The global trading environment is shifting fast. The government’s reengagement with the US, EU and China is a good first step – but a wider reset of the UK’s trade strategy is now essential.
TBI is calling for a shift in the UK’s trade liberalisation efforts – with less focus on slow, goods-oriented FTAs and more emphasis on faster, targeted market access deals that play to the UK’s strengths in services and digital trade.
In a tougher trading environment, the government must also help more firms make better use of existing trade agreements. Upgrading the UK’s digital trade infrastructure can make it faster, simpler and cheaper to trade and create a new engine of growth.
In a major new report, “Making Trade Work Again: Resetting the UK’s Trade Strategy for a Changing World,” the Tony Blair Institute for Global Change argues that the UK’s trade strategy needs a fundamental reset. The old model – built on multilateral liberalisation, US leadership and falling trade costs – no longer holds. Multilateral progress has stalled. The US is increasingly using trade policy to pursue strategic and domestic goals. And the risk of deeper trade fragmentation is growing.
While the government is rightly re-engaging with major partners including the US, EU and China to improve the UK’s trade prospects, this must be the starting point for a broader strategic rethink on two fronts.
1. From Slow-moving FTAs to Dynamic Market Access Agreements
A core part of that reset is recognising the diminishing returns from traditional free trade agreements. Following welcome progress on an FTA with India, the UK now has agreements in place or pending with most of its major trading partners. FTAs are also slow to negotiate, heavily goods-focused, and less aligned with the UK’s service-dominated economy. Rather than chasing further gains through broad, slow-moving deals, the government should shift more of its trade negotiating resource towards targeted market access agreements that focus on the UK’s sector strengths – particularly in digital services, where trade is growing rapidly. As TBI’s report sets out, this shift would make the UK’s trade strategy more agile, more competitive, and better suited to the realities of a fast-changing global economy.
2. Tech-Enabled Trade Facilitation as a New Engine of Growth
The report also highlights that in a world where signing new trade agreements is increasingly difficult, the UK must make better use of the deals it already has – by investing in digital trade infrastructure to make it easier, cheaper and faster for firms to trade, especially for SMEs. It proposes a package of reforms to unlock this potential, including: an AI-powered trade advisor to help businesses navigate rules and access markets; a reboot of the UK’s stalled Single Trade Window; the use of global supply chain data to make customs checks more efficient; and encouraging the use of distributed ledger technology to speed up and simplify trade documentation and cross-border payments. Done right, tech-enabled trade facilitation can become a new engine of growth.
Trade has been a major driver of UK growth in the past. With growth weak, public finances tight, and global conditions more volatile, the government must do all it can to ensure trade is contributing to economic performance – not weighing it down. That demands a more shrewd, modern and strategic approach to navigating the world as it is, not as it once was. The government’s forthcoming Trade Strategy should reflect these pivots if it is to be fit for the future. Tom Smith, Director of Economic Policy at TBI said:
“The UK can’t control global trade winds – but it can ensure its own sails are set to catch them. The government is right to re-engage with major partners like the US, EU and China, but that’s only the start. Globalisation is evolving quickly, and the UK’s trade strategy needs to evolve with it.”
“We should place less emphasis on broad FTAs, which often get bogged down in debates over sensitive goods sectors – and focus more on faster, targeted market access agreements that reflect the UK’s strengths in services and digital trade.”
“And we need to make sure more businesses can benefit from the trade deals we already have – by upgrading the UK’s digital trade infrastructure to make it faster, simpler and cheaper for UK firms to trade. Get it right, and trade can be a real engine of growth – even in this tougher global environment.”