State of UK Trade Policy 2024 – Preparing for New Direction

Since Brexit, Free Trade Agreements have been the focus of UK trade policy to the extent of obscuring other activities. Notwithstanding this year’s key achievement, accession to CPTPP, that agenda is losing momentum. Meanwhile, a Labour Party increasingly confident of victory in a 2024 election is finding unimplemented ideas including from our UK Trade Policy Project for its agenda.

This raises the prospect that the UK having been first into a populism of increasing trade barriers could also be first out – but implementation will be tricky given turbulent not least given global trade politics.

FTA Agenda inevitably slows

2023 started well for the UK government, interlinked issues of post-Brexit arrangements for Northern Ireland and accession to the CPTPP mostly resolved by March. Agreeing the Windsor Framework with the EU allowed the UK government to drop threats of breaking the Northern Ireland Protocol. With one eye to China’s application, CPTPP members had insisted on the UK not breaching this particular existing international commitment before concluding the accession process.

As has become customary, both agreements were excessively hyped by the UK government. In the case of the Windsor Framework, the details disappointed the unionist community of Northern Ireland who wished to avoid internal UK trade barriers. As widely predicted, including in our February 2022 paper, a deal negotiated for but not with Northern Ireland parties fell short. Subsequent relatively smooth implementation should not hide the failure to meet one of the key aims.

CPTPP, the Comprehensive and Progressive agreement for Trans Pacific Partnership, had become a totem of UK trade policy. Accession became essential for credibility, and was delivered by a broadly praised UK negotiating team. Joining a club including many similar middle powers of trade has attractions. These positives don’t however overcome three issues:

• Few stakeholders are particularly enthused by CPTPP benefits, with only Malaysia offering significant new market access, and content looking rather dated despite branding as a ‘high standard’ agreement. A review process under way could update some areas, though reaching consensus is likely to be tough, and China and Taiwan’s applications mean a likely slow accession process;
• Acceding via Australia and New Zealand bilateral FTAs led to what were perceived as poor deals, particularly the former. So much so that in May 2023 Rishi Sunak was forced to publicly reassure farmers that this wouldn’t happen again, pressuring future deals;
• Canada’s unhappiness with the final CPTPP deal brokered by Japan meant talks to replace the inherited bilateral FTA running into difficulty.

Other FTA negotiations proceed slowly with unclear ultimate benefits. Indian attempts to railroad agreement centred on modest mutual tariff reduction were rebuffed though some in government were clearly tempted. There is actually a respectable argument for such a deal as a building block, given the difficulties of India going further, but the legacy of previous perceived failures plus concern about a negative perception of Sunak’s India links seem to have proved stronger. None of talks to renew replicated agreements with Mexico and South Korea, a new deal with Gulf Cooperation Council, or enhancing agreements with Switzerland and Turkey seem to be moving quickly. The latter particularly depend on relationships with the EU, on which little progress was made after the Windsor Framework.

These form a 2024 agenda, but the loss of momentum is obvious.

Broader UK Trade Policy – especially implementation – under-developed

Signing Free Trade Agreements is just one part of trade policy, and UK Trade Ministers from Liam Fox to Kemi Badenoch have frequently emphasised other tools including market access, trade diplomacy, trade remedies, unilateral preferences for developing countries, and export promotion. Despite plenty of solid work from officials, for example the broadly welcomed Developing Countries Trading Scheme that entered into force in June 2023, much of this has remained in the background.

To some degree this is unsurprising, implementation is unglamorous compared to signing something new, and use of the wider toolkit the business as usual of all developed country governments. Yet, more should have been done, and sometimes the UK government seems to expect praise simply for basic competence. Obsessive secrecy and expectation of validation are also key problems.

Every UK government trade announcement is accompanied by supportive quotes from business, that rarely reflect often-scathing private opinions. Such quotes are a price of access, with those deemed to be not supportive or even worse sharing information still seen as the enemy. Business has been particularly critical of the lack of focus on implementation, which has been exacerbated by the belief in government that information should be secret as a rule. Without a trade strategy or regular reporting, there is simply no driver to energise the broad work of a trade department

Secrecy is a Brexit legacy, alongside a Global Britain approach that prioritised FTAs over any suggestion of deeper relations with the EU. Indeed, government handling of trade policy towards the EU is still separated from that for the rest of the world. Little has indeed moved on since our March paper – Building a Mature UK Trade Policy – and there is little sign of this government changing that.

Labour’s easy trade policy wins

A UK General Election must be held by January 2025, and most likely will come in October or November 2024, with the current opposition Labour Party heavily favoured to win. Taking little for granted, senior figures are focused on reassurance more than policy development. Nonetheless, some broad themes are emerging, with which stakeholders are seriously engaging.

