UK Trade Strategy: analysis

Introduction

The appearance of this, the first comprehensive Trade Strategy, is itself a significant achievement. Many stakeholders, including the CITP and UKTPO, have called on the UK Government repeatedly since Brexit to produce an overarching strategy to guide its approach to trade policy, and provide clear signals both domestically and to the world about its priorities and direction

High-minded post-Brexit rhetoric regarding Global Britain’s world-leading importance feels like a distant memory. This strategy is more realist, sometimes to the point of bluntness. It adopts a pragmatic approach, positioning the UK as a middle-power economy and possibly, regional leader post-Brexit.

The strategy follows a clear structure, first taking stock of what the UK economy and its trade flows look like, setting this against the current tumultuous world context, and then on that basis deducing strategies for how trade should be nurtured, with which partners, and with what institutional framework(s). It is closely linked to the Industrial Strategy. However, it is less clear how much cross-department coordination there has been, notably with Departments such as the Foreign, Commonwealth and Development Office, the Department for Environment, Food and Rural Affairs, the Department for Transport, or the Department for Energy Security and Net Zero.

The Strategy identifies the UK’s priority partners (the EU, the US, and China), and provides some largely useful signals as to the government’s policy direction. While recognising that the decisions made by the EU, US, and China will prioritise their own national interests and in a more aggressive way than heretofore, the UK aims to balance relations with all. Overall, the discussion is pragmatic, and the emphasis on diversification is welcome.

The UK essentially commits to "no containment, no alignment", opting for strategic engagement in areas where mutual benefit is clear, particularly in green tech, finance, and consumer goods. The Strategy acknowledges China's central role in supply chains and global trade, while also identifying sectors of concern such as advanced manufacturing, AI, and digital infrastructure, where it should engage more heavily but with caution. However, the Trade Strategy doesn’t explain how this balancing act will be managed in practice vis-à-vis the other important trade partners identified. It lacks a sector-specific framework for deciding where trade should be encouraged, limited, or safeguarded.

It acknowledges the realities of a more fragmented global landscape and the challenges of deepening integration between countries. Despite rising global protectionism and interventionism, the Strategy also reaffirms the UK’s commitment to free trade principles. There is also a willingness for stronger international cooperation through the G7, Organisation for Economic Co-operation and Development, and World Trade Organization (WTO), which is also a positive signal indicating the UK’s alignment with free trade and open markets.

The Strategy is also blunt about the instruments it will use, including the diminishing role of WTO - though noting its continued relevance to a certain extent; plurilaterals inside and outside the WTO; sector-specific, targeted, flexible trading arrangements - including on regulatory cooperation, mutual recognition; and non-binding instruments. It also commits to increasing export finance, though it is not clear whether export finance may amount to subsidies that are legally suspect.

The Government states it will be “unashamedly opportunistic in considering deals of every sort as we hunt out opportunities for growth”. However, other than digital, there is little discussion as to which areas may benefit from binding and formal rules or which may do just as well with non-binding approaches. Despite the commitment to the international rule of law, non-Free Trade Agreements could undermine Article XXIV of the General Agreement on Tariffs and Trade (GATT), depending on their content. Indeed, the UK appears to have been happy to negotiate with another country (the US deal) while on the face of it agreeing to the violation of Most Favoured Nation (MFN).

Dismantling regulatory barriers abroad for UK traders and investors through a Ricardo Fund sounds good, but more clarity is awaited on how it will function, and it is not clear how it will engage with foreign economies on regulatory cooperation. The Strategy terms it a “win-win” because it sees no cost of concessions by the UK, while being able to overcome regulatory barriers in foreign markets via negotiations. But in practice, this may be more complicated.

In sum, the Strategy seems clear-eyed, but a number of the details and the prioritisation remain uncertain.

Commentators: Emily Lydgate and Michael Gasiorek

Analysis

International partnerships

What the Trade Strategy says

‘International partnerships’ is intentionally a broad term. There is a general approach in the strategy that the UK will “need a more varied – and smarter – set of trade tools than we have had in the past”. In good part what this seems to translate into is a shift away from Free Trade Agreements as a primary instrument of trade policy – to international agreements which are not FTAs, something the document variously refers to as "bespoke accords", “new modern partnerships”, “bilateral and multi-party deals” and “smart agreements”. There is also a clear statement that the government will be “unashamedly opportunistic in considering deals of every sort”.

For the purposes of our discussion, we refer to these as ‘mini-deals’, but we note the lack of clarity on defining and understanding the terms used above.

The specific examples the document gives to illustrate the terms used are Digital Trade Agreements, such as the existing agreement with Singapore or the one with Ukraine (see separate section for a specific discussion of digital issues), and the initiation of dialogues with Brazil, Thailand, Kenya and Malaysia; as well as the possibility of acceding to the Digital Economy Partnership Agreement (DEPA). Other examples include financial services agreements, critical minerals partnerships, clean energy and green sector agreements, mutual recognition agreements, as well as agreements on rules of origin or investment, including Investor State Dispute Settlement (ISDS).

Quite what form such mini-deals take, whether or not they are legally binding or simply memoranda of understanding, is not specified. What is clear is that the Government seeks a set of “flexible” trading arrangements.

All this is not to say that FTAs are not on the agenda. Much is made in the document of the benefits of the FTAs the UK has agreed with the EU, India, as well as the prosperity deal with the US. The document also discusses the ongoing negotiations on FTAs with Korea, Canada, Turkey and Gulf Cooperation Council (GCC) for example, as well as reviews of other FTAs.

