The EU moves on with Australia and New Zealand - it's time for the UK to get real about trade deals

28 October 2017

While the Tory government continues to offer nothing more than brash posturing and empty rhetoric on free trade, the EU continues to push its global liberalisation agenda.
 
On Thursday we voted in Strasbourg for the opening of trade talks with Australia and New Zealand. But MEPs didn't give the negotiators a blank cheque; setting out a clear roadmap for the EU negotiating team, including stringent conditions to protect jobs, rights and the planet. These future agreements will not contain any kind of private tribunals for multinationals, whether in the form of "Investor-State Dispute Settlement" (ISDS) of "Investment Court System" (ICS). This should be regarded as a major win for everyone who campaigned against TTIP and CETA, the trade deals with the US and Canada. I am very pleased to see that the pressure we have built within the European Parliament is yielding concrete results. MEPs are instead calling for the inclusion of a workers' rights tribunal in the Australia and New Zealand deals. These are long standing demands of the trade union movement and the Labour Party, which has now been fully endorsed by the European Parliament. 
 
While this is good news for the EU, Australia and New Zealand, Brexit means that these deals may not benefit the UK in the same way - or not at all. Whether this works for Britain entirely depends on the parameters of our future relationship with EU, rather than our dealings with Australia and New Zealand.
 
Trade deals are typically long in the making, even when you know what you are doing. Today's vote signals the start of the process to negotiate these trade agreements, not the end. There will be countless negotiating rounds led by the EU Commission, with constant consultation of MEPs and member states' governments throughout and another vote in the end before the deals can enter into force. In the past, similar negotiations have taken well over 5 years to be concluded. Suggestions that the just established and vastly unexperienced Department for International Trade could perform any better is wishful thinking, not least since Australia made it very clear that it will prioritise negotiations with the EU over a deal with the UK.
 
This timeframe means it is very likely that the EU will sign these deals after 2019 and the formal exit of the UK from the EU. If we leave the EU's customs union as well this means that German and French companies will benefit from the new opportunities offered by the deals in Australia and New Zealand - but UK firms will not. These deals could therefore be major missed opportunities for the UK but it could be worse: with Australia and New Zealand getting closer to the EU there's a real risk that our own link with Oceania withers. In the global world of trade envisioned by the Tory government for the future, we will increasingly find ourselves competing for markets abroad with our European neighbours. Currently we are well ahead when it comes to trading with Australia and New Zealand, but this could change if the EU has trade deals in place and we don't.
 
To put this in perspective, just consider that while the UK represents 16% of the EU's economy, it accounts for 28% of the block's exports to Australia. This goes for imports too: last year, £9 billion worth of goods and services went to the UK out of the £12 billion exported by Australia to the EU. In Europe, we're both Australia's prime supplier and best customer, and the trade picture is similar with New Zealand.
 
So to avoid Aussie contracts going from Tyneside to Rhineland and keep New Zealand Pinot Grigio on our supermarkets' shelves, we should be ensuring that we remain on par with the EU before indulging in daydreams about leading globalisation. This reality-check may explain why the Prime Minister indicated over the summer that the UK would be looking at replicating EU trade deals, rather than negotiating new deals from scratch.
 
But copying and pasting is not as straightforward as it sounds. When Australia and New Zealand are negotiating with the EU, they are prepared to make certain concessions in exchange for a greater prize: access to a market of 500 million consumers. The proposition is simply not the same when you downgrade it to a market of 65 million consumers. Concessions we could extract on our own are bound to be lesser than what the EU can get as a whole.
 
A strong suggestion that the rest of the world is not willing to humour us with Brexit came only a few weeks ago when a joint UK/EU proposal to deal with the consequences of Brexit at the WTO was met with strong opposition by our partners.
 
This relates to the allowances given to third countries to sell on the EU market under WTO rules, known as "Tariff Rate Quotas" (TRQs). With the UK leaving the  EU, the European Commission and the government agreed that these TRQs should be split according to the relative economic weight of each, with third countries given a quota for the UK and a separate one for the EU27 - both of which totalling the amount of the quota they currently get for the EU28.
 
This sounds fair enough but it was rejected point-blank by a group of 7 countries, including three with which we are supposed to have a 'special relationship': the US, Canada... and New Zealand. These countries simply do not agree that access to the UK market is worth the same as access to the EU market, not even in proportion, and they are asking for extra concessions as a result of Brexit. In the harsh world of global competition, economic interest trumps age-old friendship it seems.
 
This means that even without new trade deals, we would have to open our market further without getting anything in return simply to remain within the WTO framework. This goes for TRQs and there is no reason to expect that it will be any different when the government will attempt to keep the WTO duties currently applicable in replicating the EU's schedule: expect the rest of the world to demand greater access to the UK market while offering nothing in exchange.
 
None of this needs to happen. We can easily keep the conditions we currently enjoy at the WTO, and negotiate better conditions with Australia and New Zealand. This desirable outcome simply requires us to remain part of the EU's customs union and the EU's Common Commercial Policy.
 
I strongly believe that while a majority in the UK voted to leave the European Union, a majority did not vote for economic self-harm. Leaving the European Union does not mean leaving the single market and the customs union, and I stand by Labour's campaign to remain part of both, at the least during a transition period, because it is in the interest of everyone in Britain to do so.
 
As for the suggestion that we would fare better in terms of trade outside of the world's largest free trade area, it simply does not fit with reality. This is the unambiguous message coming from our old friends Down Under. It is up to us to listen to it.

Do you think the North East needs its own voice in the EU exit negotiations?

Latest Tweets

RT @PaulBrannenNE: ‘A bruising Brexit could shipwreck the British economy.’ I read this while eating my lunch. I now have indigestion https… 3 days 5 hours ago
RT @Jude_KD: Will Tories now back not block stronger EU action to save steel jobs? https://t.co/btoar2b11C @ShadIntTrade @EuroLabour 3 days 5 hours ago
RT @Jude_KD: Today MEPs adopted new rules to deal with trade dumping and market distortions #MES #China #saveoursteel https://t.co/0X8JIspp 4 days 1 hour ago
RT @SebDance: Very honoured to have been elected as Deputy Leader of Labour MEPs. Thank you to my @EuroLabour colleagues for their trust an… 4 days 1 hour ago
RT @Jude_KD: Good to discuss #MeToo, working motherhood & labelling settlement goods with Israeli Knesset MK @azariarachel this pm https://… 4 days 23 hours ago

Sign up to our Newsletter