FTI Consulting International Trade Bulletin – 25th November

FTI’s Key Headlines

Trillion-pound target for UK exports

The headline figure from the Department for International Trade’s refreshed export strategy, published last week, is a “new” target of £1 Trillion worth of annual exports by 2030. Sceptics have of course been quick to highlight David Cameron’s quickly abandoned 2012 intention for the UK economy to hit the same goal by 2020, leaving us to pontificate on just how soon this resurrected ambition will find itself re-buried.

UK trade officials argue that the difference this time around will be the freedoms wrought from Brexit. But in reality the strategy reads less like a plan for increasing exports than a study on how trade can be a vehicle for the Government’s altogether more domestic-focused objectives. Of course, increasing exports can help the Government kill two birds with one stone, boosting economic activity in left behind parts of the country while also demonstrating the so-far illusive Brexit dividend. However, if you were expecting a detailed plan of execution, this is not it.

Of course, practical detail is not entirely absent. Making DIT more joined up and more digital is a worthy endeavour and some of the suggested reforms should disproportionately benefit SMEs. Meanwhile, a new Export Support Service that, despite the fuss made over post-Brexit trading opportunities, is focused on supporting businesses to trade more with the EU, is a welcome acknowledgement of the enduring reality of the European market for British goods.

Whether the trillion-pound target is achievable is of course a moot point for now. Only time will tell. But what is in the Government’s favour is a balance of trade deficit – something that threatened to snowball out of control a decade ago, prompting Cameron to unveil his own £1 Trillion target – that is now operating at a more politically comfortable 2.6% of GDP. That provides the Trade Secretary with a little more breathing space, at least for the time being.

Peppa Pig overshadows PM’s EV revolution 

The Prime Minister’s choice of Peppa Pig as a case study fit for the keynote speech at the CBI Conference on Monday raised more than a few eyebrows, not least among Johnson’s own backbenchers. His shambolic performance left business leaders demonstrably unimpressed and a presumably red-faced anonymous Downing Street source admitting to the BBC that “Business was really looking for leadership today and it was shambolic”.

However, with delivery dominating the headlines, little attention was paid to the content of the speech which majored on a promised “electric vehicle revolution.” Key policies announced by Johnson include the requirement for all new homes to install electric vehicle charge points from next year, with the PM predicting 145,000 extra charge points as a result by the 2030 deadline for the ending of sales of new petrol and diesel cars in the UK. The PM also announced that Innovate UK will commence a three-year, £150m programme in new flexible and affordable Innovation Loans to help British SMEs commercialise their latest R&D innovations.

The Government thus seems intent on doubling down on its commitment to the green transition even post COP26. Number 10’s hope is that the energy transition to net zero has the potential to not only win over “green” voters, but also a way to direct R&D spending towards the red wall rump of seats Johnson will need to hold at the next election. Meanwhile, betting that electric vehicles offers the surest route to net-zero transportation, to realise this the government seems to be realising that adequate infrastructure needs to be in place and this regulation aims to encourage the private sector to do much of the heavy lifting.

WTO Resilience Report

On the occasion of the WTO’s 25th anniversary, the publication of what might once have been planned as a laudatory Annual Report (17/11/2021) instead finds itself forced though circumstance to focus on recovery and resilience. Describing the pandemic as a “stress test of the world trading system” the report is most notable for openly acknowledging the critical arguments made by a growing chorus of economic nationalists: a hyper-connected global economy, with high volumes of imports and exports, makes the world more vulnerable to shocks. Pre-pandemic such sentiment from the WTO would have bordered on the unthinkable.

Of course, this is not the Damascene conversion it might initially appear to be. The report concludes that the counterweight of increased resilience to supply shocks, facilitated by deep trade links makes global free trade worth the hassle, enabling businesses to switch suppliers easily and offering consumers a wealth of choice that local markets alone simply cannot provide. There is even a handy little graph associating overall economic recovery with trade recovery during the COVID-19 pandemic.

In truth, the WTO’s message is one that will find it just a little harder to stick with governments not immune from the growing nationalist sentiment felt among many of the world’s major economies, a trend exacerbated by the pandemic. This has created a climate where even the most ardent evangelists for free-trade – not least Boris Johnson – are increasingly feeling the electoral need to square their ideology with rather more local concerns, which of course bring us full circle to the UK’s new Export Strategy…

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