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“KPMG predicts economic growth of 1.4 per cent next year, but cuts this to 0.6 per cent if Britain leaves the EU without a deal.” — The Times
While some firms predict slower than normal growth for the UK economy in the post-Brexit timeframe, it’s always good to reflect on the assumptions that forecasters employ in creating their reports and why such forecasts can cause more harm than good.
- If you tell your employees that, ‘the chips are down, the economy is sinking, and corporate belt-tightening isn’t far off’ they are likely to respond in a negative way. Some may look for other employment, some will opt for early retirement, while others spend more time in the staff room talking with their coworkers about their employment concerns than getting their work done. Which means such reports can actually cause the negative outcome they’re warning about. It’s human nature to perform to a predicted level instead of trying to exceed expectations. There are few exceptions to this behavior and they are called names like; Olympic athlete, Pulitzer Prize Winner, President, or Astronaut who have the innate ability to ‘power through’ the negative times without losing momentum.
- Such reports deal with known inputs only. For example, a zero-tariff trade deal with the Americans may seem far off today, but by 2020 it may already be signed. And not only the U.S., other political and trade blocs are likely to sign trade deals with the UK following Brexit. The AU (Africa), MERCOSUR (the South American trade bloc), the Pacific Alliance (several Pacific nations), the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) nations, ASEAN (the Association of Southeast Asian Nations), The Commonwealth (Commonwealth of Nations), and China, are likely to expand their trade links with the UK after it departs the European Union. America and those seven trading areas will have a combined total of 7.0 billion people by 2020. That’s a lot of potential consumers, and the massive opportunities presented by signing zero-tariff trade deals post-Brexit are absent in most economic projections by design. Even if the UK were to sign only one free trade deal (with the U.S., for example) it could improve UK growth by a full 2 per cent or more. Presto! A shiny new UK economy!
- “Now we’ve got them!” While economic forecasting provides vital information for policymakers, Brexit negotiators aren’t helped by the news that growth will slow even in the face of a ‘good Brexit deal’ and will slow moreso in a ‘no Brexit deal’ scenario. It’s the kind of report that makes Michel Barnier’s day! KPMG is certainly one of the most respected firms around, but if you’re a Brexiteer and a report like this has been released to the public instead of it remaining in the hands of policymakers it plays with your mind; “Are they working for the UK’s best interests or are they working for the EU’s best interests?” (and) “Who commissioned (who paid for) this report and what parameters were used?”
So, while the good people of KPMG do their best to provide policymakers with the best near-term assessment of the UK economy, making such reports public can actually cause the negative things to occur about which the report warns.
That’s why policymakers everywhere must be ahead of the curve and treat all such documents as ‘the worst-case scenario’ without exception.
Now that UK Prime Minister Theresa May has been reliably informed that the worst the UK can do is 0.6 per cent growth between now and 2020, it should be an easy matter to arrange a number of free trade deals and blow the doors off that projection by 3 or 4 per cent by 2020.
Looking at this in the proper context means accepting that exiting the European Union is merely a necessary stepping stone to get the UK to 4 per cent growth by 2020 — which should result in Theresa May keeping the PM’s chair for at least one more term and with all past ‘political sins’ forgiven.
Not a bad deal Theresa, if you’re up for it! 🙂
It looks like the so-called ‘Project Fear’ campaign has failed in its quest to force referendum after referendum until they got the answer they wanted (which to observers, seemed they wanted to stay in the European Union at any cost) and that Brexit will occur on March 30, 2019 as planned.
All that remains to be decided between the UK and the EU is whether future relations will be based on World Trade Organisation rules, or on a bilateral trade agreement that allows both sides to prosper while maintaining a reasonable level of protection for national sovereignty, for their respective economies, and is able to shelter startups or other businesses that may require some form of special treatment or protection.
Either UK and EU leaders are up to the task, or they’re not. We’ll soon know.
And if they aren’t up to the task, every one of them deserves to get the boot at the next election.
First on the Agenda for the UK
Of paramount importance for the UK are free trade agreements with its Commonwealth partners — agreements that automatically come into effect within 24 hours of the official Brexit date.
It’s important to begin with Commonwealth trading partners because if Commonwealth nations aren’t willing to sign bilateral trade agreements with the UK, why would other countries want trade deals with the UK?
(If I represented a non-Commonwealth country and the UK couldn’t get its act together enough to sign worthwhile free trade agreements with its own Commonwealth partners, I wouldn’t be interested in signing with the UK either)
Yesterday, Australia’s Prime Minister generously indicated his country will sign a bilateral trade agreement to automatically come into effect the day after Brexit, and New Zealand, Canada, India, and other Commonwealth nations have indicated they’re open to bilateral trade agreements with the UK too.
Therefore, it isn’t a reach to suggest that such agreements be ready for a signing ceremony the day after Brexit and that UK foreign direct investment (FDI) in those countries will thenceforth take an instant leap forward.
The time to get such negotiations done is NOW so that a simultaneous signing ceremony can be televised across each of the Commonwealth’s 53 capital cities at 00:01 (in the UK timezone) on March 30, 2019.
What a tribute to enduring relations between Commonwealth members. Such a historic moment!
