This Briefing Paper sets out a new basis for reciprocity in what might be deemed essential goods, of which the medical kit and equipment associated with COVID-19 are examples. The authors propose a trade policy bargain that, although time-limited at first, could evolve into a multilateral or plurilateral deal. As governments of net exporting nations realise that export bans do little to end shortages of medical kit in a world of international supply chains, and do much to antagonise trading partners and to embolden economic nationalists at home and abroad, this proposal provides them with a rationale for embracing a more collaborative approach that generates a commercial edge for their exporters of medical supplies. For nations reliant on foreign deliveries of these goods, this proposal provides greater reassurance that supplies will be forthcoming when they are needed—thereby diminishing the case for devoting scarce resources to an import substitution drive on medical goods. The authors describe the underlying commercial logic of this bargain, its elements, and their WTO compatibility. The paper also discusses this proposal in relation to other recent joint trade policy initiatives in this critical area of world trade. Read Briefing Paper 40: PREPARING FOR A SECOND WAVE OF COVID-19: [...]

State aid is a delicate issue in the current EU-UK trade negotiations. Whilst the EU is seeking dynamic alignment of any set of future UK State aid rules with the EU rules to maintain a ‘Level Playing Field’ (LPF) in areas relating to access to the Internal Market, the UK takes the stance that it would introduce its own regime of subsidy control. The UK prefers to adopt a more relaxed process for international trade based upon the rules in the WTO’s Agreement on Subsidies and Countervailing Measures (ASCM) but relying on WTO rules would not create a robust domestic system of state aid control. To maintain a close trade relationship with the EU, the UK must manoeuvre into a position where it gives effect to a State aid regime equivalent to that maintained by the EU, with an effective and robust independent enforcement process, but the UK has taken a different view. The reaction of the UK Government to the COVID-19 crisis has revealed the need for transparency in the granting of subsidies as well as accountability in procurement and yet the current situation is very opaque. Read Briefing Paper 42: STATE AID: NOT ONLY ABOUT TRADE

In this Briefing Paper, Michael Gasiorek and Anna Jerzewska provide an analysis of the UK’s recently published Command Paper. They argue that it highlights significant differences between the UK and the EU and does not fully address the challenges which come from the special situation around the border in the Irish Sea.  As a result, they warn that businesses should expect more paperwork, bureaucracy and additional costs on trade between Northern Ireland and Great Britain when the transition period ends in seven months’ time. Among the key stumbling blocks between the UK Government and EU that the Command Paper fails to resolve are the criteria for determining when a good is not at risk of moving into the EU market and would therefore not be subject to tariffs. Furthermore, permitting goods from Northern Ireland to freely enter Great Britain, could impact on the UK’s trade relations with third countries and even lead to WTO disputes. Read Briefing Paper 41: THE UNRESOLVED DIFFICULTIES OF THE NORTHERN IRELAND PROTOCOL

The UK left the European Union on January 31, 2020. As the UK Government begins to develop the UK’s independent trade policy for the post-transition period, one part of the preparations is to establish the UK’s independent tariff schedule that will apply to goods imported into the UK. In February 2020, the Department for International Trade launched a public consultation concerning the UK’s applied Most Favoured Nation tariffs. This briefing paper outlines the proposals under consideration, discusses their potential implications, and provides our recommendations on the issues that we believe are important for the UK Government to consider when formulating the UK’s trade policy going forward. We explore the structure of the UK’s MFN tariff as a member of the EU and then analyse the potential impact of simplifying the tariff structure for firms, households, the environment and domestic policy objectives. Read Briefing Paper 39: RECOMMENDATIONS ON THE UK GOVERNMENT’S GLOBAL TARIFF PROPOSALS  

The importance of EU rules to maintaining open borders within Ireland has been at the centre of UK and EU negotiations. Yet what is less appreciated is the significance of those rules for achieving frictionless trade between England, Scotland and Wales. In this Briefing Paper, the authors highlight that leaving the EU could create new border trade barriers inside the UK, and opens up questions about how – and whether – the devolved nations will unite with England on external trade agreements. They argue that a US trade negotiation poses a serious threat to the unity of the United Kingdom because it would likely require changes to UK domestic legislation in very sensitive areas, including drug pricing and food safety regulation, which Scotland, with its large Remain-voting majority and stated desire to maintain alignment with EU regulation, would strenuously oppose. The authors argue that devolved nations should have a formal role in the setting of UK negotiating objectives, to ensure, among other things, that external trade agreements do not lead to internal trade barriers. Read Briefing Paper 38: DESTRUCTION OF THE UNION: TOO HIGH A PRICE TO PAY FOR A US TRADE AGREEMENT

