28 Jun The Election Debate on…International Trade
The last few years have been very difficult for the UK economy, with high inflation and low growth hitting businesses, public services and the public’s pockets hard. Strengthening the economy has therefore been placed at the heart of this general election campaign, with Labour pledging to ‘secure the highest sustained growth in the G7’, while Sunak has argued that he has a ‘clear plan to take bold action’ to fix the economy. For both parties, part of the solution to this economic crisis is seen to lie in international trade.
Post-Brexit, the focus for the Conservatives has very firmly been on transitioning existing EU trade agreements to bilateral agreements, and strengthening and broadening bilateral trade relations with a broad range of partners. The latter has been achieved primarily through a proliferation of Free Trade Agreements, of which the UK’s new agreements with Australia and New Zealand are the most notable. Joining the CPTPP was also a key part of this ambition and was seen by the Conservatives as a way to deliver new trade opportunities for the UK, while also putting some meat on the bones of its commitment to the Indo-Pacific tilt.
In their manifesto then, the Conservatives commit to a broad continuation of this philosophy, prioritising securing trade deals with a wide range of partners. Commitments are made to completing trade deals with India and with the Gulf Cooperation Council, and to pursuing trade deals with the US, as well as ‘countries such as Israel and Switzerland’. However, the review of the UK’s Trade and Cooperation Agreement (TCA) with the EU, the UK’s most comprehensive FTA, is not viewed as a major priority, with the Conservatives’ focus for the review on ensuring that reform of the TCA does not infringe on the UK’s legal sovereignty or involve dynamic alignment with the EU.
This stands in stark contrast to Labour, who are critical of what they view as the Conservatives’ ‘scattergun’ approach to trade agreements, arguing the Conservatives have focused on the quantity rather than depth or quality of agreements, and, in turn, have failed to bring meaningful benefits to the UK. Labour’s focus then is more narrow, with improving trade relations with the EU the top priority. This includes plans to negotiate a veterinary agreement to reduce border checks, strengthen support for touring artists, and secure a mutual recognition agreement for professional qualifications. The review of the TCA is also seen by Labour as a critical opportunity for the UK to strengthen trading relations, while still staying out of the EU customs union and the single market.
More broadly, Labour believes the UK needs a more strategic approach to trade, committing to delivering a new trade strategy, within which it will no doubt seek to grapple with the challenges of juggling its broad range ambitions for trade – including stimulating growth, promoting sustainability, protecting workers’ rights, and strengthening regional economic development. It has also pledged to give parliament a more substantive role and greater oversight of trade deals.
Where the two parties do agree though is in the need to ensure that trade does not compromise British standards or national security. The Covid-19 pandemic and Russia’s invasion of Ukraine laid bare the security risks within the UK’s supply chains, and the decision to remove Huawei from the UK’s 5G networks, for example, reflects the growing recognition of this risk. For the Conservatives, their focus is firmly on energy security, committing to investing £1.1 billion into Green Industries Growth Accelerator to support British manufacturing capabilities and boost supply chains.
Meanwhile, so called ‘securonomics’ is placed at the heart of Labour’s plans for government. Securonomics seeks to strengthen the UK’s ability to withstand global shocks by protecting key supply chains. The Labour manifesto therefore includes plans to invest £1.8 billion of Labour’s proposed National Wealth Fund into upgrading ports and building supply chains across the UK. It also commits to strengthening defence supply chains, including steel, and argues that its proposed Clean Power Alliance will help enhance clean Green supply chains. With Labour firmly committed to fiscal discipline, the scope for such intervention may be limited, and will be reliant on stimulating private investment to strengthen these sectors, rather than on public subsidies.
While their solutions may vary then, the Conservatives and Labour are trying to solve the same problem – how to strengthen the UK economy through trade, while protecting the UK’s values and security at the same time. In the current economic climate this will be difficult and will be particularly challenging against the backdrop of rising trade protectionism across the world, not least in the United States. Both President Biden and President Trump are increasingly protectionist – just last month Biden announced significant new tariffs on a range of Chinese goods. Meanwhile, President Trump has floated the idea of a 10 percent tax on all imports from all countries, as well as a tax of as much as 60 percent on everything that comes from China. A more isolationist US would force the next UK government to diversify its trade partnerships, strengthen its Commonwealth and regional ties, and be a champion for free and fair trade on the world stage. Against the tide of rising economic isolationism, that will be no mean feat.
