publicly available information about their geographies and powers. Efforts should be made to ensure all Freeport bodies publish clear, accessible and easy to digest information about site locations, governance arrangements and mechanisms for allocating retained business rates.[10] Making this information publicly available will facilitate learning about the effectiveness of UK Freeports.
Improve evaluation. The government should work with Freeports to develop metrics tracking benefits to businesses, the effectiveness of Freeport policies, and the costs and benefits of tax reliefs. The current Freeport programme has a strong monitoring and evaluation system in place at the national level, but there are challenges in the provision of local data and developing sound counterfactuals.
While Freeports have not featured strongly in the 2024 general election campaign, the issues the current UK Government purports that they resolve – particularly improving economic prospects in ‘left behind’ places – will remain central to the success of the next government. We suggest not throwing the baby out with the bathwater but reassessing the UK Freeport model as part of a broader place-based industrial strategy, including due scepticism regarding the trade effects.
[1] Conservative Party manifesto (2019) https://assets-global.website-files.com/5da42e2cae7ebd3f8bde353c/5dda924905da587992a064ba_Conservative%202019%20Manifesto.pdf (p.57)
[2] HM Treasury (2020) Freeports: bidding prospectus. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/935493/Freeports_Bidding_Prospectus_web_final.pdf
[3] Conservative Party manifesto (2024) https://public.conservatives.com/static/documents/GE2024/Conservative-Manifesto-GE2024.pdf
[4] House of Commons Business and Trade Committee (2024) Performance of investment zones and freeport in England. https://committees.parliament.uk/publications/44455/documents/221158/default/
[5] Peter Holmes and Guillermo Larbalestier (2021) Two key things to know about Freeports. https://blogs.sussex.ac.uk/uktpo/2021/02/25/two-key-things-to-know-about-Freeports/
[6] Peter Holmes, Anna Jerzewska and Gullermo Larbalestier (2022) ‘Exporting from UK Freeports: Duty Drawback, Origin and Subsidies.’ UKTPO Briefing Paper 69. https://blogs.sussex.ac.uk/uktpo/files/2022/09/BP-69-Freeports-FINAL-28.09.22.pdf
[7] House of Commons Business and Trade Committee (2024)
[8] Business and Trade Committee (2023) Oral evidence: the performance of investment zones and Freeports in England. https://committees.parliament.uk/oralevidence/13744/html/ (Q9)
[9] Tees Valley Review (2024) https://assets.publishing.service.gov.uk/media/65ba58ec3be8ad0010a081a9/Tees_Valley_Review_Report.pdf
[10] Nichola Harmer, Patrick Holden and Guillermo Larbalestier (2023) Written evidence submitted to the Business and Trade Committee inquiry into the performance of investment zones and freeports in England. https://committees.parliament.uk/writtenevidence/124415/html/
Additional Information
The authors would like to thank Guillermo Larbalastier for earlier research input and advice. Guillermo is not responsible for any views expressed in this article. The opinions expressed in this blog are those of the authors alone and do not necessarily represent the opinions of the University of Sussex or the UK Trade Policy Observatory.
Republishing guidelines:
The UK Trade Policy Observatory believes in the free flow of information and encourages readers to cite our materials, providing due acknowledgement. For online use, this should be a link to the original resource on our website. We do not publish under a Creative Commons license. This means you CANNOT republish our articles online or in print for free.
Charlotte Humma July 3rd, 2024
Posted In: Uncategorised
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June 25 2024
Sahana Suraj is a UKTPO Research Fellow in International Trade.
With less than two weeks until the United Kingdom elects its 59th parliament, campaigning efforts by contesting political parties intensified with the recent publication of party manifestos.[1] The UK is the fourth largest exporter of goods and services, so it is particularly important to shine light on the next government’s stance for developing a robust trade policy that maximises the benefits of trade consistent with domestic policy objectives.
While clearly there is a degree of overlap, the approaches to trade (policy) by the main parties—Conservatives, Labour, Liberal Democrats, Green Party, Reform UK—can be broadly categorised into three different groups.
One group, consisting of the Labour Party and Liberal Democrats, appears to align trade policy with industrial strategy. Concerned with building a resilient and secure economic future, their proposed course of action aims at capitalising on the UK’s existing economic strengths, including in services trade. This approach entails a focus on the depth and quality of agreements, forging strategic partnerships to create a pro-business and pro-innovation environment, and making trade more accessible.