Second on the Agenda for the UK
No later than 24-hours after Brexit (which puts us at March 31, 2019) the UK should have free trade agreements automatically coming into effect with every economy in the world — agreements that work for each country just as well as they work for the UK.
‘Win-Lose’ thinking is no longer an option in the 21st century and anything less than ‘Win-Win’ isn’t worth spit. In fact, unless trade agreements are ‘Win-Win-Win’ these days, their value is questionable.
If the UK offers a ‘Win-Win’ trade agreement to China, but Japan offers a ‘Win-Win-Win’ trade agreement to China; Which of the two countries will be China’s most favoured trading partner?
Obviously, Japan’s offer would win, and the UK offer would simply gather dust as Japan’s relationship with China surged forward.
These negotiations must occur NOW and be led with a high level of urgency by Prime Minister Theresa May and Secretary of State for International Trade Dr. Liam Fox, so that by April 1, 2019 the UK will have bilateral trade deals with every country in the world — that automatically come into effect the day after the official Brexit date.
Anything less than that stellar achievement should be considered by UK voters to be a mediocre performance by the (then) ruling party in the UK House of Commons.
Time is running down on the Brexit clock (399 days and counting!) and the default path seems the only way that will allow a smooth and orderly Brexit in any sort of timeframe that could be construed as reasonable to British voters.
If the UK government chooses to simply photocopy existing EU trade regulations and then change those laws incrementally over a period of years, the UK should rightly expect to be invited by the European Union to continue their mutually beneficial trade relationship.
After all, how could the EU possibly be upset that the UK will voluntarily continue to follow European Union trade regulations in the pre-Brexit period?
However, this implies that until Brexit actually occurs, the UK will be obligated to consult with the EU on every incremental change made on those photocopied laws and regulations from now until the UK officially leaves the European Union on March 29, 2019. It’s not about polite diplomatic behavior, it’s about pragmatic self-interest.
The UK must begin today to re-prove that it intends — in all cases — to be a fair and reliable trading partner with the EU, and other countries are sure to be watching as this process unfolds. No amount of effort can be spared in this regard, because as so goes the UK trading relationship with the EU, so it will go between Britain and every other country in the world, after Brexit.
Trade After Brexit
Once March 29, 2019 has passed and the UK has officially left the European Union there will be no longer be any requirement for lengthy consultations with the EU on changes to British trade laws or regulations far in advance of them coming into effect.
That doesn’t mean that the UK shouldn’t continue to consult with the EU, it means that it doesn’t need to consult with the EU during the entire policy formation period. But once UK policy has been decided, the EU should continue to be the first to know about pending changes due to the bloc’s importance to the British economy.
As above, no effort should be spared in showing the EU every possible courtesy on even the most incremental of trade policy adjustments under consideration in the pre-Brexit timeframe.
And in the post-Brexit timeframe, a high level of communication and consultation must continue to define the relationship between the two sides.
Customs Law After Brexit
Unlike trade, the present customs union will end the day after Brexit which will be a very positive thing for the UK. After Brexit, the UK alone will be fully in charge of who can and can’t enter the country, and it should mount a Herculean effort now to identify and locate every single foreigner in the country, matching them to their home and workplace (or school) address.
Every non-British born resident in the country should be required to pay 100 pounds sterling per year, and also be required to provide their updated home and work/school address as often as it changes, no matter which country they originally hailed from. It’s the 21st century(!) all of this can be done on a UK.gov webform in less than 10 minutes per year.
Especially for those foreigners living in the United Kingdom anytime prior to Brexit day, the UK government should make the entire process as streamlined as possible.
Commonwealth Nations in the post-Brexit Timeframe
As the UK returns to its Commonwealth roots, immigration to the UK should thenceforth be sourced from Commonwealth nations.
Of course, there will always be a number of immigrants from the EU, America, and other countries. But as much as possible, the focus should be on the ‘all for one and one for all’ approach of Commonwealth nations — and one great way to keep that viable is by sourcing 2/3rds of the UK’s immigration requirements from the Commonwealth.
In addition, the UK should continue to spend .7 per cent of GDP on foreign aid — but spend it in Commonwealth nations exclusively.
This means that the British government must find other nations to take over its existing foreign aid commitments in non-Commonwealth nations so that Britain can concentrate on building a better Commonwealth.
Done right, every pound sterling spent in Commonwealth foreign aid should return a minimum of two pounds sterling to the UK, as a rising tide in a finite environment like the Commonwealth will lift all boats, which is quite unlike spending that same amount of foreign aid in the wider world.
One example of how Britain could benefit in the post-Brexit timeframe with a policy that favours Commonwealth nations is that UK universities, colleges and trade schools should see a vast increase in enrollment from the 2 billion citizens of Commonwealth nations.
Time is Tight
Although Brexit once seemed far-off, time is getting a little tight. Much needs to be accomplished in the remaining 399 days until Brexit.
The best way to do that is to harmonize UK trade law with EU trade law and then make incremental changes over time. That’s how not to lose.
How to win is to engage with Commonwealth nations as never before in ways that work to benefit both the United Kingdom and every Commonwealth member nation.
Keeping our EU friendships healthy on the one hand while updating our Commonwealth friendships for the 21st century on the other hand, is irrevocably in Britain’s best interests, thereby creating a new paradigm that will allow the UK to work to its strengths over the next 100 years.