Stephen Booth: To reach a best in class trade deal with New Zealand and Australia, we must liberalise on agriculture

1 Oct

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

While the Brexit negotiations with the European Union have grabbed the headlines, the Department for International Trade has been quietly working away at the UK’s trading relationships with non-EU countries. Much of the work to date has been relatively uncontentious and therefore largely passes under the political radar.

In part, this is because the trade deals concluded to date have focused on securing and maintaining existing market access provided for by EU trade agreements, the UK’s access to which falls away at the end of the Brexit transition period on January 1. For example, the recent successful conclusion of UK trade negotiations with Japan built upon an existing EU-Japan agreement. While the UK and Japan were able to go further in some important areas, such as digital services and visas for business travel, the EU-Japan deal provided the template for much of the agreement on goods and tariffs.

However, the UK is also prioritising its negotiations with the United States, Australia and New Zealand. A trade agreement with the US presents the bigger immediate economic prize, but the negotiations with Australia and New Zealand are nonetheless strategically important. They are not only essential stepping stones towards the UK’s medium-term objective of joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – a trade bloc of 11 countries around the Pacific rim and the third largest in the world. They are also like-minded countries with which the UK can hope to influence others.

The negotiations with Australia and New Zealand should be simpler than those with the US but all three negotiations are truly novel, requiring the UK to break new ground. As a consequence, trade policy is likely to move up the political agenda as the Government seeks to manage the competing interests an independent UK trade policy inevitably needs to reconcile.

For example, last week, the House of Lords amended the Agriculture Bill to stipulate that any agricultural imports must “match or exceed” the UK’s own welfare and production standards. The amendment is supported by industry-led and celebrity-backed campaigns, urging MPs to “save our standards”, and the Bill is expected to return to the Commons later this month.

Of course, maintaining and promoting high standards is a legitimate aim and an important objective for UK policy. However, as we leave the EU’s regulatory system, we need to balance these objectives against the way the world outside the EU operates in practice. Not only might trade partners accuse the UK of using standards as a cloak for protectionism. As the National Food Strategy’s recent report argued, we cannot realistically expect to unilaterally force our standards on others at the same time as we are seeking trade agreements with them.

The crux of the trade negotiations with both Australia and New Zealand is likely to be the extent to which the UK is prepared to liberalise on agriculture in return for a high-quality agreement on trade in services, data and investment. The UK should use these negotiations to push for the best in class FTA on these issues, going further than the commitments contained in the CPTPP because, ultimately, if the UK joins the CPTPP, it will have access to these benefits anyway. Australia and New Zealand are both supportive of the UK’s bid to join and, like the UK, view the bilateral negotiations as important staging posts.

60 per cent of UK exports to Australia are already in services sectors and this could be boosted further by reducing barriers to professional and business services, such as the mutual recognition of qualifications, opening up procurement markets and liberalising visa regimes for business people. Both Australia and New Zealand have requirements on inward investment that are higher than the UK’s and higher than the OECD average. The UK will be looking to reduce some of these requirements in order to ease firms’ ability to invest in those economies as a base for exports into the Asia-Pacific region.

In return, both countries expect the UK to offer greater market access for their agriculture exports. Both countries traditionally seek complete tariff elimination in their FTAs. This is unrealistic, given that the UK is largely maintaining the EU’s tariffs on agriculture products. Nevertheless, the UK will have to be prepared to offer tariff reductions.

The Japanese experience of negotiating with Australia and on its accession to the CPTPP could serve as a model. Japan, which had a highly protected agricultural sector, has undergone tariff liberalisation as part of those agreements, but in some of the most sensitive sectors tariffs have been maintained and reductions have been phased in over 10, 15 and even 20 years.

The issue of standards ought to be less contentious with these markets. The RSPCA notes that New Zealand’s farm standards “have been judged higher than the UK”. Nevertheless, it is worth noting that Australia and New Zealand take a different approach to the EU when it comes to standards. Both joined the US in its complaint against the EU’s ban on hormone-treated beef.

George Brandis, Australia’s High Commissioner to the UK, said recently that “the intellectual argument for free trade in some quarters of the British political establishment is an argument that still needs to be fought and won.” It is true that the UK has much to learn and much to gain from cooperating with both countries on trade policy.

Both have undertaken radical programmes of unilateral trade liberalisation (Australia from the 1970s and New Zealand from the 1980s). Both countries have also liberalised further via networks of trade agreements. Australia’s FTAs with Chile, China, Malaysia, Singapore, Thailand and the US provide for duty-free and quota-free access for all their goods into the Australian market.

As a result, both countries have successfully combined the diversification of their exports while delivering benefits to consumers by lowering tariffs on imports. Just as importantly, both countries have used the moral and political capital earned from unilateral reforms to place themselves at the forefront of global initiatives to promote free trade.

New Zealand is a founding member of the Digital Economy Partnership Agreement (DEPA), together with like-minded Chile and Singapore, which is at the cutting-edge of innovation in digital trade. It was with these countries that New Zealand initiated the process that ultimately led to the CPTPP. Meanwhile, Australia is the joint leader of the 23-party negotiations on the Trade in Services Agreement at the World Trade Organisation.

If the UK wishes to be at the forefront of the argument for global free trade, this is the sort of company it should be keeping.

Jason Reed: Taiwan, Britain and the UN. It’s time to rethink the One-China Policy.

25 Sep

Jason Reed is External Communications Officer at the British Conservation Alliance.

The World Health Organisation (WHO), which is an arm of the UN, has come under a great deal of scrutiny this year as a result of its disastrous leadership throughout the pandemic, the most troubling aspect of which is its close links with China.

When the Coronavirus first emerged, transparency of information in government was suddenly more pivotal than ever before. But little to no information sharing occurred between countries at that crucial time, thanks to the combination of the WHO being at Beijing’s behest and the Chinese Communist Party’s aversion to openness of any kind. The cost of that failure was tens of thousands of lives.