Our commentary

We have long argued that trade policy should be focused around FTAs, and in principle, the idea of considering more focused agreements or mini-deals with partner countries is sensible. Indeed, the objective trade value of flexible trade arrangements beyond the immediate stated advantages of smaller deals (i.e., speed of negotiations, easier implementation) may be beneficial. However, the evidence base is unclear for the value to the UK in terms of trade and investment flows, and growth from such arrangements vis-à-vis WTO or FTAs, especially against the backdrop of possible WTO incompatibility of such arrangements. Considerably more research and evidence are needed, both quantitative and more qualitative / survey-based research.

The value of the agreements will likely depend on the type and nature of obligations which are included in such arrangements, whether they are legally binding, and whether there are binding dispute settlement mechanisms. In the absence of binding obligations and dispute settlement, the value of such agreements vs FTAs is perhaps more unclear.

There is also the issue of the compatibility of such arrangements with the UK’s commitment (in the Trade Strategy) to multilateralism and the WTO. It is of some concern that the compatibility of such agreements with the rules of the international trading system is not even mentioned; the focus is more on being “unashamedly opportunistic”.

Overall, the Trade Strategy encompasses a wide range of mini-deals and seems to support a somewhat unsystematic approach and unfiltered approach to the desired flexibility. Hence, it is not clear why is some contexts one would wish for a Digital Trade Agreeement, in others, to join DEPA, and in others to negotiate digital chapters in FTAs. Mutual recognition includes sectors under governmental regulation (eg. financial services) as well as agreements on conformity assessment, product regulations or professional qualifications which are not under governmental regulation.

There is also an important issue with regard to scrutiny, transparency and oversight. While FTAs have some degree of scrutiny, eg, through the Constitutional Reform and Governance Act 2010 (CRaG) process, this is unlikely to apply to many mini-deals. Indeed, it is very hard to find information on what mini-deals the UK has already signed, of whatever form, and even where there is reference to some ‘mini-deal’, the terms of that deal are not revealed. Hence, if such tools are going to be increasingly used, there is a need for appropriate transparency, consultation and scrutiny.

We were surprised by the inclusion of ISDS, which is typically seen as running counter to many of the stated objectives in Chapter 6 of the Trade Strategy on Accountable Trade, especially with regard to environmental issues or labour rights. ISDS is increasingly less popular as an instrument with alternatives being used or discussed, such as the EU’s investment court system.

Commentators: Achyuth Anil and Fiona Smith

Multilateralism and the WTO

What the Trade Strategy says

The UK sets out its strategy by stating that it will stand up for free and open trade, a notable and bold commitment in the current global context. It is honest that the multilateral trading system under the WTO is no longer the sole avenue for trade cooperation; rather, it sets out a lower ambition that “salvaging and then repairing the remaining pillars of the international trading order is still firmly in the long-term interest of the UK.”

One of the headlines of the Trade Strategy is that the UK has committed to join the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), a temporary arbitration mechanism for addressing appeals while the dispute settlement system is only partially operational (due to the current disabling of the WTO Appellate Body). The MPIA provides a pragmatic means to strengthen dispute settlement in the absence of consensual reforms, and has key players including the EU, China, Canada, Australia, Brazil, Japan amongst others. It does not include, notably, the US and India.

The strategy also sets out a commitment to making progress on a plurilateral basis and states that ‘too often, consensus has been misinterpreted to mean unanimity.’ These are strong words, and the UK outlines a commitment to push for plurilateral process, inside and outside the UK, in particular on environmental goods and services liberalization, AI cooperation, and trade facilitation during emergencies.

Further, the UK clarifies its interests in a reformed WTO. Such a reformed WTO would contain new rules to better tackle market distortions caused by subsidies, overcome the problem of “overcapacity”, resolve disputes efficiently and effectively, ensure and enforce transparency, and bridge trust deficits. In addition, it appears to, in principle, issue a call for collective action amongst small open economies, “to coordinate economic policies to address the disproportionate impact of the current economic instability on small open economies”.

Our commentary

Despite the commitment to multilateralism, several other elements of the strategy have the potential to conflict with these rules. These include export finance commitments, the proposal for a new approach to trade remedies, and the embrace of bilateral sectoral deals done outside the confines of traditional FTAs.

Signing onto the MPIA is a step in the right direction. It is a significant development in that it shows the UK aligning with the EU and China and not the US, which has not supported, or become a party to, the MPIA. It may also be a signal that the UK does not believe there is much more concession from the US to be had, by staying out of the MPIA. While the diplomatic effects of joining the MPIA are strong, the UK has limited interests as a complainant or respondent in WTO dispute settlement at the moment. However, it may also be a signal that the UK government expects to engage more in future dispute settlement to protect itself from the rise of contentious trade policies and regulations globally. Moreover, joining the MPIA would also allow the UK to propose candidates of its choice (including nationality, provided other merit-based conditions are met) as potential arbitrators in the MPIA system.

Finally, the strategy usefully clarifies the UK’s most desired areas of WTO reform. Presumably, it will work at the Committee-level to place reform proposals and work with members to arrive at consensus, although it is not clear what kind of reform proposals the UK would support. However, it also makes it abundantly clear that the UK will not wait for the WTO’s agenda to be repositioned, even though it claims to continue supporting the principles of the WTO. Instead, it will seek out various kinds of “collaborative partnerships” to coordinate economic policies. The strategy does not clarify what such coordination entails—whether it means tariff policies or non-tariff regulations. Presumably, issues such as overcapacity are posed by different trading partners than other issues, such as economic instability. How and whether these antidotes in the form of collaborative partnerships will overlap, and how the UK Government will navigate these diplomatic challenges, remains to be seen. Moreover, plurilateral processes inside and outside the WTO seem practical steps forward to engage in some form of small-group coordination. But details are awaited, for instance, whether it would consider joining the Agreement on Climate Change, Trade and Sustainability.

