1/ Interesting point 👇 that's worth unpacking. Does being major importers and big investors translate into FTA negotiation leverage?
The answer is that it CAN but as always in trade, things are a bit more complicated.
The answer is that it CAN but as always in trade, things are a bit more complicated.
2/ By definition, a country that's importing has barriers (tariffs, regulations, etc.) low enough at least some foreign firms can compete.
Unless those foreign firms are importing under FTAs or other exclusive arrangements, lowering barriers further is useful but limited.
Unless those foreign firms are importing under FTAs or other exclusive arrangements, lowering barriers further is useful but limited.
3/ When evaluating a tariff offer, negotiators will ask two questions:
- Can an increased number of my firms better compete with local producers with this new lower tariff?
- How big an advantage will this offer be over competitors from other countries (under MFN or their FTAs)
- Can an increased number of my firms better compete with local producers with this new lower tariff?
- How big an advantage will this offer be over competitors from other countries (under MFN or their FTAs)
4/ If your country is already importing a lot, from a variety of sources, then you may either have low barriers across the board or a wide range of FTAs and preferential schemes.
Either way, what you can offer is reduced.
Either way, what you can offer is reduced.
5/ You can still generate a lot of negotiating coin by opening up the few sectors you do protect, but that generally comes at a high political price.
Those barriers, be they regulations or tariffs are probably there for a reason.
Those barriers, be they regulations or tariffs are probably there for a reason.
6/ (Side note: If it leaves the EU without a Customs Union, the UK will inheret some EU barriers that were important to other Members but not the UK.
It can trade those away, but only if doesn't immediately lower them on an MFN basis and only to limited effect)
It can trade those away, but only if doesn't immediately lower them on an MFN basis and only to limited effect)
7/ Investment outflows are similarly complex.
There's not a lot a country can offer in FTA to make more of its investors put money abroad.
Rather, it asks the other side to lower barriers for its investors, provide guarantees and open sensitive sectors (like energy).
There's not a lot a country can offer in FTA to make more of its investors put money abroad.
Rather, it asks the other side to lower barriers for its investors, provide guarantees and open sensitive sectors (like energy).
8/ Being a major source of capital is definitely a strength, but how big a strength depends on the perceived demand among investors for these kind of concessions.
If investing in the other country is already easy and safe, investment provisions in an FTA lose potency.
If investing in the other country is already easy and safe, investment provisions in an FTA lose potency.
9/ The ideal FTA partner is a massive, wealthy and closed market willing to open itself up to your exporters and yours alone.
A high volume of imports and capital outflows suggests size and wealth, but also openness.
Oppeness means less negotiating coin.
/Thread
A high volume of imports and capital outflows suggests size and wealth, but also openness.
Oppeness means less negotiating coin.
/Thread
