The UK should promote its knowledge economy in signing free trade deals after Brexit, says Shenoa Simpson, a KPMG trade expert.
We are rapidly approaching the moment when British officials will once again negotiate free trade agreements around the world. Up to now, the biggest question has been whether the UK has the necessary skills and experience to do the job. But I haven’t heard much talk about a more pressing issue: what kind of deal should the UK be prioritising once it's at the negotiating table?
Trade deals are not one-size-fits-all: they come in all forms, reflecting the particular priorities of signatories at a particular stage of development in the global economy. In the 1840s, the British were concerned with cutting tariffs on animal skins, raw silk and indigo dye. Likewise, the 1951 foundation agreement of what is now the EU focused on coal and steel. While many of its provisions are still active, these provisions are far less relevant to today’s digital economy than 30 years ago.
My hope, therefore, is that the UK doesn’t seek to replicate the tariff schedules of past agreements, or recruit negotiating teams with identikit skill-sets. Trade policy needs to be dynamic. The trick is to write the agreement that is still relevant in a decade’s time.
The UK has a completely blank canvas, but what will it paint upon it? For me, the direction of travel is clear. The UK’s competitive advantage now lies in the knowledge economy. Areas like media and the creative arts; research and innovation in industries from pharma to aerospace; the shape-shifting innovation of our financial services and the fintech sector. In carving out trade policy to govern these less tangible – but extremely precious – resources, the UK could become something of a pioneer.
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Many trade agreements today don’t cover areas like news services, cross-border data flows, digital rights, or the protection of software codes. All these should become part of the UK's new position on trade. So too, the intellectual property rights so essential to underpinning innovation – and a flourishing UK economy post-March 2019. A pharmaceutical firm, for example, confident that its IP is sufficiently protected, would be far more willing to collaborate with foreign partners in ground-breaking areas of research.
We would not be alone in championing a more knowledge-based trade system. Several countries have already mooted the idea of signing e-commerce trade agreements. This is clearly the way forward.
However, the Department for International Trade cannot be expected to work in a vacuum. Several other government departments will feed in their views, but the answer also lies in boardrooms around Britain. Our innovators, the entrepreneurs, the disruptors need to make their voices heard.
The UK should take a leaf out of Europe’s book: when the EU negotiates a trade deal, trade bodies and business groups actively inform and influence the EU position. UK businesses will need to speak up with similar clarity, using fact-based arguments to support their case. Government, by the same token, will need to demonstrate that it’s hearing the message loud and clear.
Undoubtedly, British companies face short-term uncertainty and a possible hit to trade from tariff and non-tariff barriers and complex regulatory questions, unless a trade deal with the EU is swiftly agreed. The UK will also have to sign new deals with the dozens of countries that have, or hope to have, a trade agreement with the EU.
But, longer term, by starting afresh and rejecting a cut and paste of existing agreements, the UK can develop a new generation of creative trade deals – an outcome truly fit for the future.
Shenoa Simpson works in KPMG’s Brexit Intelligence & Analysis Unit and is a former trade policy officer at the US State Department.
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