FTI Consulting International Trade Bulletin – 17th September

FTI’s Key Headlines

Truss trades places

The long-mooted Cabinet reshuffle on Wednesday saw Liz Truss rewarded for her success as trade envoy-in-chief with promotion to Foreign Secretary, leaving a hole at the Department for International Trade.

Truss is replaced by Anne Marie Trevelyan, who has seemingly big shoes to fill. Certainly the Tory faithful think so, putting Truss at the top of the approval rating leader board after securing trade deals with Australia, Japan and Norway, with New Zealand in the pipeline and the UK’s application to join the CITTP gathering steam.

Trevelyan’s own free trade instincts appear similarly strong, but there is concern the change will take the wind out of HMS Global Britain’s sails. There is also the question as to whether Truss will be able to let go – DIT is arguably of greater importance than the Foreign Office right now in terms of the Government’s overseas agenda and she might just use her new seniority to make sure she can still exercise control.

Aussies leave greens aggrieved

The UK-Australia free trade deal has come under greater scrutiny with UK ministers accused of removing binding climate provisions, at the behest of their Australian counterparts. Critics, have pointed to provisional commitments reiterating the 2015 Paris climate being dropped. Australian Prime Minister Scott Morrison, didn’t exactly help matters by stating that climate agreements ‘deal with climate issues’ and ‘in trade agreements, I deal with trade issues.’

While the value of including such clauses might be questionable, with some dismissing them as mere greenwashing, the decision to remove certainly pushes against the political tide. Deals with Canada and New Zealand have both included such clauses as does the UK’s post-Brexit trade deal with the EU. The public, by and large, now expects them.

Climate politics is certainly more contentious in Australia – Morrison’s surprise election success in 2019 has been put down to swings in his favour from rural coal mining communities – and there is clearly flexibility inside a Downing Street when it comes to delivering on the promise of an abundance of post-Brexit trade deals.

France cries merde over nuclear subs 

The UK’s budding bromance with Australia continued on Wednesday with the announcement of a new security partnership between the two nations and the US – christened AUKUS – to protect shared interests in the Indo-Pacific. Closely aligned with the UK Government’s Integrated Review, which prioritised a diplomatic shift eastwards, AUKUS is overtly positioned as an effort to counter Chinese influence across the region. Beijing naturally reacted angrily to the deal.

It also ruffled French feathers, given that the first AUKUS project will be collaboration to develop Australia’s first nuclear-powered submarines. Last month Australia binned a similar deal with France, dubbed by Yves Le Drian, France’s foreign minister as the “contract of the century.” Yesterday he accused Morrison’s Government of a “stab in the back.”

The deal also raises questions about the state of Anglo-French defence relations. Strained since Brexit, Le Drian demanded a fast march towards EU strategic autonomy, something that would pointedly leave the UK on the outside. Nevertheless, just two days on from AUKUS, reports swirl today that the Dutch Prime Minister will, on behalf of Brussels, grace Boris Johnson with an offer of a UK-EU security deal.

Frost relights the bonfire

Excessive red tape and ingrained protectionism were central to many of the arguments for Brexit and slicing up overly prescriptive EU regulation was, allegedly, the UK’s reward for leaving. However since ‘taking back control’ some Brexiteers are increasingly concerned that a continental mindset of economic statism has griped Downing Street.

Stung by such criticism and aware that the pandemic demanded a very un-Tory approach to state intervention, Lord Frost – who emerged from the reshuffle unscathed with his hand still firmly on the tiller of Brexit – is once more stoking the bonfire of European law.

Frost told Parliament this week that upcoming changes will finally allow UK courts to fully depart from EU legislation. Describing the move as finalising the process of restoring a sovereign Parliament, he said it will allow British business to ‘get on and succeed.’ Here then is the plan to restore the UK’s economic competitiveness and re-incentivise foreign investors alarmed by recent tax rises and growing protectionist rhetoric – hardly stuff that can be blamed on Brussels.

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