The CCP’s tentacles extend far beyond the WHO, of course. The Chinese government has spent the last several decades worming its way into every corner of the UN. Perhaps the most obvious manifestation of that is the UN’s persistent refusal to recognise Taiwan as anything other than Chinese territory.

Imperialism is alive and well in the twenty-first century. China, a modern colonial power, still claims sovereignty over Taiwan, despite the fact that Taiwan has been an independent country for over 70 years, and its government was democratically elected by its population of 24 million.

Taiwan’s exclusion from the UN has nothing to do with Taiwan itself. It’s not as if the UN considered Taiwan’s request to join and rejected it on merit. Even North Korea is a member, after all. The UN simply refuses to acknowledge Taiwan’s existence. It is so beholden to the will of the Chinese government that it does not dare contradict anything that comes out of Beijing. What is the point of an international peace project if it reliably does the bidding of a communist dictatorship?

If there was ever a time to put our foot down and begin to roll back China’s power on the world stage, it is now. “De-Sinoficiation” will define international relations in the coming decades. The Coronavirus coverup, along with flagrant assaults on democracy in Hong Kong and the appalling genocide of the Uyghur Muslims in Xinjiang, mean that the world has no choice but to begin to distance itself from the CCP.

This will be an almighty task. For at least forty years, our politics and our economies have gradually become more and more intimately connected with those of China. Disentangling ourselves from that relationship will be a lengthy and arduous process. Finally deciding to exclude Huawei from our 5G network was the first step on a very long road.

But it is a journey we must make. De-Sinoficiation is a necessary task. The entire western world has effectively turned a blind eye to China’s wrongdoing for far too long. The watershed moment has now passed – there is no going back. In order to preserve any semblance of a liberal, globalised world order, China must be knocked off its omnipotent pedestal and held accountable for its actions.

Taiwan’s right to exist as an independent nation seems a good place to start. The right and wrong of the issue is clear-cut and it has always been a touchy area for the CCP, whose greatest fear is its sweeping authority being undermined.

In the Economist’s democracy index, Taiwan ranks third in Asia and 31st in the world (higher than Italy and Belgium). Meanwhile, China languishes among the fifteen least democratic countries, making it more authoritarian than Cuba and Iran. While Taiwan was legalising same-sex marriage, making it the first country in Asia to do so, China was writing ‘Xi Jinping Thought’ into its constitution.

Taiwan stands ready and able to become a fully-fledged member of the international community. There ought to be no question about its validity as an independent country. You might even argue that the island nation, which calls itself the Republic of China, has a much stronger claim to be the Chinese government than Beijing.

On top of everything else, Taiwan is a trailblazing Covid success story. Its total death count from the pandemic to date is seven. The Taiwanese government is also going above and beyond any reasonable expectations in order to build friendships with other democracies around the world, including the UK.

Despite the western world unfairly shunning it in favour of China’s economic might, Taiwan continues to behave courteously towards its would-be allies. For instance, the Taiwanese government donated over a million face masks to the NHS at the height of the British coronavirus outbreak.

Since then, Taiwan has – politely – asked to join the UN and be recognised as an independent nation, calmly pointing out the enormous body of evidence and precedents in its favour. Those calls have gone unheard. Some bridge-building is going on – such as through UK Export Finance investing in a Taiwanese renewable energy project – but it will never go far enough while China is still in the picture.

The British left is beginning to stake its flag in Beijing apologia. Now is the time for Conservatives to demonstrate what post-Brexit Global Britain could look like by standing up for freedom on the world stage. The first step ought to be reconsidering the long-outdated One-China Policy, which would surely cause a ripple of similar actions across the west and – potentially – force the UN to reconsider its close relationship with China.

The Government has an opportunity to lead the world on de-Sinofication and create a valuable new ally for Britain in the process. Let’s not waste any more time.

David Skelton: Brexit can unleash a new era of reindustrialisation. But only if we are free from state aid laws.

17 Sep

David Skelton is the author of Little Platoons: How a revived One Nation can empower England’s forgotten towns and redraw the political map.

Brexit provides the UK with an opportunity to build a new, high-skill, high-productivity economy. A bold agenda of reindustrialisation can revive regional economies and see the levelling-up agenda made flesh. But we can only make the most of these opportunities if we aren’t unnecessarily restricted by the EU’s state aid laws. As a sovereign nation, we should be free to follow an industrial policy that is best for Britain. We mustn’t have the ability of the British state to support innovation to be hidebound by the EU’s strict state aid rules.

There were many reasons that we voted to leave the EU. The ability to set our own laws and have them made by people who were elected and could be held accountable was a crucial part of the decision to Leave. A clear message was delivered in the referendum from long forgotten “post-industrial” towns across the country that we needed to tackle regional inequality. The EU’s apparent insistence on maintaining state aid rules after Brexit would ride roughshod over the first and make tackling regional inequality much more difficult to achieve.

I’ve long taken the view that the restrictive state aid rules imposed by the EU were one of the major obstacles to us achieving a new economic settlement that benefits the whole of the UK. The pursuit of a level playing field for the EU meant that the parts of the country that I talked about in Little Platoons, which were heavily impacted by deindustrialisation, became stuck in an economic cycle of low innovation, low skilled, low wage work.

This was bad for post-industrial parts of the country, but also bad for the economy as a whole, with the UK’s low productivity problem being particularly pronounced in those parts of the country that had seen economic decline for decades. The recycling of UK taxpayers cash (a reminder that we were a net contributor to the EU budget for decades) through much trumpeted structural funding was no substitute for the fact that state aid rules bound our hands and prevented us from a more ambitious strategy to reverse decades of decline.

