Truss to rip up rules on as­sess­ing trade deals

The Daily Telegraph - Business - - Front Page - By Lizzy Bur­den

LIZ TRUSS is ready to rip up the Trade Depart­ment’s rule books on as­sess­ing deals in an ef­fort to im­prove how it mea­sures the eco­nomic ben­e­fits of its post-Brexit “Global Bri­tain” project.

The Trade Sec­re­tary has drafted in ex­perts to over­haul the depart­ment’s mod­els. Tony Ven­ables, an economics pro­fes­sor at Ox­ford Univer­sity, will lead a team in­clud­ing Gra­ham Gud­gin of Cam­bridge Univer­sity, Swati Dhin­gra of the Lon­don School of Economics, Michael Plum­mer of Johns Hop­kins Univer­sity and Chris­tine McDaniel of Ge­orge Ma­son Univer­sity.

Their task will be to ad­vise the chief econ­o­mist of the Depart­ment for In­ter­na­tional Trade on how to adapt its tra­di­tional “trade grav­ity” model, which gives weight to the prox­im­ity of trad­ing part­ners, to fo­cus more on trade in ser­vices, in­clud­ing dig­i­tal and data.

Of­fi­cial data have pro­jected that cer­tain trade deals could shrink the econ­omy, and the new re­sults are there­fore likely to cast the Gov­ern­ment’s “Global Bri­tain” trade deals in a more favourable light, given the UK is the sec­ond­largest ex­porter of ser­vices glob­ally.

In­deed, Dr Gud­gin pub­lished a pa­per in 2017 ar­gu­ing that the trade grav­ity model gen­er­ated overly pes­simistic pre­dic­tions of the im­pact of Brexit. Ms Truss said: “Bet­ter mod­el­ling will help us cap­ture the full ben­e­fits of free trade agree­ments and strike Bri­tish-shaped deals that suit our econ­omy and de­liver for the whole coun­try.”

DIT has also asked that the panel ac­counts for the ben­e­fits of se­cur­ing open trade routes and low tar­iffs com­pared to sce­nar­ios where pro­tec­tion­ism might in­crease.

“Deep and dy­namic free trade deals are even more valu­able when trade bar­ri­ers else­where are high, and we want our eco­nomic as­sess­ments to re­flect that,” Ms Truss added.

DIT’s ini­tial scop­ing as­sess­ment of the im­pact of leav­ing the EU fore­cast a 5pc loss of GDP over 15 years, while of­fi­cial es­ti­mates saw up to a 0.01pc loss of GDP from a deal with New Zealand.

The deals Bri­tain is seek­ing to strike with non-EU coun­tries are not ex­pected cu­mu­la­tively to com­pen­sate for the loss of mem­ber­ship of the sin­gle mar­ket and cus­toms union un­der cur­rent mod­el­ling, but these es­ti­mates are based on data from 2011.

The re­view is ex­pected to take about a year so the re­sults will not be ready in time to as­sess the im­pact of the UKJa­pan trade deal agreed “in prin­ci­ple” last week. Trade talks are also un­der way with the EU, US, New Zealand, Aus­tralia and Canada, with a goal of join­ing the Com­pre­hen­sive and Pro­gres­sive Agree­ment for Trans-Pa­cific Part­ner­ship in the longer term.

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