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.

Neil O’Brien: The view that manufacturing is a relic of the past is itself a relic of the past

22 Mar

Neil O’Brien is co-Chairman of the Conservative Party’s Policy Board, and is MP for Harborough.

“Nothing so much contributes to promote the public well-being as the exportation of manufactured goods”. From the King’s Speech at the opening of Parliament, 1721 (drafted by Robert Walpole).

Here’s a funny thing.  Wages and productivity in manufacturing are higher than the average across the whole economy. Productivity has also grown more quickly in manufacturing. But places where manufacturing is a larger share of the economy have, on average, lower wages and productivity.

The answer to this seeming paradox is that manufacturing provides an outsized proportion of the better paid jobs in poorer areas. And that they typically started with even more manufacturing, and lost more from deindustrialisation. Might manufacturing now have a particular role in levelling up poorer places and getting private sector growth going there?

Put simply, if manufacturing is a bigger chunk of the economy in less affluent places, and if you could do some things that caused manufacturing to grow faster then, other things equal, that would tend to particularly help worse-off places.

That’s not to say government shouldn’t also work hard to grow other sectors – just that manufacturing might be particularly helpful in levelling up.

Between 1978 and 2019, output per job grew an average of 0.36 per cent a quarter across the economy as a whole, but not far off twice as much (0.64 per cent) in manufacturing.  It’s not just the UK: looking at 26 OECD countries since 1996, all but one saw faster productivity growth in manufacturing.

Why? Much of the economy consists of people-intensive local services.  While there’s productivity growth in cafes, pubs, gyms, leisure and so on, it’s harder to achieve. A café is quite like it was 50 years ago.

Your smartphone really isn’t. There is no theoretical upper limit to how atoms can be arranged in new and more productive ways. Physical goods can also be exported in a way that haircuts can’t: so they can be traded in a more dynamic global market with stronger competition and more transmission of knowledge. That’s why manufacturing accounts for 42 per cent of our exports and two thirds of business investment in R&D.

But manufacturing is particularly relevant for levelling up because that higher productivity in manufacturing is particularly marked in less prosperous areas.  For the UK outside London, output per hour is 20 per cent higher in manufacturing than the economy as a whole.

Reflecting this, wages are also higher.  For example, in the North East the median wage in manufacturing was 22 per cent higher than average, in Wales 16 per cent it was higher and so on.  This earnings premium applies across qualification levels too: it’s not just more workers in manufacturing having higher qualifications, they’re earning more than similarly qualified people.

You might say, that’s all very well, but isn’t UK manufacturing doomed to shrink? Isn’t manufacturing too small to drive the wider growth of the economy much?

Having declined relentlessly as a share of the economy between the 1970s and 2010, manufacturing’s share has actually held pretty steady since then.

While it is now a relatively smaller share of employment (nine per cent of hours worked), manufacturing accounts for a larger share of output and a much larger share of productivity growth in poorer regions of the UK – accounting for more than 40 per cent of productivity growth between 1997 and 2017 in places like the West Midlands, Wales and the North West, creating a big multiplier effect on incomes and jobs in their local area.

Growth in manufacturing might particularly help places outside our large cities. As the UK economy has deindustrialised, higher productivity jobs have tended to be in professional services, typically located in large city centres. Across Europe, capital cities have grown faster than their countries.

The rise and then fall in manufacturing as a share of the economy since the Second World War was mirrored by a fall and then rise in differences in productivity: the shift to services has caused the richest region, London, to forge ahead, while deindustrialisation has seen poorer regions fall back.

The same effects are underway in smaller cities.  Between 2002 and 2018 productivity grew 76 per cent in Glasgow and Edinburgh and 62 per cent in the rest of Scotland. In Cardiff and Swansea it grew 59 per cent compared to 47 per cent in the rest of Wales. And in Belfast it grew 72 per cent compared to 49 per cent in the rest of Northern Ireland. Productivity grew 54 per cent in England’s large cities and 49 per cent in the rest of England outside London – even including the relatively prosperous south east.

It’s great to see our cities revive, powered by services growth. But we need to make sure places outside city centres grow faster too. Manufacturing is space-intensive, so more likely to locate outside the centres of the largest cities. It’s one high productivity activity in which less urban areas may have a natural advantage.

And those are just the sort of places our new majority is built on.  Nationally about one in twelve jobs are in manufacturing – but in the seats we gained in 2019 it’s higher: one in eight jobs.

Some say deindustrialisation is inevitable for all rich countries, so emphasising manufacturing is pointless.

While many richer countries have deindustrialised, almost none did so as much as the UK.  In 1970, the UK had the sixth largest share of manufacturing in the economy in the G20. Today, it is second from bottom.

Countries as diverse as South Korea and Ireland have caught up or overtaken our living standards while growing the share of manufacturing in their economy. Rising countries like India and China have seen manufacturing growing as a share of the economy share.