Now we have left the EU, it’s essential that the EU isn’t able to bind our hands again as we look to shift the economic paradigm to that of a high-skills, high-productivity, high-wage, tech-driven economy. Freedom from EU state aid rules represents an important opportunity for us to deliver that altered economic settlement and to pursue a bold strategy that focuses on a high-tech reindustrialisation of our economy. This should emphasise the importance of manufacturing (including green industry) in reframing our economy.

Crucially, manufacturing is generally higher skill, more productive and more export driven than other sectors. Whereas manufacturing accounts for less than eight per cent of the jobs in the UK, it accounts for around two thirds of our R & D investment – the kind of investment that is crucial to future growth and prosperity. This R & D emphasis also underlines the importance of manufacturing creating what Shih and Pisano have described as the “industrial commons” – skills and knowledge networks and clusters that drive innovation further.

An industrial strategy free from the constraints of state-aid policy means that we can support the businesses and sectors that are at the forefront of the new industrial revolution and also use the power of government to create innovation hubs in the regions, along with government-supported and business-backed centres of industrial excellence. A new industrial policy, free from state-aid restrictions, could aim to deliver high innovation industrial hubs in regions where the transformative power of a government accelerated industrial commons could have an enormously positive impact.

Any discussion about the positive impact of industrial policy and the importance of a state-aid regime that supports it is normally accompanied with the construction of straw-men or, more accurately, straw “lame-ducks” and the argument that any industrial policy will inevitably go down the route of Britain in the 1970s.

This is an ideological worldview that regards the bailing out of British Leyland as trumping any international experience in the decades since.  However, what that international experience has shown is that by far the biggest risk for the UK lies in us not pursuing an intelligent industrial strategy.

International experience shows that state aid and industrial strategy can not only help to turn around lagging regions but also place countries at the forefront of emerging technologies. And successful international experience illustrates that an ambitious industrial strategy shouldn’t be about “bucking the market”, but, instead working with the market and using market signals to maximise the impact of government investment.

In many parts of Asia, including Korea, Japan, Taiwan and Singapore, industrial strategy has used market feedback to develop a sectoral industrial strategy that has seen living standards and productivity surge. In all cases, the feedback mechanism of the market has allowed governments to identify sectors for future growth and provide government investment that has allowed these countries to be leaders in key sectors.

The mid-century United States, seen wrongly as a laissez-faire bastion, also provides an example of gains that can be made when business and government work together. The hero of that story is Vannevar Bush, who saw the importance of the government strongly investing in and incubating innovation and helping to transfer ideas from the initial invention to the marketplace.

His importance has been summed up recently in the excellent work of Safi Bahcall. Bush understood that innovation and invention is key to future growth and prosperity, but also that early innovation is fragile and risky. Without government support, such innovation might well perish, but government support, through the likes of the National Science Foundation and DARPA allowed innovation to be nurtured at a crucial stage and resulted in a stream of inventions that transformed the economy.

Such a model, in which government nurtures innovation at the most important stage and invests in those companies at the cutting edge of key emerging technologies could be transformational for the UK economy, which already has a world-leading research base but often lacks the ability (or often means due to distorted or inefficient funding models) to maximise the commercialisation of innovation.

Government is in a position to support innovation at the most fragile stage of the innovation process in a way that the market simply cannot. An effective industrial strategy could maximise the UK’s strengths and use the directional sway of government to promote long-term growth outside of the South East. Such an ambitious policy would not, however, be fully possible under the stricture of EU state aid rules.

Brexit represents a remarkable opportunity for an economic renaissance in the UK. We no longer have to have ambition or imagination restricted by the EU’s state aid rules.

This renaissance could place the UK at the vanguard of the most industries and technologies over the coming decades. It could also bring about a lasting and meaningful transformation of parts of the country that have long been characterised by economic decline. This requires a sensible and strategic role for government, based on an independent economic policy that isn’t limited by the narrowly restrictive nature of EU state aid limits.

David Skelton: Brexit can unleash a new era of reindustrialisation. But only if we are free from state aid laws.

17 Sep

David Skelton is the author of Little Platoons: How a revived One Nation can empower England’s forgotten towns and redraw the political map.

Brexit provides the UK with an opportunity to build a new, high-skill, high-productivity economy. A bold agenda of reindustrialisation can revive regional economies and see the levelling-up agenda made flesh. But we can only make the most of these opportunities if we aren’t unnecessarily restricted by the EU’s state aid laws. As a sovereign nation, we should be free to follow an industrial policy that is best for Britain. We mustn’t have the ability of the British state to support innovation to be hidebound by the EU’s strict state aid rules.

There were many reasons that we voted to leave the EU. The ability to set our own laws and have them made by people who were elected and could be held accountable was a crucial part of the decision to Leave. A clear message was delivered in the referendum from long forgotten “post-industrial” towns across the country that we needed to tackle regional inequality. The EU’s apparent insistence on maintaining state aid rules after Brexit would ride roughshod over the first and make tackling regional inequality much more difficult to achieve.

I’ve long taken the view that the restrictive state aid rules imposed by the EU were one of the major obstacles to us achieving a new economic settlement that benefits the whole of the UK. The pursuit of a level playing field for the EU meant that the parts of the country that I talked about in Little Platoons, which were heavily impacted by deindustrialisation, became stuck in an economic cycle of low innovation, low skilled, low wage work.

This was bad for post-industrial parts of the country, but also bad for the economy as a whole, with the UK’s low productivity problem being particularly pronounced in those parts of the country that had seen economic decline for decades. The recycling of UK taxpayers cash (a reminder that we were a net contributor to the EU budget for decades) through much trumpeted structural funding was no substitute for the fact that state aid rules bound our hands and prevented us from a more ambitious strategy to reverse decades of decline.

Now we have left the EU, it’s essential that the EU isn’t able to bind our hands again as we look to shift the economic paradigm to that of a high-skills, high-productivity, high-wage, tech-driven economy. Freedom from EU state aid rules represents an important opportunity for us to deliver that altered economic settlement and to pursue a bold strategy that focuses on a high-tech reindustrialisation of our economy. This should emphasise the importance of manufacturing (including green industry) in reframing our economy.

