A tipping point year for UK free trade agreements?
During the 2019 general election campaign, one of the ruling Conservative party’s less plausible political commitments was that by 2022, 80% of the UK’s post-Brexit trade would be covered by free trade agreements (FTAs). David Sapsted reports.
20 September 2023
This article is taken from the Autumn 2023 issue of
Think Global People magazine
Click on the cover to access the digital edition.It did not happen, of course. But now, four years on, there are signs that things have begun to move in the right direction:
- this spring, brand-new trade deals came into force with Australia and New Zealand
- this summer, the UK became the first European nation to formally join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- Indian officials have expressed confidence that a major FTA between the two nations could be completed by year’s end
- negotiations are underway for a similar deal with the Gulf Cooperation Council (GCC) states, including Saudi Arabia
- talks are underway with both Turkey and Switzerland over much more comprehensive trade agreements.
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India-UK Agreement closer
Although membership of the CPTPP, which is expected to become effective on a practical basis in the second half of next year, is estimated to have only a minor effect in the short term on Britain’s GDP, the longer term prospects involving a market of half a billion consumers appear enticing.The biggest prize this year promises to be an FTA with India. Even before any deal has been struck, total trade in goods and services between the two nations stood at £36.3 billion in the year to the end of March, representing a 34.2% rise on the previous 12 months. Total UK exports to India amounted to £14.7 billion (up 44.2%), while India’s exports to the UK rose 28% to £21.6 billion.While the-then Prime Minister Boris Johnson said an FTA would be signed and sealed by October last year, detailed negotiations have taken much longer, with the twelfth round of talks getting underway in the middle of August.One reason for the length of negotiations has been that India’s government wants a complex agreement with the UK to serve as a template for other FTAs it is negotiating, including one with the EU. Even so, sufficient progress has been made to prompt Sunil Barthwal, India’s commerce secretary, to state in the summer that a deal would be concluded before the end of this year. ‘The Hindu’ newspaper reported: “Both sides are working to iron out differences on issues including an investment treaty, intellectual property rights and rules of origin.”Briefings in late August by government officials in London downplayed speculation that a deal could be reached by September’s G20 summit in New Delhi. “It’s about the deal and not the date,” said a government source. “There are several outstanding issues, and you leave the really tricky stuff until the end.” This sparked press speculation that sticking points included tariffs on Scotch whisky and UK car imports.However, reports from India suggested these issues had been as good as resolved with a ten-year plan to progressively reduce the tax on whisky and with Narendra Modi’s government agreeing to reduce the import duty on cars to 75% from the current 100%, although compact cars would be excluded. According to Bloomberg, there would also be a cap on the number of vehicles that could be sold under the lower tariffs.The main disagreements appear to centre on freedom of access for UK financial and other services, and the tricky issue of liberalising visas for Indian students at a time when immigration is a controversial issue in Britain. Problems over the high costs of Indian professionals on short-term assignments in the UK appear to have been settled.The GCC and the UK
Aside from India, Britain’s other continuing negotiations over an FTA are focused on the six GCC states: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The fourth round of negotiations took place over the summer in London with a draft treaty text being “advanced across the majority of chapters,” according to a British government spokesperson, who pointed out that the GCC was equivalent to the UK’s seventh largest export market with total trade worth £61.3 billion last year. “An FTA will be a substantial economic opportunity and a significant moment in the UK-GCC relationship,” the Department for Business and Trade (DBT) stated. “Government analysis shows that, in the long run, a deal with the GCC is expected to increase trade by at least 16%.”But aside from the GCC and India – and talks aimed at bolstering existing carry-over deals – a recent report from the London thinktank, the Institute for Government, suggested future UK trade policy would not be centred on FTAs. “For one thing,” said the institute, “the UK has already secured deals with most of its major trading partners; the US and China are the only two countries in the UK’s top 25 export markets with which the UK neither has, nor is negotiating, an FTA.Neither of those gaps is likely to be filled in the near future, given the state of US domestic politics and growing geopolitical tensions.” Instead, the report said it was likely that the DBT’s focus would switch to a trade policy increasingly dominated by foreign policy and security considerations, driven by Downing Street’s political priorities.“On the ground,” added the report, “DBT officials will need a sharper focus on helping individual UK businesses to deal with specific obstacles to exporting. For example, they can play a useful role in negotiating with partner countries to remove or reduce the impact of specific trade barriers; help UK businesses to make use of the trade agreements that have already been signed, and thereby drive up their utilisation rates; promote exports through visits, trade fairs and other activities; and monitor partner countries’ compliance with their obligations under FTAs and World Trade Organisation agreements, so they can take action against them if they default.”And then, of course, there is the UK’s relationship with the European Union, with British exporters still blaming Brexit for the loss of opportunities with the nation’s largest trading partner. The latest polling by YouGov revealed growing support among the public for a second Brexit referendum on EU membership. Nearly half of Britons favoured a new vote in the next ten years, with 26% wanting one this year. And about a fifth of those who voted ‘Leave’ in 2016 now favoured a new referendum.Given the prevailing political climate in the UK, such a referendum stands no chance of being staged, despite the fact exporters would love to re-establish EU ties. But, at least the opportunities in deals with the likes of India, the CPTPP and the Gulf states offer hope for the future.As Business and Trade Secretary Kemi Badenoch said during a trip to India last month: “India is the UK’s second biggest source of investment projects and I’m confident this new campaign will help boost interest in and demand for UK goods and services even further.” That, at least, sounded more plausible than the 2019 election pledge.Read more global mobility news in the upcoming Autumn issue of Think Global People magazine. Reserve your copy here.
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