Baroness McIntosh: Serious implications for UK's future trade relations after failure to reach agreement at G7 Summit
4 min read
Conservative peer Baroness McIntosh writes ahead of her parliamentary debate today on 'Implications for the UKs future trade relations following the failure to reach agreement at the G7 Summit in Canada' with specific regard to the food, drink and manufacturing sectors.
The G7 Summit hosted by Canada in early June aimed to promote the rules-based international order, to advance free and fair global trade, promising talks leading to more trade between the subscribing nations.
Why does the G7 matter? Precisely because it bridges trade relations between the EU and world trade through the WTO. I am delighted to have secured a debate on Thursday 21 June on the implications for our future trade relations of failure to reach agreement in Canada.
The background to the June Summit was the latest UK trade figures in April 2018 showing a widening of the total UK trade deficit to £9.7 billion in the last quarter. This change was due mainly to falling exports of both goods and services.
Exports in goods fell by £3.1 billion due to falls mainly in exports of machinery, pharmaceuticals and aircraft, while exports in services fell by £2.5 billion.
Given the fact that we are negotiating our exit from the EU, it is perhaps unsurprising that our trade deficit in goods with EU countries grew while that with non EU countries improved. Trade relations pose the greatest threat to the global order. Post Brexit the UK wants to negotiate our own trade deals with the Government aiming to strike a deal with the EU and subsequently with America, India, Australia and so on. Success will depend on all the players playing by the rules and following Trump’s behaviour at the Summit and introducing tariffs on trade, respect for the rules is doubtful.
Yorkshire seems to have bucked the trend with trade figures showing the region outperformed the national average in the first three months of 2018, both an increase in the amount of goods Yorkshire exports and increase in the number of companies exporting.
In terms of food and farming, Yorkshire is well placed to compete both with other regions of the UK and internationally. Exports to China from Yorkshire are growing helped by the sale of pigs’ trotters and other parts to China where they are considered as delicacies.
The EU is the UK’s most important market for food and drink exports, generating £13.3 billion of the total of food and drink exports for 2017, accounting for 60 per cent of the total, followed by the US and China. The EU has 36 preferential trade agreements with more than 60 countries, representing 15 per cent of all UK traded goods not just food and drink. Many Commonwealth countries have Economic Partnership Agreements with the EU giving preferential access for their goods to what will be a market of 440 million consumers after Brexit.
The application of the EU’s standard Rules of Origin on the day after Brexit would be hugely damaging to UK - EU trade. In terms of the share of national exports as percentage of world exports, in 2016 China (excluding Hong Kong) led, followed by the EU and then the United States.
As a major trading nation, we should welcome every opportunity to improve our international trading relations. So it was a disappointment that the June G7 Summit was divisive and inconclusive. The attempt by US President Trump to persuade the G7 partners to readmit Russia following on from the decision to impose US tariffs on steel and aluminium poisoned the atmosphere of the talks which were then doomed to fail.
Russia was admitted to the G7 in 1997 and removed in 2014 following the annexation of the Crimea. In August 2014, Russia announced a ban on imports covering a wide range of agrifood and drink products from the EU, US, Canada, Australia, Norway, Ukraine and other countries. In the year following the ban’s implementation, UK food and drink exports to Russia fell 52 per cent. EU food and drink exports to Russia fell by 53 per cent.
US threats to impose tariffs on EU and Chinese exports to the US look set to raise the temperature in international trade talks still further with consequent retaliatory measures. Rising trade tensions globally do not augur well for trade. Signs of slower economic growth can only be increased by the prospect of a trade war between the US and the EU and China.
How best to navigate these choppy waters in regard to international trade? How do we replace our existing market on our doorstep with alternatives? There appears to be no simple answer. Current international tensions highlight the dangers of leaving the trading block of 505 million consumers of which we have been an intrinsic part since 1973. The debate on Thursday will provide the opportunity for the Government to share its priorities for future trade talks mindful of the importance of these to the food, drink and other manufacturing sectors.
Baroness McIntosh of Pickering is a Conservative peer
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