Crucially, manufacturing is generally higher skill, more productive and more export driven than other sectors. Whereas manufacturing accounts for less than eight per cent of the jobs in the UK, it accounts for around two thirds of our R & D investment – the kind of investment that is crucial to future growth and prosperity. This R & D emphasis also underlines the importance of manufacturing creating what Shih and Pisano have described as the “industrial commons” – skills and knowledge networks and clusters that drive innovation further.

An industrial strategy free from the constraints of state-aid policy means that we can support the businesses and sectors that are at the forefront of the new industrial revolution and also use the power of government to create innovation hubs in the regions, along with government-supported and business-backed centres of industrial excellence. A new industrial policy, free from state-aid restrictions, could aim to deliver high innovation industrial hubs in regions where the transformative power of a government accelerated industrial commons could have an enormously positive impact.

Any discussion about the positive impact of industrial policy and the importance of a state-aid regime that supports it is normally accompanied with the construction of straw-men or, more accurately, straw “lame-ducks” and the argument that any industrial policy will inevitably go down the route of Britain in the 1970s.

This is an ideological worldview that regards the bailing out of British Leyland as trumping any international experience in the decades since.  However, what that international experience has shown is that by far the biggest risk for the UK lies in us not pursuing an intelligent industrial strategy.

International experience shows that state aid and industrial strategy can not only help to turn around lagging regions but also place countries at the forefront of emerging technologies. And successful international experience illustrates that an ambitious industrial strategy shouldn’t be about “bucking the market”, but, instead working with the market and using market signals to maximise the impact of government investment.

In many parts of Asia, including Korea, Japan, Taiwan and Singapore, industrial strategy has used market feedback to develop a sectoral industrial strategy that has seen living standards and productivity surge. In all cases, the feedback mechanism of the market has allowed governments to identify sectors for future growth and provide government investment that has allowed these countries to be leaders in key sectors.

The mid-century United States, seen wrongly as a laissez-faire bastion, also provides an example of gains that can be made when business and government work together. The hero of that story is Vannevar Bush, who saw the importance of the government strongly investing in and incubating innovation and helping to transfer ideas from the initial invention to the marketplace.

His importance has been summed up recently in the excellent work of Safi Bahcall. Bush understood that innovation and invention is key to future growth and prosperity, but also that early innovation is fragile and risky. Without government support, such innovation might well perish, but government support, through the likes of the National Science Foundation and DARPA allowed innovation to be nurtured at a crucial stage and resulted in a stream of inventions that transformed the economy.

Such a model, in which government nurtures innovation at the most important stage and invests in those companies at the cutting edge of key emerging technologies could be transformational for the UK economy, which already has a world-leading research base but often lacks the ability (or often means due to distorted or inefficient funding models) to maximise the commercialisation of innovation.

Government is in a position to support innovation at the most fragile stage of the innovation process in a way that the market simply cannot. An effective industrial strategy could maximise the UK’s strengths and use the directional sway of government to promote long-term growth outside of the South East. Such an ambitious policy would not, however, be fully possible under the stricture of EU state aid rules.

Brexit represents a remarkable opportunity for an economic renaissance in the UK. We no longer have to have ambition or imagination restricted by the EU’s state aid rules.

This renaissance could place the UK at the vanguard of the most industries and technologies over the coming decades. It could also bring about a lasting and meaningful transformation of parts of the country that have long been characterised by economic decline. This requires a sensible and strategic role for government, based on an independent economic policy that isn’t limited by the narrowly restrictive nature of EU state aid limits.

Stephen Booth: Why Stilton matters to the Japanese trade deal – and how talks can bring the UK closer to the CPTPP.

20 Aug

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

Global trade is the result of billions of individual decisions taken by businesses and consumers, but trade negotiations and agreements are inherently political. They not only require politicians and policymakers to haggle, in painstaking detail, over tariffs, quotas, rules and regulations; trade deals are also tools of foreign policy and in an increasingly unsettled, competitive and multi-polar world they can signify alliances between nations or groups of nations. Outside the EU, the UK’s trade agreements must therefore simultaneously address narrow economic and wider geopolitical interests.

Last week, we learnt that the UK-Japan trade talks had hit a roadblock over UK demands for greater market access for exports of Stilton cheese. The talks still seem likely to conclude successfully but the episode illustrates how seemingly small issues can play a disproportionate role in trade negotiations.

This would be a significant agreement for the UK. Japan is the third largest economy in the world and an increasingly important strategic ally for the UK post-Brexit. A UK-Japan trade deal is also an important step towards the UK’s accession to the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Total UK exports to Japan are already worth around £14 billion, just over half of which are in services, so increasing the market for UK blue cheese exports, which is currently worth around £100,000 in Japan, might appear a strange issue to potentially derail the talks. However, the UK’s demands on Stilton have not simply come out of the blue.

Growth in cheese exports is a recent UK success story, with the Department for International Trade (DIT) noting that the UK made it into the top ten cheese exporters worldwide in 2018, selling £665 million worth, almost half of which was cheddar. Growth in Asian markets in particular has been strong, with demand in China rising from £67,000 in 2013 to £6.5 million in 2018, so it is not unreasonable for the UK to seek greater opportunities for these products in Japan.

More significantly, the UK-Japan deal will replace the EU-Japan deal, which will cease to apply to the UK when the Brexit transition period ends on January 1, 2021. The goal, largely on the insistence of Japan, has been to seek a new agreement, rather than simply copy and paste the existing EU-Japan deal. Inevitably, however, with time tight, these talks have not departed significantly from the EU-Japan precedent with regard to trade in goods (services and data are likely to be the more innovative aspects of a UK-Japan deal).