On the overall balance, it is difficult to draw a sense of coherence between the stated support for multilateralism and the admission of the need to acknowledge power rivalries and pragmatism driving trade cooperation. But it should be celebrated that the strategy is frank, blunt, and pragmatic.

Commentators: Emily Lydgate and Sunayana Sasmal

Services

What the Trade Strategy says

The salience for the UK economy of services exports, in terms of trade value and employment, is prominently and repeatedly acknowledged.  Service trade is recognised as the “indispensable core of the UK’s contemporary export earnings” (p.7). The Trade Strategy also notes that UK services trade has proved to be more resilient to past turbulences than goods trade and has also fared better in the fractured relationship with the EU-27 single market. Both aspects are good reasons to build on services trade for future growth.

Moreover, in what is a real breakthrough for a strategy document, the linkages between services and goods trade are recognised. This corresponds to an increasingly blurred line between goods and services and the way in which business models have evolved. Recognising these linkages bodes well for joined-up policymaking, including relevant associated aspects of investment policy, mobility, or intellectual property rights.

Our commentary

The Trade Strategy indicates nothing short of a paradigm shift for UK policy that puts services trade into sharper focus on the basis of factual evidence. The invisibility of services and the complexity of regulatory measures affecting services trade have long meant that services trade was an afterthought. Recognising that the £508 billion worth of services exported last year exceeds the UK’s goods exports by a wide margin—which is not even factoring in sales of UK service businesses abroad—is a major contribution that sets the right tone going forward.

Whereas the mindset has shifted in the right direction, the importance of services trade is conceived of very much from the export side, on account of the perennial and large UK trade surplus in services.  At the same time, the economics of services suggest that substantial benefits, including for productivity and growth, also derive from imports of services. This would call for more discussion on how such benefits could be achieved, across all four modes of services trade, including the movement of natural persons (business mobility in HM Government parlance).

There is a dedicated section on ‘The importance of Imports’ (p.67), which is, however, in traditional manner concerned with customs treatment, the UK’s tariff regime, and consumer protection, but not with how services imports contribute to UK manufacturing competitiveness or, for that matter, how foreign services and service suppliers could help the UK with its own transition to net zero. In the forthcoming UK-India FTA, a double contribution convention (DCC) was agreed but deeper provisions would have been available. The UK should recognise more broadly that facilitating services imports is in its best interest and aligned with comparative advantage.

Following on from services trade now being seen as constituting the core of UK export earnings, one might expect that services trade policy is commensurately at the core of trade policymaking. Yet, it is less clear how this new angle permeates through later chapters of the Trade Strategy.  For instance, examples of clean energy or infrastructure projects abroad (railways, buses, digital construction) are often framed in terms of the goods aspect. In reality, they are probably integrated services solutions, albeit with substantial goods components, delivery of which likely requires a combination of cross-border services trade, movement of service professionals, and investment in services sectors.  To underpin future services trade growth, clarity is needed about what it takes to secure market access for UK services exporters abroad.  This may entail access to overseas procurement markets insofar as big service projects are often linked to backbone infrastructure. From a negotiating perspective, it may also entail the consideration of what the quid pro quo might be in negotiations with partners, especially emerging or developing economies, to which the UK hopes to export services.

There are a few other areas that one might expect to be covered more fully if trade policy was thought of stringently from a services perspective.  One is the governance of cross-border data flows (see also our separate discussion of the digital realm), alongside the domestic intellectual property regime with regard to data access and usage, as both are important for most services trade and especially so for digitally-delivered services trade. The US, the EU and China each pursue their own approaches to data flow governance, and more clarity on how the UK intends to negotiate these divergent digital realms would have been an integral part of defining the UK trading partnerships. The Trade Strategy stops at mentioning that digital trade agreements can be a tool for securing the free flow of data, which neither reconciles potentially conflicting promises in agreements with different partners (or groups, in the case of CPTPP) nor addresses the recognised concern of UK services exporters about regulatory heterogeneity across the UK’s trade partners (pg. 39).

Another area is business mobility, or the movement of people as service suppliers, which admittedly is politically sensitive. The mutual recognition of professional qualifications (MRPQ) is one important tool for facilitating this kind of services trade.  Whilst the Trade Strategy does mention the example of improved professional mobility for engineers as between the UK and the US (pg. 44), the same kind of gains could presumably be reached with the EU only on a much bigger scale as the EU is a huge market that is close by. MRPQs are crucial for regulated sectors such as legal, accounting, technical, healthcare, or finance, which have been identified as core both in the Trade Strategy and the Industrial Strategy. The aspirational language to “seek to identify and secure” (pg. 46) recognition of qualification agreements with partners across the globe is a step in the right direction that is hopefully followed through with determination.

Lastly, and for transparency reasons, hands up that CITP as a Research Centre of UK universities has a vital interest in this area, education services are not identified as a priority sector, despite the UK being a world leader in higher education, exporting some £25 billion worth of educational services in 2023, which is not far away from the roughly £30 billion combined exports of “high value Professional Business Services sectors” (pg. 46).  In addition, education has less easily quantifiable but nonetheless important obvious links to research and innovation.

