Some Thoughts on Export-Led Growth
What I might have said to the Business & Trade Select Committee
Today I was supposed to appear before the Business and Trade Select Committee in Parliament. Unfortunately I was unable to make it in the end which is disappointing as I was looking forward to giving evidence and helping the Committee.
I didn’t know exactly what they would ask but I knew it would be around the UK’s trade policy, including FTAs and also the Board of Trade. Here are some semi-structured thoughts on what I might have said.
The panel is on ‘Export Led Growth’. This used to have more of a clear definition when it was contrasted with import substitution and signalled that a country was eschewing protectionism and embracing free trade. Recently, it seems to be used as a euphemism for governments who wish to give a preference to exporting over importing and so is essentially a return to mercantilism. While exporting is important, so is importing. It is imports which give consumers access to greater choice and cheaper products and forces firms to up their game and become more productive. I have written about this before and it would be a good idea if the government were to introduce an ‘Importing is GREAT Britain’ as I suggested back when I was advising Truss.
I would hope that the UK recognises that trade should not be viewed as a zero sum game. The government should seek to strike ambitious free trade deals with countries around the world. However, this should not just be with the aim of boosting exports, but also increasing imports. This will increase productivity for British firms and lead to increased choice and lower prices for UK consumers.
The UK is somewhat of an outlier at the moment as while other countries are retreating from the world stage when it comes to trade, it is actually trying to negotiate new deals. It should use its status as an independent trading nation to challenge protectionism and encourage like minded nations to embrace free trade. It should push for reform of the WTO and ensure that the rules of trade are fit for the modern global economy. Part of this should be using its influence with the US to encourage it to step back into its role of championing free trade. This should look like the Biden Administration reforming the WTO and (re)joining CPTPP.
I also find it odd that the government is often quite negative when it comes to many of the UK’s main exports. It tends to focus on goods exports. This is understandable as bigging up agriculture and cars and the like is politically popular whereas the services we’re really good at (management consultancy, finance, universities, gambling, and entertainment (including of the adult variety) are often less popular.
While I would not expect Rishi Sunak or Jeremy Hunt to turn up the Only Fans offices for a photo opportunity or pay tribute to the hard working content creators in the same way they would at a car manufacturing plant, they are actively working against the interests of some of its key industries. Take universities for example. I know there are issues about sub-standard institutions essentially selling visas and I am planning on writing something on this, but these universities are technically an export and so the recent immigration changes are going to hit a major exporting industry.
Ultimately, I don’t think that ‘Export Led Growth’ is a particularly helpful or achievable policy. Exports will obviously play a role in growth but they will not lead it. As I have written countless times, there are deep seated structural issues in the UK economy such as the planning system which is why we have experienced stagnant economic growth. The government should focus on fixing them and then we will see economic growth (as well as increased exports).
Moving onto FTAs. It is my understanding that the Committee brought up Rishi Sunak’s comments during the leadership election on the UK-Australia deal and how it sold out British farmers. I’ve written about this before. I did work on the deal and I accept that due to political pressures it was somewhat rushed and it wasn’t entirely clear what exactly the UK wanted from the deal, it was still a remarkable achievement to get the deal. Again, lots of the criticism comes down to farmers having to face some competition. Trade policy should be based on what is best for UK consumers, not Big Farmer.
The other criticism of the UK’s FTAs (and CPTPP) is that they are pretty insignificant in GDP terms. This is true but that’s because most modern FTAs don’t create that much value as they tend to focus on eliminating tariffs which are generally already relatively low and so we shouldn’t expect to see massive gains. The exception to this would be India (but that’s stuck in negotiations) and the US (which is unlikely to happen under either Biden or Trump as the UK will refuse to shift on SPS standards over things such as chlorine washed chicken and hormone treated beef).
If the UK wants to reap the benefits of FTAs then it should focus on issues such as Rules of Origin and other regulations as well as the mutual recognition of qualifications and increasing mobility to make it easier for professional services companies to trade. It will also need to stop being so beholden to lobby groups and be prepared to reform its SPS standards. Most of these things are very unlikely to happen.
As for the Board of Trade, I have written before about my time overseeing its work. I also co-signed a letter calling for its reform. The main criticism of it is that it’s not really independent of government and is made up of people who don’t really understand trade policy or have their own agenda. Unfortunately Kemi Badenoch’s reforms failed to address this.
It is my understanding that CBAM was brought up. I have written about this before and how the issue we find ourselves in now is down to the failure of the UK government to actually tackle this early enough and so British businesses risk being hurt. The correct solution would be something approaching a border-adjusted carbon tax with dividends for firms and low income households.
I will probably watch the session later and might address some of the points raised. Sorry I haven’t written much recently - work has meant I’ve had less freedom to share my views on stuff but that should be changing soon. I am also focussing on finishing the book proposal.
Thanks as ever for reading. As ever, if you like my writing then feel free to buy me a pint (I tend to write these posts from a Spoons so this way the blog will not become a loss making venture at least): https://buymeacoffee.com/opportunitylost
Have a great week!