As set out in the EU Withdrawal Act (2018) the government’s approach to Brexit is to transfer EU law into UK law and address any deficiencies in that law by secondary legislation. This Briefing Paper examines post-Brexit food safety legislation and finds that the UK’s post-Brexit  safety rules fall short of the level of protection currently provided by the EU and, in some cases, they give ministers broad discretion to make future changes without full parliamentary scrutiny.  This would provide a relatively clear path for a UK Prime Minister to overcome parliamentary opposition to any new trade agreements that cover agricultural and food products, such as US-UK FTA. Also, Brexit food safety legislation allows for devolution which could undermine both the UK’s ability to undertake a unified approach to external trade agreements and also the maintenance of the UK’s internal free movement of goods. Read Briefing Paper 37 BREXIT FOOD SAFETY LEGISLATION AND POTENTIAL IMPLICATIONS FOR UK TRADE: THE DEVIL IN THE DETAILS

Since the 2016 Brexit Referendum, the strategic importance of increasing UK exports to outside of the EU has been heightened in the pursuit of new sources of future national growth. With this aim, the UK Government has put renewed priority on developing the UK’s export credit agency (UKEF) as a vital component of its new export strategy. Yet securing new export opportunities to support is increasingly challenging in the current trading environment of global export stagnation. Furthermore, although export credit support is seen as the fuel that powers the international trading system, in competing for overseas contracts there is a potential for governments to use public resources to provide unfair subsidies to exporting firms in the form of export financing. This Briefing Paper examines the export credit support options open to UKEF, with specific reference to its international legal obligations under the OECD and the WTO. Leaving the EU will not change the UK’s obligations under either, but the UK Government will make and defend its position towards official export credit support as a single country, rather than within a bloc. The paper examines the rationale for official export credit support, and the rationale for regulating any such public support, [...]

A great deal of attention has been devoted to the consequences of different forms of post-Brexit trade policy for UK exports. But focusing on the gross value of UK exports – e.g. the decline in exports of completed cars as the cost of exporting to the EU rises – is only part of the story because it misses the effects on the sectors and other countries that supply inputs into UK goods. In this Briefing Paper, the authors unpack value chains to identify which sectors and countries create the value that is embodied in UK flows of exports and imports, and hence to identify how the changes in trade induced by a ‘No deal’ Brexit will affect the value contributed (i.e. the incomes generated) by different sectors and countries. Studying only the effects of ‘No deal’ on the costs of conducting goods trade, but following them throughout the British economy, the authors find that ‘No deal’ could reduce UK GDP by 4% relative to remain. Moreover, because of the decline in incomes and the fact that services are key inputs into manufactured exports, the incomes generated in services sectors would also be around 4% smaller. Read Briefing Paper 35 – BREXIT AND [...]

Within days of Mr Johnson becoming Prime Minister, President Trump announced that talks about a “very substantial” trade deal with the UK are under way. In this joint Briefing Paper with colleagues from Georgetown University and UKTPO fellows, we consider the effects that Brexit uncertainty is likely to have on the capacity of the UK to agree a deal with the US and ask whether a deal is politically even possible in the UK.  We investigate key issues in negotiating a bilateral agreement: the backstop and the problems posed by the EU and US standards regimes. The paper also explores the prospects and pitfalls of the US Government guidelines for negotiations between the US and the UK; the US’s potential strategic position on services and the declining importance of the UK and Europe as traditional places of spending for US multinational corporations especially in the areas of information technology soft- and hardware. Overall we conclude that while the governments involved see obvious political attractions in a UK-US free trade agreement, a quick and economically significant conclusion to the talks seems unlikely. Read Briefing Paper 34 – THE FUTURE OF UK-US TRADE: AN UPDATE

Economists have long argued, and with good justification, that international trade brings overall benefits to economies. However, increasing trade is likely to create losers as well as winners. As the UK prepares to leave the EU and have an independent trade policy it is important to understand how future trade agreements, or policy changes, may affect economic outcomes such as prices, productivity and output, and through these, individuals and regions. In this Briefing Paper, the authors provide a conceptual background of how trade changes may result in winners and losers – be these consumers, workers, regions, or industries, and give an overview of what the empirical evidence tells us about how developed economies have adjusted to changes in trade. They also consider potential policy responses that could help losers from international trade adjust, and ensure that the winners can take advantage of the new opportunities created by trade liberalisation. Read Briefing Paper 33 – WINNERS AND LOSERS FROM INTERNATIONAL TRADE: WHAT DO WE KNOW AND WHAT ARE THE IMPLICATIONS FOR POLICY? Launch and Panel Discussion at British Academy, 18 July 2019