“Automotive for agriculture” was a major feature of the EU-Japan negotiations and, in this case, Japan has been targeting an immediate removal of UK car tariffs, whereas the EU-Japan agreement only provides for phased reductions over several years. The UK has understandably countered that it cannot make the concession for nothing in return.

Under the EU-Japan deal, Japanese tariffs on hard cheeses such as cheddar would be phased out by 2033. But for blue cheeses, such as Stilton, there will only be duty-free access on an agreed quota. Reportedly, the UK has also targeted a faster reduction to Japanese tariffs on pork. If the UK is successful in increasing the quota or removing tariffs faster, it will have achieved concessions the EU did not, which would have obvious symbolic significance for Brexiteers.

We don’t yet know the full details of the eventual UK-Japan deal but the likely compromise is that neither side will get as much as they would like on cars or agriculture. Ultimately, this kind of tussle is part of the theatre of end-game trade negotiations, where both sides need to be seen by domestic audiences to be fighting hard over every inch. Indeed, given the importance of getting the agricultural lobby onboard in various UK trade negotiations to come, going into bat for British agriculture now is not a bad PR move for the Government.

Some commentators have questioned whether spending political capital on trade agreements is worth the candle since the estimated macroeconomic gains from them are relatively small. DIT estimates the increase to UK GDP from a Japan deal will be 0.07 per cent over the long run, while a deal with the United States would provide up to a 0.16 per cent boost.

Putting aside a valid debate about how accurately existing models capture all the facets of comprehensive modern trade agreements, these types of numbers are not unique to UK FTAs. The EU-Japan deal (the biggest ever completed by the EU) was estimated to boost EU GDP by 0.14 per cent, a figure regarded by independent researchers as “plausible, though at the high end of the range of past estimates”.

Ultimately, for advanced and open economies, trade agreements are rarely macroeconomically significant. They are opportunities to address microeconomic issues and require trade-offs to be made between them. These decisions can be hugely important for individual sectors, which is why they can be politically controversial.

Beyond any quantifiable economic benefits, closer economic and political cooperation via trade agreements presents an opportunity to build coalitions to help shape the course of regional or global developments. Successful conclusion of the Japan agreement and accession to the CPTPP will boost the economic and political relevance of the UK in the Indo-Pacific region, which is likely to host most of the world’s economic growth in the years ahead.

Similarly, Japan’s enthusiasm to reach a deal with the UK is not only about commerce. Foreign Minister Toshimitsu Motegi’s recent trip to London also provided a chance to discuss bilateral co-operation on security and defence, including the UK’s stronger stance towards China on issues such as Huawei and Hong Kong. A trade deal is another way to strengthen strategic bonds.

It is worth keeping this mind as another round of UK-EU talks – in this case to loosen ties – get underway this week. The Remain campaign had wanted the Brexit debate to be about trade above all else, but it was always primarily about politics. All trade agreements are political, but the level of economic and legal integration in the EU means it is as much, if not more, about politics than trade. Remain lost because it was unable, or unwilling, to make the intrinsic case for political union, or at least that it should be tolerated.

Indeed, the most significant macroeconomic consequences of Brexit – leaving the customs union and the single market – flow from the political desire to “take back control” of trade and regulatory policy. Continued dependence on Brussels in these fields without a vote in the EU’s political institutions was always likely to be untenable for the UK in the long-term.

Equally, sovereignty is never absolute. The more integration the UK seeks from trade agreements with the likes of the US and the CPTPP in the future, the more the UK will face difficult political trade-offs over its approaches to various issues from agricultural liberalisation to the regulation of data. Existing trade flows and geographical proximity to the EU will inevitably play some role in how the UK takes these decisions over the long-term.

However, it shouldn’t be a surprise that Brexit means treating the EU much more like any other trade partner. It’s the politics, stupid!

Stephen Booth: Why Stilton matters to the Japanese trade deal – and how talks can bring the UK closer to the CPTPP.

20 Aug

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

Global trade is the result of billions of individual decisions taken by businesses and consumers, but trade negotiations and agreements are inherently political. They not only require politicians and policymakers to haggle, in painstaking detail, over tariffs, quotas, rules and regulations; trade deals are also tools of foreign policy and in an increasingly unsettled, competitive and multi-polar world they can signify alliances between nations or groups of nations. Outside the EU, the UK’s trade agreements must therefore simultaneously address narrow economic and wider geopolitical interests.

Last week, we learnt that the UK-Japan trade talks had hit a roadblock over UK demands for greater market access for exports of Stilton cheese. The talks still seem likely to conclude successfully but the episode illustrates how seemingly small issues can play a disproportionate role in trade negotiations.

This would be a significant agreement for the UK. Japan is the third largest economy in the world and an increasingly important strategic ally for the UK post-Brexit. A UK-Japan trade deal is also an important step towards the UK’s accession to the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Total UK exports to Japan are already worth around £14 billion, just over half of which are in services, so increasing the market for UK blue cheese exports, which is currently worth around £100,000 in Japan, might appear a strange issue to potentially derail the talks. However, the UK’s demands on Stilton have not simply come out of the blue.

Growth in cheese exports is a recent UK success story, with the Department for International Trade (DIT) noting that the UK made it into the top ten cheese exporters worldwide in 2018, selling £665 million worth, almost half of which was cheddar. Growth in Asian markets in particular has been strong, with demand in China rising from £67,000 in 2013 to £6.5 million in 2018, so it is not unreasonable for the UK to seek greater opportunities for these products in Japan.

More significantly, the UK-Japan deal will replace the EU-Japan deal, which will cease to apply to the UK when the Brexit transition period ends on January 1, 2021. The goal, largely on the insistence of Japan, has been to seek a new agreement, rather than simply copy and paste the existing EU-Japan deal. Inevitably, however, with time tight, these talks have not departed significantly from the EU-Japan precedent with regard to trade in goods (services and data are likely to be the more innovative aspects of a UK-Japan deal).