And many other rich countries have deindustrialised far less: manufacturing is about 10 per cent of GDP here, about 22.5 per cent in Germany.  In the Blair years this was actually seen as a UK strength. But post financial crisis it doesn’t look so smart, as productivity there has grown faster.

Another objection might be of principle. What would Margaret Thatcher think of all this?

Well, while Mrs T (rightly) let go lossmaking industries, it’s worth remembering she also worked hard to replace them. She used taxbreaks, factory start up costs (and lots of her time) to woo Japanese carmakers here.

She backed life sciences, founding a government-backed biotech company (Celltech) and using pharmaceutical pricing to lure pharma businesses to the UK.  In telecoms, Thatcher drove the adoption of the GSM standard at an EEC summit in 1986 to help create a huge market for equipment makers, and then let UK companies like Vodaphone charge yuppies a fortune for calls, meaning tha they had pots of cash to buy up more heavily regulated rivals overseas.

In 1981, she appointed the world first minister for IT (Ken Baker) and funded the “micros in schools” programme.  That put rocket boosters under the company that won the government contract to manufacture the computers, (Acorn), enabling it to create ARM, now one of the UK’s largest tech firms.

In aerospace Thatcher moved heaven and earth to sell British Aerospace products overseas, flying to Saudi Arabia to secure their biggest ever order. Visiting the factory, she said she would love to have flown a harrier.

Today, there are still massive security arguments for keeping the capacity to make things, underlined by EU threats over vaccine supply. But even without those arguments, the 1990s/2000s view that it would be fine if British manufacturing became a thing of the past now seems like… well – a thing of the past. The truth is that in many parts of the UK, making things goes hand in hand with making a decent living.

Kate Ferguson: This new genocide amendment puts Parliament at its centre. Which is why it should be supported.

22 Mar

Kate Ferguson is Co-Executive Director at Protection Approaches and Chair of Policy at the European Centre for the Responsibility to Protect. Protection Approaches has convened The UK Atrocity Prevention Working Group since 2017.

Today a new iteration of the genocide amendment to the Trade Bill returns to the House of Commons after a fraught and bruising process of parliamentary “ping pong”.

At the heart of the fight is China. The Government wants to avoid any process that could curtail UK-China trade, and so is trying to force through its own amendment ­­that limits focus only to future trade deals.

The Genocide Amendment would trigger immediate scrutiny of existing deals with China – which the campaign for it says could help Uyghurs now. MPs will today need to vote against the Government’s amendment and then vote for the reimagined Genocide Amendment (assuming procedure so allows). It will be a tight fight and an important one.

Like others, I had reservations about the previous attempts of the Genocide Amendment, but this new formulation offers practical and needed augmentation to how the UK approaches and responds to modern mass atrocities.

The essence of Lord Alton’s original amendment remains – namely, seeking a method for determining cases of genocide, but supporters are now proposing a parliamentary rather than legal process.

This makes sense, and builds on the Government’s own idea of going through the Foreign Affairs Select Committee. The proposal is something of a parliamentary judicial committee that would bring together five former High Court justices in the Lords to respond to conclusions made by the select committee; if both committees determine genocide is ongoing, the Government must then set out their response, which would then be subject to parliamentary votes.

Because the amendment is attached to the Trade Bill, the actual legislative impact would still be very limited, impacting existing or potential trade agreements with perpetrating states. Yet in promising to invest greater responsibility upon Parliament, this new mechanism will both raise expectations regarding the implementation of the Government’s stated commitments to confront genocide, and create potential for British parliamentary leadership on the international stage in times of grave concern.

The reimagined Genocide Amendment is more flexible than earlier versions. It will be a speedier process than a court could ever deliver. The new amendment also offers much-needed bolstering to how parliament engages with modern atrocities, forcing the issue on to the agendas and into the inboxes of MPs, Peers, committee clerks, and journalists.

It should go without saying that our collective responsibilities to confront genocide and crimes against humanity should be an issue that supersedes party political lines. Just as the UK quite rightly supports efforts at the UN Security Council for permanent members to withhold their veto in matters relating to mass atrocity crimes, I’d like to see political parties lifting the whip for votes that fall within that remit. If modern atrocities are not matters of conscience, I don’t know what is. The impact and potential of this amendment will fail if UK atrocity prevention policy becomes partisan.

To be successful, the Foreign Affairs Committee and the proposed panel of former judges will need to apply a common sense approach to the conceptual scope of the process. Taking too narrow a remit risks opening a pathway to exclusionary justice and would contradict the principle behind the prevailing national approach mass atrocities, which rightly confronts crimes against humanity, ethnic cleansing and war crimes as well as genocide.

The painful debates over various iterations of the genocide amendments have shown how badly the UK needs a national strategy on modern atrocities, or else comprehensive legislation via a Modern Atrocities Act. Without it, the government have been forced into a corner, appearing to defend  trade with genocidal states and reluctant to make their own determination of what is so blatantly happening in Xinjiang.

