The UK's "Indo-Pacific tilt" strategy and inclusive trade policy

Having left the EU, the UK is strategically shifting its focus from the EU to the Indo-Pacific - what the UK Integrated Review (2021) framed as an “Indo-Pacific tilt”. The UK Government aims to capture economic opportunities from the region where 56% of global growth is expected (2019-2050) and to strengthen security engagement with the region.

In the context of trade policy, the UK is using Free Trade Agreements (FTAs) as a major policy tool in its “Indo-Pacific tilt” strategy. To date, the UK has concluded new bilateral FTAs with Australia and New Zealand and a digital economy agreement with Singapore. The UK is also in the process of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – it hopes by 2023. Furthermore, it launched negotiations for an FTA with India in January this year. Negotiations to upgrade or modernise existing bilateral continuity agreements, such as the UK-Canada, UK-Korea and UK-Mexico FTAs, have also been launched or scheduled to commence.

There are two significant issues to be considered with regard to the UK’s “Indo-Pacific tilt” from the inclusive trade policy perspective.

First, geopolitical inclusiveness:

Precisely, how can the UK maintain a good economic partnership with the EU while tilting towards the Indo-Pacific? There are two points to be made. If the UK excludes the EU, the UK’s trade policy is simply not geopolitically inclusive.  Another point is that by limiting its engagement with the EU, the UK is not doing its best for its non-EU trade partners as maintaining healthy economic relations between the UK and the EU would be in the political and economic interests of the UK’s new trade partners.

In terms of politics, the value of stable UK-EU economic relations is mounting amid uncertainty surrounding the global economy, such as Russia’s war in Ukraine. The UK’s trade partners are watching the unstable and unpredictable UK-EU relations over the Northern Ireland Protocol with dismay. In terms of economics, Brexit has created a new bureaucracy for business (e.g. customs declarations, new VAT procedures, different regulatory regimes, the end of country-of-origin rules in services, the end of mutual recognition of professional services and loss of passporting rights in financial services). But new barriers increase fixed costs, hurting businesses, especially small businesses that are too small to absorb shocks. The UK’s trade partners which have invested in the UK or the EU are trying to cope with these new realities just as UK companies have to. Without healthy political and economic relations with the EU, the UK’s trade policy can never be geographically inclusive.

The second issue is societal inclusiveness:

How can the UK ensure social inclusiveness in promoting regulatory cooperation with the Indo-Pacific countries? Modern FTAs have huge societal impacts because the promotion of regulatory cooperation is comprehensive, covering not only trade in goods and services but also other areas, such as digital trade, environment, labour and human rights. With regard to FTAs with the Indo-Pacific region, the UK should be well aware that the Indo-Pacific region is diverse in terms of the level of economic development, political system, environmental protection, consumer protection, labour, and human rights. Thus, the level of regulation and the regulatory approaches taken are different. In general, the UK’s regulatory regimes provide higher standards in terms of environmental, health, safety and consumer protection. Thus, the UK has to promote regulatory cooperation with Indo-Pacific countries without lowering its own high regulatory standards. One example is digital trade, there is a digital divide and divergence of data governance in the region. The level of data governance in many Indo-Pacific countries is lower than that of the UK. Specifically, their regulatory frameworks do not comprehensively consider the implications of data use and reuse for ethics, trust and human rights.  For example, the US does not have a federal level data privacy law. Promoting free cross border data flow in FTAs or digital economy agreements should go together with improving regulatory standards in the region so that the UK does not lower its regulatory standards but improves those of its trade partners. But doing so is a complex matter that requires further study, such as what legal and technical mechanisms can promote cooperation, and policy discussions including societal actors are also needed.

As explained above, the UK’s “Indo-Pacific tilt” tends to focus on economic benefits (although its economic impacts are expected to be slim) and lacks both geographic and social inclusiveness. An evidence-based multi-disciplinary approach should examine what has been done so far and what should be done to improve inclusiveness in promoting the “Indo-Pacific tilt”.