Kemi Badenoch took a brave step in spelling out a trade strategy and some concrete targets for the United Kingdom. But how realistic are the goals set?
The politicians who oversee British trade policy have come in for some criticism in recent times for failing – in the eyes of their critics – to be clear enough about what their trade strategy is.
So it is a welcome development for international trade secretary Kemi Badenoch to take the opportunity of a speech at a trade promotion event in London this week to spell out her “top five priorities for trade”.
Some of these priorities even came with specific numerical targets.
This is always a brave step, as it creates what management consultants like to refer to as ‘performance indicators’ against which future developments can be assessed.
The targets set out by Badenoch create the impression of a woman who has clear plans and objectives – and doubtless it was the secretary of state’s intention to create that impression.
Of course, setting out targets also creates potential hostages to fortune if and when these are not reached. Badenoch will be well aware that detractors will be only to keen to remind her of these targets if hiccups are encountered in the delivery process.
But even at this early stage, a critical evaluation can be made of just how meaningful or relevant these targets actually are – and to what extent current government policy is helping or hindering the process.
So what did Badenoch promise?
Removing trade barriers
The first promise is to remove trade barriers. “DIT will knock down 100 unnecessary blockers standing in the way of helping UK businesses sell more and grow more, creating new jobs and paying higher wages.”
That’s a worthy aim – but the international trade secretary did not say how these ‘blockers’ would be selected for removal, nor by when the magic 100 figure would be achieved.
And one may be tempted to ask: what is the difference between a ‘necessary’ blocker and an ‘unnecessary’ one?
Those UK businesses – predominantly SMEs – which have had to abandon their ambitions to expand sales to the EU market because of the bureaucratic complexities entailed by the EU-UK trade and cooperation agreement might be able to point Badenoch towards some market barriers that they would love to see removed.
Complex rules of origin requirements, sanitary and phytosanitary checks at the EU border, non-recognition of professional qualifications – none of these trade ‘blockers’ existed until a couple of years ago.
Perhaps Brexit-related barriers to trade fall into the politically ‘necessary’ category. And under the careful delineation of external responsibilities which the UK government has put in place, Badenoch does not have responsibility for the TCA in any case – that now lies with the foreign office.
The second goal is to “grow UK exports every year until we hit our Race to a Trillion – selling over a trillion pounds of goods and services to the world a year by 2030”.
Badenoch insisted that “whatever you have read in papers today, the fact is that UK exports are growing – and even to the EU”.
Exports of goods and services currently stand at just over £ 800 billion (€ 907 bn) a year. A cynic might observe that if a 3% inflation rate is maintained throughout the next eight years, that £1 trillion target could be hit without the UK selling a single additional tonne of goods abroad, or signing a single additional services contract.
In fairness, it should be noted that the UK did achieve real-terms export growth in 2022.
An increase in exports is generally taken to be a fair indicator of economic health – although fetishising export growth for the sake of it is not a guarantee that political rewards will always follow. Just ask Donald Trump.
The third goal is to “make the UK the undisputed top investment destination in Europe, attracting new investment into communities and helping to level-up the country”.
It is no longer permitted for government ministers to express aspirations to be ‘a major European investment destination’, or ‘a country which attracts growing interest among the global investment community’.
Only the “undisputed” number one slot is good enough.
Unfortunately, this target is looking decidedly shaky. DIT’s own data shows that the total number of FDI projects in the UK has fallen from 2,072 in 2017-18 to 1,589 in 2021-22 – although the latter figure does represent a 3% increase on the previous year.
More seriously, a word which has become increasingly prevalent in UK business discourse over the past year or so is “uninvestable”.
The chaos of Liz Truss’s short-lived premiership in late 2022 scared many would-be investors away – but now there is also considerable apprehension about the impact of a bill currently before parliament which would cause all EU-inherited legislation to lapse automatically at the end of this year, in the absence of a specific agreement to do otherwise.
Many companies are keen to retain the regulatory framework which the government would so much like to rid them of. This is a disconnect which continually seems to baffle Badenoch and her government colleagues.
India and CPTPP
The fourth goal is to “seal high quality deals with India and CPTPP […] opening exciting opportunities in fast-growing markets for years to come”.
This is a specific target which may well be met. All the signs are that talks with India are well advanced, although the issues to be resolved in the final stages are thorny – notably business visas for Indian business people and tariffs on either side.
Tariffs are also a big issue in the UK’s negotiations to accede to the Comprehensive and Progressive Agreement on Trans-Pacific Partnership – and specifically the UK’s agricultural tariffs, which currently look a lot more ‘European’ than ‘Asian-Pacific’.
But it is more likely than not that both deals will be duly sealed before the end of 2023. The question of whether they turn out to be ‘high-quality’ will of course be more of a subjective assessment.
Defending ‘free trade’
The fifth goal is to “defend free trade, and make the world more secure by strengthening supply chains and standing up to protectionism”.
As an important partner of both the EU and the US, the UK has the potential to play a role in exerting some influence over decision-makers on either side, amid the current transatlantic rush towards ‘strategic autonomy’, and the egregious trade impacts that this threatens to entail.
But does the UK really have the influence that it would like to think it has in either Brussels or Washington?
As a military power at a time of war, Britain certainly punches its weight globally. But its continuing threats to tear up parts of the Northern Ireland protocol as a way of resolving the problems caused by the 2019 Brexit settlement has undermined its standing with both the EU and the US. The current Sunak government is tentatively trying to repair the damage – but there is still a long way to go.
At the WTO, the UK is a valuable member of reform-minded alliances like the Ottawa Group, and a consistent defender of the rules-based trading system. But it is no more than a mid-sized player in the WTO power game – something which UK political leaders sometimes appear to find hard to grasp.
So, with five priority deliverables, Badenoch has set out her objectives for UK trade policy for the coming year.
To return once again to the language of management consultancy: how will she fare once it is time for her end-of-year appraisal with her line managers? Borderlex will be among those – metaphorically- in the room providing constructive feedback.