We need free trade in agriculture to catalyse trade deals, but the Chequers Plan puts this at risk

We need free trade in agriculture to catalyse trade deals, but the Chequers Plan puts this at risk

When I set up Prosperity UK with Lord Hill at the end of 2016, the intention was to bring together Remainers and Leavers from business, commerce and academia to forge new strategies to take advantage of Britain’s ‘unfrozen moment’.

Central to the vision was trade. The EU is unique in wrapping its trade arrangements into complex political structures which involve sacrifices of sovereignty and ideological commitments such as free movement of peoples. Once Britain negotiated a ‘normal’ trade agreement with the EU, albeit a Free Trade +++ Deal to reflect our proximity and historic integration, we would give ourselves scope to negotiate new lucrative deals with other faster growing parts of the world like the US, TPP and the Commonwealth.

Moreover, at a time when global liberalisation of trade in goods is approaching its natural limits, Britain would have the opportunity as one of the leading exporters of services to catalyse a new phase of liberalisation of trade in services. The particular prize was agriculture for services. We could open up our markets in agriculture and foods beyond the highly restrictive standards and tariffs imposed by the EU in return for access to others’ markets in services.

Apart from anything else, this type of trade deal is Ricardo 1.0. The biggest gains in trade come when you follow the laws of comparative advantage: Britain will gain much more from deals with complementary economies, like most of the Commonwealth, than with mirror economies like the EU (or even the US).

This all seemed fairly obvious at the time, and no doubt this type of thinking fed into the Canada+++ proposal developed by DExEU. However, as President Trump rightly pointed out, the Chequers White Paper – with its common EU rule book in both goods and agrifoods and its Facilitated Customs Arrangement – more or less put paid to the vision of a global free-trading Britain. How did this come about?

Partly, it is character. Theresa May, a Remainer, has a ‘cling to matron’ approach to life and has installed ministers after her own image in some of the most important departments. She has also chosen to rely overwhelmingly for advice on a deeply europhile civil servant.

It is also partly process. The sequencing of the exit process means that the Government has been required to focus almost entirely so far on the downsides of leaving the current EU trading arrangements rather than the upside of new deals with other countries and continents. Any business facing a strategic choice of the kind Britain is facing would make sure it had a schedule of risks and opportunities so that it could understand all the trade-offs. Not so the Cabinet. First it is presented with the risks of leaving the EU. Then later, after most of the decisions have been made, it may be asked to consider the opportunities.

But there has also been a failure by the Leave side to set out the upside of global trade deals to offset any potential losses from Europe. Two years on from Brexit, we still do not know the contours of an Indian or a US or a TPP trade deal and what trade-offs this would require vis-à-vis our EU arrangements.

With such a vacuum, it is not surprising that advocates of the status quo in goods markets like autos, aerospace and chemicals have got the upper hand and that the compromise of a single market in goods and divergence in services emerged.

It is noticeable that entrepreneurs like Sir James Dyson have not felt the need to fight publicly for the ability to diverge from the EU rule book. That is because they will still be able to manufacture under different standards for non-EU markets if they choose, just as Dyson has done with hoovers.

But agriculture and agrifoods are a different matter. The winners from an ‘agriculture for services’ deal are British consumers on the one hand (through lower prices) and UK exporters of services on the other (through growing markets). British consumers are not organised to lobby for these benefits because the gains are spread too broadly. But we need to be absolutely clear that agriculture and agrifoods would form an essential part of any meaningful trade deal with the US (as Trump made clear last week), with India, with Australasia or with other parts of the Commonwealth. Many current EU regulations on food and agriculture are not based on safety or scientific issues but simply on producer interests. If we are to make an independent trade policy we need flexibility to make our own rules.

It is a mystery why Theresa May has thrown in the towel on agriculture so early. When pressed on this, as on other issues, she seems to fall back on the Irish border issue. Apart from the fact that she has allowed the EU to weaponise the Irish question far too easily, the DExEU alternative White Paper proposes a workable solution for Ireland through the creation of a dedicated Sanitary and Phytosanitary (SPS) sub-committee for Irish agriculture. If necessary, the island of Ireland could have special carve-out arrangements for agriculture just as it does for other areas of policy like the Common Travel Area.

The fact that Theresa May has not even tried to drive such an agenda suggests that she has no real interest in free trade. Trump, Lord Mandelson and David Davis are all correct. In the nineteenth and large parts of the twentieth century, Britain was the world’s greatest exponent and exemplar of free trade. Unless she substantially revises the Chequers Proposal, Theresa May looks set to bring down the curtain down on those great eras.