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Brussels calling. The UK duly having Brexited, the PR battle is on for which side can stake out its negotiating position for the ensuing trade agreement with more determination and blame the other when things go wrong. The EU published its draft mandate for the talks this morning, while the UK is making less structured but stridently defiant noises about not getting pushed around. It’s best to equate this stage of negotiations to the bit at the beginning of a wrestling match when the opponents strut around the ring bellowing provocation and firing up their supporters in the crowd.
We’ll let you know when the first round actually gets under way — but as today’s post discusses, the UK may be at a negotiating disadvantage in terms of manpower alone. Today’s Tit-for-Tat is with Chris Southworth, UK secretary-general of the International Chamber of Commerce, while our chart of the day looks at the slump in trade in Iowa as the Democratic caucuses kick off today.
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Plenty of troops, few battle-hardened commanders
Liz Truss, the ebullient UK trade secretary famously enthusiastic for British penetration of Chinese pork markets, made quite a claim in the House of Commons the other day. Questioned whether the UK had enough trade negotiating capacity, given that it was planning to open talks with the EU, the Japanese, the Americans and God knows who else, she claimed the UK had as many negotiators as the US.
We hold no views on Truss’s ability to hawk ham to the Middle Kingdom. But on this issue she was not only right but actually being rather modest. The department for international trade (DIT) has a policy group, which covers development of strategy as well as negotiating, of more than 600 staff. There’s another separate team in Downing Street to deal with Brussels. Meanwhile the US trade representative’s office scratches along with just 250 souls.
So will Britain be able to crush the US negotiating machine with sheer weight of numbers? Sadly not. It doesn’t really work that way.
You can’t fault the UK for lack of resources. They’ve thrown money and bodies at the issue with gusto. Training programmes run by the Foreign and Commonwealth Office and DIT have wheeled in an array of experts from around the world. Trade lawyers — the law firm Linklaters put together a teaching programme — academics and former negotiators all came in to do teaching.
Courses have included brief introductions to the subject, “deep dive” programmes on particular issues and simulations of trade talks to learn negotiating tactics. The civil service has also assembled its existing expertise, finding officials with experience at the OECD and the WTO and so on and making them senior negotiators for various bits of the talks.
Liz Truss: not only right on this occasion but actually rather modest © AFP via Getty Images
But we’ve spoken to several people involved in that training programme who reckon there are still big gaps. The UK civil service has hordes of super-bright 20-somethings with an intense enthusiasm to learn. It doesn’t, though, have senior people in place able to make trade-offs between different issues. As one person put it, the UK now has a big standing army but no special forces commando unit.
Critically, it also lacks ministerial direction. Emily Jones, an expert in the political economy of trade at Oxford university, was brought in to teach civil servants about negotiations. She told us: “The problems I foresee are not with the level of expertise and competence of our civil servants, but with the lack of effective co-ordination mechanisms across Whitehall on trade, and a lack of clarity about our overall economic strategy.”
Since trade deals cover a vast array of subjects — regulation, intellectual property rights, the infamous food standards — they need input from departments for business, the environment and food, health and so on. But ministers haven’t been consulting businesses or other interested parties properly, Jones says. “So far we seem to be rushing into trade deals without knowing where we want to end up, which is a recipe for disaster.”
The UK has had a bit of practice negotiating rollovers for existing EU deals with various third countries such as South Korea. But those talks were about trying to replicate current agreements, not constructing a different strategy with new priorities.
This puts the army of 600-plus civil servants into perspective. The lesson from the US is similar: we also talked to Jennifer Hillman, one time USTR general counsel and a former US textile negotiator. (Textiles talks are famously gruelling and complex, and its negotiators are basically the Navy Seals of the trade world.) Her point was that a couple of hundred staff are all you need if you can effectively draw on expertise from across the US federal government. Much of a senior USTR negotiator’s role is about managing the US government’s famous “inter-agency process” and liaising with domestic lobbies. “A lot of it is working out whether your industry is ready to walk through a market access door [for exports] when you open it up.”
But British industry is complaining increasingly vociferously that they haven’t been consulted on trade priorities. And there you have it. Plenty of troops, but few battle-hardened commanders. Not much sense of the lay of the land. No clear instructions from the Defence Council. And with hostilities about to commence. This will be one to watch.
Charted waters
The Democratic presidential candidates will start battling it out in Iowa today as the caucuses kick off — but will trade be a hot topic? Trade in Iowa has slumped in the past year as trade wars have raged. The question is whether the US state’s farmers will blame Trump or blame China for that.
Tit-for-tat
Chris Southworth, UK secretary-general of the International Chamber of Commerce, joins us for three blunt questions:
What effect would the UK government’s proposed divergence from EU regulations have on UK businesses?
It depends. Divergence generally means more complexity for business — different sets of rules to navigate — which translates to more cost and red tape especially for small companies.
The government may remove rules and regulations to become more competitive but rules are usually there for a reason so there may be consequences elsewhere in the system which aren’t in the interests of business — such as workers losing their rights or lower food standards. If this happens, unions and civil society may blame big business — which erodes public trust and creates a divisive environment.
Why might the emerging US-driven trend towards bilateral rather than multilateral deals not work for digital trade?
Digital trade is global not national, so having lots of different rules for each market makes no sense at all when a company is trying to sell a product into every market or across a whole region. It doesn’t deal with the big issues like data flow. Two hundred-plus different sets of rules on data management, as is currently the case, is not helpful at all to a small company trying to go global and frankly off-putting, especially for first-time traders. Digital trade is global and needs a multilateral approach — which is why more than 80 governments are negotiating a new, updated ecommerce deal at the WTO.
What can the UK learn from the TTIP negotiations when it comes to negotiating deals with the US and the EU?
The big lesson from TTIP is that trade has to be done differently if it’s going to work for everyone. There has to be more transparency, consensus building and democratic oversight so it is clear there is a net benefit to the economy and society. The system has to build trust, not erode it. TTIP was over in two to three weeks because of two issues: chlorinated chicken and the NHS. Those two same issues were back again in 2019 during the election campaign and could easily derail a UK-US deal, whatever the UK prime minister or US president want to do. Trade negotiations cannot be undertaken in isolation or behind closed doors any more. Civil society, unions and consumers are as important as stakeholders as business.
Don’t miss
- Trade tensions are expected today between the UK and the EU post-Brexit, as both sides announce their vision for future trade relations: at heart is the issue of alignment on rules.
Read more - The challenges facing UK-US trade talks: there are concerns that disagreements between London and Washington in areas ranging from trade itself to security are clouding the launch of the negotiations.
Read more - The US will this week hold talks with Kenya aimed at clinching a bilateral trade agreement as the Trump administration turns its back on what has been a traditionally multilateral approach to trade with Africa.
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Tokyo talk
The best trade stories from the Nikkei Asian Review:
- International clothing brands including Adidas and Ralph Lauren are urging Cambodia to improve its human and labour rights record, with less than two weeks before the EU decides whether to revoke Cambodia’s trade privileges — and the country’s garment factories have hit back.
Read more - The disruption of China’s manufacturing industry due to the coronavirus could affect Apple’s plans to release a cheaper iPhone 11 model in March.
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Source: Economy - ft.com