“Automotive for agriculture” was a major feature of the EU-Japan negotiations and, in this case, Japan has been targeting an immediate removal of UK car tariffs, whereas the EU-Japan agreement only provides for phased reductions over several years. The UK has understandably countered that it cannot make the concession for nothing in return.

Under the EU-Japan deal, Japanese tariffs on hard cheeses such as cheddar would be phased out by 2033. But for blue cheeses, such as Stilton, there will only be duty-free access on an agreed quota. Reportedly, the UK has also targeted a faster reduction to Japanese tariffs on pork. If the UK is successful in increasing the quota or removing tariffs faster, it will have achieved concessions the EU did not, which would have obvious symbolic significance for Brexiteers.

We don’t yet know the full details of the eventual UK-Japan deal but the likely compromise is that neither side will get as much as they would like on cars or agriculture. Ultimately, this kind of tussle is part of the theatre of end-game trade negotiations, where both sides need to be seen by domestic audiences to be fighting hard over every inch. Indeed, given the importance of getting the agricultural lobby onboard in various UK trade negotiations to come, going into bat for British agriculture now is not a bad PR move for the Government.

Some commentators have questioned whether spending political capital on trade agreements is worth the candle since the estimated macroeconomic gains from them are relatively small. DIT estimates the increase to UK GDP from a Japan deal will be 0.07 per cent over the long run, while a deal with the United States would provide up to a 0.16 per cent boost.

Putting aside a valid debate about how accurately existing models capture all the facets of comprehensive modern trade agreements, these types of numbers are not unique to UK FTAs. The EU-Japan deal (the biggest ever completed by the EU) was estimated to boost EU GDP by 0.14 per cent, a figure regarded by independent researchers as “plausible, though at the high end of the range of past estimates”.

Ultimately, for advanced and open economies, trade agreements are rarely macroeconomically significant. They are opportunities to address microeconomic issues and require trade-offs to be made between them. These decisions can be hugely important for individual sectors, which is why they can be politically controversial.

Beyond any quantifiable economic benefits, closer economic and political cooperation via trade agreements presents an opportunity to build coalitions to help shape the course of regional or global developments. Successful conclusion of the Japan agreement and accession to the CPTPP will boost the economic and political relevance of the UK in the Indo-Pacific region, which is likely to host most of the world’s economic growth in the years ahead.

Similarly, Japan’s enthusiasm to reach a deal with the UK is not only about commerce. Foreign Minister Toshimitsu Motegi’s recent trip to London also provided a chance to discuss bilateral co-operation on security and defence, including the UK’s stronger stance towards China on issues such as Huawei and Hong Kong. A trade deal is another way to strengthen strategic bonds.

It is worth keeping this mind as another round of UK-EU talks – in this case to loosen ties – get underway this week. The Remain campaign had wanted the Brexit debate to be about trade above all else, but it was always primarily about politics. All trade agreements are political, but the level of economic and legal integration in the EU means it is as much, if not more, about politics than trade. Remain lost because it was unable, or unwilling, to make the intrinsic case for political union, or at least that it should be tolerated.

Indeed, the most significant macroeconomic consequences of Brexit – leaving the customs union and the single market – flow from the political desire to “take back control” of trade and regulatory policy. Continued dependence on Brussels in these fields without a vote in the EU’s political institutions was always likely to be untenable for the UK in the long-term.

Equally, sovereignty is never absolute. The more integration the UK seeks from trade agreements with the likes of the US and the CPTPP in the future, the more the UK will face difficult political trade-offs over its approaches to various issues from agricultural liberalisation to the regulation of data. Existing trade flows and geographical proximity to the EU will inevitably play some role in how the UK takes these decisions over the long-term.

However, it shouldn’t be a surprise that Brexit means treating the EU much more like any other trade partner. It’s the politics, stupid!

Sunder Katwala: Gandhi does not quite fit the bill of recognising ethnic minority Britons on our currency

4 Aug

Sunder Katwala is the Director of British Future.

There is a certain irony in Mahatma Gandhi being the dominant face of India’s currency. There was talk from the moment of independence of Gandhi replacing the image of the king on the money of the new Republic, though it took some decades for that plan to come to fruition.

A special commemorative 100 rupee note was produced as part of the centenary celebrations of Gandhi’s birth in 1969, but it was only during this era of India’s post-liberalisation boom after 1996 that the austere home-spun Mahatma became routinely the image and watermark of modern India’s new high-security banknotes. It is still only Gandhi who appears on Indian banknotes, reflecting both his role as the spiritual father of the nation, and the lack of consensus whenever additional figures have been proposed.

Now Gandhi may be set to achieve an unusual double, following reports that the Royal Mint proposes to feature him on British currency too. Rishi Sunak, the Chancellor of the Exchequer, is supporting a call to recognise ethnic minority contributions in those celebrated on our currency.

Sunak wrote to the Royal Mint that “Black, Asian and other ethnic minority communities have made a profound contribution to the shared history of the United Kingdom. For generations, ethnic minority groups have fought and died for this country we have built together; taught our children, nursed the sick, cared for the elderly; and through their enterprising spirit have started some of our most exciting and dynamic businesses, creating jobs and driving growth”, in requesting that they bring forward proposals to reflect this on coinage.

The Chancellor’s intervention was a response to the “We Built Britain Too” campaign, coordinated by former Conservative candidate Zehra Zaidi and Windrush campaigner Patrick Vernon, of which I am a supporter. The campaign had hoped to persuade the Bank of England to feature the first ethnic minority Briton on a banknote.

Despite broad cross-partisan political support across right, left and centre, the Bank of England took a perfunctory and dismissive response to the campaign. The Bank’s remit includes “recognising the diversity of British society” in its choices, but it has considered this primarily through the lens of balancing artists and writers with engineers and scientists.