Commentators: Ingo Borchert

Green transition

What the Trade Strategy says

The strategy has numerous references to clean energy, clean / green growth, and there is a clear affirmation of the UK’s commitment to meeting its climate objectives and net zero. This can also be seen in the Industrial Strategy – “There can be no plan for economic stability of sustainable growth that does not include a credible plan for net zero”.  In the Trade Strategy there is recognition that trade will be important for the UK's green transition and that many essential inputs required for the transition must be imported. For instance, as the UK increases electric vehicle (EV) production, batteries will need to be imported. Hence, imported inputs will be key to a successful green transition. On the other hand, the Strategy also acknowledges the trade-off between the benefits of international trade and the fact that moving goods around the world involves emissions.

Some of the Strategy is quite general with the laudable aim to ensure that trade supports sustainability:

  • Driving initiatives that support trade in environmental goods and services.
  • Seeking outcomes in trading frameworks and international agreements, including at the WTO, that support sustainable trade and the UK’s domestic agenda. Relatedly, the Strategy also identifies the importance of working with partners to diversify supply chains, including those for green technology and to build complementary capabilities.
  • Seeking trade deals which preserve our latitude to protect the environment and promote high sustainable standards.
  • Maintaining the UK’s global environmental leadership, by seeking plurilateral or multilateral outcomes, promoting initiatives, supporting greater international collaboration and incentives, using our Climate and Nature Envoys to champion the global green transition, and bolstering sustainable trade.

There are also some specific policies / recommendations. These include the promise for UK Export Finance to provide £10bn of clean growth finance between now and 2029, with the example that a number of the UK’s automotive businesses have benefitted from UK Export Finance support towards their transition to EVs; the desire to build on existing clean energy and green sector agreements with partners including Norway, Japan and the Republic of Korea, and to explore new and deeper clean energy cooperation with markets, such as Brazil, the Philippines, and Mexico; as well as citing the Carbon Border Adjustment Mechanism (CBAM).

Our commentary

Overall, it is clear that the UK Government regards the green sector and the green transition as a central pillar of its trade strategy, recognising the vital role of trade in supporting these objectives. The Government also highlights its commitment to working with international partners on green and environmental challenges. Its intention to embed green and environmental considerations within trade negotiations is a positive and welcome development. While ambitious, this approach is both timely and essential.

However, as indicated above, much of the Strategy is somewhat generic and lacking in specific policy levers. The alignment of the Emissions Trading Scheme with the EU in the recent UK-EU reset deal and the introduction of CBAM in 2027 show strong commitments to the environment. Nevertheless, while there is mention of the CBAM, there is no discussion of linkage to the EU’s CBAM, nor the international objections and difficulties that the government will have to deal with – which means there is ongoing uncertainty for UK businesses operating in affected sectors.

While the Strategy highlights several ongoing projects — including UK Export Finance programmes, UK offshore wind in Latin America, a partnership on green energy pipeline with the Dominican Republic, and signals attention to the sector within the broader trade agenda, we would expect more clarity and detail on concrete next steps. Although we can expect further concrete actions in the future, these are not outlined in the current document. It will be important to closely monitor upcoming initiatives and programmes led by UK Export Finance, as well as other initiatives introduced.

Commentators: Dongzhe Zhang and Nicolo Tamberi

Trade defence and trade remedies

What the Trade Strategy says

The press release for the Trade Strategy came with a degree of fanfare with regard to trade defence “Trade defence toughened up with new and improved tools to better protect our vital industries from global threats”. Indeed, it was the second bullet point from that press release.

In the 100-page document, trade defence is discussed in detail from pages 79-81, with one full page dedicated to a case study of steel. This is in the section on “Protecting the Economy” where there is also discussion of national security measures (investment screening, export controls, sanctions, procurement security and working with businesses; see p. 78).

The measures proposed in the strategy on trade defence are:

-              To introduce legislation to expand government powers to respond to unfair trade practices and guard against global turbulence in critical sectors such as steel.

-              To seek views on the potential for new powers to respond to deliberate economic pressure against the UK

-              To continue to utilise bilateral, plurilateral or multilateral opportunities to improve subsidy transparency and the rule framework on market-distorting practices.

And on trade remedies:

-              To seek to introduce legislation to adjust the Trade Remedies Authority policy guidance and operating framework

-              To improve businesses access to trade remedies by reducing the cost and increasing the speed of applications

-              To make the trade remedies system more accountable to Ministers.

Our commentary

Trade defence refers to the set of legal measures that governments may employ—under World Trade Organization (WTO) rules—to protect domestic industries from unfair competition, such as dumping, illegal subsidies, or surging imports that cause injury to local producers. Trade defence measures are thus anti-dumping duties, countervailing duties or safeguard measures.

It is not always clear in the Trade Strategy whether this is their interpretation of the trade defence or whether a broader interpretation is being used. Reference to the “strategic weaponisation of trade” and the need to “create new powers to face these new threats,” may suggest a broader interpretation is being adopted here. Hence, the suggestion for new powers to respond to deliberate pressure may allude to the possible need for some form of anti-coercion instrument, perhaps along the lines of the EU.

In any case, the references to expanding government powers and introducing legislation are somewhat vague as to what is being proposed and why it is needed and are proposed on a conditional basis i.e. “when parliamentary time allows”, “we will seek views on the potential for new powers”. It may well be that the government wishes to move quickly on this to be able to pursue a more aggressive trade policy, and it will be important to monitor closely any such developments.

Given the emphasis on trade defence in the press release, what is in the strategy is relatively thin.

