As the UK contemplates its future with Europe, what’s needed now is a parallel pursuit of free trade agreements (FTAs) with the other major economies, a London Business School expert has said.
Linda Yueh, Adjunct Professor of Economics, London Business School, made the comments writing earlier today in Forbes.
“The dust hasn’t settled on Brexit and the European Single Market with its deep integration that eliminates non-tariff barriers through common standards, which is economically valuable. The UK has a lot of negotiating to do there.
“But, as the saying goes, “plan for the worst, hope for the best.” Britain should be actively securing its place on the world stage through pursuing trade agreements with the other major economies while it sorts out its future with the EU,” says Yueh.
With trade agreements likely to take years, as will Britain’s negotiations with the EU, Yueh believes the sensible approach is to start informal talks with the often overlooked Commonwealth, which includes India, Canada, Australia, as well as pursuing trade with the world’s biggest economies, US, China and Japan.
“The Commonwealth is a network that Britain is well placed to pursue more trade with.
“Economic studies consistently show that among the determinants of greater trade are historical ties, shared language and institutions. The 53 nations of the Commonwealth have that largely overlooked advantage.
“Trade among these nations, which range from the rich such as Britain and Singapore to the poorer ones in Africa, has been growing rapidly. Even without being a formal trade bloc, intra-Commonwealth trade was estimated at $592 billion in 2013 and is forecast by the Commonwealth Secretariat to surpass $1 trillion by 2020.
“That’s due to the rapid economic growth, including in trade in these countries, in the past few years. Since 2000, global exports of Commonwealth countries have nearly tripled from $1.3 trillion to $3.4 trillion, accounting for 14.6% of world exports in 2013. In other words, if it were one economic entity, the Commonwealth would be the world’s largest trader, surpassing China.”
With a combined population of 2.2 billion across six continents, many of them faster growing than the rich economies of the West, Yueh points out, fostering greater trade and investment links with the Commonwealth could prove to be helpful.
More attention than ever is also being paid to new and potential trade deals such as the TPP (Trans Pacific Partnership) between America and Asia, and the TTIP (Trans-Atlantic Trade and Investment Partnership) between the US and Europe.
“These are led by the US, so the UK would do well to start parallel talks with the world’s biggest economy,” she says.
“Indeed, the Republican Speaker of the House of Representatives of the US Congress has said that he is interested in starting negotiations with Britain as it negotiates Brexit. This is promising, though much hinges on their November elections to take it forward.”
Another priority is pursuing a free trade deal with China, the world’s second largest economy.
“The UK may be at risk of looking less attractive as a gateway to Europe, but that depends on the EU negotiations. Until that happens, in the meanwhile, it would be sensible to build on the existing strong links between Britain and China to secure a free trade agreement.”
Although China is a tough negotiating partner and has few FTAs, having one or at least moving towards an FTA with China would also help with Britain’s negotiations with the EU, if the UK can become the gateway to over a billion Chinese customers for EU businesses, Yueh believes.
“Global trade is far from free,” she says. “So negotiating market access for trade and investment for British businesses is important, especially if the UK is to retain its international outlook that has contributed to its economic growth and strong position as the world’s fifth biggest economy.”