In the midst of the COVID-19 pandemic, an ambitious post-EU membership Free Trade Agreement (FTA) negotiation programme has been underway. To date, the UK Government has been working on deals with 66 countries plus the EU, which accounts for £890 billion of UK bilateral trade.
To explore what this means for UK businesses, I took part in a digital event with Crawford Falconer, Chief Trade Negotiation Advisor, and Duncan Adams, Deputy Director, UK Regions, both from the Department for International Trade (DIT). The discussion was hosted by KPMG Chair Bina Mehta. Here are some key takeaways that I think will help organisations of all sizes.
Reaching far and wide
The reach of the UK’s new FTAs is far and wide, with a particular focus on positioning the UK to have strong access to emerging markets.
Crawford said ambitious agreements are being looked at with countries as diverse as Canada, Mexico, India and Switzerland, while good progress has been made on securing deals with Australia and New Zealand. He noted that these two agreements have particular strategic importance for the UK, due to their location near the fast-growing Indo-Pacific region.
The next goal for the UK is to lock in its inclusion in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), to drive greater access to economic growth areas. The US is also a core focus, and, while FTA negotiations have slowed during the Administration handover, “we stand ready when they are ready to go,” he said. Crawford expects negotiations that have slowed during the Administration handover to ramp up again shortly.
We also discussed the importance of China becoming a stronger future trade partner, as well as less-obvious markets such as Africa, Indonesia and Thailand – which I expect could all emerge as very important to the UK economy.
Services at the core
While many UK industries are set to benefit from new FTAs, including classic areas such as agriculture and manufacturing, service providers and digital organisations are likely to see particular benefits. Crawford’s view is that the UK is a “services superpower” and that “we need to have a trade policy that reflects that”. The UK-Japan Comprehensive Economic Partnership is a good example of how services are core to the new deals, which Crawford described as a “harbinger of what we can pursue now outside of the EU”.
Benefits of a broader trade network
There are a number of benefits for UK businesses to having FTAs with an expansive global footprint, including accessing a wider customer base, a wider supplier base, and a global talent pool. If implemented effectively, a broader trade profile can also diversify a business’s risk profile – which is key to resilience when disruptions occur in both the UK and the global business environments.
However, while there are many positives to broader trade, we often see organisations take a number of missteps when chasing international markets, and these risks will need to be mitigated. If a business is struggling to be competitive locally, getting things in order at home first is important before exploring overseas activity.
So, with that in mind, what should businesses be asking themselves when looking to make the most of the new FTA environment? First, it’s important to stress that trade must be a strategic decision, not an accident. If an overseas buyer sees your business online and asks for supply, that may be tempting, but should only be pursued if it fits your overall business strategy.
To help think through the strategic steps on the international trade journey, I shared KPMG’s EDGE model. EDGE stands for:
- Explore: Here it is important to ask, why, where and how? Asking questions such as, where are we likely to win business, do we have the ability to deliver to a particular market at scale, or do we have the right professional support when it comes to decisions about business models, mode of entry, strategic alliances, or regional acquisitions, can all help.
- Develop: This is about having the right management to solve challenges as your footprint grows – such as changes in rules that arise concerning the movement of people or goods.
- Govern: Ensuring you are compliant across the various regulatory regimes is vital, especially in areas such as tax, legal frameworks, immigration, banking terms and conditions, and data privacy and sharing laws.
- Evaluate: As your programme is underway, you need to continually evaluate the performance of the operations regularly and change strategy if necessary.
All of these challenges can be overcome with the right support – please get in touch if you’d like to discuss your own international trade journey. Duncan Adams shared a number of DIT resources that businesses of all sizes can access to help them increase their capability to export too. These include webinars, master classes or in-person advice at consulates around the world, available here .