Without a strategy on China and without a strategy on mass atrocities, debates over the different formulations of the Genocide Amendment have seen the Government contradicting themselves at every turn, one week saying “it would frankly be absurd for any Government to wait for the human rights situation in a country to reach the level of genocide, which is the most egregious international crime, before halting free trade agreement negotiations. Any responsible Government would have acted well before then” and the next week inviting China to Downing Street for free trade negotiations.

Publication last week of the Prime Minister’s long awaited Integrated Review set out a new and welcome commitment to prioritising atrocity prevention, but until this is built out in policy the unresolved tension between rights and trade will stymie the pursuit of both. The paragraphs on China are some of the weakest of the whole document: How can the UK “continue to pursue a positive trade and investment relationship with China, while ensuring our national security and values are protected”?

If the Government’s China policy is confused, so too is the UK’s current approach to mass atrocities. It relies on political leadership, attention and will. This doesn’t work. It never has. As the incidence of mass atrocities have continued only to rise – most of the world’s refugees have fled atrocity-afflicted states – the issue has fallen between the cracks of UK development, diplomacy, trade, justice and the MOD.

By contrast, allies such as the US and Germany have done more to prioritise prevention. Even when trade was part of the Foreign Office, the two never coordinated in responding to mass atrocities. Until the government has a cohesive strategy for action and has demonstrated a willingness to use it, it is only right that Parliament steps in.

This reimagined Genocide Amendment is no panacea. Centring parliament in the process might well help invigorate political engagement with “Never Again”, but it does not guarantee it. The amendment will not “stop genocide”. To pretend anything else is more than disingenuous – it’s downright dangerous to the communities at risk now and in the future. Determinations alone have never saved lives: that requires action which too often has failed to follow.

Lord Alton’s newest proposal is not a substitute for the justice that victims deserve, nor will it absolve Government of its responsibility to enact comprehensive policy on modern atrocities, but it would be a welcome addition to how the UK confronts, understands, and responds to the most serious violations.

Johnson – “Our new, full-spectrum approach to cyber will transform our ability to protect our people”

13 Mar

The Integrated Review will be published on Tuesday.  That’s to say, the Integrated Review of security, defence, development and foreign policy, to give the document its full title.  Boris Johnson will make a Commons statement.

And he steps up the pre-publicity today by saying that the review will commit to a new, full spectrum approach to the UK’s cyber capability – announcing the establishment of a ‘cyber corridor’ across the North of England and, he claims, thousands of jobs. The Prime Minister said:

“Cyber power is revolutionising the way we live our lives and fight our wars, just as air power did 100 years ago. We need to build up our cyber capability so we can grasp the opportunities it presents while ensuring those who seek to use its powers to attack us and our way of life are thwarted at every turn.

“Our new, full-spectrum approach to cyber will transform our ability to protect our people, promote our interests around the world and make the lives of British people better every day.”

The Government says that opening a new headquarters for the National Cyber Force (NCF) in the North of England will drive growth in the tech, digital and defence sectors outside of London, and help create new partnerships between government, the sector and universities in the region.

The NCF was created last year to transform the UK’s capacity to conduct targeted offensive cyber operations against terrorists, hostile states and criminal gangs – drawing together personnel from both defence and the intelligence agencies under one unified command.

Opening the HQ of the NCF in the North of England will drive growth in the tech, digital and defence sectors outside of London and help create new partnerships between government, the sector and universities in the region, Government sources claim.

They add that “the review will set out the importance of cyber technology to Britain’s way of life – whether by defeating enemies on the battlefield, making the internet a safer place or developing cutting-edge tech to improve people’s lives”.

Defence currently sustains more than 35,000 jobs in the North West of England alone. Ten thousand people are employed in maritime design in Barrow and 12,000 people work in advanced aerospace engineering and manufacturing at Samlesbury Aerospace Enterprise Zone, where the UK is producing the fifth generation F-35 stealth aircraft.

In addition to the NCF,  last year saw the creation of the 13th Signals Regiment, the first dedicated cyber regiment, and expanded the Defence Cyber School. These capabilities will play a part in operations, including HMS Queen Elizabeth’s first global deployment this year.

We now wait to see what mix of cyber and conventional capabilities the review proposes; what it says about the major foreign policy and security challenges, and where development fits in – as the Government prepares to abandon the 0.7 per cent GNI aid target, at least temporarily.

The challenges should shape the capabilities – on paper, anyway, though that is more often than not the case in the breach than the observance.  If the review stresses, say, naval and cyber capability at the expense of the army, what does that imply for the potential defence of the Baltic states from Russia?

What is Boris Johnson’s position on China, where the UK’s trade and security interests are at odds, Conservative backbenchers are in revolt over China’s abominable treatment of the Uighars, and Dominic Raab, this very day, has accused China of breaching the joint declaration on Hong Kong?

