Four options for a UK trade strategy

In May 2017, our paper Taking Back Control of Trade Policy set out what the UK needed to do to make its newly independent trade policy a success. We recommended that the government develop and publish an overall trade strategy explaining what it wanted to achieve from its trade policy.

Four years on, no such strategy has been forthcoming. If it had, Whitehall wouldn't be hanging on a decision from the prime minister on whether to accept cuts to the tariffs that protect UK farmers as the price of a trade deal with Australia. But what could this elusive UK trade strategy say? Here are four possibilities.

1. One nation free trade

Unilateral free trade – taking down all tariffs on all imports – is an intellectually respectable policy with a long history in Britain. The UK could return to its Victorian tradition of openness, reaping the benefits of a more dynamic and competitive home market. Some studies estimate the gains at as much as 0.75% of GDP, more than the government thinks all its trade deals will deliver.^[1]

But this policy would stop most of those deals in their tracks, as the UK would have little to offer its partners. It could also have serious negative effects in areas dependent on agriculture and manufacturing: not ideal for a government committed to levelling up or maintaining the union.

2. Switzerland with muscle

Switzerland, as a European country prospering mightily outside the EU, is another possible model for post-Brexit Britain. While it does sign free trade agreements (FTAs) – it now has 32, including one with China – these are often less comprehensive than others’, as the Swiss seek to avoid compromising their sovereignty and democratic choices. Even Switzerland’s agreement with the EU, for instance, keeps high tariffs on agricultural products to protect its farmers – as anyone stopped at the French border to have their car inspected for more than the permitted kilo of meat or butter can testify.

The UK could take the same approach, signing FTAs only where they do not prevent it from pursuing its own approach on issues like animal welfare or environmental standards in food production. This would limit the UK’s range of partners, though, so the government might need to reorient some of its energy on trade to driving up the UK’s competitiveness in markets where it does not have preferential access.

3. Geopolitics first

Hilary Clinton called for a “NATO for trade” in the early 2010s and, for a while, it seemed like the abortive EU–US trade agreement might just become it. Now that the World Trade Organization and the global rules-based order appear permanently paralysed by tension between the US and China, focusing the trade agenda on geopolitics not economics might be even more necessary. The UK could become the linchpin of such a system, building on its existing deals with democratic allies like Japan and Canada (and yes, the EU) and signing new ones with the US, Australia and New Zealand.

It would have to give up on lucrative deals with China, though – and the US would not hesitate to use its political influence to get what it wants on trade with the UK. A less fractious relationship with the EU (not least as regards the increasingly fraught topic of the Northern Ireland protocol) might also be a help.

4. Quantity not quality

Finally, the UK could prioritise simply getting trade agreements done. This is perhaps closest to its current approach and is most likely to get the government to its manifesto target of having 80% of UK trade covered by FTAs. But to pursue it coherently would require clear direction from the centre of government. For example, it should explicitly reject the recommendations of the Defra-sponsored National Food Strategy and the Department for International Trade’s Trade and Agriculture Commission to make tariff cuts conditional on compliance with UK animal welfare rules. This is a non-starter with the US and difficult even with smaller partners.

As well as the environment and agriculture lobbies, the China hawks on the Conservative backbenches would also need to be given their marching orders: a UK focused on maximising the deals it does should surely not miss the opportunity of becoming the first G7 economy to sign a trade agreement with the world’s largest exporter.

Of course, these are all simplifications of what a real trade strategy would look like. Ultimately, however, the government does need to have a clear idea of what it wants. Ministers and officials across Whitehall have spent long enough on fruitless internal arguments: they now urgently need a clear trade strategy to pursue.

Watch our explainer on the UK-Australia trade deal