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Brexit ideology will be bad for exports

If visions from ministers were effective in boosting UK exports we would long ago have surpassed the £1 trillion target set by George Osborne when he was chancellor.

Last year we managed total overseas sales of £616bn, according to the latest official data. With just three years to go before we were supposed to hit the magic £1 trillion figure, we need exports to grow at an average annual rate of 17 per cent. So only triple the average rate of 5 per cent achieved since the turn of the millennium.

Could it be a sign of intruding realism that the trade secretary Liam Fox has quietly dropped the £1 trillion target and replaced it not with a nominal target for exports, but a target as a share of GDP? Fox, in a speech yesterday, said he wants total UK exports to be equivalent to 35 per cent of GDP, up from the current share of around 30 per cent. That at least gives him the opportunity of hitting the mark via a big UK recession and consequent collapse in GDP even if exports sales don’t actually budge.

The past eight years have been a nightmare for the Greek economy, but its exports as a share of its (collapsing) GDP have leapt from 20 per cent to 32 per cent.

But then perhaps realism hasn’t yet breached the walls of the trade department because Fox is still burbling vacuously about the great trade “opportunity” presented by Brexit.

There’s something supremely frustrating about hearing Fox rabbit on about the potent’exporting superpower’ial of selling more luxury goods to the Chinese when the preeminent trade challenge over the coming years for the UK is simply standing still.

Leave aside, for a moment, the question of our future trade arrangements with our dominant commercial partner, the EU. We also urgently need to “grandfather” the 50-odd existing trade deals between the EU and other countries, from Mexico, to South Korea, whose coverage the UK will fall out of after the post-Brexit transition ends at the end of 2020.

This is by no means a simple task, either politically or technically, as Peter Holmes and Michael Gasiorek of the UK Trade Policy Observatory have painstakingly explained. Some countries may seek to extract concessions from the UK as a price of rolling them over. And then there’s a planet sized headache over “rules of origin”, relating to finished exports made with components from third countries.

The details are too complicated to outline here but the bottom line is that successfully grandfathering these trade agreements would require the agreement not only of the UK and the third countries involved, but of the EU as well.

There was not a word on any of that in Fox’s speech. Instead we got a cargo container of spurious assertions.

Fox spoke as if world trade intensity is booming. But it’s not. Since the global financial crisis a decade ago trade as a share of global GDP has actually fallen from 60 per cent to 55 per cent. And then there’s Donald Trump’s trade war and the White House’s attempts to undermine the World Trade Organisation, which Brexiteers routinely herald as the UK’s safety net in the event of a no-deal Brexit.

Again, all this seems to have passed our chronically incurious trade secretary by.

So does the fact that the Office for Budget Responsibility, the government’s own official forecaster, expects the UK’s share of global trade to stagnate, not grow, over the coming years. We should probably just be relieved he didn’t call the OBR traitors, trying to sabotage Brexit Britain.

But the fact is that only an incorrigible ideologue could survey the horizon in 2018 and see a vista of burgeoning trade opportunities.

The views of Fox on the Brexit negotiations are of little value given he’s been kept well away from them by Theresa May. But, when asked about them yesterday, he offered this warning: “If the European Union decides that it wants to put…the ideological purity of the bureaucracy of Brussels ahead of the wellbeing of the people of Europe, it will send a very big signal to the rest of the world about exactly where Europe is heading.” But the fetish for ideological purity belongs not to Brussels, but to the Brexiteers.

And that, alas, shows the direction they’re dragging us.


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