Finally, does the Government now believe that there is no major third threat to Britain’s security – from Islamist extremism, which dominated the security conversation from 9/11 through 7.7 to the murder of Lee Rigby and beyond? It didn’t get so much as a mention in the Prime Minister’s recent speech to the Munich Security Conference.

The review’s launch this week will be followed by a Defence White Paper next: that’s the document in which cuts and scalebacks will be announced.  A procurement review will come in its wake.

Meanwhile, there’s at least one select committee report in the immediate pipeline – the Defence Select Committee report on procurement itself.  Busy times for the Ministry of Defence in the immediate future then,.

David Gauke: Is Britain really set to become a low tax, less regulated, free trading, buccaneering country?

13 Mar

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Conversations about tax policy can take unexpected turns. It was during one such conversation in the late 2000s – I was the shadow tax minister at the time and developing our plans for corporation tax – that a senior tax lawyer at a city firm recommended a series of books on naval battles.

Peter Padfield’s Maritime Trilogy is, in truth, somewhat broader than that. Padfield alternates accounts of the most important maritime confrontations since the Spanish Armada with a broader account of the social, economic and constitutional development of the great powers.

His central argument is that there is a distinction to be drawn between maritime nations – with linked strengths of sea-fighting, trade, financial innovation and constitutional constraints – and land-based empires. The later relied on closed domestic markets, rigid hierarchies and centralisation, the former distinguished by liberty, flexibility and enterprise.

It is an analysis that many British Conservatives would share and, the argument goes, makes the UK well suited to the era of globalisation. We are historically and culturally accustomed to trade and with that comes a recognition that trading partners have other options. Our prosperity is dependent upon those partners wishing to continue to trade with us. Political stability; the rule of law; paying our debts; limited government; competitive and predictable taxes – all qualities that are necessary to succeed as a maritime nation and in the era of globalisation.

It was in this spirit that the Prime Minister’s first big speech following our departure from the EU was at the Old Naval College in Greenwich where – in extolling the virtues of free trade – he talked of recapturing “the spirit of those seafaring ancestors immortalised above us whose exploits brought not just riches but something even more important than that – and that was a global perspective”.

So how are we doing? Are we on course to be the open, outward-looking nation of which the Prime Minister spoke? Are we becoming a more flexible, enterprising, maritime nation?

My last column assumed that corporation tax rates would increase and argued that this would be a mistake. When I heard Government ministers defend the rise by saying that our corporation tax rates remained the lowest in the G7, I was reminded of my conversation with the tax lawyer.

The lawyer’s argument (which I found persuasive) was that we became economically successful from the 1690s onwards because our model was more like that of a small country dependent upon foreigners choosing to trade with and invest in us, taking inspiration from the Dutch rather than the French. Our modern tax system should seek to emulate this, he argued, encouraging international businesses to locate activities and investment in the UK. Our rates may be lower than other G7 economies but, if we see ourselves as nimble and competitive, our ambitions should be greater than that. A better corporate tax regime than France is not a proud boast.

How about freeports? The name could not be more evocative of our trading and maritime traditions. But the evidence suggests that they will achieve little other than displacing activity from one part of the country to another. And if we were really ambitious about a deregulated, low tax, low customs solution to our economic woes, why give these advantages to some places, why not everyone?

The emphasis on freeports reveals an approach to the levelling up agenda that I worry is more about creating grateful localities in exchange for pots of spending rather than a clear sighted vision for improving productivity. The suspicion must be that the preference for ad hoc ministerial decisions over a more defined industrial strategy will lead to a less economically rigorous approach. The suspicion will linger that party political considerations will be to the fore.

There is one surprising, if qualified, bright spot. We are becoming more open to talent. It was already the case that the requirements to get a work visa were much less restrictive than previously, and the Chancellor’s announcement on the skills visas is worthwhile. The qualification, of course, is that it is still much more bureaucratic for EU citizens to work here than it was – which brings me to Brexit.

Our history as a maritime nation is one often identified by supporters of Brexit – like the Prime Minister in his Greenwich speech. Even the word ‘Brexiteer’ evokes the naval escapades of buccaneers (although the Oxford English Dictionary also defines ‘buccaneer’ as ‘a person who acts in a recklessly adventurous and often unscrupulous way’). Liz Truss tops the ConHome Ministerial popularity charts largely on the basis of her energetic advocacy of Global Britain and for free trade as a benefit of Brexit.

The reality is that Brexit involves the erection of trade barriers with our largest market, as January’s appalling trade numbers suggest (although, to be fair, a clearer picture will only emerge over time). Given the Prime Minister was willing to agree to the Northern Ireland Protocol, it even involves trade barriers within the UK.