This orientation to trade policy can be characterised as going beyond a conventional focus on Free Trade Agreements (FTAs). Labour, for instance, also recognises the importance of Mutual Recognition Agreements (MRAs) and standalone agreements to promote services trade and digital trade. Agreements of this nature can have strong trade promotion effects and can be effective in reducing non-tariff barriers to trade. The Liberal Democrats have stressed the importance of human rights, labour rights, and environmental standards while negotiating trade deals. This indicates their commitment to using trade policy to achieve benefits in other areas of public policy. They propose renegotiating existing trade agreements with Australia and New Zealand to achieve more favourable outcomes for the UK in health, the environment, and in animal welfare.
Both parties are focused on promoting deeper cooperation in trade policy by expanding markets for British exporters and deepening trade partnerships. Labour also endorse the ongoing FTA negotiations with India and are open to negotiating agreements with the United States and the Gulf Cooperation Council (GCC). Moreover, they recognise the importance of African economies and multilateral institutions such as the World Trade Organisation (WTO).
Another group consists of manifestos whose approach to trade policy derives from their commitment to sovereignty above all. This includes the Conservatives and to a lesser extent Reform UK. They focus on the imperative for the UK to independently dictate its course on all trade policy matters, as well as protecting the UK’s internal market. The Conservatives propose heavy reliance on FTAs to extend ties to Switzerland, the Middle East (GCC, Israel), Asia (India, South Korea, Vietnam, Singapore, Indonesia) and the United States, the rationale being an expansion of trading relationships post-Brexit. The aim of these agreements is largely to increase cooperation in trade, technology, and defence that will eventually allow the UK to become the largest defence exporter in Europe by 2030. These strategies exemplify their strong emphasis on linking trade policy with economic security.
As part of the focus on sovereignty, the Conservatives and Reform UK both assign importance to agriculture. Ending UK quotas for EU fishers, creating opportunities for the domestic food and drink industry, and recognising the importance of farmers while negotiating FTAs are issues raised by the parties. There are also detailed plans to promote intra-UK trade. While Reform UK proposes a rather radical approach by abandoning the Windsor Framework, the Conservatives recommend the establishment of an Intertrade body to promote Scottish exports and partnerships with British Overseas Territories.
Lastly, the Green Party’s stance on trade policy incorporates elements found in the preceding two groups with policies that encourage trade agreements to take account of worker’s rights, consumer rights, animal protection, and environmental standards, and a traditional focus on agriculture. They advocate the ending of what the party perceives as unfair deals related to food and agriculture and rather place emphasis on encouraging domestic food production.
The question of the UK’s future relations with Europe is arguably of central importance from a trade perspective. On this aspect, the parties exhibit much greater divergence between each other, than their general stance on trade. Each of the parties proposes varying levels of engagement with the European Union as shown in Figure 1.
Figure 1: Level of closeness to the EU as proposed by the parties’ manifestos.
Both main parties—the Conservatives and Labour—are against Britain’s return to the European Union. However, they differ on future trade relations with Europe. Labour advocates closer ties with the EU and wants to take advantage of Britain’s geographical proximity to the region. It intends to negotiate a mutual recognition agreement with European counterparts on professional qualifications and services exports. Labour is also in agreement with the EU’s approach to transition to Net Zero by adopting a Carbon Border Adjustment Mechanism (CBAM), and they aim at negotiating a veterinary agreement with the EU to reduce the burden of border checks.
In contrast, the Conservatives place legal sovereignty above other interests and accept a gradually growing regulatory distance from the EU as a result. They are keen to repeal EU laws that have been transposed into UK law since Brexit and ensure that the EU’s commitments are met under the Trade and Cooperation Agreement (TCA). They intend to dub the UK as the largest net exporter of electricity and implement a new carbon import pricing mechanism by 2027.
The position towards the EU of the other parties—Green, Reform, and Liberal Democrats—fall at either end of the spectrum. While Reform staunchly advocates for a complete renegotiation of the TCA and seeks to distance themselves completely from Europe, the Green Party and Liberal Democrats propose an eventual re-integration into the European Union. The Liberal Democrats especially want to align the UK’s and EU’s Emissions Trading System (ETS) and also align the UK’s food standards with that of Europe.
From the outset, trade policy does seem to be on the agenda of contesting parties, albeit still considered in conjunction with Brexit. That being said, there is a significant degree of uncertainty attached to the UK’s future trade policy, as the main parties present starkly opposite proposals on EU relations. And yet, the UK is an open economy that relies on international trade for economic prosperity and jobs. Therefore, the next government’s approach to trade policy and trade governance will matter a great deal, and the more clarity voters have over the parties’ intentions, the better.
[1] Party manifestos can be accessed by visiting the following links:
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Jessie Madrigal-Fletcher June 25th, 2024
Posted In: Uncategorised
