Perspectives, UK WTO & 3rd countries

Perspectives: David Frost’s challenging double inheritance

The UK’s former chief EU negotiator David Frost has been promoted to a ministerial role, in which he will take charge of UK-EU relations and coordinate wider trade policy. The impact of previous decisions taken – or sometimes not – makes for a tricky inheritance.

2020 was a good year for British trade policy – and for David Frost.

David Frost in 2020 in Brussels. Credit: EC.

The successful replication of existing trade deals means considerable trade continuity with countries where the UK was previously covered by EU preferential access. This includes European Free Trade Area countries and Turkey, although on weaker terms. It also includes an agreement with Japan labelled ‘new’ although based on the EU-Japan Economic Partnership Agreement.

Among the successes one can also count the replication of existing trade agreements with Canada and Mexico with commitments to renegotiate them. All this was supplemented by the new EU-UK Trade and Cooperation Agreement negotiated by David Frost.

The speed of these achievements was helped by avoiding difficult decisions. The ‘replica deals’ deliberately sought minimal change to existing provisions. The new EU deal negotiated by Frost required acceptance of EU provisions on state aid, labour and environment, but deliberately made few regulatory commitments. The previous Withdrawal Agreement reached in 2019, containing the Northern Ireland Protocol, bound the UK to accept EU Geographical Indications and Northern Ireland to only follow EU product regulations – but nothing further.

Frost as cabinet minister will face the consequences of previous government choices in his new role, a difficult inheritance partly of his own making.

The impact of not aligning product regulations with the EU has meant more checks on exports from the UK mainland to both Northern Ireland and the EU than many expected. It has also meant a continuing domestic debate over whether food regulations should be changed in order to secure a trade deal with the United States or accession to the Asia-Pacific trade pact CPTPP.

The problems extend further to market access demands from Australia and New Zealand in bilateral free trade agreement negotiations, and to a lack of clear trade priorities for other markets.

EU trade issues

Out of many new UK-EU trade issues at least three have reached broader public awareness. The prohibition of certain UK shellfish exports led to unconvincing claims that the EU was not following their own rules correctly. Restrictions on visas for musicians led to a public intervention by pop star Elton John, and to promises of action by government.

Most high-profile have been the problems with Great Britain-to-Northern Ireland trade caused by implementation of the protocol. It is widely reported that Frost felt that the UK had been insufficiently assertive towards the EU over these, particularly after the EU threatened to invoke a safeguard in the Northern Ireland protocol that could have led to restrictions of exports to vaccines to this part of the island.

Frost evidently insisted on taking full responsibility for all EU agreements. However given strong US and EU backing for the Northern Ireland protocol there is no chance he can renegotiate it away. Checks could be reduced by aligning UK regulations more closely with the EU – but this goes against his own 2020 negotiating approach.

Such decisions were made before problems became visible. They could be reversed to encourage trade. In the short term, Frost wishes to stick to last year’s negotiating position. It remains to be seen if this position can be sustained.

Wider difficulties threaten Global Britain agenda

Beyond policy towards the EU, Britain’s considerably active trade policy has not been backed up by decisions, concrete results, or a clear sense of priority.

It has been known for some time that Australia and New Zealand have been unhappy with the UK government’s attitude to increasing agricultural market access. Indeed the UK’s World Trade Organization goods schedule has not been ratified because of concerns over lost market access resulting from a splitting of EU quotas. This now puts in jeopardy the UK’s first new bilateral agreements with these countries – as well as CPTPP accession.

The most complex question for UK trade policy is related to food regulations.

It is widely assumed that the UK’s decision not to seek regulatory alignment and reduced checks with the EU was motivated by US market access demands for their trade agreement with Britain. These are related to accepting chemically-washed chicken and other products made under US standards and not allowed in Britain due to food safety rules inherited from the EU.

However domestic concerns to likely US demands have led to ministers making repeated promises not to lower food standards.

As a result, at the moment the UK government seems to be facing the worst of all worlds by neither committing to EU food standards, nor to changing to US ones. Given Australian food rules, for example in allowing hormone-treated beef, this could also be a problem with CPTPP.

The food issue was also raised in the context of a largely symbolic memorandum of understanding signed with Brazil, prompting a Brazilian minister to expect the UK to move towards a ‘science based’ approach to food, away from EU regulations. Naturally, this increased UK stakeholder concerns.

Meanwhile the UK government must soon restart negotiations with Canada, Mexico, South Korea and Turkey due to the provisions of recently concluded replica agreements. It will be something of a test to move significantly beyond EU provisions.

There is also the issue of costly penalty tariffs on Scotch Whisky imposed by the US to resolve.

A further reminder of the difficulties awaiting UK trade policy came from another symbolic UK agreement with India to develop an undefined ‘Enhanced Trade Partnership’. Warm talk of a potential future preferential trade deal could not hide the well-known difficulties of concluding a trade deal with India – not least previous UK resistance to making a generous visa offer.

End of the domestic honeymoon 

Growing parliamentary concerns are unsurprising against this backdrop. A cross-party group of MPs supported by the International Chamber of Commerce have described UK government secrecy as excessive. A separate group of MPs meanwhile seek greater powers over any future trade deal with China, delaying an already late Trade Bill.

Overall, it seems clear the UK government’s trade policy honeymoon period is over, with the easy part, replicating agreements, completed. Implementing these, and improving market access globally, is a rather harder proposition, particularly given the absence of a clear and realistic sense of direction. Tariff reduction is the priority most often mentioned by ministers, a rather strange priority for the world’s second largest services exporter.

Global Britain was the vision, but making progress towards it in 2021 will be quite a challenge for Lord Frost.

 

 David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

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