While good progress has been made by the Department of International Trade in completing free trade agreements with third countries, these have primarily rolled over existing agreements that we had as members of the EU. There was a flurry of excitement last week when the US dropped punitive tariffs on UK products that were in place because of a longstanding dispute with the EU over Airbus and Boeing. Brexit supporters rushed to declare it a triumph due to our new status, the Trade Secretary wrote a self-congratulatory piece in The Daily Telegraph. A day later, the US announced that it was dropping the punitive tariffs against the EU, too. The search for a trade benefit from Brexit continues.

What about regulatory flexibility? It is nearly five years since we voted to leave the EU, but there are still no bold plans to regulate in a different way. Plans to review workers’ rights have been dropped on the basis that this would be politically unpopular.

If the hard Brexit delivered by the Government has made trade with the EU much harder, the combative manner of our dealing with the EU has not only reduced trust but even undermined a key attribute for a trading nation – the rule of law. Having threatened to breach international law for three months over the autumn, Lord Frost has now decided to extend the grace period before internal checks come into place – unilaterally changing the terms of our agreement with the EU. A second breach of an international treaty only recently agreed begins to look like a habit. It does nothing for our reputation for trustworthiness.

The attributes of an outward-looking, open, trading nation are ones to which we should aspire. But in terms of our openness to trade, competitiveness on tax and adherence to the rule of law we are going backwards. In terms of the State telling businesses what they should do and where they should do it, we are becoming more centralised and more arbitrary.

For years, many in the UK have characterised the EU as centralised, interventionist, uncompetitive and protectionist. It would be a sad irony if our departure from it makes us more like the type of inward-looking, land-based power that we once used to disparage.

Nigel Wright: What Canada’s new Conservative leadership thinks about CANZUK

8 Mar

Nigel Wright is the London-based Chair of Canadian Conservatives Abroad (CCA). 

With the United Kingdom’s recent withdrawal from the European Union, the country finds itself needing to negotiate new free trade deals to expand market access for its products and services. This position provides a unique opportunity for the UK to work more closely with other like-minded, Commonwealth countries, to not only allow for free trade between nations, but to come together and advance their shared democratic values on the world stage. A Canada-Australia-New Zealand-United Kingdom (CANZUK) alignment could benefit not only these countries but also the wider global community.

Erin O’Toole, Leader of the Official Opposition of Canada, championed CANZUK during his leadership bid for the Conservative Party of Canada. Citing Canada’s long history of championing the rule of law, human rights, and standing with its allies to defend democratic values globally, O’Toole sees CANZUK as an opportunity to adopt a policy of “aspirational multilateralism,” where these like-minded Commonwealth countries work not only to advance the wellbeing of their citizens but also work to promote a commitment to democratic values on the world stage.

O’Toole’s commitment to CANZUK should not come as a surprise to those familiar with Canadian politics or the policies of the Conservative Party of Canada. In addition to specifically calling for a CANZUK Treaty, the Conservative Party’s official policy states that Canada’s government should work with foreign nations to reduce protectionist policies, in turn allowing for the establishment of free trade agreements.

In fact, one of O’Toole’s predecessors as leader of the Conservative Party of Canada, former Prime Minister Stephen Harper, doubled the number of countries with which Canada has reciprocal free trade agreements. Simply put, reciprocal free trade is an important part of present-day Conservative party policy.

Since becoming leader, O’Toole has also made it his goal to broaden the appeal of the Conservative Party of Canada. In his televised victory speech after he won the leadership, O’Toole introduced himself to Canadians, telling them that everyone “has a home in the Conservative Party of Canada.” He quickly orchestrated a rebrand and has made efforts to establish the Conservatives as a “modern, pragmatic, mainstream party.” A forward-thinking internationalist agreement like CANZUK shares many similar themes.

With the current hung parliament and the Liberal government widely acknowledged to have bungled the procurement of Covid-19 vaccines for Canada, an election could take place this year. O’Toole’s embrace of CANZUK might provide the Conservative Party of Canada with a foreign policy plank that resonates with Canadians looking for sources of economic growth and for avenues to advance democratic values in a world in which that has become more urgent to do.

One of the cornerstones of CANZUK is freedom of movement, and this policy could give conservative parties a meaningful youth issue. CANZUK proposes allowing professionals, students and recent graduates to travel for work, education or leisure without the difficulties or bureaucratic hurdles associated with applying for visas.

This provides the CANZUK nations with an opportunity to establish an academic exchange similar to Europe’s Erasmus programme, which is popular among students in the EU. Academic exchanges have proven economic benefits. Increasing cross-fertilisation opportunities could enrich the skills and global experience of CANZUK students and help them to form international relationships that can generate trade and investment for Canada.

It is not only students who could benefit from enhanced education opportunities through CANZUK. The freedom of movement associated with the agreement would reduce the bureaucratic red tape that faculty and researchers currently grapple with when they wish to research at another institution or in another country.

This provides an opportunity for member countries’ leading research institutions to widen their net and more easily tap into the knowledge of the other nations leading academics and researchers. If 2020 has taught us anything, its that reducing barriers to research and knowledge sharing is essential in today’s world.