The statement regarding making the trade remedies system more accountable to ministers is also potentially worrying as it strongly implies a greater politicisation of the process of trade remedies as opposed to such actions being evidence-based and investigated by an independent authority.

Commentators: Javier Ruiz and Maurizio Zanardi

Regulatory barriers to cross border goods trade and international standards

What the Trade Strategy says

Regulatory Barriers

In the Trade Strategy, the Government seems to have sensibly identified the types of regulatory challenges (duplicative testing costs, mobility of professionals, product certification) faced by business involved in cross-border trade.

There is also a commitment to using a flexible toolkit (Mutual Recognition Agreements, Sectoral Agreements) that can have the ability to tackle problems that are unique to a given sector.

Chapter 2 of the document acknowledges that the EU is the largest trading partner and wants to improve relations with the EU. It repeats the Government’s previous statements on not wanting to join the EU Single Market, and there is little beyond reference to Sanitary and Phytosanitary Measures as to how the Mutual Recognition of Conformity assessment might be achieved with the EU.

International Standards

International standards are discussed in two places.

On the export side, the Ricardo Fund, (Ch 3) which builds on its predecessor- the Regulatory Growth Partnership Fund - is seen as a way for UK regulators to unlock foreign markets in part by getting trading partners to adopt international standards, or even simply UK-friendly ones. The intention of the Ricardo fund is described as

“enabling them (UK Businesses) to capitalise on their comparative advantage across the Industrial Strategy Sectors in high value markets such as Australia, Canada, Japan and India. It will also enable us to work more closely with our world-class standards organisations to shape the global standards of the future in these high-growth sectors.”

Meanwhile, in Ch 4 in the section on “The importance of imports” there is stress on ensuring that foreign exports to the UK do not undermine or seek unfair advantages by undercutting UK standards.

The Strategy displays a commitment to using international standards as a primary vehicle to uphold product standards and promote regulatory cooperation among partners.

It focuses on the desire for our export industries to have access to foreign markets at the same time as being concerned about “unfair competition” on the import side.

Our commentary

The document does not address the issue that pursuing deeper alignment with one partner—such as the US, through a Mutual Recognition Agreement (MRA) on conformity assessments for goods—can create tensions or divergence with others, particularly the EU, and vice versa.

There is considerable emphasis on deepening the UK’s partnership with the US, particularly through easing regulatory barriers and leveraging the economic gains from previously negotiated MRAs for professional qualifications. The previous government’s efforts focused on Memorandum of Understanding at state level. Advancing binding agreements at the federal level, given the structural differences between UK and US systems of conformity assessment and accreditation, may need a different approach than the ones adopted during sub-national negotiations.

The Strategy does not address the key issue of how mutual recognition of conformity assessment with the EU - our leading trade partner- is to be achieved, nor how to break out of the out of the asymmetry where UK firms must, in most cases, comply with EU rules but incur additional costs for conformity assessment. There are areas where mutual recognition of conformity assessments is used within the EU-UK Trade and Cooperation Agreement (TCA), but these are not mentioned. There is no discussion of the choice between using the regulatory cooperation provisions of the TCA, new sectoral side agreements, and seeking overall alignment of accreditation.

Dynamic regulatory alignment, where appropriate with the EU, could help in removing trade frictions. This involves ensuring new regulations are not developed in a globally isolated environment. Key steps to achieving this include establishing mutual recognition or equivalence agreements and embedding international benchmarking into domestic regulatory impact assessments. By aligning with evolving global norms and reducing duplicative compliance requirements, dynamic alignment can lower costs for businesses, enhance supply chain efficiency, and ensure that UK products and services remain competitive in international markets.

Mutual recognition was often seen as a silver bullet by post-2016 UK governments, and the paper does not address the problem that some form of regulatory alignment is still necessary, and while dynamic alignment with the EU is necessary to reduce regulatory barriers with the EU, it is not sufficient. Plus, it can generate frictions with the US. The text speaks of mutual recognition agreements as if these are a solution rather than a problem of themselves to be solved – because they are very hard to operationalise.

On standards, the Strategy provides a welcome step back from the doctrine that the UK could set its own “nimble” standards and regulatory regimes.

The objectives underpinning the Ricardo Fund appear to be largely aspirational and are not accompanied by any concrete policy actions, institutional mechanisms, or timelines for implementation. There is no clear framework detailing how such collaboration will occur, which regulatory agencies will be involved, or what form this engagement is expected to take.

Regarding imports and the role of standards, there is little if anything on the role that international or regional standards play in the support for domestic efficiency and integration in value chains.

More broadly, there needs to be a wider perspective in the UK Government’s thinking on how international standards can be used as a vehicle for trade and growth. Rather than international standards being seen as regulators of market access, they can also serve to improve efficiency across the value chain. This can be achieved by enabling UK businesses to participate actively in international standard-setting bodies, such as the European bodies ISO, thereby ensuring that UK expertise is both recognised and reflected in global standards and the UK is seen as remaining at the heart of global and especially regional value chains.

Commentators: Peter Holmes and Sahana Suraj

Inclusivity, sustainability, process and scrutiny

What the Trade Strategy says

That these issues are discussed in the final chapter on “Accountable Trade” is, in principle, very welcome. The chapter covers both non-growth objectives (environment, labour rights, corruption, support for Less Developed Countries), as well as internal UK governance arrangements.

On stakeholder engagement the strategy underlines the importance of listening to stakeholders: “We understand that we won’t get trade policy right if we don’t understand the concerns of business and civil society or keep our ears open to bright ideas from outsiders.”

Our commentary

Recognition of non-growth objectives and the governance / scrutiny of trade policy is to be welcomed. However, in practice, commitments are lacking in substance.

