27 June 2018

IFT Event: Stephen Harper and Liam Fox talk trade

Originally published by IFT.

On Tuesday 26 June, IFT hosted a discussion between the former conservative Prime Minister of Canada, Stephen Harper, and the current UK Secretary of State for International Trade, Liam Fox, concerning the challenges and opportunities ahead, for an independent UK trade policy.

Stephen Harper - having led Canada from having FTAs with 5 other countries, to 51 by the end of his premiership - offered a well of wisdom as to how the UK can best navigate a free-trading future post-EU:

I think that this is both an opportunity and a risk for you on trade… an opportunity to strike deals and look for opportunities that Europe wouldn’t take, but the risk is that the opposite can happen… it is really important – let’s say that you do not have the same economic integration and trade relationship with the EU after Brexit – it is really, really critical that this country rediscovers itself as a trading nation. If you do not do that, then frankly the Brexit experience will be bad. This is the opportunity; and if not seized, the results will not be neutral, they will be negative.

Canada has a comprehensive free trade deal with the European Union - [and] we have, not only a comprehensive free trade deal, but we have comprehensive economic integration with the United States - while at the same time maintaining our political, social and legal independence. And I see absolutely no reason - no logical reason - why the United Kingdom should not be able to have that kind of arrangement with the European Union.

Mr Harper also explained that extensive consultations were a key to his success toward inspiring public buy-in. Dr Fox accepted the challenge that UK faces on this front:

...since [the 2008 financial crisis] we have seen something of a very subtle reversal in attitudes, because between 2010 and 2015 the OECD say that the G20 went from having 300 non-tariff barriers to trade to 1200, in just 5 years. In other words we were seeing a gradual silting up of the trading system. And in many respects the protectionist attitude of the current American administration were an exacerbation of the trend rather than a new trend…

All the truths remain about why free trade is to everybody’s advantage, but we are going to have a more difficult time to sell it to a more sceptical public than we have had before…

We have to make an argument for free trade that is not only an academic one, although it is important; but the political one that cuts across the whole left-right spectrum. And on that left spectrum the argument to use is that free trade is the means by which we have taken a billion people out of abject poverty in 25 years. In one generation we have done more to take people out of poverty than any other generation in human history. But equally… turning that on its head: slowing or even reversing that process would be something that would be morally unacceptable.

Mr Harper shared some of his experiences toward the beginning of his premiership:

When I became Prime Minister, we hadn’t concluded a large trade deal in 15 years - we had a low negotiating capacity… and what we found in practice, was to focus our efforts on countries that actually wanted deals with us, and wanted them badly. We built negotiating teams, and we got some deals done and it gathered momentum. And the really big deals came at the end… but they would not have happened from a standing start. My recommendation is to build up your teams.

Dr Fox replied, explaining that the UK is beginning from a different starting position:

Stephen Harper mentioned countries that might want trade agreements. We actually already have a lot of those trade agreements, but we have them by virtue of our membership of the EU… we are in a different starting position and we can take those agreements and then turn them into something more liberal.

We will take continuity as a first step but everything we do will be to create a more liberal environment than we have today. But we have slight problem in the UK… until we pass the Trade Bill and Customs bill that are currently coming before parliament, we have no ability to roll over trade agreements into UK law, we have no ability to create and pass tariffs, we have no ability to set up trade remedies, all of this we sacrificed in the 1970s, we have to create a whole infrastructure for this all over again.

Turning to the development agenda, Dr Fox asserted:

It cannot be right that Germany makes more money out of processing coffee than the primary producers of coffee make from it. That cannot be what we intended in the first place, and so we do require major tariff reform. Countries that produce primary commodities should have the ability to add value to them themselves and to profit from doing so and not to become simply a supply shop for the European Union and developed countries. As part of our development agenda there is a huge amount we can do.

Adding, Mr Harper said:

I would observe the following, its that if you look in the post-independence world who are the countries that have scored? They are the countries that have become big trading nations - whether they are the Chinas and Indias that are just starting to take off, or whether they are Singapore and Hong Kong, South Korea… These are the countries that succeed, and if you want to succeed you have to be in the trading game. There is no combination of domestic policy and foreign aid that trade can accomplish what trade can - that is just key.