It seems entirely possible that we will have reached the post-cash society before Britain’s ethnic diversity enters onto the Bank of England’s radar. The support of the Chancellor and the Royal Mint will make a crucial difference to this happening on coins first.

It is not quite the case that no ethnic minority face has ever featured on British coinage. For example, the first black British army officer Walter Tull featured on a special £5 coin, part of a limited edition first world war centenary set in sterling silver and 22 carat gold, for the First World War Centenary.

But no ethnic minority Briton has featured on legal tender, or on the notes or coins that any of us might spend at the shops. The campaign is not proposing any specific individual – wanting to see a process of public engagement and debate – but suggestions including Noor Inayat Khan, Mary Seacole and black abolitionists such as Olaudah Equiano and Ignatius Sancho, the first black British voter in the 1774 general election, have been suggested.

Gandhi does not quite fit the bill for the campaign’s aim of recognising ethnic minority Britons. Though he did not live almost of his eight decades of life as among the king’s subjects, though the central mission of his life was that this should cease to be the case. He saw India become independent, and the trauma of Partition, but was assassinated by a fanatical Hindu supporter of the far right RSS within six months.

To the British public, Gandhi is a famous name, one of the great figures who shaped the 20th century and of very few names that would mean at least something to most people. Standing alongside Winston Churchill and Margaret Thatcher as British leaders are a handful of international figures: Hitler and Stalin as the villains of the last century, while Gandhi and Nelson Mandela are cast as its secular saints. No other figure from the end of Empire – including Nehru in India, or any other figure from Ireland, Asia or Africa – has any similar level of public recognition.

So Gandhi’s iconic image is claimed for many causes. An image of integrity, to contrast with the politicians of our time; an image of simplicity and sustainability, perhaps now to be seized by environmentalists; an image of activism, “to be the change you want to be in the world” used for myriad causes.

A simplistic deification of Gandhi risks losing the complexity of the man and his times. He was a pacifist, who helped Britain to recruit Indians in the First World War as a strategy to earn Dominion status, and whose philosophy could drive the British from India but lacked answers to address the menace of Hitler and the Holocaust in WWII.

His arguments with Nehru over India’s post-Independence path illustrates how part of Gandhi’s appeal as an icon in the West can reflect a problematic romanticisation of Indian poverty. Gandhi was a crusader against caste and for India’s untouchables, and developed his strategies in campaigning for Indian rights in South Africa, but held dismissive prejudices against the black Africans, as his leading biographer Ramachandra Guha has set out. “Gandhi’s blanking of Africans is the black hole at the heart of his saintly mythology”, as Patrick French wrote in his review of Guha’s Gandhi before India.

So Gandhi too has been challenged by anti-racist campaigners. We should recognise that there are no flawless heroes. The school curriculum should interrogate every controversy, so that we understand them, warts and all. Yet we can not set standards for the recognition of past achievements that not even Churchill or Gladstone, Gandhi or Mandela can attain, or we would surely have no statues at all.

That Gandhi’s statue now stands in Parliament Square – joining the statesmen of previous ages, along with the suffragette campaigner Millicent Fawcett – is modern Britain’s way of acknowledging the justice of Gandhi’s and India’s cause. It places his campaign against British rule as part of the story of British democracy, whose traditions and arguments were used by Indian Nationalists to tell the British that it was time to go.

The statue was welcomed across the British party spectrum, though it was David Cameron and Sajid Javid who unveiled it. The proposal to feature Gandhi on coinage may also be considered an important gesture of Global Britain’s commitments to the Commonwealth – and the warmth of its bilateral relationship with a rising India today – but this is a different, parallel proposition to the case to recognise British ethnic minority contributions.

This timely change would be one simple response to the growing appetite to deepen the public understanding of the history of race in Britain, and how that has shaped the country that we are today. Most people don’t want that to turn into a culture war over the history of our country. If the focus is almost entirely on who might be removed, we risk neglecting to ask contributions we want to recognise better.

This constructive campaign to reflect significant ethnic minority contributions to British history on national symbols, like coins, symbolises how our generation can contribute to broadening Britain’s national story in an inclusive way. Zaidi says her hope is that “it helps build cohesion, inspires young people and unites us as a nation that we all have an equal stake and contribution in society.

Having as open as possible a process of public debate about the potential candidates would maximise the educational value of this positive, symbolic change.

Richard Holden: Three opportunities that open for us in an Australian trade deal

20 Jul

Maddisons Coffee Shop, Front Street, Consett

On Saturday, I did my sixth “Lockdown Litterpick”, around the beautiful Bollihope Common. A group of us bagged up five bin bags full of cans, bottles, pizza boxes and the general detritus that had been dumped in one the most beautiful spots in my constituency.

While chatting to my Association Chairman as the rubbish was collected, one of the volunteers revealed that she had emigrated from Canada to marry a Brit almost 40 years ago. Later that afternoon, I spoke with an old friend who had worked with me when I was a Special Adviser, before getting married and returning ‘down under’ to work for the Australian Government.

And later that afternoon still, on my way to my constituency office, I listened with interest to Times Radio as one of their correspondents gave an update on the New Zealand election – where the newly-elected National Party leader, Judith Collins, seems to be clipping the wings of Jacinda Ardern in an election that had until a couple of weeks ago looked as though it was shaping up to be a Labour landslide.

I mention these things because they to remind us that the ties that bind the United Kingdom with Canada, Australia and especially New Zealand are incredibly strong. Yes, they’re linguistic and historic, but they’re also based on families and friendships, and shared mature democratic systems of government underpinned by the rule of law.

As has been seen in recent years in both Australia and the United Kingdom, our Parliaments are more powerful than their premiers and the people aren’t afraid of switching out either if they’re not getting what they want. While Britain has spent the last few decades concerned over and trying to reform the nature of our relationship with the EU (which in 1980 made up 30 per cent of global GDP, but has shrunk to just under 15 per cent today) our CANZUK allies have been reaching out into the world.