With regard to stakeholder engagement, on the one hand, the Strategy discusses the value of listening to a wide range of voices from business, to civil society and academia. In practice, what comes across is that the main voices that have been listened to are those of the business community. With the emphasis on economic growth in both the Trade and Industrial strategies, this is perhaps unsurprising. But what is clear is that issues of inclusivity and the environment appear to have a much lower priority. If that is the case, we would have liked to have seen this stated clearly, addressed and justified. They could have also set out a clear plan on how to enhance transparency and accountability in stakeholder engagement.

UK trade policy has faced criticism regarding its approach to trade negotiations, stakeholder engagement, devolved nations and oversight from Parliament. Many have called for Labour to make formal changes to legislative and governance processes in order to create a more consultative approach. While some changes and commitments have been made, largely under the previous government, such as supporting Parliamentary debate of FTAs (time allowing) and establishing an inter-ministerial group on trade, this new Trade Strategy largely preserves the status quo. The most concrete change is to give Parliament twice as long (20 days) to scrutinise new comprehensive FTAs and making negotiators more available to Parliamentary select committees (a controversial issue in the last Government), but these are not significant reforms, especially given that the Strategy correctly notes that most of the action in trade policy will take place outside the sphere of FTAs. We would have welcomed some details about how the new, more diffused, trade policy would be monitored and overseen by Parliament.

A final issue with regard to process concerns the monitoring and evaluation of the new strategies being proposed by the government.

For the Industrial Strategy, the document is specific and provides some level of detail stating that there will be:

“robust and comprehensive monitoring and evaluation (M&E) of the Industrial Strategy, which will be overseen by the Industrial Strategy Advisory Council… The ISAC will take a data-led approach to assess progress on the overall Industrial Strategy”…

And

“We have chosen six core metrics… for the IS-8 and the economy as a whole: business investment, Gross Value Added, productivity growth, trade exports, labour market outcomes such as employment and wages, and the number of new, large, ‘homegrown’ businesses.

Importantly too

“The ISAC will set out its findings publicly, including in its annual report, in which it will also provide views on how the Industrial Strategy could evolve in response to policy delivery progress and relevant developments in the UK economy”

In contrast, the commitment and level of detail in the Trade Strategy is somewhat more limited:

“Actions will be assigned, monitored, evaluated, and adapted through established governance and accountability arrangements across government, including to the Growth Mission. Data on the monitoring and evaluation of the strategy will be published in the Department of Business and Trade Annual Report”

This is disappointing. We would have liked to have seen more detail on the process and what will be monitored and evaluated, and a much more explicit commitment for this to take place.

Commentators: Emily Lydgate and Michael Gasiorek

Business support and export finance

What the Trade Strategy says

Both the Trade Strategy and the Industrial Strategy discuss the importance of support for UK businesses. In the latter document, there are policies which are not specifically trade-oriented but may well lead to increased competitiveness and trade. There is frequent mention of the role of UK Export Finance UKEF) in the Industrial Strategy, as well as in the Trade Strategy. Indeed, the Trade Strategy recognises “the UKEF as a critical lever to drive economic growth”. The Strategy also highlights that “nothing matters more to traders across the UK than reduced trade frictions with our biggest trading market: the EU”. This latter quote identifies the importance both of the EU market but also the obstacles posed by trade frictions, and much of the proposed improved business support is focused on these obstacles and trade finance, through UK Export Finance. There is also discussion of reviewing whether it would be beneficial for the UK to join the Pan-EU Mediterranean system of cumulation of rules of origin.

Drawing upon both documents, the main functions of UKEF do not appear to have changed. These include the provision of export credit, insurance (e.g. guarantees to shield UK exporters from non-payment of foreign buyers), loans and guarantees to foreign buyers conditional on them sourcing from the UK, and providing finance for foreign firms investing in the UK.

In total, there is a wide range of policies proposed with an increase in UKEF funding by 33% to £80bn. Indeed, this is one of the few very explicit commitments in the trade strategy. In addition:

·      £3 billion additional UKEF Direct Lending capacity available to stimulate overseas demand. At least £3 billion of this is to be dedicated to defence exports. Relatedly, there is a proposed new Office for Defence Exports, with the aim of supporting businesses.

·      Support for the transition to net zero with UKEF aiming to support £10 billion of clean growth finance between 2024 and 2029, as well as using UKEF’s Invest-to-Export Guarantee to attracting inward investment in clean energy with a view to generating future exports.

·      The integration of export support services into the new Business Growth Service, which links support for exporting with support for growth more in general.

·      Expansion of the network of regional Export Finance Managers to focus on city regions and clusters with strengths in the Industrial Strategy IS-8 core sectors.

·      A pivoting of resources in diplomatic missions to focus more on helping UK businesses to export and international firms looking to do business in the UK.

·      More funding for trade missions to boost exports.

·      Improved and modernised digital export support, bringing relevant information together into one place on GOV.UK, improved content and making the site easier to navigate. The aim is to make this more accessible and customer-focused. Much of this is directed at SME’s, to help businesses to start, export and grow.

·      Pilot projects focused on the adoption of Electronic Trade Documents (ETDs) to reduce border frictions, and digital trade corridors with EU markets.

·      Support for UK regulators, expert bodies and overseas trade teams to open up and shape priority growth markets.

·      There is also mention of the launch of ‘new products and digital services’, and the aim to work with a wider range banks and non-bank institutions.

