Thread by @37paday

1/ Let’s talk about trade

2/ Some of the arguments made in favour of Brexit are the UK’s ability to negotiate its own trade deals, most growth will come from outside the EU, the EU is “protectionist” and slow at negotiating trade deals.

3/ As we rapidly approach 29 March 2019 where the UK will have no trade deals to its name & is asking the EU to include the UK in its FTAs (& stay in the single market & customs union in all but name but with no influence) during the transition, the UK is not in a great position

4/ If there is no transitional deal then the UK no longer benefits from the EU’s existing trade deals, including the advantages of being in the Single Market and the Customs Union.

5/ The EU represents around 44% of the UK’s exports (over the past 18 months it has ranged between 43% and 51%) (of which 2% is estimated to be attributed to the Rotterdam effect) and around 53% of the UK’s imports.

6/ The UK’s exports to the EU represents about 13% of UK GDP. EU exports to the UK represent about 3% of EU GDP. So that is a lot of trade affected by a no deal outcome and the UK is certainly going to be more affected than the EU.
uktradeinfo.com/Statistics/Ove…

7/ If we include the existing trade deals the EU has with third countries, then around 54% of UK exports go to the EU or countries with whom the EU has a trade deal. About 66% of imports come from the EU or countries with whom it has a trade deal.

8/ Here are some links to evidence the above
fullfact.org/europe/does-mo…
fullfact.org/europe/uk-eu-t…
fullfact.org/europe/UK-EU-t…

9/ Note if the EU does not have a trade deal with a country that does not stop UK business being able to trade with that country.

10/ So how does the EU measure up compared with the rest of the world?

11/ Well first, here is my attempt at explaining the main types of trade arrangements. The most common are:

12/ Customs Union (2 or more countries agree to charge the same import duties to other countries and have free trade between themselves (no import duties)

13/ Free Trade Agreement (2 or more countries agree to reduce trade barriers such as import quotas and import duties between themselves). Increasingly FTAs may also look to cover services and the freer movement of people.

14/ Preferential Trade Agreement (2 or more countries agree to reduce import tariffs for certain agreed products only)

15/ Framework Agreement (2 or more countries look to expand trade and investment with one another. Usual a precursor to agreeing an FTA.)

16/ Mutual Recognition Agreement (2 or more countries agree to recognise one another’s conformity assessments).

17/ There are 195 countries in the world

18/ Here is a list of the largest economies in the world: statisticstimes.com/economy/countr…

19/ The top 15 economies are: USA, China, Japan, Germany, UK, France, India, Italy, Brazil, Canada, Russia, South Korea, Spain, Australia and Mexico

Looking at the top 10, 4 of those (Germany, UK, France and Italy) are in the EU.

20/ Let’s look at the non EU territories in the top 10. I have tried to list the FTAs and some of the major other trade agreements but this does not cover every single trade arrangements including those in negotiations, framework agreements and preferential trade agreements.

21/ What is obvious about what follows is how the majority of trade deals are done between neighbouring countries and how many countries strategically want to be in trade blocs of some kind

22/ The USA has 20 FTAs in force: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore
ustr.gov/trade-agreemen…

23/ China has 16 FTAs: ASEAN, Maldives, Australia, South Korea, Georgia, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Iceland, Switzerland, Hong Kong, Macao, and Taiwan.

24/ China is party to the Asia Pacific Trade Agreement which is a preferential trade agreement between China, Bangladesh, India, South Korea and Sri Lanka

China has more FTAs under negotiation or consideration:
fta.mofcom.gov.cn/english/index.…

25/ Japan has 18 FTAs in force (TPP12 which has fallen through) & 5 in negotiation. The 18 are Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, ASEAN, Philippines, Switzerland, Vietnam, India, Peru, Australia, Mongolia, TPP12, TPP11 and EU
mofa.go.jp/policy/economy…

26/ TPP11 covers Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam

27/ Canada has 15 FTAs in force: NAFTA (USA and Mexico), Israel, Chile, Costa Rica, EFTA, Peru, Colombia, Jordan, Panama, Honduras, South Korea, Ukraine, Canada itself, TPP11 and the EU.
international.gc.ca/trade-commerce…

28/ Canada is in discussions with CARICOM, Dominican Republic, Guatemala, Nicaragua, El Salvador, India, Japan, Morocco, Singapore, China, Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the Pacific Alliance (Chile, Colombia, Mexico and Peru)

29/ Brazil is part of Mercosur (a customs union) and has 5 FTAs in force: Egypt, Israel, Peru, Bolivia, Chile. It also has a number of framework and preferential trade agreements in force.

sice.oas.org/ctyindex/BRZ/B…

30/ India has 7 FTAs in force: ASEAN, SAFTA, Sri Lanka, Singapore, Malaysia, Japan and South Korea.
indiantradeportal.in/vs.jsp?lang=0&…

31/ India is also party to the Asia Pacific Trade Agreement and the Global System of Trade Preferences which is aimed at promoting trade between 44 developing countries
un.org/ldcportal/glob…

32/ Let’s look at the EU. Details can be found here:
ec.europa.eu/trade/policy/c…

33/ The EU itself is a free trade area and a customs union among 28 member states. Indeed the single market is the world’s largest free trade area and goes beyond simply reducing tariffs, taxes and import quotas relating to goods and also covers services, capital and people.

