The International Trade Select Committee met in December (HERE) and heard some expert testimony from Andreas Dur, professor of international politics at Salzburg University and Hosuk Lee-Makiyama, Director, European Centre for International Political Economy, Brussels. They were both fascinating and highly knowledgeable witnesses. They must have wondered about the MPs on the committee.
The EU apparently has 41 free trade deals but only the 10 signed since 2010 are deep according to the professor. Before 2010, the trade deals were not much above WTO terms, so we are leaving the EU just as the most deep and potentially advantageous FTAs are coming into use.
The EU apparently has 41 free trade deals but only the 10 signed since 2010 are deep according to the professor. Before 2010, the trade deals were not much above WTO terms, so we are leaving the EU just as the most deep and potentially advantageous FTAs are coming into use.
The 41 covers 15-17% of UK trade but this is probably an underestimate since they don't include the full impact of the most recent ones with Canada and Japan. A deep and special FTA increases trade usually by about 30% so it can be assumed we will lose about 5-6% of total trade with the non EU countries where there was an FTA in force after we leave.
It also turns out only seven countries in the whole world do not have some form of preferential access to the single European market, or are not negotiating something at present. Mostly this is under something called the GSP (General Scheme of Preferences), a system allowing developing countries to export into the single market without tariffs or with very low ones. The countries without any form of preferential trade with the EU include Libya, Venezuela, Cuba, Russia, Kazakhstan and if we leave without a trade deal we will join the list. This alone should be sobering.
It was also interesting to hear it confirmed that most international trade is done between countries that are close together - the so called gravity model that Patrick Minford of Economists for Brexit claims is wrong!
Hosuk Lee-Makiyama said China doesn't want to do trade deals anyway and India can't because of internal political reasons. Most countries in the world are trying to get access via FTAs to the USA or the EU and, to a lesser extent, China where the Chinese are reluctant to do any deals and of course when you think about it, why should they? China has as much trade as it can handle at the moment and doesn't need to open its market to others.
The 759 bilateral and multilateral agreements also came up. Many are of minor significance but others are important. Included in the total is the Open Skies agreement between the USA and the EU but there is also similar agreements between the EU and Canada and the EU and Brazil. These for example allow BA to fly from any EU airport to Canada and back to any EU airport. Even if we were to sign a new agreement this would only cover the UK.
Every sector of the economy will have some agreements that are important even vital to them. Some can be grandfathered but not all. Agreements involving agriculture will give the counterpart an excuse to renegotiate them as will any agreements which expire because we haven't renegotiated them. Hosuk Lee-Makiyama said in May that the logistics of renewing these 759 agreements is terrifying and is still of that opinion.
He made the point that transitioning in to the EU takes decades but getting out is far more difficult.
Also many FTAs signed by the EU and the UK have a territorial clause which means they only apply to EU members. So, even if we signed them they don't apply to us after Brexit.
Nigel Evans, rabid Brexiteer that he is, argued that it was not easy for Turkey to transition in to the EU (they have been trying for years) but Mr Lee-Makiyama said he was talking about the legal process and not the political issues which have dogged the EU Turkey relationship. Evans accused him of being pessimistic about Brexit by suggesting leaving would be harder than joining. He asked if it would not be easier for the UK to sign an FTA with the USA but was soon put in his place. The USA are hard masters, know the value of their market and will demand a high price for an FTA. The USA has great influence and standard setting power but not as much as the EU and neither the EU or the USA make compromises. They know the worth of their domestic markets. Look out for a bad deal!
The USA offers no service or financial service access to it's market. TTIP, the potential FTA between the USA and the EU failed, and the UK with its strong service sector using all the leverage of the EU could not persuade the USA to open up its service market. Lee Makiyama said he couldn't see how the UK could ever do it on its own.
Andreas Dur made the point that it is possible to conclude an FTA with America if you're prepared to accept everything they USA wants. Switzerland tried to negotiate a FTA and couldn't.
It all looked so easy during the campaign. Now the blue skies have given way to dark clouds and things don't look quite as simple as Brexiteers led us to believe.
To make matter worse, at a recent WTO meeting in Buenos Aires after three days of discussion between ministers from member states, nothing was agreed. That's right nothing! The delegates of more than 160 countries from around the globe failed to reach any new agreements in the face of stinging U.S. criticism of the WTO and vetoes from other countries. At the end, they were not even able to agree on a joint communique. It was described as a wobble (HERE) by Reuters.
As I have said before, if we can't reach agreement with 27 relatively closely aligned friendly countries, how do we think we're going to succeed with 160, some of which are potential enemies? Some hard lessons are coming up.
It all looked so easy during the campaign. Now the blue skies have given way to dark clouds and things don't look quite as simple as Brexiteers led us to believe.
To make matter worse, at a recent WTO meeting in Buenos Aires after three days of discussion between ministers from member states, nothing was agreed. That's right nothing! The delegates of more than 160 countries from around the globe failed to reach any new agreements in the face of stinging U.S. criticism of the WTO and vetoes from other countries. At the end, they were not even able to agree on a joint communique. It was described as a wobble (HERE) by Reuters.
As I have said before, if we can't reach agreement with 27 relatively closely aligned friendly countries, how do we think we're going to succeed with 160, some of which are potential enemies? Some hard lessons are coming up.
