Why British trade policy needs to stand still

“First, do no harm.” The medical profession’s historic motto has largely fallen into disuse as a doctors’ oath, but it would serve a post-election British government well when it examines the pallid patient that is UK trade policy.

So far, the general election campaign has been insultingly devoid of substantive policy discussion for a country that is facing serious fiscal and growth problems and needs to improve its relations with the EU. But for non-EU trade policy, an incoming Labour government’s watchword should be to avoid making a bad situation worse.

Eight years of a Conservative government running around trying to create a credible post-Brexit trade policy has resulted in little of importance. Rolling over the near 70 preferential deals that it inherited from the EU was a non-trivial task for a trade department expanding almost from a standing start. Less positive are its achievements in joining the Asia-Pacific CPTPP deal and signing bilateral agreements with Australia and New Zealand.

The government’s own figures estimate those agreements collectively add less than 0.2 per cent to UK GDP. It’s hard to find officials from CPTPP countries who, whatever their official public line and however much access to the UK market their own companies have gained, think Brexit was a good thing for Britain.

The CPTPP numbers are so small because the UK already had preferential agreements with the economies it includes. Despite the rhetoric of eschewing sclerotic Europe for the fast-growing economies of the Pacific Rim, the UK’s trade route to the Asia-Pacific has gone mainly through Brussels.

The same could be true of Latin America. A signed but as yet unratified deal between the four-nation Mercosur bloc and the EU may never be finalised, but the UK doesn’t even have negotiations open with Mercosur.

A US bilateral deal has resolutely failed to materialise, as almost everyone familiar with the situation predicted. The Conservatives have resorted to staging pitiful signing ceremonies with individual US states on pieces of paper whose texts explicitly state (Section 11 here) they have no legally binding status.

Even if it got a bilateral US deal, UK exporters wouldn’t get much from it. That’s leaving aside the well-known issues with the imports of chemical-washed chicken. Nor — and this is an under-appreciated aspect of its trade policy overall — will the UK achieve much from any probable preferential deal anywhere in the world.

The UK’s competitive advantage is in services. As noted this week in a report by the think-tank UK in a Changing Europe, British services exports have performed relatively well in recent years, particularly in management consultancy and similar business services that are regulated lightly or not at all.

Few trade deals contain market-opening provisions for regulated services — except, of course, the EU single market. It’s laughably improbable that the US would give the UK’s financial services substantial new access in a preferential trade agreement. The US jealously guards its regulatory prerogative. Negotiators reported that in talks with the EU for the now abandoned Transatlantic Trade and Investment Partnership, the US Treasury, the main negotiator for financial services trade, simply refused to engage with the conversation.

You can of course argue that any trade deals, even at the homeopathic levels of the CPTPP and Australia/New Zealand deals, are worthwhile. But consider this (admittedly simple) calculation. The long-run cost of leaving the EU single market and customs union is credibly estimated at 5 per cent of GDP. No set of preferential deals the UK can realistically strike will compensate by a tenth of that, even if any plausible group of Asian countries joins the CPTPP.

Joining deals like CPTPP, because it means giving preferential tariff cuts and possibly regulatory concessions that will have to be undone, will create at least some obstacle to realigning with the EU’s single market. If those deals make rejoining even a little less likely, they’re not worth doing. True, the UK has signed some other deals, such as a digital agreement with Singapore, which might prove less problematic for rejoining the EU, but nor will they have much effect.

Fortunately, although its opposition to rejoining the EU single market and customs union remains destructively absolutist, there are some signs that the Labour party is grasping the pointlessness of running around signing pieces of paper for the sake of it. In practice, a Labour trade policy is likely to amount to helping companies benefit from existing trade agreements rather than signing new ones.

Reducing UK trade policy to a technical assistance consultancy and events organiser for export fairs might seem a comedown for Britain’s ambitions to regain its 19th-century position of global trailblazer for free trade. It is, however, more realistic and more constructive.

First, do no harm. There is one overwhelming policy that will improve Britain’s trading position. But it involves the massive market 22 miles away across the Channel, not small economies thousands of miles distant across the oceans.