The truth about post-brexit trade deals - FT Bearbull19 Jun 2021 15:55
What therefore is so attractive for the UK about joining a trade pact built around 11 far-away countries – the average distance of each one’s major city from London is just over 7,000 miles? What indeed. As Table 1 shows, it is not as if the TPP offers free-ish trade with particularly fast-growing economies. Sure, a weighted-average GDP growth rate of 1.8 per cent a year for the period 2011-19 is faster than the EU’s 1.4 per cent. But it is nothing to get excited about, coming in behind the US’s 2.2 per cent and even the UK’s 1.9 per cent. Given that the TPP is dominated by Japan, which accounts for half its $12.5tn output, pedestrian growth is almost inevitable. Japan’s growth has averaged 1.0 per cent, as sclerotic a pace as might be expected from a country where the median age is 49 – the world’s oldest bar Monaco – and almost 30 per cent of the population is over 65.
Yet Japan is already an important customer with whom the UK has a post-Brexit trade deal in place anyway (a cut-and-paste job from the EU’s deal with Japan) so membership of the TPP will bring little extra. Much the same might be said of the UK’s trading relationship with Australia, another TPP member, with whom the UK formalised a deal this week to predictable acclaim. None of these are reasons for the UK to forgo membership of the TPP. They just underscore the point that when all is signed off, the improvement in the UK’s export income will be marginal.
This comment will apply to almost all deals the UK government may make in the coming years, with the possible exception of the US. The two-way trade between the UK and the US is so big – £370bn in aggregate in 2019 – that a free-trade deal could make a difference. Yet, ironically, the US is the one country with whom the UK may not want a deal. Partly that’s because US trade negotiators have the reputation of taking no prisoners (you can do that when you represent the world’s biggest economy). Chiefly it is because, from the UK’s viewpoint, the trading relationship is fine as it is. The UK consistently runs its biggest trade surplus with the US. At £39bn in 2019, nowhere else comes close; trade with an aggregate of ‘residual Gulf Arabian countries’ takes second spot with a £12bn surplus.
Besides, as Table 2 shows and as everyone knows, the function of all trade deals the government can cobble together is to compensate for the present and future loss of trade from the UK’s closest and most important market, the EU. Of the UK’s top 15 overseas customers, as shown in the table, seven are EU countries, which together handed over £297bn of revenue in 2019. In all, EU states accounted for 41 per cent of the UK’s 2019 current-account income. Sure, that is well down on the peak ratio of 52 per cent hit in 2001, which may well indicate the direction of travel of the EU’s buying power. Even so, why hasten the decline?
https://www.investorschronicle.co.uk/news/2021/06/17/the-truth-about-post-brexit-trade-deals/?xnpe_tifc=h.E_xDss4
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