International Trade (Weak) Week?

By Sabine Tyldesley

Welcome to another week in British politics: the first full week of new PM, Rishi Sunak, Halloween week, and as the Department for International Trade will tell you: International Trade Week.  

The second installment of the event, comes at a time when trade statistics are looking on the up. However as these compare year on year, and with 2021 impacted severely by post pandemic issues, an uptick was expected and not difficult to deliver. 2022 has seen some of the most trade disrupting events in recent years, with the Russian invasion of Ukraine leaving businesses facing recessionary and inflationary forces. However, even taking those into account the overall picture is showing that trade is quite weak, and a Brexit dividend remains elusive. 

According to research given to the Houe of Lords European Affairs Committee, UK trade openness (the sum of imports and exports compared to GDP) has fallen significantly, relative to other G7 countries  

The latest OBR bulletin concludes that more than five years since the Brexit referendum, and two years since the UK left the EU, “there is little sign to date of UK goods exports to non-EU countries making up for lower exports to the EU, with the former down 18 per cent on 2019 levels.” 

A week long event focussing on “helping businesses understand how to capitalise on opportunities secured by our new trade deals” is therefore either just what the doctor ordered, or it’s a little tonedeaf.  

I will let you decide.  

But what is clear is that this is a year which has more uncertainty than many feel can be managed; neither by business nor by policy makers.  

While the UK installed its third Prime Minister in 2022 only last week, those watching Government policy long term observe many moving parts:  

FTAs  
Keen to realise the post-Brexit vision of Global Trade, the Government reassures us that the Australia and New Zealand deals will be ratified as planned in 2022, with implementing legislation going through the final stages in the first half of 2023. In fact it was just last week that the New Zealand deal finally started its journey of Parliamentary scrutiny.  

Meanwhile after a hiccup last month, Rishi Sunak held a phone call with Indian Prime Minister, Narendra Modi,  in a bid to salvage the trade deal that was due to be finalised by Diwali. The press update did little to reassure the masses of a positive outcome when it simply said “The Prime Minister *hoped* the UK and India could continue to make good progress in negotiations to finalise a comprehensive Free Trade Agreement.”  

Regulations 
A “bonfire” of regulations was going to be one of the big prizes of Brexit and is the aim of the Retained EU Law (Revocation and Reform) Bill. This Bill has now had its Second Reading in the Commons but was championed by a Minister now no longer in post. This is also a pretty big task to preserve, restate, replicate, revoke, replace or modify every piece of retained EU law. More on what the Bill means here.  

While the Government has been clear on its desire to remove regulations for businesses, some are facing more paperwork than before owing to Brexit.  

The Electronic Trade Documents Bill, which was introduced last month, is meant to help with this by ending the need for paper-based trading documents but will need to navigate a busy Parliamentary timetable starting in the House of Lords.  

Finally, some of the challenges are sector specific, but as the Public Accounts Committee concluded, it’s across many sectors where progress on developing long-term regulatory strategies post-EU Exit has been slow. The future direction of UK regulation remains unclear, which has led to increasing regulatory risks and costs.  

Some challenges are to do with the situation in Northern Ireland, which is facing new elections after power-sharing could not be established. However, it also faces uncertainty derived from the Northern Ireland Protocol Bill, which has completed Commons stages and is now being examined by the Lords at Committee stage. The Bill would give Ministers delegated powers to decide which parts of the Protocol would be an ‘excluded provision’ in domestic law, raising the risk of contravening international law. 

The new Government …again 
Not all is doom and gloom, as the Institute of Directors (IoD) has published new research finding that 42% of firms expect their overseas trade to grow over the coming year.  

The economic situation is dire for many, but almost half of businesses reported better trading prospects (up two percentage points to 46%) according to a recent survey.  

Government is expected to capitalise  on this optimism.  

In one of the developments offering a measure of consistency, new Trade Secretary Kemi Badenoch is one of the few Cabinet Ministers to have stayed in their role, despite the change in Prime Minister.  

Speaking at the Green Trade & Investment Expo – one of the flagship International Trade Week events - in Gateshead today she very clearly articulated her vision of trade as a means to an end, to support communities future proof, with regards to becoming more green, using trading relationships to strengthen energy security and create jobs.  

This is a slightly different narrative to the line we heard from the previous ministerial cadre, which focussed more on growing the economy and helping more businesses grow through trade. 

However, there is still plenty of hesitancy among businesses who remain unsure about how “to take that first step onto the trading ladder”, to quote Badenoch again.  

So as the new Ministers settle in, and the Government tries to tackle the domestic challenges through its trade policy, there are plenty of engagement opportunities to shape what comes next.  

And meanwhile maybe ITW22 has something to offer you. Find out more here.