34/ The EU has 35 trade agreements in force, including with Mexico, Russia, South Korea and Switzerland

35/ The EU has 50 trade agreements partly in place (for example the terms are already being applied even if the deal is not yet ratified) including with Canada and South Africa. The Canada one should really belong in tweet 34 but I keep it here based on the EUs own website.

36/ The EU has 27 pending agreements or agreements being updated including with Japan, Mexico Singapore and Vietnam

37/ The EU is in negotiations with another 21 countries (all of which are at different stages of progress) including Australia, Mercosur (Argentina, Brazil, Paraguay, Uruguay), China, India and New Zealand.

38/ But the EU has no trade deals with the USA or China I hear you say. Well, not true!

39/ Here is a list of trade arrangements between the EU and the USA - a total of 147
ec.europa.eu/world/agreemen… States of America&countryFlag=treaties

40/ Here is a list of the trade arrangements between the EU and China – a total of 71
ec.europa.eu/world/agreemen…

41/ Here is a list of all the trade arrangements the EU has by country
ec.europa.eu/world/agreemen…

42/ The EU has a number of mutual recognition agreements including with Australia, Canada, Israel, Japan, New Zealand, Switzerland and USA:
ec.europa.eu/growth/single-…

43/ The EU also operates the Everything But Arms scheme which grants full duty free and quota free access to the EU single market for all products (except arms and armaments) from qualifying countries.

44/ Currently 49 countries benefit as you can see here.
trade.ec.europa.eu/doclib/docs/20…

45/ Countries qualify if listed as a “Least Developed Country” by the UN Committee for Development Policy.

EBA countries do not lose EBA status if they enter into an FTA with the EU

46/ So the EU not only has the world’s largest free trade area but also has the most FTAs and other trade agreements globally. The UK benefitted from and had a strong voice in shaping all of that as an EU member

47/ The UK in choosing to leave the EU is choosing to lose the benefit of all those existing agreements. The first task of the UK will be to spend time replicating the benefit of all those agreements, let alone improving upon them.

48/ & that is before one factors in whether those third countries will wish to offer the same terms to the UK as offered to the EU & that trade arrangements for services (which represents about 80% of the UK economy) are much harder to agree than for goods (even in the SM).

49/ If a third country is only interested in a goods only trade deal where does that leave the UK if it wants to leverage services (where it is strong)?

50/ And despite the UK running recent consultations on trade deals with USA, Canada, Aus and NZ, third countries are going to want to know the terms of trade between the UK and the EU before agreeing a trade deal with the UK.

51/ After all Canada has a deal with the EU and Aus/NZ are in negotiations with the EU.

52/ This is because not only if they have their own trade arrangements with the EU will they not want to undermine those but also because they will want to get the best terms they can from the UK.

53/ Some trade deals the EU has involve Most Favoured Nation clauses which means if the EU offers better terms to the UK it would have to offer those to the countries who it agreed an MFN with. The EU may not wish to do that.

54/ All of which to say the UK is in a fantastic position as a member of the EU to benefit from free trade and push for incremental gains as an EU member (including improving the single market and EU trade deals in relation to services).

55/ On its own the UK has to reinvent the wheel while having helped create an enormous competitor on its doorstep.

56/ Which is why certain pro-Brexit MPs talk about unilaterally abolishing tariffs and quotas and waving checks at the border and falling back on WTO rules. But that has consequences.

57/ It means we give up leverage on trade deals as we have already abolished tariffs thereby allowing third countries to compete with domestic businesses. It is not protectionist, true, but is the price of Brexit really worth destroying jobs in the UK?

58/ Freed trade for whom? Do we want the UK to protect UK jobs? Does anyone want to give up their job?

59/ If we abolish tariffs then we have to offer the same to every country under WTO rules but they don’t have to reciprocate. As you can see by the number of trade deals the EU & other countries have, it is good evidence that WTO terms alone is not the best trade outcome.

60/ Waving checks at the border means less control at the border than we have now and increases not only security risks but also risks goods being imported that are unsafe, among other things.

61/ And relying on WTO terms does raise the issue of whether checks are required at the Irish border. While WTO rules don’t require border checks, the rules on non-discrimination may require them anyway on both the UK and Irish side.

tradebetablog.wordpress.com/2018/07/18/doe…

62/ And if border checks are required how does that fit with this piece of legislation passed by the UK?

https://twitter.com/37paday/status/1056093395888816129

63/ Good job our Government has until 29 March 2019 to resolve all this in a way that leaves us better off than we were as members of the EU.