Global trade: the UK’s prospects for new partners

If the course of true love never runs smooth, then the route to consummating a trade deal can be distinctly rocky – at least, it is if the UK's post-Brexit experience of international courtship is anything to go by, writes David Sapsted.

David Sapsted

16 August 2022

This article is included in the Autumn issue of Think Global People magazine (5831k) .

Although it is now more than two and half years since the country's split from the European Union, only one comprehensive, free trade agreement (FTA) has been negotiated from scratch: that with Australia, and even this still awaits parliamentary approval.True, dozens of other deals have been done, but the bulk have been agreements that rolled over the trade arrangements that existed when Britain was still a member of the EU.Now, the need to boost exports through FTAs is becoming pressing: official data for the second quarter of the year showed that the UK's trade deficit in goods alone had widened by £9.5 billion.But there is a big prize on the horizon: a trade deal with India, which both sides are confident can be done by year's end or, possibly, as early as October 24 – the start of Diwali festival, which the-then Prime Minister Boris Johnson set as the target date when he formally kicked off negotiations on a trip to Delhi earlier this year.

India deal “by autumn”

Over the summer, the Government in London was expressing confidence that an FTA was "absolutely achievable" by Diwali, as discussions focused on market access aspects of the proposed deal.Piyush Goyal, India's Minister of Commerce & Industry, was equally upbeat, saying almost half of the proposed deal’s 26 chapters were already “dusted and ready” and that the remainder should be finalised “within the next few months”.In an interview with the Financial Times, Mr Goyal said: “Whenever you have a free trade agreement, there is always a lot of give and take. The challenges are there, but there are no challenges that cannot be overcome.”Those challenges are believed to centre on mutual access for the nations' financial services sectors and improved market access for such goods as British automobile parts and whisky, and Indian textiles and green exports, such as solar panels. Easier UK visas for Indian students and skilled workers are also believed to be on the agenda.On the tricky issue of greater access to financial services, the Department for International Trade (DIT) in London said it had been buoyed by the Indian government’s decision last year to ease barriers to overseas insurance firms.“India has traditionally had a protectionist economy when it comes to services," said a DIT source. “But the fact they’re already moving in the right direction on things like the insurance industry shows there is real momentum when it comes to services and that a deal can be struck.”Sealing a deal with India, the world’s sixth largest economy, would be seen as a major prize for the UK. Prime Minister Narendra Modi has recently shown a greater willingness to reach trade agreements, having signed a landmark deal earlier this year with Australia and another with the UAE. It is also pursuing FTAs with both the EU and Canada.There had been fears that political turmoil in Britain, which led to Boris Johnson stepping down at the beginning of September, could derail or, at least, delay the talks. However, negotiations continued in New Delhi as scheduled over the summer.Arpita Mukherjee, Professor at the Indian Council for Research on International Economic Relations, said while the ousting of Boris Johnson had caused uncertainty, the two nations were being driven by the need to finalise a trade deal that would be win-win.

The US and Australia

Of course, the FTA the UK would dearly love even more than one with India is with the US. But President Joe Biden is far from keen, particularly as he fears Britain's threat to scrap the Northern Ireland protocol – agreed with the EU and covering trade across the Irish Sea – could pose a threat to peace in Ulster. A US Government trade mission has also revived Trump-era demands for “equitable access” to the British market for its food and farm exports ahead of any possible trade deal.Jewel Bronaugh, Deputy-Secretary at the US Department of Agriculture, has urged British officials and the food industry to “be forward-thinking” about American-sourced goods, which she claims are “the safest in the world”, despite concerns in the UK over animal welfare and chemical treatments.Ministers in London have turned their attention to reaching agreements with individual states: Indiana in the spring and North Carolina in July, with Oklahoma, South Carolina and several others in the offing.But these are not trade deals on goods and services, which only the US Congress can sanction. Instead, these memoranda of understanding will improve procurement processes and strengthen academic and research ties, enabling academics and businesses to collaborate more effectively, according to the DIT.The Government in London also says agreements with individual states will promote mutual professional equivalence so workers from the UK and US can have their professional qualifications recognised on both sides of the Atlantic.This is all a far cry from the FTA agreed with Australia, which provides tariff reductions on UK exports in exchange for greater access to the UK for Australian farmers, and which sets "new global standards in digital and services and creating new work and travel opportunities for Brits and Aussies," according to the DIT.The deal is expected to unlock £10.4 billion of additional trade, with Britain particularly keen on opportunities in digital and tech, along with increased access to Australia's service sectors."The deal is also a gateway into the fast-growing Indo-Pacific region," says the DIT, "and will boost our bid to join CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), one of the largest free trade areas in the world, covering £8.4 trillion of GDP and 11 Pacific nations."A decision by those 11 nations – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – on whether or not to approve the UK's membership application could be made as soon as this winter. Some, however, have questioned whether there will be any immediate gain for the UK as most of the 11 have some sort of existing deal with Britain.But an agreement would loosen restrictions on UK services and digital trade, while, over the longer term, CPTPP membership could grow significantly and could even attract the US into the fold, although President Biden has yet to express an interest.

New Zealand, the GCC – and EU

In the interim, the UK is pursuing an FTA agreed in principle with New Zealand and the two nations have already signed a Mutual Recognition Agreement to “fast-track customs processing for businesses and promote market access for exporters between each country”, according to Christine Stevenson, Chief Executive and Comptroller of New Zealand Customs Service.Additionally, one deal already done is the UK-Singapore Digital Economy Agreement (UKSDEA), which was signed off in June. According to the Institute of Export and International Trade in London: "As well as playing to the UK’s strengths as the world’s second-largest services exporter and fifth largest digital services exporter, the UKSDEA also provides a wide range of benefits for businesses who trade in goods. It will cut costs, slash red tape and pave the way for a new era of e-signatures and e-contracts."This summer also saw the UK signing its first international data sharing deal when it inked an agreement with South Korea, which will allow organisations in the two countries to exchange data without restrictions.Add to this the FTA negotiations that opened in the summer between the UK and members of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) along with the continuing talks over a deal with the likes of Canada and Mexico, and you have what adds up to a busy time for British trade negotiators.There is, however, one cloud on the horizon: the existing deal with the European Union, by far the UK's largest trading partner. Although Mr Johnson once claimed a post-Brexit agreement with Brussels was "oven ready", it has turned out to be half-baked with exporters lumbered with extensive bureaucracy, delays and additional costs.A survey of almost 1,000 firms by the British Chambers of Commerce found that 45% reported difficulties adapting to changes in rules for buying or selling goods in the UK-EU Trade and Cooperation Agreement.Now the entirety of the deal is threatened by disagreements over the Northern Ireland protocol, proving yet again how rocky the course to a true agreement can sometimes be.

This article will be included in the Autumn issue of Think Global People magazine.Click here to access the Summer digital edition.

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