Can the UK really become an export country?
Dr Gerhard Schnyder, Director of the Institute for International Management, recently wrote an article for Encompass. Encompass is an online magazine delivering comment, opinion and analysis on the affairs of the European Union and Europe’s place in the world. This article delves deeper into the the UK Government’s post-Brexit economic strategy, the reliance on concluding Free Trade Agreements with countries around the world, and the possibility of the UK could become an export country.
Trade deals with countries around the world have figured prominently in the UK government’s post-Brexit economic strategy. The rollover of the free trade agreements (FTAs) concluded by the EU when the UK was still a member has been remarkably successful. However, the rollover of these agreements only means that the UK does not lose any of its existing access to other countries’ markets. To compensate for any decline in trade with the EU, the UK government will need to conclude new trade deals. Here, the Government’s Integrative Review promises an ‘Indo-Pacific tilt’ through FTAs with countries like Australia, India, and New Zealand, as well as membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Yet, much of the political rhetoric around UK’s post-Brexit FTAs with countries around the world remains vague or unrealistic regarding what the UK can bring to the table in negotiations over these FTAs. Indeed, despite the political focus on exports as driver of post-Brexit growth, Britain never was an export-led growth model like Germany. According to post-Keynesian economists the UK economy is mainly driven by domestic, private consumption, not exports – which explains the persistent yearly trade deficits (the UK imports more than it exports).
Turning the UK into an export-led model would require a fundamental transformation of its economy. The first question one would have to ask is: What could the UK export more of?
An obvious answer is high-end business services. The UK is the world’s second largest service exporter and runs a service trade surplus every year (exporting more services than importing). So, could exporting business services be the motor for post-Brexit growth?
That is highly unlikely. Services liberalisation has been notoriously slow compared to goods, as the Institute for Exports also noted in a recent report. There are also doubts over whether the UK Government really will make service liberalisation its priority. The prospects of making any major progress on service FTAs seem slim. More importantly however, if the UK’s post-Brexit growth strategy were to rely on high-end services exports, this would directly counteract another post-Brexit priority: ‘levelling up’ the country. Much of the business service industry is concentrated in or around London. So, a service-export led growth model would possibly reinforce regional inequalities. Such a model does hence not seem realistic or desirable for the UK.
You can read the full article here.
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To read more about Encompass, please visit this web page.
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