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Although the Conservative and Labour parties are both making a policy promise a day ahead of the 4 July general election, none of these proposed policies is addressing the UK’s international trade. This is leaving many important and cross-cutting aspects of trade untouched. Both parties’ reluctance to talk about trade with the EU may well explain the general lack of focus on this area.
With barely two weeks until polling day, it is worth exploring why the incumbent Conservatives and their main challenger Labour are both avoiding the topic of trade relations with the EU – and other key areas in international trade that deserve the next government’s attention.
While the UK may have notionally ‘taken back control’ over policy areas such as trade and migration, as campaigners for Brexit insisted it would, empirical evidence suggests that leaving the European Union has negatively affected the UK economy. Slower GDP growth and slower growth in trade than comparable economies are key indicators of this.
The UK is a very open economy and the value of trade relative to GDP is close to 70 per cent. More than one-fifth of UK jobs are directly or indirectly associated with the exporting activities of UK firms. Average wages tend to be higher in exporting sectors and importing offers the country access to a greater range and quality of consumer goods and intermediate inputs. All these factors are important drivers of prices, of UK firms’ competitiveness, and of future investment and economic growth in the country.
Approximately 50 per cent of UK trade is with the EU, and many UK firms’ supply chains are closely linked to the EU. Hence, it is hard to discuss international trade (policy) without mentioning EU trade (Brexit). As such, it is clear to see why parties struggle to discuss international trade without talking about the UK’s trade and trade relations with the EU.
The parties’ recently published manifestos do offer some main approaches to international trade. Broadly speaking the Conservatives seek a continued focus on free trade agreements as well as ‘freeports’. They plan to establish a UK-wide body called InterTrade to promote more internal trade, and they reject any closer relationships with the EU.