There is a fun website called Spurious Correlations. It has lots of fun graphs showing the correlation between things such as per capita cheese consumption with the number of people who died by becoming tangled in their bedsheets and people who died by falling into a pool with films Nicholas Cage appeared in. The point is you’re not supposed to go away thinking that Nicholas Cage somehow has blood on his hands. In short, it’s a helpful reminder that correlation does not imply causation.
It’s a shame the journalists at the Observer did not remember this as they decided to dedicate their front page to branding the UK’s trade deal with Japan a failure. The only thing in the way of evidence for this is the fact that a trade deal was signed and trade is down, therefore it must be the fault of the agreement. As an aside, there was a much more important story on how an international student was treated like a criminal by our cruel and incompetent immigration system.
I worked on part of the Comprehensive Economic Partnership Agreement (CEPA) with Japan, mainly on the Digital Chapter. It is essentially the same deal we had with Japan as part of the EU – the Economic Partnership Agreement (EPA) – but with the Digital Chapter and a few other stuff thrown in as well. The negotiators even got mugs made with the branding ‘CEPA goes deeper than EPA’. It was pointed out by critics at the time that it was essentially a copy and paste job which, while I think is unfair as a lot of work did go into it and wouldn’t necessarily be a bad thing even if it was, does have some merit to it. As such, it is unlikely to be the reason for a slump in trade with Japan.
This doesn’t mean that Brexit isn’t responsible for this downturn in trade as it’s likely it has resulted in fewer Japanese companies using the UK as a European base. It also highlights the fact that some people will be keen to criticise any trade deal the UK strikes. This is obviously a bad thing as it stops there being a serious discussion about UK trade policy without someone screeching ‘Brexit’. The government needs to accept some responsibility here as there has been a tendency to overstate the benefits of a deal and make bizarre claims about the price of soy sauce.
It’s also important to remember that most new free trade deals simply don’t boost economic growth by a significant amount, especially with countries so far away. This is because tariffs on most (non-agricultural) goods are already low, and so a deal which sees them lowered or scrapped won’t make too much of a difference. This obviously isn’t the case with India, which would have the potential to be very significant as long as the Home Office gets out of the way.
Free trade is great and we should be doing far more of it. However, the UK should think seriously about what it actually wants and work out to maximise the benefits of trade. For example, after the negotiations were finalised I was tasked by Liz Truss (possibly as a punishment) to work on ensuring that the new Geographical Indications (GIs) were recognised by the Japanese Government. GIs essentially mean that certain UK products receive protected status in another country, so that there would be no imitation Cheddar Cheese or Cornish Pasties being produced in Tokyo or Kyoto. This is all well and good, but could hardly be considered a priority given how economically insignificant many of the industries set to benefit are. The politics of it all matters unfortunately, and it makes for nice headlines especially if accompanied with a photo next to some flags.
The UK should focus on its strengths such as services. We are world leaders in this area and so future trade deals should push for making it far easier for firms to do business in other countries and access the talent they need from all over the world. This can be achieved through the mutual recognition of professional qualifications and increasing immigration between the UK and countries we sign trade deals with. Digital chapters which allow for the free flow of data and ban unjustified data localisation are also a good thing. This is what we should be focussing on as it will bring economic growth, rather than basing our trade policy on the demands of economically insignificant but politically powerful industries.
The UK government should also slow down. The country has world class trade negotiators but are given arbitrary deadlines which obviously reduces the likelihood of the UK getting what it wants. Removing deadlines will allow the UK to think about what it actually wants to achieve and will increase the likelihood of striking a meaningful deal.
We also need to tackle non-tariff barriers to trade. Rules of origin, quotas, and regulations all make trading much more difficult and costly. This UK should focus on this during negotiations as well as pushing for reform at the WTO.
It’s probably far too early to accurately assess the long term impact of the UK-Japan deal, but to suggest that it’s to blame for the slump in trade is simply wrong. Both sides of the debate need to have a grown up discussion about trade and push for things which will actually improve trade. The UK needs to drop the fluff and focus on our strengths in services while also tackling non-tariff barriers so that we can have deals with real substance.