I am very aware of how much with the grain some of these thoughts are in traditional conservative circles. But it’s increasingly clear to me that the opportunities presented by closer bonds with our Commonwealth allies are not some nostalgic pipe dream, but instead absolutely central to our future global ambitions, as well as the fillip our post-Coronavirus economy will need.

Our trade deal with Australia looks a though it might be one of the most comprehensive of the ones currently on the table, and there are three aspects of it that I’d like to flag.

First, Australia currently has a 20 per cent tariff on imports of luxury cars. Like the UK, the country is also right-hand drive. With our Range Rovers, Aston Martins and other top marques, surely this must be top target for negotiations.

Second, we’re much more understanding of Australians who want to come and work in the UK than the other way around. As we end our open borders with the EU and look at our Australian-style points-based immigration system, more mutual measures with our cousins in this regard must be a basis of future agreements.

Finally, Canada, Australia and New Zealand are all very developed service sector economies, but even our biggest companies are dwarfed by those of our American cousins. By opening our services sectors up to each other, we’ll drive competition, lower prices, increase productivity and, crucially, enable the formation of global firms with the diversity and reach across the globe.

That’s not to mention the new security integrations between our counties as the power structures of the globe tip towards the Pacific more generally and in which Canada, New Zealand and Australia all have a massive stake. We should be looking to leverage our foreign, defence and international assistance policies more generally on these security and international arrangements, as well as looking to build closer ties with an old ally of manufacturing in the North East of England – Japan.

China’s recent actions towards Hong Kong, the Pacific island nations, the South China Sea and, domestically, to its ethnic minority populations should give us all pause for thought. At the forefront of the minds of our allies across Asia and the Pacific is Chinese outward expansionism, control and internal repression

For Britain, out into the world is our call now. The tectonic plates of geo-politics have shifted to the Pacific; away from Europe to the wider globe. The world, not just the continent, is where Britain is at home. Now we’ve got to make the most of the opportunities on our global doorstep – and that starts with building our relationships with our old allies facing a new world on the Pacific rim.

Face mask policies abroad. How do they compare to the UK’s rules?

15 Jul

After weeks of pressure and indecision, yesterday the Government announced that face coverings will be mandatory in shops and supermarkets from July 24, with a fine of up to £100 for anyone who doesn’t comply.

As often in the Coronavirus crisis, the UK has been accused of being an outlier in its approach to controlling the virus. Without further ado, ConservativeHome takes a look at how its face mask policy compares to other countries’.

Scotland, Wales and Northern Ireland

Throughout the pandemic, the devolved administrations have had different strategies in managing Covid-19, with face coverings being one area of disagreement. In Scotland, people have had to wear them in shops since July 10, with fines if they do not follow the rules.

In Wales and Northern Ireland, on the other hand, shoppers are not required to wear face masks, but it is understood that this situation is under review.

France

The country requires anyone over the age of 11 years to wear face masks, with travellers who fail to comply charged up to €135 (£121). Many supermarkets and shops now ask customers to wear them, but they will be made compulsory in all enclosed public spaces from August 1 – with the aforementioned fine applicable to anyone who violates the rules.

Germany

Face coverings in the country have been mandated on public transport and in shops since April 27, with Berlin and Schleswig-Holstein the last regions to enforce compulsory masks on April 29. In the German state of Thuringia, masks are required in the workplace. Very young children are exempt from the rules, but the age at which they are mandated to wear a mask differs by state.

Italy

People have been required to wear masks in specific enclosed spaces, such as restaurants, shops and public transport, since May 4. In restaurants, they must be worn when people enter the venue and any time they leave their table. Several regional authorities, such as Lombardy and Piedmont, have made masks compulsory in all public spaces.

Greece

Everyone has to wear masks on public transport and they are compulsory in hospitals and other medical facilities, as well as in lifts. Greece also made them compulsory in shops, but the measures have since been relaxed, although shop staff are still required to wear them.

Spain

Face masks are mandatory for anyone over the age of six if they’re not able to keep the required social distance of 1.5 metres. Some regional authorities have implemented tougher rules in regards to face coverings, so that they are required in public regardless of social distancing measures.

Catalonia

After a surge of new Coronavirus cases in Spain’s autonomous region, face masks are mandatory in public for anyone aged over five. People who are caught without one, even if they engage in social distancing, can be charged €100 (£90).

Turkey

Face masks are compulsory in crowded places, such as markets, hairdressers and barber shops, as well as public transport. Bodrum, Marmaris and Istanbul, some of Turkey’s most popular tourist destinations, have made masks compulsory at all times outside of the home, such as on beaches, in parks and in restaurants.

East Asia

For many countries in Asia, such as mainland China, Japan, South Korea, Hong Kong and Taiwan, there is a strong culture of mask wearing, partly as a result of previous health crises.

China has forced its citizens to wear masks in all public spaces since the beginning of the Coronavirus outbreak last year, and anyone who doesn’t comply can be fined, banned from subways shops, offices and banks, or even arrested.

In Singapore, it’s compulsory to wear face masks outside or be fined around £170.

And in Taiwan masks are seen as a form of social etiquette – used to protect others while out and about. Its government has been one of the most proactive at obtaining masks during the Covid-19 crisis, partly due to lessons from the Sars outbreak.

India

India, which has almost 880,000 cases of Coronavirus, and over 23,000 fatalities, has recently made face masks compulsory to wear out and about in most big cities. The police now hand out fines of 500-rupee (£5.29) for violations.

Russia

Due to the country’s nine time zones, there are different rules on face masks for different destinations. Moscow has mandatory guidelines on wearing masks and gloves in its public spaces, although people are only recommended to wear these on the streets. Police also enforce mask wearing in shops and public transport.