As we approach the end of the first year fully outside the EU, the UK government continues to see control or trade policy as a key Brexit dividend. There is no longer quite the frenzy of activity we saw around the end of last year associated with signing UK replicas of existing EU trade deals with third countries, but plenty happening nonetheless. Last week, for example saw International Trade Week, with the headline announcement of a £1 trillion export target by 2030.
Looking into 2022, some of the key predicted developments are as follows:
New Free Trade Agreements to come into force with Australia and New Zealand, with negotiations starting with India and perhaps Gulf countries. Agreements in Principle have already been reached with the first two, the primary effect of which will be to open up the UK to greater imports of agricultural products. There will also be limited new benefits for UK exporters. India and the Gulf Cooperation Council are typically difficult negotiating partners. There is still a possibility of revived talks with the USA by the end of the year.
Negotiations to join the Comprehensive and Progressive agreement for Trans Pacific Partnership (CPTPP) will be the UK government’s highest trade policy priority. The aim is to complete talks with the 11 members by the end of the year, though some delay into 2023 would not be a great surprise. As Australia and New Zealand are members, our new agreements with them are pathways to CPTPP, as will be talks for renegotiated agreements with Canada and Mexico. Short term economic benefits from all of these will be limited, but there will be opportunities to build longer term partnerships.
Broader UK trade policy remains somewhat unsettled. While pursuing new Free Trade Agreements, many relevant policy areas are relatively poorly defined. For example, there is uncertainty about the future of farming and food standards given new trade deals with major agriculture exporters, regulatory decisions from product marking to digital rules, and approaches to services trade. These ambiguities are a major reason for the doubt on the value likely to be delivered by the deals mentioned above.
Trade and economic barriers between UK and EU will remain high. The impact of changes to the UK-EU trade relationship at the start of 2021 took many companies by surprise, particularly those relating to food and movement of people. There will be higher barriers in some areas in 2022, notably with the UK grace periods on food import checks ending. Trade disputes resulting from the Northern Ireland protocol or fishing arrangements remain likely. It is hard to see areas where cooperation will remove barriers. Cumulatively this will have a negative impact on trade.
A world trade outlook for growth but weakening institutions. The weakening of the covid pandemic has seen economic and trade recovery, best demonstrated by backlogs of container ships entering ports. Despite various reports of shortages, global trade has actually adapted to the last two years remarkably successfully, and this is likely to continue. The same cannot be said for global institutions such as the World Trade Organisation, which is struggling to survive in meaningful form with major members such as the EU, US and China more openly flouting rules. Unresolved, as seems likely, this will lead to a rise in the number of trade irritants.
