LONDON — Brexit is a “once-in-a-generation opportunity” to design a “21st-century” trade policy which focuses more heavily on emerging markets outside Europe, free from the “straitjacket” of EU policy, according to a major lobby group.
A report released on Tuesday by TheCityUK, which represents the financial industry, calls for the government to “recalibrate” its trade and investment policies so they are “relevant to growth that is taking place in the rest of the world.”
Trade in financial services represents a hugely significant part of the UK economy. In 2014, the country the UK ran a trade surplus in financial services of £62bn ($77.3 billion).
The report argues that the EU’s trade policy — which the UK is signed up to — had a “straitjacket” effect on trade, and “dates back to an era before the current trends and potential changes in the balance of power in the global economy.”
It says that the last 15 years have seen a change from a “tri-polar trade policy world” to “one that far more multi-polar,” as illustrated by the graphic below:
The report says that roughly 90% of economic growth in the next ten to 15 years is expected to be generated outside Europe, and that “trade and investment are the conveyor belt that will link the UK to the new global growth centres and be a unique source of productivity gains.”
Prime Minister Theresa May confirmed earlier in January that Britain will leave the European single market when it quits the EU, which means that securing a wide range of trade deals and investment guarantees outside of Europe will be vital to the success of Britain’s post-Brexit economy.
A “new trade narrative”
The paper details 24 specific recommendations which could define a “new trade narrative.” Those include:
• A “multi-tiered” approach to liberalising trade and lowering trade regulations between countries. The most beneficial type of trade deals, it says, are multilateral ones arranged by the World Trade Organisation (WTO). However, such deals have been “sporadic” and often take many years to arrange.
• Where multilateral deals are not possible, bilateral free trade agreements (FTAs) between Britain and other countries could be forged. “FTAs between the UK and selected trading partners will have an important role to play, just as they have had in the EU’s trade policy in which the UK has participated up to now,” the report says.
• Fighting protectionism. The report calls on the G20 — a group of advanced and newly-developed economies — to provide leadership by opposing “protectionist measures” and “advocating further liberalisation” of trade. Given that the United States has a fiercely protectionist president in Donald Trump, that could involve Britain turning to other partners in the G20, including the newly-developed “BRIC” economies — those of Brazil, Russia, India, and China.
The report also says that foreign direct investment (FDI) is of particular importance to the UK economy. It cites the fact that, in 2014, businesses held over £1 trillion in capital holdings outside the UK, while non-UK businesses held over £1 trillion within the UK.
In 2009, the EU gained control of most aspects of UK investment policy under the Treaty of Lisbon. The report calls for the UK to refocus on striking “short, simple” bilateral investment treaties which safeguard existing UK investments and place a greater focus on fast-developing economies including the “BRIC” economies.
Gary Campkin, director of policy and strategy at TheCityUK, said: “The Prime Minister has signalled her commitment to striking the best trade deals around the world post-Brexit. One of the most significant opportunities for the UK following its exit from the EU will be its ability — for the first time in decades — to pursue an independent UK trade and investment policy based on UK interests.
“The UK is the leading exporter of financial services globally, generating a record high trade surplus in 2015 of $97bn. Around 40% of the UK’s trade surplus in financial services is with Europe. However, over the next 10 — 15 years, 90% of global economic growth is expected to be generated outside Europe and these markets — developed and emerging — must be a priority focus for the country post-Brexit.”