Richard Graham is MP for Gloucester, and is the Prime Minister’s Trade Envoy to the Philippines, Malaysia, Indonesia and the ASEAN Economic Community.
Threat, opportunity, or both? Britain’s export prospects post Referendum are at a crossroads – and could go either way.
Theresa May’s government inherits a trade conundrum. David Cameron made huge efforts personally to boost exports – leading large trade missions where I saw his very effective salesmanship and convening power, initiating the Prime Minister’s trade envoys and creating the successful GREAT campaign to promote the UK abroad. His Government supported research in sectors like aerospace, expanded apprenticeships and supported business growth through reduced corporate tax and tax breaks on R&D and capital allowances. More UK Trade & Investment (UKTI) resources were put into export Growth Markets and particularly China, where exports doubled in five years. So far so good.
But the wider picture has been less encouraging – virtually no productivity improvements from business, little increase from the one in five companies that export towards the one in four target figure (and Germany’s reality), and a further deterioration in our balance of trade. We have to do better, against a currency wind which should help exports and overseas earnings but may be tough short term.
At the same time UKTI was restructured from a country focus to a sectoral focus with mixed success. Further re-structuring under Francis Maude and inherited by Mark Price was a work in progress when the new Prime Minister took over – and signalled her intent by creating a new Department of International Trade under Liam Fox that combines UKTI, Defence Sales, and UK Export Finance (UKEF).
The trade argument during the referendum campaign was exaggerated either as dumping a focus on sclerotic Europe for another more dynamic world or risking losing fifty-plus Free Trade Agreements (FTAs) under the EU umbrella without any guarantee of replacements. The truth is more nuanced. We need both to maintain and grow our exports to Continental Europe (currently 44 per cent of the total) and be as proactive and successful as we are with China in many other Growth Markets – a term I much prefer to Emerging or Developing Markets.
Fox is already deploying some cards. The old Commonwealth nations are keen on free trade deals which are not possible while we’re in the EU. A coalition of the willing in the Commonwealth can be built up before and around the Commonwealth Trade Ministers’ London meeting early next year.
At the same time the Government should continue to extract as much direct benefit as possible from our International Development programme and more from our Prosperity Fund. This will need strong co-operation between the three lead departments (DIT, FCO and DFID). The opportunities are there if we adopt the spirit and flexibility of enterprise, and agree priorities. Experienced trade negotiators are scarce and not cheap: they need to be deployed where the return on investment is likely to be greatest.
The key to getting things off the ground quickly will be the enthusiasm and energy of Ministers, Heads of Mission and trade envoys. But I would caution against expectations getting ahead of reality. A complete FTA with China, for example, may be a long term ambition but is not without risks on both sides, as our own steel sector knows so well. And local distribution rules can often be as much an obstacle to genuinely free trade as the principle of duty free imports.
Judging by the current mooted timetable of Brexit, we shouldn’t expect new trade deals to go live until the last year of this parliament. Before then exports will be largely the prosaic business of 99 per cent perspiration and 1 per cent inspiration, as Calvin Coolidge once said in a different context.
The good news is that good business is being done. In July, BP signed off on a giant further $8 billion investment in Indonesian offshore gas – creating 10,000 jobs there while generating a partly UK supply chain and long-term earnings that support many British pensioners. And Air Asia generated the largest single order (100 planes) for Airbus at the Farnborough Air Show.
Big, bold, bilateral projects invariably need government (taxpayer) support – and especially long term energy nuclear investment, which is why it is right to scrutinise the Hinkley Point C project (which involves French and Chinese investment) carefully before final approval.
At the heart of all this has to be a strong vision of a Britain in the world, with strong links everywhere. Based in Europe and leading its innovation, services and enterprise. At the heart of the Commonwealth and leading more intra-Commonwealth trade and rising prosperity. Asia’s western partner of choice, with London as its international base. Latin America’s window for capital and preferred European HQ. Second only to the US in defence, intelligence and aerospace. And of course a major role in the UN Security Council and NATO.
This should come with a commitment to remain open to inward investment, while considering the strategic implications of certain deals (as say Canada does), and a determination to move up the Premier League of Exporters. We should aim to improve on sixth place.
I hope we will hear more of this post-Brexit narrative at the Conservative Party Conference in October. And it’s important that we get the message over that business growth is ultimately about jobs and raising tax revenue for public services: currently 75 per cent of our taxes come directly and indirectly from business. So exporting is not just nice to have, it’s essential to the Prime Minister’s mission of recognising how tough life is for millions – and improving both our standard of living and our public services across the United Kingdom.