Blog post
Writing a coherent trade strategy is not easy
Published 28 January 2025
The current landscape for international trade is that there seem to be more challenges than opportunities. The challenges arise from several interrelated factors:
a) events (eg. geopolitical tensions, the election of Trump)
b) increasing broader concerns ranging from sustainability (climate change, environment, biodiversity), worker and human rights to food standards and health
c) technological change (eg. digitalisation, AI); and
d) changes in the public perception of the benefits of trade and the need for trade to be concerned with more than just economic efficiency and economic growth.
Ideally, the UK Government needs to identify which of these challenges can be turned into opportunities, building on the UK’s existing strengths. For example, digital trade is transforming international trade and trade policy. This encompasses digitally-enabled trade (payment systems, insurance); the digital delivery of goods and services; the digitisation of trade transactions (customs and paperwork) and the digitisation of supply chain management. This both changes what we may trade, and how we trade, and has system-wide positive impacts on the efficiency with which companies can trade. Given the UK’s competitive advantage in digital services (both direct and in support of manufacturing) and the role the UK has played in digital trade agreements, the digital space has the potential to be both an exciting, but also an important opportunity for the UK. A second example concerns the environment and the green transition. This could be an opportunity for the UK – in areas ranging from research and development to windfarms, and carbon capture and storage.
This is a difficult context in which to pen a trade strategy which the (relatively) new Labour government has promised to publish sometime this Spring. The Government’s consultation on the trade strategy closed last week, and like many organisations, we submitted a response. In our submission, we highlighted six key policy areas to be addressed: the domestic trade policy process; international partnerships and multilateral issues; economic security, sustainability and climate change; digital trade and firms / industries / sector-specific issues.
In reflecting on the broader challenges outlined above and the trade strategy it seems to me that there are four key possible difficulties or obstacles in developing a coherent trade strategy which the government will need to face – at least if it wants the strategy to be successful.
1. The current overriding objective of this government is economic growth. Growth is important, but it is not the only economic or social objective. There are, or should be, other important objectives for a trade strategy, be this to address the climate and broader sustainability concerns, or the impact on people as consumers or workers, as well as regional disparities or levelling up. A coherent policy needs to take these properly into account. The worry is that the political imperative on economic growth may override these other objectives.
2. Closely related to this is the very approach to trade itself. There is a strong tendency by many economists and policymakers to take as given that free(er) trade is good for economic efficiency, the allocation of resources and economic growth; ergo, the aim of trade policy should be to liberalise trade as much as possible. Other considerations, even if valid should thus be dealt with in other ways. Hence, if trade leads to winners and losers, then this does not mean there should be less trade, but that there should be complementary policies in place for the losers.
This is, of course, a simplification, and in some cases this line of reasoning is sensible. It is too easy to load up the trade agenda with other issues and use this as a reason for trade interventions. But at the same time, trade can also be part of the problem and can directly impact sustainability or the treatment of workers, health, or even economic security. Good trade policy is then about understanding which policies and under which circumstances may lead to ‘good’ v ‘bad’ outcomes and then what the best interventions are. This is difficult and can lead to incoherence in policy tools / levers.
3. It is easy and tempting to think of government as a single entity. However, it is not. When it comes to trade policy there are various elements of trade policy that are the primary responsibility of different government departments, ranging from the Department for Business and Trade; the Department for Science, Innovation and Technology; the Department for Environment, Food and Rural Affairs; the Foreign, Commonwealth and Development Office; the Cabinet Office, the Home Office and, of course, the Treasury. Some of this is inevitable because of the range of trade policy areas and their cross-cutting nature. But it does make it very difficult to have coherence across trade policy, and the lack of coherence is a refrain I hear often from business and other stakeholders.
4. Finally, there is a need for temporal coherence – i.e. to write a strategy that is also fit for the future. What happens in the future is in part driven by events which can be highly unexpected, in part by changes in technology, and in part by changes in the zeitgeist – by what is contemporaneously considered important. Some of this is hard to predict, and we have to recognise trade strategies will need to evolve and change and sometimes be rewritten. Hence, no doubt the election of Trump, and the rising geopolitical tensions were hard to predict, but they now need addressing.
Some of the future, however, can be thought about with more certainty, for example, changes in technology. The big changes we face are almost certainly to do with digitisation and AI. Some of this can be planned for, and policy responses considered. Then there are other future challenges which are less certain but worth evaluating now. One such area concerns food standards and more broadly human health. I anticipate that this will be an area of growing importance for policymakers and could rapidly spill over into trade concerns and frictions, which in turn, could impact issues of food security. The trade strategy needs to allow space for policy to develop but also needs to provide longer-term certainty. This requires clarity and transparency over objectives.
One final comment: Because of the way Brexit was handled, in the UK, trade policy discussions are highly politicised and often fractious. How many other areas of government policy have red lines which need to be constantly affirmed or defended? This is not helpful. A trade strategy might just be a small step in the direction of depoliticising some of the discussions, but perhaps there is no real solution to this but time. Time, however, moves slowly relative to the need for coherent trade policy.
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