It has become a well-rehearsed view that, while Brexit comes with risks, the economic opportunities that come from the UK securing better trade deals are significant. The problem is that securing trade deals is complex, time consuming and, often, controversial.
The precedents are clear. The USA took nine years to agree the Trans-Pacific Partnership (TPP) that it now looks set to abandon; and while the EU has only been working on negotiations of the Trans-Atlantic Trade and Investment Partnership (TTIP) for four years, much of the past two decades had been spent preparing the groundwork, and agreement is still a long way off. Notably this lengthiness cannot be overcome by simply pursuing bilateral agreements; ChAFTA – the deal between China and Australia, took approximately 10 years to complete.
But such protracted negotiations are not an option for the UK. The public are eager to see evidence that their June 23rd referendum decision has led to improved economic conditions and, with a general election due in 2020, the Government will be eager to get deals done, or at least well under way, before then.
With a Civil Service already stretched and an apparent lack of experienced trade negotiators (Britain has not, independently, had responsibility for negotiating trade deals since 1973), there are real challenges. All the more so if time and effort is spread across a number of different potential deals.
But success is not impossible. By making clear strategic choices and prioritising a small number of significant deals, the Government could make good progress before the next election.
The recently launched Trade Prospects Index from WPI Economics and Heathrow Airport demonstrates how this should be approached. By using UN Comtrade statistics alongside an in-depth analysis of the likely feasibility and speed of trade deals, we have ranked the top ten non-EU countries that the UK should be looking to negotiate with.
The results clearly demonstrate the trade-offs that the Government will need to make. Deals with countries like Australia, where existing barriers to trade are relatively low, may produce speedy results but will, ultimately, be of lower value.
Others, like China and Indian will be of extremely high value, but with large barriers to trade in place and track histories of complex and lengthy negotiations, the immediate opportunities are less tangible.
Thankfully, there is a middle group of countries – including Brazil and the UAE – where returns are potentially significant and barriers to securing a deal comparatively low. The Government must focus its effort and resources on making progress with this group of countries.
One prime example is South Korea, which tops the 2017 Trade Prospects Index. The potential is clear: its imports of financial and business services rose by 23 per cent between 2009 and 2014, representing a good opportunity for Britain in a sector where we have a significant comparative advantage.
In terms of ease, we have already seen South Korea making strong overtures to the UK Government in the wake of the referendum. It also has a successful Free Trade Agreement with the EU, which negotiations could be based on, and their last bilateral Free Trade Agreement (with Colombia, ratified in 2013) was agreed in 30 months.
Significant progress could be made before 2020 and offer the hope of improved economic circumstances for businesses and families across the UK. But the Government must act quickly. Failure to do so will result in slow progress, lost economic opportunities and an increasingly frustrated electorate wondering why they aren’t seeing the action they want off the back of their June 2016 referendum choice.