Britain’s trade relationship with the EU is needlessly dysfunctional

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It would be easy to react to the string of Brexit supporters belatedly admitting that leaving the EU‘s single market and customs union was bad for the UK economy by saying “I told you so”. So here it is: I told you.

Inexorably, from year to year, the evidence of the damage accumulates. Not only did the fall in the exchange rate after the referendum inflict a painful shock, but overall trade lagged that of similar economies, and business investment was surprisingly weak.

Is there a way to repair this damage in the short or medium term? Unfortunately, the political toxicity of the UK‘s relationship with the EU and the Opposition Labor tactic of being at least half as mute as the government at all times means that any dismantling of barriers with the single market will be slow and fragmentary. A Horizon Europe research program here, a labor mobility agreement there, a veterinary agreement somewhere down the line. And all subject to the EU’s unnecessary aversion to smearing the hard line between easy market access granted to member states inside its legal order and difficult border bureaucracy for those without.

What is infuriating is that it is not as if the UK has given in to the blind construction of trade barriers at all levels. So far, the rest of Britain’s trade policy (parties without a Prince of Hamletyou might say) is quite sensible and for the most part quite well executed.

The UK’s ability to pursue two trade policies driven by different philosophies under one government is surprising. At a World Trade Organization summit last week, UK ministers and officials showed off their progressive and internationalist free trade credentials. Anne-Marie Trevelyan, the UK trade secretary, told the FT that other (unnamed) governments present at the meeting had told her “how important UK leadership is in supporting the values ​​of free and fair trade in rules-based order”.

At one point, the UK gave a big show of its independent spirit by being the latest government to resist a proposal to override a WTO agreement on intellectual property rights over Covid vaccines. In this way, he assumed the somewhat paradoxical pose of being a lone fighter for multilateralist principles.

Outside of the WTO, the UK’s favorite gang in global trade is Asia-Pacific, where its attitudes and conduct are quite sane. In addition to its bilateral deals with Australia and New Zealand, a digital deal with Singapore has just come into effect and the UK is closing in on a deal with India.

In some areas, such as its willingness to embrace agricultural liberalization and address digital issues such as data flow in trade agreements, its activities mark a constructive shift from EU trade policy. In others, including his eagerness to accept a weak trade deal from India rather than emulate the EU’s determination to hold out for something more substantial from New Delhi, it’s a sign of opportunism. geostrategic strategy guiding trade policy.

But, in any case, the UK, in its dealings outside the EU, is generally proving to be a competent negotiator and a constructive participant, in keeping with the tradition of free – internationalist exchange of the country. By contrast, his relationship with Brussels since Brexit has been reactionary and damaging. The commitment to the international rule of law that he prides himself on at the WTO is entirely absent from his threats against the Northern Ireland Protocol. His neurotic aversion to cooperation is childish and self-destructive.

A common argument among Brexiters was that opportunities elsewhere would and ultimately outweigh the shock of trade with the EU. It’s theoretically possible that it will still happen, or that the government’s hunt for the dividends of Brexit’s domestic deregulation will end in substantial play at some point. But so far, the net effect of the UK’s exit from the customs union and the single market is very clearly negative.

Asia-Pacific remains far away, even if you squint. The UK’s dysfunctional relationship with its biggest and closest trading partner far outweighs anything constructive it does elsewhere, including multilaterally. Again: I told you.

The general weakness in UK business investment, including domestic firms, and trade with non-EU economies, is particularly striking. This suggests that it is not just border frictions with the mainland that have hurt the economy, but general uncertainty among businesses and a sense that economic policy is in the hands of a government that does not know or don’t care what he does.

A digital partnership with Singapore — which in any case should not be incompatible with joining the EU single market — is fine. But that is no substitute for an open and constructive relationship with the trading area that the UK has so recklessly left.

alan.beattie@ft.com

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