UK Trade and Brexit

The US President’s pronouncement on Theresa May’s Brexit plans – “If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK, so it will probably kill the deal. If they do that, then their trade deal with the US will probably not be made” – dominated the headlines late Thursday and early Friday, taking many aback and leading to something of an exercise in damage limitation over the subsequent period of his official visit.

But while the statement was unusual in breaking diplomatic sensitivities – and distinctively Trumpian in tone – it was also quite coherent with US trade policy priorities, and is worth taking seriously as a reminder of some of the challenges that the UK faces as it makes choices about trade post-Brexit.

What lies behind Trump’s statement? To begin with, while tariff wars have recently dominated the headlines, the United States’ primary objectives in trade with the EU have, for many years, related not to tariffs but to regulation and specifically to what the US Trade Representative’s most recent report characterises as “costly EU regulatory barriers to U.S. exports.”

What are these regulatory barriers? The first mentioned by the USTR are ‘technical’ and ‘sanitary and phytosanitary’ regulations. Some of these may involve areas where negotiations could be productive; there are regulations on both sides which could be streamlined or harmonised. But some of them are designed to protect vital aspects of health, animal welfare, and the environment. In agriculture, these include regulations that ban agricultural goods produced involving practices not permitted in the EU – such as the oft-cited hormone-injected beef and chlorinated chicken – as well as agricultural products that have higher levels of chemical residues than the EU permits. In other areas, they involve such things as using the precautionary principle to evaluate chemical safety and establishing the kinds of chemicals that can, for example, be used in cosmetics.

The US’s complaint is not simply that the EU adopts these regulatory standards for its own use; it’s that the EU standards, because of the bloc’s trading power, influence standards globally and that the EU (it argues) “encourag[es] trade agreement partners to adopt EU standards and to exclude products manufactured to different U.S. and other international standards.” The US, in short, wants its standards to be the norm, and the EU is standing in the way.

From a US trade policy perspective, Brexit provides a great opportunity. If the UK could be separated from the EU standards and brought closer to the US, it would not only increase the market for relevant US exports to the UK but also weaken the EU’s capacity as a global standard setter and strengthen the US’s capacity.

The Government’s recently-released White Paper, however, seeks to avoid a hard border for Northern Ireland and to avert damage to ‘just-in-time’ processes and integrated supply chains connecting EU and British manufacturing. To do this, it has to avoid insofar as is possible inspections at borders. Divergence in regulatory frameworks necessitates border inspections to ensure that goods comply with the standards of the area they are entering. The White Paper therefore envisages that its proposed ‘association agreement’ with the EU will include a “free trade area for goods, including agri-food” underpinned by a common rule book, with the UK committing in advance to ongoing harmonisation with EU rules on goods, as necessary for frictionless trade at the borders.

In the sense that it retains valuable regulatory protections, avoids a hard border and protects manufacturing and the UK/EU goods trade, aligning with the EU’s regulations offers several positives – and trade policy experts feel there is a case for it both politically and economically. But there are also several political difficulties with the way that this is done in the White Paper. Most importantly from a domestic perspective, its approach leaves the UK as a ‘rule taker’ rather than a ‘rule maker’ with respect to trade in goods, needing to harmonise with the EU without having input into the way its regulations are created, and unable, as Trump implied, to negotiate separate regulations for trade in goods with third parties.

Donald Trump’s intervention was intended to reinforce the US position and, at a time when Theresa May appears vulnerable, to strengthen the hand of those in the UK who dislike the White Paper and who favour a hard Brexit. And even if his approach was subsequently tempered, it has sent a clear signal – and provided ammunition for those who see him as an ally.

Donald Trump and pro-Brexit politicians, however, are not the only people who are unhappy about the White Paper. For many UK politicians – not simply those who saw Brexit as an opportunity to ‘take back control’ – this is an unacceptable compromise. Lord Mandelson, a strong Remain advocate and a former EU trade commissioner, has come out against it.  Other large countries seeking concessions are also likely to make their opinions known: India has explained what it feels are barriers to trade (as with the US, there is a focus on health and safety regulations for food and chemicals) though trade experts generally feel that the likelihood of a UK-India agreement is low anyway.

And on the EU side, theWhite Paper crosses one of the EU’s major red lines – the separation of the four freedoms (freedom of movement for goods, services, capital and people). While, therefore, EU governments have cautiously welcomed the paper as a starting point for negotiations, there is little likelihood that the EU would accept the proposals as they stand. EU member states, moreover, have agendas of their own – particularly where the UK’s services industries are concerned.

Where, then, does the government turn? Pressures are likely to increase. While the EU is moving forward on a number of significant free trade agreements – this week alone, officials discussed the implementation of one with Canada,  the signing of one with Japan, and progress in one with Australia – the UK is feeling increasingly vulnerable. There is a gradually increasing sense that it would be hard to get a favourable deal with new large markets on terms that would be politically acceptable in the UK … and at the same time an awareness that the kind of deep relationship with the EU which would avoid disruption to EU trade will most likely itself require politically sensitive concessions.

How then do we pray? For ourselves, we’re framing a response in terms of Micah 6:8:

• Do justly
  The vital question in all of this is”What are we actually seeking?” It’s not enough to say “trade deals” or “freedom” – trade deals are a means to an end, not an end in themselves, and “freedom” can be used well or badly. We need to have an ethical framework that provides the narrative within which different options – with all their complexities – are considered and weighed, and that corresponds to our vision of a just society. We pray:
  • • that as it considers different trading arrangements the UK will place a priority on promoting those that maintain or strengthen our ability to care for creation, protect human dignity, and promote economic justice
    • in thanksgiving that the UK has committed to one aspect of trade justice, honouring the Everything But Arms agreements that, under EU rules, it has with the world’s Least Developed Countries

   

• Love kindness
  We’re all conscious that superficial characterisations and mis-characterisations, the trivialisation of others’ points of view, and ad hominem attacks have become the norm in discussions around trade and Brexit both in people’s comments and in much of our media and social media. In a situation where so much is at stake and there is so much complexity, we pray:
  • • for an end to all that demeans our public discussion of ideas and issues
    • that Christians – regardless of their political point of view – will be willing to champion standards in public discourse
    • that the Church (and others) will create opportunities for people who are prepared to discuss the issues to come together in conversation

   

• Walk humbly
  Humility involves self-knowledge; a willingness to acknowledge one’s true place as both a fallible part of creation and the recipient of God’s grace and gifts; an awareness of others’ gifts, failings, needs and concerns; and a respect for reality beyond oneself.As the Brexit trade negotiations continue, pray that
  • the societies and governments involved will be honest about their own strengths and weaknesses, avoiding both pride and arrogance on the one hand and underestimation of gifts on the other
  • all of us will seek out people whose expertise (through practical experience and/or study) can help to give as full a picture as possible of the options and the issues at stake
  • those who have been unwilling to engage with the complex political and economic realities of international trade negotiations and their impacts will move towards a positive and constructive engagement

This week’s Revised Common Lectionary readings remind us that being someone who is committed to seeking God’s will and speaking as God commands will often involve peril. Pray for all whom God is calling to speak hard words, especially when they are doing so to people with power.