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Given how much we're going to be talking Free Trade Agreements this week - whether UK-EU or UK-US - it is important to realise that the modern FTA is more about the locking in rules of trade rather than actual trade liberalisation 1/n
The simple average tariff of the EU (and UK) is currently 5%. 3.4% for the US. They're higher for agriculture (around 11% for the EU, 5% for the US). Just getting rid of these won't be an economic game-changer - and often they're protecting politically sensitive sectors 2/
Services? "However, in the main, services trade agreements do not lead to actual trade liberalisation" quoted from this @uk_tpo paper and many others - because services trade is really all about regulations blogs.sussex.ac.uk/uktpo/publicat… 3/
Whoever this trade expert was on R4 this morning may be right that UK betting shops will soon be a strong force in the US - but this is due to a recent Supreme Court judgement sportsbettingdime.com/guides/legal/b…
We can guess in fact that UK company access to the gambling market in the US will in fact not be included in any trade deal as it will be down to state level regulations - which typically are not included in US trade deals 5/
Why then bother with Free Trade Agreements when economic growth is fairly small compared to not having one? Different reasons, including predictability of trade rules, insurance against the WTO falling apart, and imposing your way on smaller countries... 6/
To take for example US and EU FTAs - both want to define food rules including regulations and Geographical Indications in their way, they also want to define industry standards according to their own rules. The EU has been doing better on this than the US 7/
The US number one goal for a UK trade deal is to move us away from the EU ruleset towards the US one. Thus for example giving more opportunities to US agriculture companies - though still with an overall modest economic gain 8/
The so-called mega-regional trade deals, the failed TTIP and successful CPTPP, were also heavily political, to create a larger regulatory framework that was in some way a response to the rise of China and the danger they would enter this space 9/
UK discourse on Free Trade Agreements is completely different - treating them like 19th century market opening treaties with great economic benefits. Like having them with both EU and US will be an economic game changer, rather than negative compared to now 10/
We also have to recognise that huge amounts of trade now take place with companies, and / or in global, but predominantly regional, supply chains. For the first certainty is a big factor, for the second deep integration of the type we see all over the world 11/
Typically around the world we see Customs Unions and other forms of deep integration such as the EEA or NZ/Aus to encourage regional supply chains. An FTA is a much weaker form of trade integration, hence likely economic cost 12/
So, for those who want a UK-US or UK-EU FTA the question has to be why? From the US or EU point of view it is obvious, the UK either staying with EU rules or moving to US ones. But what's our actual economic goal, our desired relationship? 13/
So for Conservative leadership candidates professing no-deal or FTA with EU, what is the economic vision of which this is a part? And how much does an FTA support, or do you actually need integration e.g. for the car industry. This is the question 14/ end
