Yes, let’s agree new post-Brexit trade deals – but that means backing Britain’s small exporter business
Jim McConalogue, 29 May 2020
While Britain has begun to look away from its weary relationship with ‘social Europe’ and across the globe to strike new trade deals, it is apparent from the latest round of Brexit trade agreement negotiations that EU chief Brexit negotiator Michel Barnier remains pessimistic. He claimed to share the British ambition to achieve a free trade agreement with no tariffs or quotas on any goods, but expressed concern for our continued lack of desire to commit to a Euro-centric, baggage of regulations and standards under the catch-all term of a ‘level playing field’. While the European economy is plunged into a downturn ‘unprecedented in peacetime’ (according to Christine Lagarde, president of the European Central Bank), the wider EU leadership is still mourning a major loss: the exit of a major trading nation, its second largest net contributor to the club (after Germany) and the world’s fifth largest economy.
In tandem with the Brexit process, Britain is (rightly) looking across to the United States for a formal trade deal. Together, the two countries trade in over £220bn worth of goods and services. The International Trade Secretary Liz Truss and US trade representative Robert Lighthizer are already engaged in talks. Britain’s economy could be £3.4 better off in 15 years under the deal, according to the Department for International Trade.
Britain is also now involved in pursuing a trade agreement with Japan. The economy could be boosted by £1.5bn as UK-Japan trade flows could increase by £15.2bn. For the government, maximising trade opportunities will translate into making it flexible for 8,0000 small SMEs exporting goods to Japan. Those exporters could benefit from £33m per year. UK worker wages might be expected to increase by £800 million as a result of the deal.
But boosting post-Brexit trade across the world must mean more than agreeing trade deals. It means giving industry ‘a leg up’ at home. In a publication from our think tank Civitas, ‘Britain’s Export Boom: and how to encourage it’, Marcus Gibson, Head of Gibson Index, looks at the strong evidence which sat behind the growing strength of the post-Brexit economy – now, currently subject to the immense disruptions in trade paralysing various sectors following the pandemic. He focuses on the extraordinary rise in the UK’s export volumes – much of it pioneered by the UK’s small and medium sized enterprises (SMEs).
Neither does Marcus Gibson shy away from the realistic prospect of the current Brexit negotiations. He predicts that given the low growth of the EU economies, it is doubtful the EU Commission will have the leverage to enforce a trade deal that damages the UK economy. As a result, he finds the UK trade with the EU “will not decline but continue unchanged at the same level”.
His analysis of SMEs gives some credible and valuable insights into how we might think of accelerating UK exports. In this regard, his short book suggests a number of key and realistic low-cost programmes the government could implement, including a programme to promote an increase in UK exports by recruiting an ‘Export Elite’ of SMEs that already export to around five markets – and expand them into 50 export markets.
His book looks at how the UK’s commercially focused universities should be funded to deliver professional Export Manager courses, given that less than 20% of UK-based SMEs currently export their goods and services. He suggests the creation of a new Knowledge Commercial Partnership, alongside the highly successful Knowledge Technology Partnership (KTP) scheme, in which graduates could be parachuted into an SME to undertake an important project that requires technical skills. The Department for International Trade – now in the midst of trying to set up those global trade deals – should also look, for example, to increasing the budget of trade show support to enable thousands more SMEs, especially microSMEs, to help them exhibit in trade shows.
After all, our ongoing assessments of whether the UK recovery now proceeds with a V-shaped post-lockdown recovery will much depend on providing the right conditions for companies to grow. A vital part of that picture is recognising how exports have played a crucial role in the UK’s economic growth and why smaller domestic businesses trading internationally must be encouraged to grow.