Division at G7 casts shadow over trade

THIS MONTH’S G7 Summit in Canada aimed to promote the rules-based international order and to advance free and fair global trade.

It did not broker an agreement, hence the debate that I am leading in the House of Lords today on the implications for our future trade relations.

Why does the G7 matter? Precisely because it is supposed to bridge trade relations between the EU and world trade through the World Trade Organisation.

The background to this month’s summit was the latest UK trade figures in April 2018 showing a widening of the total UK trade deficit to £9.7bn. This change was due mainly to falling exports of both goods and services.

Given the fact that we are negotiating our exit from the European Union, it is perhaps unsurprising that our trade deficit in goods with EU countries grew while it improved with other nations.

However trade relations pose the greatest threat to the global order. PostBrexit, the UK wants to negotiate its own trade deals, with the Government aiming to strike a deal with the EU and subsequently with America, India, Australia and so on.

Success will depend on all the players playing by the rules and this is doubtful following President Donald Trump’s behaviour at the aforementioned summit over the introduction of tariffs.

That said, Yorkshire seems to have bucked the trend. Trade figures show the region outperformed the national average in the first three months of 2018.

In terms of food and farming, Yorkshire is also well placed to compete both with other regions of the UK, and also internationally.

Exports to China from Yorkshire are growing – helped by the sale of pigs’ trotters. In parts of China, they are considered to be delicacies.

However the EU is the UK’s most important market for food and drink exports, generating £13.3bn of the total of food and drink exports for 2017 and accounting for 60 per cent of the total, followed by the US and China.

The EU has 36 preferential trade agreements with more than 60 countries, representing 15 per cent of all UK traded goods not just food and drink.

Many Commonwealth countries have Economic Partnership Agreements with the EU giving preferential access for their goods to what will be a market of 440 million consumers after Brexit.

As a major trading nation, we should welcome every opportunity to improve our international trading relations. So it was a disappointment that the G7 Summit was divisive and inconclusive.

The attempt by President Trump to persuade the G7 partners to re-admit Russia, following on from the decision to impose US tariffs on steel and aluminium poisoned the atmosphere of the talks which were then doomed to fail.

Russia was admitted to the G7 in 1997 and removed in 2014 following the annexation of Crimea. In August 2014, Russia announced a ban on imports covering a wide range of agrifood and drink products from the EU, US, Canada, Australia, Norway, Ukraine and other countries. In the year following the ban’s implementation, UK food and drink exports to Russia fell by 52 per cent. EU food and drink exports to Russia fell by 53 per cent.

US threats to impose tariffs on EU and Chinese exports to the US look set to raise the temperature in international trade talks still further with consequent retaliatory measures. Rising tensions globally do not augur well for trade.

Signs of slower economic growth can only be increased by the prospect of a trade war between the US and the EU and China.

How best to navigate these choppy waters in regard to international trade? Current international tensions highlight the dangers of leaving the EU trading bloc of 505 million consumers of which we have been an intrinsic part since 1973.

Today’s debate will provide the opportunity for the Government to share its priorities for future trade talks, mindful of the importance of these to the food and drink industry as well as other manufacturing sectors.