Shadow Secretary of State Jonathan Reynolds gave his first speech dedicated to trade in November 2023, taking the opportunity to adopt policies neglected by the current government. These included a trade strategy linked to industrial strategy, focus on other kinds of agreement to FTAs, a proper role for Parliament in ratification, and greater focus on implementation. These reflect stakeholder demands, as also reflected in our March paper whose content was discussed with Labour.

One good example of this approach is the proposal to reconvene the historic Board of Trade “as an independent advisory agency, horizon scanning for opportunities, advising on the impacts of regulation on trade; and [reporting] against how each region and nation is performing to boost opportunities for the whole of the UK”. The need for such a body was first identified in our March 2018 paper “Assessing UK Trade Policy Readiness” which stated “Ideally one would also want accountability in the form of an independent body which could scrutinise trade agreements and related policies, reporting on likely results, and proposing improvements and alternatives”. Pressure also came from the cross-party UK Trade and Business Commission and even a former adviser to Liz Truss.

Tentatively, Labour is also talking about deepening the UK-EU relationship within the overall Trade and Cooperation Agreement structure. This would include seeking an SPS agreement, which could also help resolve outstanding issues in Northern Ireland, and improvements around movements of people, though progress on Professional Qualifications in particular will be difficult. Expectation is that a Labour government would be more inclined to align other regulations and protect UK participation in supply chains by joining the PEM convention on rules of origin. These would also help talks with Switzerland and Turkey.

Notwithstanding considerable Trade Union interest, and despite Labour’s occasional suggestions of following ‘Bidenomics’, it is worth noting from the speech the absence of ‘worker centred trade policy’. Similarly, there was nothing about opposition to Investor State Dispute Settlement mechanisms that are a big issue for some party activists. While reference was made to this not being the globalisation of the 1990s, Reynolds also clearly rejected protectionism. Collectively, through the speech, is the basis of a Labour government trade agenda.

Labour’s Implementation challenge

Quite possibly Labour will be elected as President Trump prepares for office and breaking global trade rules even more brazenly than in his first term. President Biden has however been lukewarm about the WTO, and global tensions around net-zero transition, domestic manufacturing, China, and supply chains are only just being kept under control. Coming on top of multiple domestic UK challenges not least in terms of flat growth projections, there must be a question of how much time Labour can dedicate to a trade agenda.

Most likely Europe will be the priority, not least as Reynolds talked of limiting active negotiations. This would mean seeking the SPS, PEM and other agreements, and using regulatory alignment to strengthen possible Switzerland and Turkey agreements. One trade related set of regulations for which quick decisions will be needed is the overlap of trade and climate, where the UK government for example has yet to determine an approach to the EU Carbon Border Adjustment Mechanism. Labour will most likely seek alignment to protect exports, but this alongside other asks will likely need much stronger political engagement with the EU.

Establishing more open partnerships with stakeholders will provide an easy win. Using regular public reporting as a driver for improving day-to-day operations such as on market access and implementation of existing FTAs could also demonstrate quick results. However, significantly shifting the trade or investment numbers will be challenging, integrating with industrial strategy likely to be time-consuming.

Greater focus on services, the area of outstanding UK strength, will also be tricky, Labour will be subject to the same pressures as the Conservatives on immigration numbers affecting the higher education sector among others. Digital agreements remain of unclear value given their exclusions in a world in which data flows are coming under increasing pressure. Broader services agreements remain an uncertain prospect, and on this as much else it is hard to imagine a UK presence making a meaningful difference to a struggling WTO, though stronger ties with other middle powers may be explored.

One target of the current government that has remained elusive except for cooperation agreements at sub-federal level is the US, which may offer Labour an interesting opportunity. Numerous US politicians have stated that issues around Northern Ireland have been the major barrier to serious discussions of a trade agreement, though there is a contradiction in their position in also expecting a change of UK food rules which would add to the Great Britain to Northern Ireland checks. Yet, a Biden second term and refreshed UK government could just feasibly see a recognition of an important trade partnership with a different approach, perhaps focused on supply chains and services.

Conclusion – Waiting Game

By the next UK election, impatience for change may slightly overwhelm any new administration. For while trade policy activity will continue in 2024, this government’s approach is unlikely to change meaningfully, so frustrations will continue. Time will not be on Labour’s side on various fronts, from the global position to these demands, and they will need to make a positive start.

Economic results may also be slow, since no single measure is going to have a substantial growth effect, and improving stability to attract investment will take time. A renewed sense of purpose will help, but there are no guarantees. For stakeholders though, just the prospect of moving away from the secrecy and anyone-but-the-EU foundations is a heady one, enough to keep them engaging enthusiastically. They too however will need clear asks not least for the strategy to come, and that may be the best use of their time next year. At the very least, they will expect a new positive hearing.