CANZUK could also give its member countries an avenue to help move the world forward. Canada, New Zealand, Australia and the UK are in many respects model countries: peaceful, prosperous, and multi-ethnic pluralist democracies. With countries around the globe stepping back from liberty and rights, the world needs leadership from countries committed to democratic values and freedom more broadly. This agreement could help facilitate much-needed cooperation between four of the world’s democratic leaders.

CANZUK’s member countries are already members of Five Eyes, which includes the United States, and cooperate to share intelligence. CANZUK would create additional mechanisms to help these four nations enhance and coordinate their own defence and foreign affairs capabilities.

With the UK being the only member nation to have a permanent UN Security Council seat, CANZUK could provide a forum for the nations to unite on foreign policy initiatives, with the UK voicing them on their behalf at the council. The agreement would also create an opportunity for increased military collaboration, training and equipment supply which could benefit the smaller militaries of Canada, Australia, and New Zealand.

Specifically for Canada, CANZUK could make us a more valuable strategic partner to the US by providing a deeper bridge to the other three allied countries, while simultaneously creating anchor points to help us to preserve our ability to act independently of the US when that is necessary for our national interest. The CANZUK alignment would fit well with the UK’s desired entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which Canada should promote.

The prospect of an early federal election in Canada makes this an opportune time to develop the CANZUK idea further. Canadian Conservatives Abroad intends to play its part in doing so.

CCA will be hosting a policy discussion about CANZUK on 20 March during the Conservative Party of Canada’s convention. The event will feature UK MP Andrew Rosindell and Canadian MP Ed Fast. For more information about CCA please visit conservativesabroad.ca

Shanker Singham: Breaking the Gordian knot of agricultural trade negotiations. How the TAC has risen to the challenge.

2 Mar

Shanker Singham is CEO of Competere. He is a former adviser to Liam Fox when he was Secretary of State for International Trade, and to the Office of the United States Trade Representative.

Agricultural trade is one of the most difficult areas to negotiate, and has long been the bugbear of international trade negotiations. The lack of liberalisation in developed country markets has done significant damage to developing countries and is a profound source of friction between developed and developing worlds.

In its report for the Secretary of State for International Trade, the UK’s Trade and Agriculture Commission might have just come up with a way of breaking the Gordian knot of agricultural trade negotiations.

I was privileged to be a TAC commissioner, and while, as commissioners we came to the subjects with very different perspectives, we have, I believe managed to resolve the tensions in a way that makes a major contribution to trade policy. We have done so on a unanimous basis – a credit to my fellow commissioners and our chairman.

The heart of the TAC report’s import policy contains an innovative proposal that attempts to simultaneously promote a trade liberalising agenda in agriculture, while at the same time protecting the UK’s high standards in food production and ensuring the UK fully complies with WTO rules on animal and plant health, as well as technical regulations that apply to food trade.

This proposal includes a mechanism to deal with some of the most difficult issues in agricultural trade which relate to animal welfare, environment and labour rules. The heart of this mechanism is the potential for the application of a tariff in cases where an aggrieved party can show that a trading partner is violating agreed standards in an FTA.

The result of the mechanism is a tariff based on the scale of the distortion which operates like a trade remedy. The mechanism can also be used offensively where a country is preventing market access by the UK as a result of the market distortion, or defensively where a distortion in a foreign market leads to excess exports from that market.

Unlike the UK-EU TCA rebalancing mechanism with which it has some similarities, the tariff would be calibrated to the scale of the distortion and would apply only to the product category in which the distortion is occurring. The advantage of this over a more conventional trade remedy is that it is based on cost as opposed to price and is designed to remove the effects of the distorting activity. It would not be applied on a retaliatory basis in other unrelated sectors.

In exchange for this mechanism, the UK commits to trade liberalisation and, within a reasonable timeframe, zero tariffs and zero quotas. This in turn will make the UK’s advocacy of higher standards in international organisations much more credible, another core TAC proposal.

The TAC report also notes that behind the border barriers and anti-competitive market distortions (“ACMDs”) have the capacity to damage UK exports and therefore suggests a similar mechanism or set of disciplines could be used offensively. Certainly, where the ACMD is being used to protect a particular domestic industry, using the ACMD mechanism to apply a tariff for the exports of that industry would help, but this may not apply where the purpose is protective, and the industry does not export much.

I would argue that in this case, it would be important to ensure that UK FTAs include disciplines on these ACMDs which if breached could lead to dispute settlement and the potential for retaliatory tariffs for sectors in the UK’s FTA partner that do export. This is certainly normal WTO-sanctioned practice, and could be used here to encourage compliance. It is clear from the experience in dealing with countries that engage in ACMDs for trade or competition advantage that unless there are robust disciplines, mere hortatory language would accomplish little or nothing.

