Early reflections of a new UK trade policy approach – tensions to be resolved, narrative created

Many years ago, a veteran trade commentator welcomed me to a field he said was endlessly fascinating but in which nothing actually happened. In further discussion that turned out to mean trade deals that could have significant economic impact such as those at multilateral level or between the USA and EU never happened, and anything that could be agreed didn’t actually make much difference. While completely cynical, there’s a truth within it that becomes ever more visible.

Now imagine that you don’t know much about trade policy and have just watched the last eight years in the UK in which promises of world-leading buccaneering became cries of betrayal. A certain amount of caution to those suggesting this as a source of significant growth is understandable. Learning from my cynical friend may have been wise, and perhaps the new Prime Minister did so.

Keir Starmer, the UK’s new Prime Minister, appears never to have given a speech on trade. From his Shadow Cabinet, the only two individuals who didn’t get full jobs in the transition to government happen to be the two who once shadowed the Department for International Trade. Early indications suggest a man in a hurry to deliver changes to people’s everyday lives, and a feeling trade policy doesn’t offer too much. That instinct isn’t wrong since we’ve long known that the benefits of trade involve painful trade-offs, and in modern politics that is becoming increasingly difficult

This isn’t just about the new government or the UK. A long-time advisor to Conservative governments admitted to me that of late there was a move towards aligning with EU regulations as long as it was kept quiet. New Free Trade Agreements have become almost a protected species in the US and EU. If you were a diligent delivery focused Prime Minister who wanted to minimise political difficulty, how much involvement would you really want? Particularly if you saw what happened with the UK-Australia FTA that so quickly became seen as a vote-loser.

New UK Secretary of State for Business and Trade Jonathan Reynolds seems to have received that memo. His expressed priorities described before the election were smaller more targeted deals and focus on implementation within the context of a trade strategy. Embracing the idea of an independent Board of Trade was to provide a factual basis for difficult trade-offs, while more openness would reduce stakeholder grumbles at secrecy.

Inevitably though there is impatience, and the more traditional ideas of major gains. Most notably the long-standing UK political obsessions that there are special economically transformational deals to be had from the US and India. One business person told me, and probably any politician he found, that it was a fact trade would at least double after an India FTA, and he could help it happen. The first isn’t true, the second almost certainly not either, but there are many such individuals applying pressure, and hence why there was mention in the Labour manifesto.

For both US and India, the most that is realistically on offer would be considered of low ambition in trade terms, and still come with unpopular trade-offs. Now, there may be reasons to do deals, for the US most likely because a President Trump is blackmailing with the threat of much higher tariffs or for India as a next step to building a stronger relationship, but neither would be transformational, and both easily criticised particular without a good accompanying narrative. As it happens both India and the US have long experienced the domestic difficulty of making concessions in trade talks.

Talk of special deals has also infected UK-EU relations. Labour plans here are modest, and one could make a case that even these would deliver as much economically as an Indian trade deal. To listen to some UK commentators going further would be both obvious and easy. Neither is true. Any SPS deal for example requires the building of EU trust in UK checks that could take several years. As for the politics, it took three days from the UK General Election for the media to make the first accusation of the Labour government walking back from Brexit. Again, a case for going further with the EU can be made, but that has yet to happen in a way that would persuade a seemingly reluctant Prime Minister.

Cross-departmental politics must also be considered. This Labour government has set its key priorities as ‘Missions’ and that for Growth, covering trade, is owned by Treasury. Traditionally that department takes a classical approach to trade, pushing for low tariffs and not worrying for example about whether food or cars are produced domestically or not. That is equally opposed by other departments for whom that is a priority. All of which adds to the challenge.

Trade isn’t of course just about the deals. Global politics and economics surrounding China and other major powers are pressing, starting with a decision on whether to follow the EU, US and Canada in imposing extra tariffs on electric vehicles. Finding a balance of security and economic interests has been an issue in UK China policy for many years, and may be the main reason for the return to the role of Trade Minister for Labour heavyweight Douglas Alexander. When added to links to economic security, the net zero transition, carbon pricing, and developing country trade preferences, this is going to take a lot of government attention. There aren’t obviously clear answers, but a good start will be to reconfirm the UK’s staunch belief in global trade rules for all.

Geopolitics and UK-EU relations are likely to keep trade in the spotlight, alongside the promotion of exports considered by most people a core function of government. Reynolds was pictured with his Ministerial ‘Red Box’ and a mug saying “made in Sunderland, sold to the world” which could refer to cars, the city’s football team, himself, and much else besides. What will have to be made clear to all across government is that rewards for good trade policy are real if incremental, most notably in attracting investment, but that this will always come with political and economic costs.

All developed countries are of course struggling with the same overlapping issues of domestic and international challenges. There has been too much denial about this, a hope to return to a ‘golden age’ of perhaps the late 1990s, which isn’t going to happen. Leaving our own delusions aside, the UK might now usefully join conversations on how best to proceed.

If the new Prime Minister thinks trade in the too difficult category, that is probably because such modern challenges were never properly defined or managed by the last government. The task for new ministers is to bring that definition and narrative as quickly as possible. This will be, in the keyword of the Labour election campaign, change.