Trade agreements everywhere are hostage to politics and protest, meaning that the UK can't expect an easy ride as it prepares for post-Brexit life, writes Brian Caplen.
The UK’s new trade minister, Liam Fox, says that the country is scoping about a dozen free-trade deals with non-EU countries to be ready for when the UK leaves the EU some time in 2019. If he does achieve this outcome he will be bucking a trend of trade deal negotiations become more fraught and taking longer than ever to negotiate.
This is a result partly of the additional complexity involved in contemporary deals, especially where services rather than manufactured goods are covered. But it is also due to the spectrum of political and populist forces ranged against different aspects of them.
As evidence of this, Mr Fox needs only to study the fate of both the much-heralded EU deal with Canada – the Comprehensive, Economic and Trade Agreement (CETA) – as well as the slow progress on the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US.
Of course, Mr Fox would argue that EU trade deals are difficult because of the need to have so many governments sign off on them and there is some truth in this. While the original plan was to push CETA through the European Council and the European Parliament – which would make sense if the EU really was a federal body – this has now been derailed and the deal will have to go to every government and some provincial bodies – 36 in all – for sign off. This may delay its implementation by four or five years and the final deal could be hugely watered down.
TTIP is much less far advanced than CETA but already has many opposition groups attacking parts of it and, if Donald Trump becomes the next US president, he may finally kill if off – after all, a big part of his campaign has been against trade deals.
Bilateral deals between the UK and Australia, for example, should in theory be easier to negotiate as there are only two parties to satisfy. All the same, it took Australia a decade to negotiate a free-trade deal with China. The scary prospect for the UK is that it unwinds all its existing trade deals that come as part of EU membership but does not have anything ready to replace them.
Brian Caplen is the editor of The Banker.
