In the down phase of the trade deals cycle

The UK’s referendum decision to leave the EU, leaves it seeking new trade deals not only with the rest of the EU but also with the 50 or so nations with whom the EU has trade deals in place. The new minister for International Trade (Liam Fox) has also indicated that he would be keen to see trade deals with the US, Canada, Australia, New Zealand, India and China. Without trade deals, countries may impose tariffs on imports of goods and stiff regulations on imports of services.

Not only does the UK have very few experienced trade negotiators, since this has long since outsourced to the EU but the UK’s demand to make trade deals comes at a most inopportune time in the trade deals cycle. Recent events indicate the momentum and desire for agreeing trade deals have reversed.

The trade deals cycle began to turned upwards in 1986 when talks for the Uruguay Round within GATT began – with the free market philosophies of Thatcher and Reagan leading the way for countries to reduce the barriers to international trade that were in place. The talks concluded successfully in 1994 with an agreement that reduced global tariffs on goods substantially, so boosting the volume of trade. Other key free trade agreements have been NAFTA which came into force in 1994, the development of the EU Single Market in the 80s and 90s, where Mrs Thatcher did much to drive progress.

As part of that agreement the World Trade Organisation was set up in 1995 to take over GATT’s responsibilities for matters relating to international trade. In 2001 the WTO initiated the Doha Round, at the same time as China was admitted to membership of the WTO. The accession of China to the WTO saw a further dramatic rise in global trade volumes until 2008.

In hindsight this was peak of the trade deal cycle and agreement between nations to reduce trade barriers. No significant progress has been made since then.

The aim of the Doha Round was to further reduce global trade barriers especially within agriculture and services. It had an original deadline for an agreement by 2005, but was plagued by difficulties – negotiations collapsed in Geneva in 2008 and the Global Financial Crisis has meant that since then national governments have been unwilling to make concessions that might harm their citizens.

In recent years, following the collapse of the Doha Round there have been three attempts at major non-global trade agreements. These are between (i) the US and the EU via the TTIP (Transatlantic Trade and Investment Partnership) talks, launched in 2013, (ii) the US and other American and Pacific nations via the TPP (Transpacific Partnership) and (iii) Canada and the EU via the CETA (Comprehensive Economic and Trade Agreement) talks, negotiated between 2009 and 2014.

Of these TTIP talks have got stuck – the original intention to conclude by 2014 has been extended to 2019 but across Europe there is increasing unhappiness at the secrecy of the proposals and the progress of negotiations. The TTP talks produced an agreement but requires ratification from the US – during the campaign Donald Trump has stated his opposition to this and other trade agreements and would not ratify it, and Hillary Clinton, having been a supporter of it when in government has now said that she would not ratify it. The CETA has recently run aground as EU ratification of the Treaty requires each of the 28 member states to ratify it individually and Belgium cannot do so without the agreement of the Walloon parliament, which is currently firmly opposed to doing so, seeing as a further dangerous step towards globalisation.

Trade deals have lost their political support and the momentum of the trade deal cycle is now firmly down. Though the UK and the rest of the EU ought to be able to agree on a post-Brexit trade deal given the economic benefits to both sides, for the UK to conclude many other significant trade deals is likely to be a very long and arduous process.

The UK’s post-Brexit need for free trade deals will prove to be cyclically poorly-timed and a negotiating weakness at a time when countries are growing increasingly suspicious of the benefits of such deals.