Truss to rip up rules on assessing trade deals
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.