Where Next for the Strategic Trade Agenda?
Adapted from remarks delivered to International Chamber of Commerce (ICC) at the meeting of the ICC UK Governing Body and Policy Chairs
I am going to take as my starting place the two key points from the ICC Brexit position statement: First: Free trade matters, and second: inclusive free trade is important. I think that both statements are well judged, well timed and true.
Following the excitement surrounding the US election I risk disappointment, but I am not going to talk about a Trump ‘dividend’, the potential for a strong economic upside from fiscal stimulus and a deregulatory agenda in the United States. Nor am I am going to talk about the transition to Brexit here in the UK.
I will focus on two things: The proposition that the US and the UK – and in particular the highly integrated British-American business community – have a role to play in shaping the global business environment.
I want to argue that the role for this community is to keep up the focus on shaping an inclusive trade agenda; and What we might see in the US-UK context contributing to, or more likely complicating, that dynamic. I believe that transatlantic business does carry a ‘global value proposition’. This is more than a ‘CSR aspiration’.,In fact, it is a proposition responsive to expectations that there should rules and compliance with rules across a whole range of risks and behaviors in our societies from food safety to ethics. And a globally-focused transatlantic business certainly seems comfortable with a diversity-enabled, innovation-hungry, ethics-compliant and democracy- inspired business model.
In short, there is a value system behind the ‘playing to win mentality’ that our best companies exhibit in global markets. It also adds up to a more expensive business model, now largely built into cost structures. But for this model to work, there’s a belief and a need that the playing field rules require that everyone else has to adhere too. If transatlantic business is paying more to meet expectations, then so should everyone else.
That ‘strategic’ trade agenda continues to be one which supports a global trade order that is democracy-inspired, innovation-hungry, with the value system ‘locking in’ as the basis for rule making globally. The Trump and Brexit phenomena appear to constitute a ‘hit’ on a strategic trade agenda that has already been in retreat for some time now. The reason the strategic trade agenda is in retreat is because we have failed to draw the explicit link between the promises of globalization and the distribution of the benefits it can deliver beyond a small group of insiders. For a long time, we have failed to hear the warning signs. This year, people used the opportunity to vote to make us hear. A majority of Brits and Americans have said resoundingly ‘no more’.
This should have been obvious to us.
It should have been obvious when the £10 billion benefit to the UK economy Promised to appear as a base case for the Transatlantic Trade and Investment Partnership (TTIP) was quickly ‘translated’ by NGOs as offering the price of a cup of coffee per capita. In other words: Nowhere close to the adjustment promise that would resonate in those communities missing out on the benefits from globalization. So what does this mean in a US-UK context?
There is a significant policy challenge out there. An ideological fork in the road indeed is looming on trade. And there are questions we need to answer.Are we for example to work for ‘inclusive trade’, to bring people into the promise of globalization or are we instead looking at another period of Reagan / Thatcher style neo-liberal supercharging of trade and investment, as a doubling down on globalization?The strategic trade agenda’s interest is in the former I would argue, but we should also take comfort that the US-UK economy in either context is always going to be a part of the solution and not the problem.
Let’s turn to a potential US-UK trade deal.Let me start by reminding everyone about the significance of the US UK economic relationship:
16-20% of total UK exports
1 million jobs in both economies
Approximately 1 trillion dollars in foreign direct investment shared between the two economies
A US-UK Free Trade Agreement (FTA) is relevant as a vehicle to boost those numbers quite clearly, especially if we can reduce barriers such as those routinely faced by SME’s with duplicate regulatory standards and customs complexity. But the questions around when, what and how still remain. Political momentum appears better with President-elect Trump, but the trade ‘bureaucracy’ does not move quickly and is still built on multilateral, regional trade agreements. We have yet to see if and how the US approach to trade agreements will change. Brexit certainly complicates but also changes matters by posing a new, reasonably well connected ’demandeur’ for a bilateral trade deal, particularly with the US. In this context BritishAmerican Business will raise the prospect of an informal trade dialogue at ministerial level between the US and UK before any formal UK trade competence crystallizes. We know this may take years.
A possible future FTA has to be imaginative. We have to look for things that our citizens care about to build ‘millennial-facing’, local and bilateral elements for such a deal. It is squarely in the interests of the UK to frame this conversation as being ‘next generation’ ‘millennial’ and ‘inclusive’. A standard FTA template and mercantilist negotiating mindset will highlight the UK’s relative lack of bargaining strength because it has an economy six times smaller than the US. A good starting point would be using the TTIP template, which itself may still play a role in the future.
We need to get ahead of the curve on obvious problem areas like NHS, Food Safety and Investor-State Dispute Resolution. And we have to give specific, tangible and most importantly local stories instead of the same tired, old GDP forecasts. ‘Evidence’ is crucial, but it does not have to be the driving element of the communication.
The strategic trade agenda may have taken a hit but it is in both the interest of transatlantic business and the UK to continue work to deliver on a globalization model that doesn’t forget to share the benefits.