Stephen Booth: The Integrated Review – a further step towards the wider world and away from the European Union

25 Mar

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

A “Global Britain” needs to ensure it is relevant in and to all three of the world’s major economic and geopolitical hubs – Europe, North America, and the Indo-Pacific. Brexit or no Brexit, it is clear that the economic and political weight of Europe is in relative decline and that global power is shifting, predominantly due to demographics and the rise of economies in Asia. 

Brexit has only emphasised the need for the UK to diversify its international relationships and that it must be prepared to do so across a wide spectrum of areas. It was significant, therefore, that last week’s Integrated Review (IR) emphasised such coherence across government, mirroring a world where the boundaries between prosperity and security, trade and development, and domestic and foreign policy are increasingly intertwined. 

The IR reflects several concepts and recommendations that have featured prominently in the think tank I work for, Policy Exchange’s, research. Arguably, the most significant is the “Indo-Pacific tilt”. Trade policy was not highlighted alongside security, defence, development and foreign policy in the official title of last week’s IR, but did feature in its conceptual development and it is a key strand of the document. It has emerged as a key component of the UK’s new strategic approach and is central to the “tilt”.

The UK intends to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and become a Dialogue Partner of ASEAN. The UK has already secured a deal with Japan. Bilateral trade negotiations with Australia and New Zealand would be expected to bear fruit this year, while talks with the United States could take longer. 

India is an increasingly important part of the UK’s Indo-Pacific economic strategy and the IR confirmed that a potential comprehensive trade deal is a long-term ambition. We may expect to hear more about the roadmap to a deeper UK-India economic relationship during the Prime Minister’s planned visit to the country next month.

Individual free trade agreements will provide important economic benefits, particularly for certain sectors of the economy, but their aggregate impact on UK GDP is likely to be limited in the short-term. Trade deals are best viewed as important elements of a long-term strategy of diversification away from – rather than immediate replacements for – the EU market and increasing the UK’s links to the economic and political developments of the world’s faster-growing markets. 

The key to taking advantage of these opportunities will be to marry the twin aims of outwardly projecting “Global Britain” and “Levelling Up” those regions of the UK that have most struggled to adapt to globalisation. The IR recognises that for Global Britain to be a success, more of the UK must become integrated and competitive in the global economy.

For example, the government is launching new UK Trade and Investment Hubs in Scotland, Wales, Northern Ireland, and the North of England. This is a complex and long-term challenge. British businesses, smaller ones in particular, will need to be supported and encouraged to make the most of new opportunities which will take time.

It is welcome, then, that the IR acknowledges that the UK’s new trade policy is not simply a commercial endeavour. It is, rightly, viewed as an important part of a geopolitical toolkit that should be deployed to reinforce the wider economic, political and security relationships, upon which a successful Global Britain will rely. 

It is noteworthy that the IR underlines the UK’s ambition to “move from defending the status quo within the post-Cold War international system to dynamically shaping the post-Covid order.” An important aspect of this means using “regulatory diplomacy” and working with like-minded partners to influence global rules.

This is particularly relevant in emerging technologies, as systemic competition intensifies, in particular with China. This is an often-underappreciated benefit of concluding trade agreements, particularly with platforms such as the CPTPP. It helps to embed and promote high-quality rules. 

The IR’s emphasis on the UK “as a global services, digital and data hub” highlights that the UK’s natural economic strengths often sat uneasily within the wider EU’s order of priorities, where the UK’s approach in these sectors has often differed from the other big players, France and Germany.

In my previous column, I noted that the UK is now able to put forward a distinct voice and approach that plays to its competitive advantage and confronts head-on the political reality that global power is shifting away from Europe, particularly in these innovative fields. France, Germany and the Netherlands have all adopted their own national strategies for the Indo-Pacific, prompting the EU to signal that it will set out a common vision in the “coming months”. The challenge for Brussels will be to produce something pragmatic that rises above the lowest common denominator.

Several commentators have remarked that the IR says relatively little about how the UK views its long-term relationship with the EU developing, both in terms of future cooperation and competition. This is perhaps unsurprising given the proximity of the publication of the IR to what has been a turbulent Brexit process.

In recent days, we have seen examples of both forces at work. The UK and the EU, along with the US and Canada, have co-ordinated new sanctions against China over its treatment of Uighur Muslims. However, the threat of an EU vaccine export ban, chiefly targeted at the UK, illustrates that any UK strategy for national resilience must now consider the prospect of an uncooperative EU.

The EU acting as a bloc can have the advantage of economic scale and collective weight but, due to internal tensions, it can lack coherence and focus, often particularly evident in its efforts to implement a collective foreign policy.

There follows a strong argument that the advantages of the EU were better suited to the relatively benign international order of the late twentieth century – an order underpinned by the US security guarantee – and its drawbacks less so to a world increasingly characterised by great power rivalry and systemic economic competition. Many within the EU have historically been reluctant to acknowledge that the transatlantic relationship, based as it is on NATO, is fundamentally asymmetric.

It is also worth recalling that during the Brexit negotiations, it was the EU that held out hope of a formal agreement with the UK on foreign and security policy. The UK ultimately decided it would not pursue such an agreement. The UK has made it clear in the IR that its commitment to European security is “unequivocal”, that it “will continue to be the leading European Ally within NATO”, and will “actively support” EU-NATO exercises.

