Hard facts among the lies and distortions on UK’s trade future

From financial regulation to the Irish border, by way of fishing quotas and farm subsidies, negotiators face a busy few months ahead. Picture: Jeff J Mitchell/Getty Images
From financial regulation to the Irish border, by way of fishing quotas and farm subsidies, negotiators face a busy few months ahead. Picture: Jeff J Mitchell/Getty Images
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Among the plethora of lies, distortions and falsehoods perpetuated by Brexiteers is the notion that Britain free from the shackles of the EU will be able to strike trade deals that will dramatically create new opportunities for British companies by opening up markets across the globe.

This scenario is based on a wilful misunderstanding of the opportunities the EU currently provides. First, we are of course leaving a single market of more than half a billion people. No matter what we replace it with, our companies will have diminished access to the EU single market with all the now well documented consequences for jobs and investment. Less well documented is the fact that we are also leaving trade deals with around 70 countries covering about 40 per cent of global trade and with the EU poised to ratify deals with Japan, Vietnam and Singapore that figure will rise to close to 50 per cent.

Nevertheless, the world, we are told, is fervently waiting for an unshackled UK in order to throw their markets open to us and this will more than compensate for any losses and if some countries or the EU are unwilling to participate in this new nirvana then there is always WTO rules to fall back on.

There are a number of problems with this outlook. Trade deals take years not months to negotiate. Britain will be in a weak negotiating position compared to the EU. Size in such negotiations does matter.

Offering access to a market of 500 million people strengthens your hand compared to offering access to a market of 66 million people.

Brexiteers also place too much hope on the WTO. It does not provide sufficient market access to services, which represents almost 80 per cent of the UK economy and it is also in deep crisis. This weekend 13 “like-minded” trade ministers will meet in Canada to try to save the organisation from collapse. President Trump has moved the USA beyond hostile rhetoric and blocked the appointments of new judges to the WTO appellate body, which is threatening to paralyse the organisation and prevent it from making decisions. The impasse of the appointment of the appellate body members threatens to bring the whole dispute settlement system to a halt.

The UK’s solution is ironically to “cut and paste” EU trade deals until it can negotiate its own. But given that we cannot begin negotiations until April 2019 and at the moment the transition period is only until the end of 2021 we will not have time for comprehensive trade negotiations.

Negotiating speed will be crucial for us but we should not forget quality. EU FTAs, especially the most recent ones like those with Korea, Canada and Japan are very ambitious in terms of scope. The first pillar of EU FTAs is about market access. It encompasses tariff liberalisation (Japan, for instance, will fully liberalise 97 per cent of EU imports in tariff lines while the remaining ones will be partially liberalised), commitments in several services sectors such as financial and banking sector (very important for the UK), in public procurement and intellectual property rights such as patents and geographical indications.

The second pillar consists of common rules in different areas such as trade defence, competition and transparency. A fundamental component of this pillar is the chapter on sustainable development. It contains provisions on labour rights and environmental protection. FTAs are often deemed to have contributed to the negative effects of globalisation.

However, through FTAs we actually try to govern globalisation by establishing rules our partners have to comply with.

This is to avoid that trade is liberalised to the detriment of workers and the environment. As a consequence, recent EU FTAs include commitments on ratification and implementation of ILO core conventions and multilateral environmental treaties such as the Paris agreement on climate change. They also establish a monitoring mechanism of these provisions by civil society that is particularly useful especially in countries where civil society is less organised and vocal e.g. in Korea, Vietnam and Singapore.

Another fundamental feature of EU FTAs is the safeguard of EU standards. This means that only goods which satisfy EU high health and food safety standards are allowed into the EU market. Therefore no risk of cheap imports of chlorinated chicken or hormone treated beef. The same goes for our public services such as the NHS, which are exempted from services liberalisation.

However, my concern is that given our pressing timeline, speed my prevail over quality. Under time pressure the UK might be forced to make further concessions not only on market access but also on worker rights, environmental protection and on our current health and safety standards. I believe there is a real risk of race to the bottom.

Furthermore, not even the smooth roll-over of EU FTAs during the transitional period can be taken for granted.

In fact, some of our trading partners such as Korea with which we signed an FTA in 2010, have already approached the UK asking for further concessions in exchange of agreeing to the roll-over of the agreement. I believe that more countries will be knocking on our door once Brexit is officially notified to them.

To conclude, Brexiteers who had in mind a glorious future trade policy for Britain will have to face the hard reality. There are no prospects of quick and super advantageous trade deals with any country even less with major economies like the US or China unless we are prepared to sacrifice environmental standards, food safety and foreign contractors being able to bid for and provide NHS and other public services.

l David Martin is a Scottish Labour MEP and a member of the International Trade Committee