Insight
Now is the worst time for ‘global Britain’ by Sam Lowe and John Springford 27 June 2019
Global trade integration has stalled since the financial crisis, and is unlikely to pick up steam any time soon. In that context, plans for ‘global Britain’ will do little to offset the costs of Brexit. ‘Global Britain’ and the pursuit of a fully independent trade policy has become a fixation for many Conservative MPs. Any mention of a customs union, which would limit the UK’s ability to negotiate away its tariffs in return for increased access to new markets, triggers a hostile reaction. The Conservative party membership, which polls suggest largely consists of hard-line eurosceptics, is likely to select Boris Johnson to be the UK’s next prime minister. Johnson has championed the idea that Brexit is an opportunity to look outward, and sign trade deals with countries far and wide. Johnson’s choice, if an independent trade policy is indeed his goal, is either to push for a no-deal Brexit, or to abandon the Democratic Unionist Party and press for a Northern Ireland-only backstop, rather than one that includes a UK-EU customs union. Both would free him – theoretically – to pursue trade deals with whichever country he wants. The problem facing Johnson and his global Britain outriders is that globalisation has stalled for over a decade. Donald Trump’s trade war with China ¬– and the risk that he also targets EU car exports – may even lead to trade disintegration (global trade falling as a proportion of global GDP). There could hardly be a more challenging environment for leaving the EU’s single market and customs union, and attempting to rebuild a trade policy from scratch. Before the Great Recession began in late 2008, global goods trade rose much faster than global GDP (See Chart 1). Manufacturers built international supply chains, sourcing components from multiple countries. Their suppliers in turn imported their own components and raw materials from multiple countries. As a result, trade grew very rapidly. However, since 2009, trade has grown at around the same rate as GDP.
CER INSIGHT: Now is the worst time for ‘global Britain’ 27 June 2019
info@cer.EU | WWW.CER.EU
1