There will be many more games of chicken to come in our post Brexit trade negotiations
Juliet Samuel
Modern free trade deals are easy to love, in theory. And Britain is a self-styled champion of free trade, so when the president of our biggest trading partner, the US, says he wants to strike a deal with us, we should be brimming with enthusiasm, right?
Enter: the chlorination chicken. No sooner had the notion of a US-UK trade deal been raised than we were plunged into a surreal “row”, in which the Government was dramatically split over whether to allow American chlorine-washed chicken into our supermarkets.
This pre-deal phoney war, conducted amongst ourselves, might seem silly, but it brings home something important. Modern free trade deals aren’t really about tariffs. They’re about regulations.
With the spectre of ill-treated chickens on our plates, such deals might seem like a threat. But for Britain, on the way to getting back control over its own trade policy for the first time in 40 years, it is also an opportunity.
In its composition, Britain is one of the most advanced economies in the world: four-fifths of our economic output is in service industries, rather than the goods and construction which dominate most economies.
And in services exports, we punch well above our weight. We are the third biggest service exporter in the world, accounting for 7pc of the world’s service exports despite accounting for only 3.4pc of global GDP.
Whatever one thinks of International Trade Secretary Liam Fox’s views on chickens, therefore, he is broadly barking up the right tree on trade policy in prioritising services.
“Extending trading freedoms to our service sector means unlocking new, global markets for our tech companies, our finance industry, and the wider knowledge-based economy,” he told an American think tank on Monday. The aim for an independent UK trade policy should be obvious: strike comprehensive trade deals covering services with both the US and EU.
That sounds simpler than it is, however, in part because the deeper the trade deal with one partner, the more nervous the other one becomes.
Take the example of chlorinated chicken, or genetically modified foods. If Britain opens up itself up to products that the EU won’t accept, Brussels will be less inclined to grant us free access to EU markets for fear that we’ll become a conduit for lower-standard imports.
This dynamic is also what will make it impossible for Britain to finalise a deal with the US before we negotiate the shape of our EU deal.
The more access we get to the EU, the more attractive a proposition we become as a trading partner for the US, and the more Washington might be prepared to compromise in negotiations.
All of which means that British trade policy cannot just focus on bilateral deals.
The real holy grail for Fox’s minions is to make progress on the Trade in Services Agreement (TISA), a negotiation between about 50 countries, mostly those with advanced economies, on opening up their markets to service exports.
TISA is the equivalent of a World Trade Organisation framework for services – a huge liberalisation programme in which countries agree to stop arbitrarily discriminating against one another’s companies and allow freer competition for services.
TISA talks began in 2013, but they quickly stalled and are currently on hold.
The task is certainly daunting. Is it even realistic to suppose that 50 countries, from Chile to Norway, will
‘A high level of suspicion remains and politicians should tackle it head on by being open and explicit’
be able to strike such a complex agreement? Given Britain’s heavy reliance on services and its talent at exporting them, the country’s new role in the global trading system, freed from EU control, will be to push this from fantasy to reality.
As with the WTO’S original membership, there is a first-mover advantage.
Service exports are, in many ways, still in their infancy, picking up speed as the ease and affordability of communications increases.
These exports cover anything from insurance to IT management, data mining, brand design, infrastructure maintenance or film-making.
As the ranks of the world’s middle classes swell, demand for these services is set to grow, and they will do so faster and more efficiently if governments can agree on certain standards like the protection and storage of personal data.
Those who are most active, determined and skilled in designing the rules of the game have everything to gain.
The most important prerequisite, however, is that free trade advocates must win the argument at home. Recent international trade agreements keep stumbling on the same block: they are perceived as secretive globalist plots to privatise swathes of public services.
If TISA talks are to un-stall, therefore, Britain needs to pioneer a new approach. The Government should make its positions as transparent as possible.
At the moment, most MPS, let alone voters, have no understanding of trade policy whatsoever. Why should they, when all of it was conducted in Brussels?
Brexit brings not just an opportunity, but a requirement to get educated, quickly. The Government should start consulting on its positions and enable the country to debate our priorities and red lines.
Beyond that, we also need to recognise the fact that certain areas are politically off limits.
The public will not accept any risk of international corporate interference in the Government’s ability to set public safety standards or grant monopoly drugs-buying power to the NHS. TISA, indeed, seeks specifically to carve out protections for public services and governments’ ability to regulate in the public interest.
But a high level of suspicion remains and politicians should tackle it head on by being open and explicit about the protections built into any agreement.
Britain has an opportunity to lead a reinvigoration of international trade. This starts with bilateral negotiations, with the EU and the US. But that should not be the sum of our ambitions.
Global trade is changing and being “pro free trade” isn’t as simple as it used to be.
The UK can get ahead of the game, however, if we educate ourselves and set a long-term strategy. The debate about chlorinated chicken is just the first step in that direction.