UK-EU Trade Policy: Challenges And Opportunities For Growth
European Centre for International Political Economy (ECIPE)
by David Henig
Splitting working time between London and Brussels has been something of a frustrating experience as an inevitably difficult UK-EU divorce turned at times angry, damaging, and fantastical. I’ll return below to signs of improvement with 2024 elections likely to be a key moment, but before that two recent ECIPE papers on the EU rather unexpectedly became objects of UK debate.
First there was the paper “What is Wrong with Europe’s Shattered Single Market?” cited as a good reason by former UK negotiator Lord Frost why the UK was right to leave the EU. Odd, since the paper advocated “Economic integration towards a “real” Single Market”, which was rather the opposite of his construction of new trade barriers.?More recently, there was plenty of UK interest in our work showing the EU falling behind US economic performance, “If the EU was a State in the United States: Comparing Economic Growth between EU and US States.” That might surely have been more justified if the UK’s own performance was markedly better than that of neighbours.
What has rarely been in evidence since 2016 is the recognition in either capital city that regardless of the exact form of the UK-EU relationship, our economic performance is going to be linked, and has recently been a disappointment. That’s symptomatic of a declining political focus on growth, for many important reasons such as covid, responding to Russia’s invasion of Ukraine and the climate emergency, but one that we should recognise.
Trade policy is changing in turn. There are new phrases being used such as “multi-functional” and “weaponised interdependence”. How to think about this was the subject of my paper in March, “Building a Mature UK Trade Policy”. Perhaps the key argument from this was that there are no single measures which will significantly change economic performance, that today’s policy-makers have to seek steady incremental gains in a complex policy environment.
Ahead of likely UK elections in 2024 (the latest possible date is January 2025), there have been positive discussions on these subjects with senior UK politicians, in particular in a Labour Party currently favourite to win. Rashly perhaps, I see grounds for optimism that UK trade policy will soon be much better grounded – though to be clear with no immediate prospect of rejoining the EU.
Future EU trade policy by contrast is more of a worry. The next Commission must carefully implement a wide suite of regulations that are the source of global concern, such as on deforestation or carbon border pricing, navigate dangerous major power politics between the US and China, and consider crucial questions of the neighbourhood, all while seeking new sources of growth.
Somehow, in a city where so much is transacted over a coffee meeting, that feels like something about which we need more discussion. We’ve been talking within ECIPE what we can do to find the right answers, and hope to share some of that in the coming year.
Big-picture analysis will help, but so will small initiatives, such as the mini-deals as explained in our latest paper by Lucian Cernat. For as he explains, we need the underpinning of the WTO, but we also need to tackle specific trade barriers, often the work of officials that deserves more credit.
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Finishing with a Rolling Stone lyric does however cause me some personal concern in threatening my position as the team’s dropper of music lyrics. So looking at my current playlist, I’ll finish by saying that although I have a “Sneakin’ Suspicion” of what might be, “I’m a Dreamer” that both the UK and EU can find appropriate ways through our policy challenges.
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Global Britain has not delivered according to the hopes expressed by supporters of leaving the EU. Trade with the rest of the world has not grown to make up for leaving a bloc with seamless trade, early Free Trade Agreements with Australia and New Zealand are of minor economic significance, and it is hard to discern much of a strategy beyond completing a few more similar deals.
In his latest policy,?Lucian Cernat challenges conventional European Union (EU) trade policy perceptions. His work delves into the world of trade mini-deals, shedding light on these lesser-known instruments poised to shape the EU's future trade landscape significantly.
What is Wrong with Europe’s Shattered Single Market? – Lessons from Policy Fragmentation and Misdirected Approaches to EU Competition?by Dr Matthias Bauer ?
Europe's Single Market can be considered the EU’s greatest achievement. But it's still a political illusion in many ways. Any company doing business in Europe faces significant barriers to cross-border exchanges within the EU. It is these barriers that hamper companies’ ability to scale and compete internationally on the back of innovation and economic integration.
If the EU was a State in the United States: Comparing Economic Growth between EU and US States?by Fredrik Erixon , Oscar Guinea ,?and Oscar du Roy ECIPE experts sound the alarm over Europe's sluggish economic growth and its potential consequences for prosperity. The report highlights the critical importance of long-term Gross Domestic Product (GDP) per capita trends, revealing that many European economies have experienced extremely low rates of economic growth.