·      The launch of a new loan guarantee scheme for domestic suppliers selling critical minerals products to UK exporters, with the aim of securing longer term contracts and providing increased supply chain resilience through more protection from geopolitical risks. Also be a scoping exercise to consider broadening this to a wider range of strategic supply chain inputs.

·      Establishing a regular, structured two-way dialogue between DBT and UK businesses on evolving EU legislation.

·      A commitment to using UKEF to open up new trading relationships in developing markets, with the aim of providing £10bn of sustainable finance to low- and middle-income countries by 2029, aimed at supporting the UNs sustainable development goals.

Our commentary

It is good to see the focus on the barriers for businesses, the need to improve the export support services and export finance. These are issues which come up time and time again from businesses and business surveys. Within this it is also positive to see the recognition of the importance of regulatory barriers – be they with regard to goods or services (see the discussion in a separate section on this issue). The linkage and integration between the Trade Strategy and the Industrial Strategy on all the preceding is also to be welcomed.

In principle, there is little that is new. What we see is an increase in the volume of support, which can (maybe) help more firms enter exporting, find some more buyers, and get more investment into the UK; an increase in the quality of the support; and some (re)direction of funding both towards clean energy, defence, and also supply chain resilience and critical minerals. The references to smaller firms is also interesting (first-time exporters, or easier guarantees for SMEs for them to find new buyers), as the empirical literature stresses the relevance of sunk entry costs into exporting, the intermittence of exporting for small firms, and short duration of export spells (again for small firms). So, more support for small firms is very welcome.

The obstacles that firms face are very tangible, and this is particularly so for small firms. Offering to reduce these barriers, and support for exporting is positive. However, at the end of the day what will matter is the extent and speed of implementation. On this, both strategies are silent. We would hope and encourage that there be clear and regular monitoring and evaluation of what is being proposed.

Commentators: Michael Gasiorek and Mattia di Ubaldo

Digital Trade

What the Trade Strategy says

The Strategy underlines economic opportunities surrounding digital and technology as one of eight growth-driving sectors. It also addresses AI opportunities and the importance of developing digital infrastructure, and the possibilities arising from digital agreements with other countries (see also our discussion in the section on International Partnerships).

There are several policy areas and initiatives that are relevant here:

·      The Strategy talks about developing resilient telecoms infrastructure in the UK and around the world while protecting our national security.

·      There is a desire to increase AI adoption across the UK through an AI Opportunities Action Plan

·      The document promoting digital transformation and the modernisation of trade processes, facilitation of customs processes and electronic trade documents.

·      The use of FTAs to deepen / update rules on digital trade, such as the CPTTP, is mentioned as well as the desire to sign Digital Trade Agreements to reduce barriers to digital trade.

Our Commentary

Despite the desire to move away from FTAs, the UK Government appears to continue using extant digital trade policy tools to tackle digital trade barriers. This includes creating new digital economy agreements under FTAs (e.g. India and the Gulf Cooperation Council), upgrading the CPTPP digital trade chapter, and joining DEPA. However, it is important to note that the approaches to digital trade under these existing agreements are different and depend on the agreement.

There is therefore a lack of consistency and the proliferation of different agreement types has resulted in what has been termed a "digital noodle bowl", creating a fragmented and potentially incoherent policy landscape. It remains unclear how the UK Government intends to address this issue. Technical instruments outside formal trade agreements—such as adequacy decisions on data protection and international standards—and institutional cooperation between regulators play a critical role in promoting best practices globally. Yet, concerns persist about the potential for conflict between trade commitments and domestic policies, particularly with regard to privacy protections and the uncertain future of data flows with the European Union.

The Government's Strategy notably omits any substantial discussion on the importance of building trust in digital trade policy. Key issues raised during parliamentary scrutiny—particularly by the House of Lords International Agreements Committee—remain unaddressed. These include matters of data governance, source code protections, intellectual property rights and source code disclosure, and online harms and consumer protection.

This gap suggests a lack of strategic focus on fostering trust among stakeholders, from businesses seeking to access international markets, to consumers concerned about the risks associated with cross-border digital services and e-commerce. While efforts to enhance regulatory cooperation are welcome and necessary, they are not a substitute for clear policy alignment and practical solutions. Moreover, it is not clear what the role will be of the newly announced Ricardo Fund (which is intended to support UK regulators in removing trade barriers) and digital regulation, and the balancing of growth objectives with the imperative to protect the public.

Current stakeholder engagement proposals appear insufficient. The strategy states: "Our extensive stakeholder engagement in the Trade Strategy showed us that Government support for business was their number one trade priority. Businesses value targeted export support" (p. 57). However, in the context of digital trade, non-business stakeholders have reported that the current advisory framework is overly narrow, excluding critical voices from civil society, consumer groups, trade unions, and regulators. This concern was highlighted in the House of Lords International Trade Committee’s December 2024 report on data and digital trade—yet it is not addressed in the Strategy.

One way of addressing this might be to expand the scope of the Ricardo Fund to facilitate more inclusive dialogue, involving a broader range of stakeholders from both the UK and partner countries during digital trade negotiations. This would help to identify specific barriers to digital trade and share best practices for mitigating wider societal impacts and concerns.

Finally, while the Strategy recognises the importance of services for the UK economy and UK trade, there is relatively little discussion of digital services, and policy to enhance digital services trade.

Commentators: Javier Ruiz and Minako Morita Jaeger

Agrifood

What the Trade Strategy says

Agrifood is explicitly mentioned in the UK Trade Strategy in a number of places. The strategy acknowledges that the agrifood and drinks sector is already the UK’s largest manufacturing sector.

