Sunak’s aim for ‘Global Britain’ trade deals fading after Brexit
Rishi sunak’s hopes for a string of high-value deals that would cement Britain’s position as trading nation are fading fast, four years after the uk officially left the european union.
The prime minister had hoped for Free Trade Agreements the US, India and others to lift a stuttering UK economy. But those have stalled over issues ranging from migration to meat imports. Discussions with Canada came to an abrupt halt last week.
It’s left the Britain relying on progress from a dwindling club of smaller countries including South Korea to Persian Gulf nations. That’s a setback for Sunak’s ambition to pump up growth and his sagging poll ratings ahead of the next election.
“Since the Brexit referendum, the global trading landscape has changed significantly,” said Raoul Ruparel, senior director at Boston Consulting Group’s Centre for Growth. “Focus is now much less on FTAS and more on industrial strategy and protecting supply chains. This means that many FTAS the UK hoped to have landed by now are taking much longer or are unlikely to happen at all.”
Trade—both imports and exports—is a crucial engine of the UK economy, and the UK lags the Group of Seven average in term of how much trade delivers for the economy. Yet the UK is stumbling on all fronts.
New border restrictions that come into place Wednesday add to frictions with what is Britain’s main trading partner, the EU.
Trade has fallen since the UK left the bloc four years ago, yet Britain’s reliance on the EU for imports and exports has risen.
So far, the UK has only agreed two bilateral deals since Brexit, with Australia and New Zealand. Those have angered British farmers by dropping limits on imports in sensitive sectors including beef, lamb and dairy products.
A deal with the US appears to be off the table, with President Joe Biden’s administration and Congress both reluctant to move.
Here’s where Britain stands on trade talks:
India
INDIA, the world’s most populous country, could present lucrative opportunities for British businesses from Scotch whisky producers to financial services providers. Issues such as tariffs on electric vehicles and post-study visas for students coming to Britain have held up a deal.
Other UK industries could lose out. These include British rice millers, who fear a reduction in UK tariffs on milled rice imports could kill off their trade. Medics say the UK’S intellectual property demands are a threat to India’s exports of cheap life-saving drugs.
South Korea
THE UK and South Korea currently have £18 billion ($22.8 billion) of trade and are seeking to broaden an existing FTA on goods to cover services. They’re also looking for digital ways to make it easier for small businesses in each country to access the other’s market.
Also on the table is an updated framework for rules-of-origin paperwork covering manufactured goods. British carmakers along with food and drink makers export heavily to South Korea and need the wording in place to maintain their business.
Gulf Cooperation Council
TALKS with the Gulf Cooperation Council—bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates—are heading into their sixth round. The countries deliver £61.5 billion of trade, equivalent to the UK’S seventh-largest export market. The UK says a comprehensive FTA could add £1.6 billion a year to the economy.
British food, auto and machinery exporters could benefit. But Gulf states may seek a mechanism to settle disputes between investors and governments, allowing lawsuits for actions that affect investment. That complicates the talks. “Do we want Gulf oil companies taking cases against the UK’S actions to do with net zero, for example?” said David Henig, director at the European Centre for International Political Economy.
Canada
BRITAIN did £19 billion of trade with Canada in 2020 and had hoped to extend an update an existing FTA to reflect the UK’S position outside the EU. But all of that is now in doubt after the UK “paused ” talks last week.
British manufactures need updated rules-of-origin provisions due to expire in April, and the UK wants to reduce frictions for small and medium-sized exporters and digitize trade. Canada is playing hardball on behalf of its hefty agricultural sector, seeking access for hormone-treated beef that the UK doesn’t allow. And the rest ....
Last month the UK and Switzerland signed a pact that will reduce frictions in financial services trade. This bodes well for a broader FTA, with round-four talks due to begin in spring. Henig thinks discussions could drag on, with the Swiss more focused on deepening EU ties.
After Biden shelved work on a US trade deal, the UK is working on sector-specific agreements and memorandums of understanding with individual states. It’s already managed seven. They’re not legally binding and may do little more than draw attention to trading possibilities.
Talks with Turkey are kicking off in earnest this month. The current FTA only covers goods, and the UK wants to broaden it to services. UK farmers could get improved access to the Turkish market, but British flour millers worry that deeper links could bring more low-quality Russian f lour to the UK, shipped through Turkey to avoid sanctions.
The UK formally launched negotiations with Israel in 2022, with the aim of boosting digital services exports. But those have been on the back burner since the war against Hamas.
Discussions with Mexico have run for almost two years, again with the aim of expanding the current deal into services. One hurdle to overcome is the Mexican administration’s perceived interference in business—it recently sent its armed forces to work on a privately-run railroad and is suing American gun manufacturers.
Greenland and the UK are discussing lower tariffs on seafood, with a potential benefit of £10 million benefit for fish imports. But even that may be a stretch since it would involve digging into fishing quotas. “My working assumption is that [talks are] going nowhere because it involves negotiating over fish,” said Sam Lowe, partner at consultancy Flint Global.