- November 2, 2017
- Posted by: lutherpendragon
- Category: insight
At the beginning of this month the Government published two White Papers, regarding the future of UK customs and trade policy, precursors to legislation expected later in the parliamentary session. The legislation will provide the framework for the UK to become an independent trading nation, able to negotiate and sign into law trade deals with other countries once we leave the EU. With a clearer picture emerging of the Government’s intentions, now is the time for businesses and their trade bodies to be thinking about how they can influence this emerging debate.
Notwithstanding the hugely positive effect that free trade can have, the Government is working in a context of weakening growth in global trade and the rise and increased threat of protectionist measures in certain countries. The desire to focus on negotiating and agreeing a suite of Free Trade Agreement is therefore ambitious. FTAs can take time and can often become the victim of domestic political trade-offs that have little to do with developing economic ties, creating jobs and encouraging investment. So are there other things that could be happening more quickly while these comprehensive agreements can are being put in place? And what collaborative role can businesses play to help grow overall trade?
A key opportunity for UK trade will almost certainly be seeking to expand the reach of our services sector. The UK is home to the world’s biggest insurance market, and one of the two largest centres in the world for fund management and international legal services. Gaining access for these kinds of industries is not so much about border protection, but the non-tariff barriers that can often make business unviable. In countries such as China, India and across Latin America, access can be difficult due to regulatory differences, local capital requirements and administrative burdens, to name but a few. These can often be challenging for a formal Free Trade Agreement to overcome.
With that in mind what role could ‘commercial diplomacy’ play – a concept raised by William Hague when he was Foreign Secretary – in developing and enhancing UK trading relationships? What could UK businesses and their representative organisations do – in partnership with the UK Government – to contribute to trade discussions, overcome these barriers and open up markets? Does the current global trade context require UK businesses to think differently about their approach to trade? For example could it be more fruitful to present a package of services in partnership with other businesses, instead of focusing on how an individual UK business can sell a specific product or service?
Given that one the unique selling points for the UK is its services ‘eco-system’, trading partners could take advantage of our the ability to take a project from conception right the way through to delivery, including sourcing finance, insurance and complementary training and long term skills development. Aligned to this, could the Government use its extensive diplomatic networks, helping UK businesses to identify partner companies in those overseas markets, building more business-to-business collaborations, which could reassure those target markets about regulatory compliance and local networks.
There is no doubt that this commercial diplomacy approach does present some dilemmas and potential trade-offs, most notably in regards to future regulation. The UK would need to reconcile two competing notions of, on the one hand becoming a regulatory competitor and on the other the need to maintain regulatory alignment with potential trading partners. This is not an easy tension to resolve and the question of regulatory alignment for services remains something of an unknown quantity in trade policy, but it’s a discussion we need to be having and it’s one businesses can and should be part of.
In the White Papers the Department for International Trade has been clear about wanting to take an inclusive approach and its willingness to listen to expert voices about trading priorities, where the focus needs to be and building partnership working to help grow opportunities. Businesses can bring new ideas to the table in this crucial economic debate and now’s the time to do it.