However, in terms of direct engagement with Brussels, the IR highlights the opportunity for a “distinctive approach to foreign policy” outside the EU and the advantages of flexibility and coherence from acting independently. The UK has also committed to finding “new ways of working with” the EU on “shared challenges” and “where our interests coincide”.

There remains no sign that the UK is interested in any formal agreement with Brussels in this area. The implication is that the merits of cooperation will continue to be assessed on a case-by-case basis and therefore cannot be taken for granted, particularly if the economic relationship were to be further soured.

Daniel Hannan: Ignore the Europhile sneers. Joining the Pacific bloc marks the rebirth of Global Britain.

3 Feb

Daniel Hannan is a writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

She’s unstoppable, that Liz Truss. The epidemic has put most Whitehall ministries in damage limitation mode, but the Department of International Trade is on a roll, signing 62 free trade agreements to date – plus, obviously, the deal with the EU itself.

Those who can’t bear the thought of Brexit succeeding are, naturally, scoffing. These deals, they say, are largely replicas of what we already had as EU members. Their new line of criticism is, I suppose, an improvement on the position that they took until 12 months ago, namely that we would barely be able to strike any deals at all.

But it’s still not true. Many of the “rollover” treaties go further in small ways: more generous quotas, fewer restrictions. True, these liberalisations are chiefly tokens of intent. But that intent is real. With limited capacity, our priority has been to negotiate new FTAs – that is FTAs with countries where the EU currently has no trade deals, such as Australia and the United States.

Where there are serviceable existing arrangements, we have tended to say, in effect: “Let’s leave things roughly as they are for now, and agree to come back to it next year”. Even in these cases, though, we have often taken the opportunity to go further. The UK-Japan deal, for example, is more comprehensive when it comes to services and cross-border data flows than the EU-Japan deal, even though the latter had only just entered into effect.

This week, Britain took a momentous step when it applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade zone comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Again, many Europhiles are sneering. Joining a Pacific trade pact, they say, defies geography. And it is of course true that Britain is not a Pacific country (other than in the technical sense of owning the Pitcairn islands). But we have exceptionally close links to a number of CPTPP members. Australia, New Zealand, Singapore and Canada are common law, English-speaking nations. So, to a degree, are Brunei and Malaysia.

One of the arguments for Brexit was that, in the internet age, cultural proximity trumps physical proximity. That argument is stronger now than it was a year ago. The lockdown has habituated us to using Zoom or Teams for important discussions. When travel returns, it is hard to imagine that business people will be as ready to hop over to Düsseldorf for the day to make a presentation. If you’re online, Rotorua is no further than Rennes – indeed, nearer in the sense that it shares your language, legal system and accounting methods.

Another argument for Brexit was that, by global standards, the EU was a slow-growth region. That argument, too, is now looking stronger. Although we talk of the pandemic as a global event, the truth is that it hit Europe much harder than Asia, Africa or the Antipodes.

But the biggest difference between the EU and the CPTPP is that the latter is a trade agreement rather than a state-in-the-making. Its members simply seek to maximise their prosperity through greater specialisation and exchange. Joining the CPTPP does not involve making budget transfers to its poorer regions, or accepting the supremacy of its laws over our parliamentary statutes, or adopting a common flag, passport or anthem. Nor does it require a member to alter its standards on non-exported goods and services.

Viewed purely as a trade pact, the CPTPP is preferable to the EU because it elevates mutual recognition over harmonisation. The essence of the CPTPP is that its members agree to refrain from certain actions that would restrict free commerce. It is perfectly possible for CPTPP members simultaneously to have ambitious trade deals with each other and with the EU – as, for example, Japan and Canada do. On services and on professional qualifications, CPTPP uses a “negative list” approach. In other words, it assumes that whatever is legal in one state is legal in all the others unless it is expressly exempted in the treaty.

It is fair to say that the CPTPP is wide rather than deep. It does not go as far as, say, the Australia–New Zealand deal, which is arguably the most advanced on the planet. But, as Australia and New Zealand demonstrate, a deeper trade deal can nestle within a broader one.

Our aim should be to negotiate a deal similar to that which Australia and New Zealand enjoy with one another – assuming that is, that our protectionists in DEFRA and the NFU will let us. We should, in other words, seek both to participate fully in the CPTPP and, under its auspices, to secure even more ambitious agreements with the countries closest to us in terms of GDP per capita and regulatory interoperability – namely, Australia, Canada, New Zealand and Singapore.

Indeed, New Zealand, Singapore and Chile – three of the world’s greatest free-traders – are currently setting the pace when it comes to digital trade. If Britain peels itself away from the wary and watchful EU, which has never been comfortable with the free-wheeling nature of the internet, and joins these Hayekian states, it is likely to end up crafting standards on digital trade that every competitive country will want to adopt.

Finally, there is a geopolitical case for membership. Donald Trump’s decision to pull out of the Pacific deal at the last minute opened the door to China which, three months ago, created a rival trade pact with Australia, Japan, New Zealand, South Korea, and all ten members of ASEAN.

My guess is that the Biden administration will want to reverse Trump’s mistake. After all, many of its leading members had been involved with putting the Trans-Pacific Partnership together in the first place under Obama. British membership of the zone, as well as being in itself a useful counterweight to Beijing’s ambitions in the region, will set the context for UK-US trade talks.

To sum up, then, our CPTPP application will boost jobs and growth, strengthen the Anglosphere, improve the prospects for a bilateral American deal, accelerate our pivot to the fastest-growing markets on Earth, and elevate Global Britain. Not bad. Not bad at all.