But this sort of mechanism with its concomitant commitment to freer trade has much wider potential application than just UK agricultural trade policy. It could also be used to solve a number of long standing trade disputes such as the US-China dispute, and indeed the most vexed questions in trade involving environment and climate change in ways that do not undermine the international trading system itself.

This is because the mechanism is based on an ex post tariff as opposed to an ex ante one which contains within it the potential for protectionism, and is prone to abuse. Because the tariff is actually calibrated to the cost advantage which is secured as a result of the violation of agreed international standards, it is much more likely that it will be simply limited to removing this cost advantage as opposed to becoming a punitive measure that curbs ordinary trade flows.

It is precisely this type of problem solving and innovative thinking that the international trading system needs as it faces a range of challenges that threaten liberalisation itself and the hard-won gains of the post war GATT/WTO system itself. The TAC report represents UK leadership that has been sought after since the decision to leave the EU. It has much to commend it.

Britain’s music industry, the EU, the UK – and an early entry for Frost’s inbox

2 Mar

Some post-Brexit barriers to business between the UK and the EU are a consequence of both parties failing to clinch an agreement that one or the other or both already have with third parties – in which the loser is the industry concerned, on both sides of the channel.

Others are a product of our own bureaucracy: of government being ponderous when it might be nimble in offering advice and support.

And others still are simply a product of Brexit as we agreed it, which brings with it friction in trade with the EU, which in turn can be minimised but not eliminated.

The continuing row over the access of British musicians to the EU and EU musicians to Britain offers examples of all three.

In the first category, we have visas.  Some EU states will allow our musicians to visit without a visa for up to 90 days and other won’t.  That isn’t a problem for other third party states, such as St Lucia, Tonga or those which make up the United Arab Emirates, because they have a bileteral deal with the EU that waives the requirement.

In the second, there is VAT. UK exporters of physically recorded music and merchandise must go from paying no VAT to negotiating 27 different EU VAT systems to dealing with a single EU VAT system during this current year.  This is a classic instance of the businesses concerned needing more advice from the government as it seeks to navigate two systems within twelve months.

Finally, there will be more bureaucracy, admin and paperwork – even if the UK and the EU can sort that visa issue, and others that could reasonably be settled (such as carnets, for which there may already be an exemption for portable musical instruments taken into the EU for professional purposes).

That last category is integral to leaving the Single Market and Customs Union – which is outweighed, to some Brexiteers, by the regaining of national independence and, to others, by the gains that come from being outside the EU system and willing to act on it.  Our vaccine success alone could be worth “more than the most pessimistic assumptions about the economic damage of Brexit,” according to Jethro Elsden of the Centre for Policy Studies.

(Northern Ireland, of course, remains in the Single Market for goods and, in key respects, in the Customs Union too for practical purposes.)

Why the difficulty over negotiating a deal on visa waivers or work permits?  Because musicians are caught up in a wider issue of which their story is part: freedom of movement.

To cut a long story short, the EU made a public offer on the issue, which had wider implications for free movement, and the UK made a private one, that did not.

The former would have applied not only to musicians but to other workers and travellers, as Free Movement confirms.  But, for many people who backed Brexit, ending it was integral to the exercise.

Our proprietor’s EU referendum day poll of over 12,000 people found that a third of those who voted Leave said the main reason was that leaving “offered the best chance for the UK to regain control over immigration and its own borders.”

Meanwhile, Oliver Dowden says that “the reason why we rejected the offer from the European Union was that it wasn’t binding, it didn’t cover touring, it didn’t cover technical support staff, and crucially, it didn’t cover work permits.”

This continuing impasse is an early bidder for entry near the top of David Frost’s inbox as he begins only his second day as a member of the Cabinet – though if the free movement obstacle remains immovable, there will be little he can wring out of the EU.

However, Frost knows the ropes, having led the negotiation on the trade deal himself, and is so is well-placed to knock on the doors of individual member states, into whose hands most of these matters fall in the absence of an EU-wide agreement.

UK Music argues that “fishing is of course an important British industry, contributing £446 million to the UK economy in 2019 and employing 12,000 fishers”.

“But it pales in comparison with the UK music industry, which in the same year contributed £5.8 billion to the economy and supported 200,000 jobs.”

It is strange to think that there is more money in Peter Grimes, figuratively speaking, than there is in real fishing – even if because there is less than there might be because of the dispute.

There will be a £23 million fund for fisheries, and Music UK proposes, by way of parallel, a music exports office to help the sector cope with the increased bureaucracy.

Perhaps Rishi Sunak will make an offer tomorrow – after all, today’s papers are full of pre-briefing, as is way with modern Budgets, of £400 million more for theatres, museums, galleries and live music venues.

Anand Menon: What does Global Britain mean in practice, and when will the Government deliver it?

1 Mar

Anand Menon is Director of the UK in a Changing Europe.

