How the UK can unleash economic growth through improved trade without losing its regulatory powers

The Trade Facilitation Commission, where I serve as co-vice chair, has reported its recommendations to the UK government outlining how trade facilitation measures can lead to economic growth. Our path-breaking modelling shows that the impact of trade facilitation could be substantial. 

We showed that improving the UK’s approach to the Belgian level of facilitation could unleash as much as £40bn into the UK economy, boosting GDP per capita by 1.4%. 

As the government looks to eke out any growth at all, these numbers cannot be overlooked.

Since the prime minister has said wealth creation is the central purpose of the UK government, and much of the trade facilitation that our report proposes is within the UK government’s gift, turning it down would seem like looking a gift horse in the mouth.

The two governing principles which constrain our recommendations are as follows: first, the PM’s focus on economic growth and wealth creation. Second, we must suggest things that maximise the UK’s opportunities to grow its economy – that is, those which are core to its external trade policy and domestic regulatory reform while also minimising costs which arise from border disruptions due to its position outside the EU’s single market and customs union.

Mutual recognition and unilateral recognition

We strongly encourage as many mutual recognition agreements as possible between the UK and EU, not just for conformity assessment and market surveillance but also for underlying product regulation.

Importantly, we note that where this is not possible, the UK should unilaterally recognise EU standards and product regulation. This would be particularly valuable for SPS goods. The UK has unilaterally recognised US, EU and Japanese medicines approvals processes for placing products on the market in the UK, without requiring UK approvals as well. What you can do with medicines and trusted partners, you can do with anything.

We believe a veterinary agreement with the EU fails on the governing principles above, unless it is a mutual recognition agreement like the NZ-EU veterinary agreement (which the EU is probably not in the market for). We do not recommend dynamic alignment in the SPS sector, as it does not gain much in terms of border disruption – customs forms and regulatory processes are still needed, although physical check intensity can be reduced.

Read more:

• Trade body warns government of safety and animal welfare risks of EU vet deal

• UK food exporters have spent over £200m on vet paperwork since Brexit

• Brexit border requirements on EU food imports delayed once more

But the UK would lose the ability to regulate in more pro-competitive and less burdensome ways for farmers and food producers, and we would be taking off the table a major issue which trading partners want to raise.

Unilateral recognition solves this problem. It allows businesses to make their own decisions about what they want to do and whose regulations they want to satisfy in order to reach certain markets.

If there is a big difference in regulatory cost between the UK and EU, then producers might well choose to do what the Australian beef industry does – have two production lines, one for the EU and China (hormone-free), and one for the rest of the world. If the difference is not that great, producers may simply choose the EU requirement and manufacture everything to that standard.

Smart customs partnership and digital trade corridors

We believe in tiered trusted trader schemes, where the more and better quality data businesses are willing to share with government, the more simplifications and facilitations are possible for the trader. But we make the important point that these schemes should not be seen as only facilitations for traders – they should also be seen as compliance tools for governments.

The more data government agencies have, and the more they can follow trade flows in real time, the more intervention points they have and the more likely they are to be able to improve their own risking tools. Tiered trusted trader schemes also help businesses understand their own supply chain, something the Covid lockdowns showed us was difficult for even the most sophisticated traders.

Even more pertinent, now that the Single Trade Window has been paused, are the recommendations for the use of digital trade corridors. These can be a vehicle for drawing together the different government agencies which have operated in their own siloes for far too long.

While we do make recommendations about one government at the border, and a single border minister, we are not limited by that. Indeed, we have alternative ways that we can draw government agencies together to deliver a border which is both facilitated and compliant. It is imperative for the UK’s economic growth that we do so, while prioritising trade facilitation.