Policies to further open up international markets for UK agrifood products will generate growth and allow the sector to diversify and become more resilient in the face of increasingly uncertain geopolitical and climate-related impacts. (p19).

  • The impact of EU border checks for food safety, plant and animal health and animal welfare standards after the UK's exit from the EU were particularly onerous for the sector, whilst the UK markets remained open to agrifood and drinks imported from the EU. The newly agreed Sanitary and Phytosanitary Agreement negotiated at the May 2025 UK-EU Summit is key to reducing over time EU market access barriers imposed following by Brexit and reducing trade headwinds for UK domestic agrifood producers. Clarity on border controls will facilitate international agrifood trade. (p27, p68 & p69)
  • Opening up markets for UK agrifood and drink exports can be delivered through a wider-ranging “trade toolkit.” Whilst FTAs and other bilateral or multilateral contractual arrangements between like-minded countries are important, “commercial diplomacy”, through the work of the UK’s Trade Commissioners and Agriculture Attachés, should be used more often to identify new opportunities for agrifood trade, provide help to navigate local rules and regulations and negotiate changes to policies that impede UK agrifood trade (p60).
  • Imports of agrifood are important for UK food security and, by extension, to its economic security. Relying solely on domestically produced food will undermine UK resilience, especially in the face of climate change impacts. The UK should focus instead on maintaining and building supply chain resilience to find a better balance between domestically produced and imported agrifood whilst maintaining existing UK food and animal welfare standards to meet consumer expectations (p67 and p76).
  • The UK should maintain its existing agrifood standards and encourage the development and use of international standards on food safety, food quality and animal welfare by trading partners. Whilst agrifood production practices may vary across the world due to differences in climate and culture, these practices should not amount to unfair trade practices that adversely affect UK agrifood businesses. The UK government should be prepared to act to protect sensitive sectors. (p68)
  • A thriving agriculture sector is key for regional communities. (p68).
  • Agrifood trade generates positive impacts but these are not spread evenly in the UK or across the world. The UK government should recognise the link between supply chains and labour rights and the economic empowerment of women, especially in key commodity chains, like cocoa. (p86-88).
  • The growing importance in sustainable agrifood trade means there is an opportunity for the UK to leverage its supply of sustainable plant and animal products as part of its growth mission (p85).

Proposed Measures:

  • Continue with finalising the terms of the UK-EU Sanitary and Phytosanitary Measures. (p27)
  • Use commercial diplomacy to further government objectives around agrifood, especially removing barriers to market access, renegotiating local regulatory requirements to facilitate market access and opening up government-to-government dialogues on new agrifood trade issues. (p60)
  • Keep UK agrifood markets open to imports to guarantee UK food security but protect sensitive agrifood sectors through permanent quotas, exclusions and safeguards (p68).
  • Streamline customs procedures by introducing a single trade window for customs documentation and work towards fully digitised trade (including use of AI) to speed up customs processes especially for fresh agrifood products. (p69).
  • Work collaboratively with other governments bilaterally, plurilaterally and in the WTO to remove export restrictions on food and to maintain supply chain resilience (p77).
  • Launch a Review of Responsible Business Practices around supply chain activities, particularly around labour rights and sustainability. (p88).
  • Increase partnerships with developing countries to facilitate exports of agrifoods from those countries to the UK to promote development. (p91).

Our commentary

What is positive?

The focus on agrifood trade throughout the strategy is welcome. Unlike the Industrial Strategy, which does not include the agrifood and drink sector as one of its 8 key sectors driving future UK growth, the Trade Strategy acknowledges the economic importance of the agrifood sector to the UK and agrifood’s role in protecting rural livelihoods in devolved nations and for the regions.

The Trade Strategy recognises the critical role trade measures can play in delivering domestic economic and social policy objectives and net zero commitments. Understanding trade measures’ dual-use role is important as it ensures domestic and international agrifood policymaking is joined up, particularly around thinking through the compatibility of domestic measures (like subsidies) with WTO commitments. The Trade Strategy therefore marks a shift away from previous UK Governments’ position under the Johnson administration which focused more on opening up international markets for UK agrifood and drink exports and maintaining global value chain resilience.

What is missing?

It is unclear what might constitute a ‘sensitive sector’ for the purpose of the permanent quota and what the criteria are for imposing safeguards and exclusions or the legal basis for these. Specifically, it is unclear whether there will be link to WTO definitions of ‘safeguard’ and ‘quota’ to justify the imposition of the measures. There are statements in the Trade Strategy about the importance of UK commitments to the WTO but the emphasis on the need to be ‘pragmatic’ and ‘agile’ suggests that the criteria used to determine when a sector is ‘sensitive’ and the scope of the policy instruments remains opaque. More clarity is needed around the definitions of what constitutes a sensitive sector, the criteria used for imposing safeguards and quotas and what degree of Parliamentary scrutiny will be put in place.

The Trade Strategy states that the UK Government will launch a review of responsible business practices in the supply chain. It is not clear whether this review will take into account existing domestic initiatives for the agrifood and drinks sector around fairness in the supply chain under the Agriculture Act 2020. There is potential for learning lessons from the experiences of UK producers and purchasers around alleviating unsustainable supply chain practices and the knowledge of the UK Agricultural Supply Chain Adjudicator in the development of the UK’s policy on responsible business practices in agrifood global value chains.

Commentator: Fiona Smith

Acknowledgements

With thanks to L. Alan Winters, Anupama Sen, Jiyeong Go, Manuel Tong Koecklin, Maria Savona and Valeria Terrones for useful comments and suggestions.