“In leaving the European Union we restored sovereign control over vital levers of foreign policy,” declared Boris Johnson in his speech to the Munich Security Conference. To be frank, that is debatable. The EU’s competence over foreign policy is limited – so membership provided little in the way of constraint on national autonomy.

What is less open to question is the assertion, as the Prime Minister clearly laid out in what was an important speech, that this is a moment of opportunity for British foreign policy. Seizing it, however, will pose several challenges.

Brexit has already allowed the UK to take some actions it would not otherwise have been able to. By 1 January, continuity trade agreements had been signed with 58 countries. The UK moved to impose sanctions on Belarus, while the EU dithered and delayed.

There are costs as well as benefits, though. The new trade deals largely replicate what we had as a member state, and their impact is paltry compared to the negative impact of new barriers to trade with our nearest and largest trading partner. Equally, sanctions are more effective when applied by several states, and autonomy from the EU comes at the price of a decline in influence over what the EU does.

Indeed, it might yet be that the most important foreign policy impact of Brexit turns out to be indirect. ‘Global Britain’ was dreamt up as a way of underlining that Brexit did not mean insularity. And the desire to ensure that Brexit is seen to succeed provides a powerful incentive to make Global Britain real.

Consequently, at Munich, the Prime Minister sketched out an ambitious agenda. He clearly intends to use his convening power to push his agenda. He has used the UK’s chairmanship of the G7 to issue invitations to Australia, India and South Korea to attend the summit in Cornwall in June. This may mark the inauguration of a formalized D10 intended to present a united front against China.

On climate change, the 26th United Nations ‘Conference of the Parties’ (COP) on climate change will be the first such event to be held in the UK, presenting a golden opportunity to establish the UK as a continuing big player in global climate diplomacy in its own right.

Yet turning ambitions into reality will require several things.

First, a clarity of vision and ability to make difficult choices. When it comes to the D10, Mr Johnson needs to consider whether it really makes sense to create a grouping of democracies without engaging closely with the EU, whether some of those he is inviting really merit the label ‘democracy,’ and, indeed, what balance he wishes to strike between sanctioning and engaging with China.

It is hard to believe now, but the Prime Minister repeatedly called for a free trade agreement with China. Domestic pressures are going to make that impossible to deliver. And yet an overlooked implication of Brexit is that Beijing can retaliate against UK measures in response to perceived human rights abuses without the need to get embroiled in a wider fight with the EU as a whole.

Dealing with China and – more so – addressing the climate crisis are the work of decades. Success is not a question of quick political ‘wins’, but requires sticking power. For partly understandable reasons related to the pandemic, this is not a Government that has, as yet, shown an aptitude for thinking beyond the short term. If it is genuine about its environmental aspirations, however, it must.

This will involve not only confronting those among the Prime Minister’s own supporters who do not share his liberal international vision, but also building a consensus that can outlive his time in office.

None of which will be altogether straightforward. According to recent polling by the British Foreign Policy Group, while 34 per cent of Britons think ‘Global Britain’ implies the UK being a ‘champion of free trade and globalisation,’ more than a fifth (21 per cent) – including 35 per cent of Conservative leave supporting voters – take it to mean the UK is a nation with strong and secure borders focused on issues at home.

And when it comes to climate, while 68 per cent support the UK taking a global leadership role, Conservative voters appear less supportive and the least willing amongst voters to take individual action to address climate change.

This matters, because tackling the climate crisis involves a combination of diplomacy with action at home. Just as claims to be a champion of a rules-based international order were undermined by a stated intention to contravene international law so, too, the UK’s international climate leadership will hinge in part on it setting an example at home. The Government’s Ten Point Plan of November last year marked a good start, but more will need to be done to meet the ambitious targets set, and a failure to do so will hardly burnish our international climate leadership credentials.

And all this is without mentioning the domestic bases of international influence. It perhaps goes without saying – yet nevertheless I will mention it here – that the UK’s ability to make Global Britain a success will hinge every bit as much on the pace of its economic recovery from both the pandemic and from Brexit, and its ability to retain its unity in the face of separatist challenges.

The year ahead holds real promise in terms of the UK’s ability to finally put some flesh on the bones of its claims about Global Britain. Brexit adds a degree of political urgency to the quest to show the UK continues to wield influence. And the Government has laid out a pretty impressive agenda committing itself to the defence of the liberal, rules based international order. But declarations are merely a start. To deliver on its rhetoric, the Government will need to make hard choices and to show evidence of a clarity and long-term vision that, to date, have been rather notable by their absence. The long-awaited Integrated Review of security, defence, foreign policy and international development will represent an important signal as to whether it is willing to do so.

ConservativeHome and UK in a Changing Europe will be discussing Global Britain – navigating the post-Brexit world this evening with: Liz Truss MP, Secretary of State for International Trade; Katy Balls, Deputy (Chairman). Paul Goodman, Editor of ConservativeHome, will chair the event. Please register via this link.