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    A member of staff stands behind flags as officials arrive for the UK-China High Level Financial Services Roundtable at the Bank of China head office building in Beijing on July 22, 2016

    US May Set Political Conditions for Trade Deal With UK, Some of Them Could Target China - Economist

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    Newly appointed UK Foreign Secretary Dominic Raab said on Wednesday ahead of his trip to the ASEAN summit in Bangkok that the United Kingdom needs to broaden its trade focus, which long has been on Europe, and acquire a global trading outlook beginning with Asia.

    Andrea Trunzo, a UK-based economist has commented on the prospects of the proposal.

    Sputnik: New Foreign Secretary Dominic Raab wants the UK to "expand its horizons" saying his first trip as Foreign Secretary will look to strengthen the UK’s friendships across Asia. In your view, which Asian countries are a priority for future economic deals? Why these in particular?

    Andrea Trunzo: Dominic Raab and the Foreign Office have prioritised the South East Asian countries in the short term, in an attempt to boost trade: Bangkok, Thailand, is the destination of Raab’s first trip overseas and the FCO will open later this year a new office in Jakarta, Indonesia. This office will be “dedicated to growing links with the ASEAN group”.

    When you look at the list of ASEAN countries – from Singapore to Malaysia, from Indonesia to Vietnam - that decision seems sensible: there is a chance to improve trade links in the mid-term with no significant political dependencies to manage.

    Nevertheless, the department responsible for trade between the United Kingdom and non-EU states is the Department for International Trade, created by Theresa May in 2016 and currently led by Liz Truss.

    Dominic Raab is seen at the Foreign and Commonwealth building after being appointed as the Foreign Secretary by Britain's new Prime Minister Boris Johnson in London, Britain, July 24, 2019
    © REUTERS / Dan Kitwood/Pool
    Dominic Raab is seen at the Foreign and Commonwealth building after being appointed as the Foreign Secretary by Britain's new Prime Minister Boris Johnson in London, Britain, July 24, 2019

    In the past, FCO and DIT leaderships were not perfectly aligned. It will be interesting to see how FCO and DIT will keep objectives aligned under Johnson’s leadership. Liz Truss is not joining the trip to South East Asia and, in a recent article published in the UK, she stated that DIT's priorities would be trade deals with the US and Commonwealth nations, alongside freeports in the UK.

    Sputnik: Taking into account the state visit of President Xi to London in 2015, where the UK and China signed off on two major financial and energy projects, how likely is it that the UK’s prime minister’s focus during the current Asian trip will be on China?

    Andrea Trunzo: It’s hard to see the UK-China relationship independently from the UK-US relationship. Even if China is a major investor and trade partner, Boris Johnson seems more focused on the UK-US relationship than his predecessor, Theresa May. That may potentially affect the next steps with China.

    Sputnik: What impact would a growing trade relationship with China have on Boris Johnson’s much-vaunted trade deal with the US, particularly given the upcoming October 31 Brexit deadline.

    Andrea Trunzo: It depends on the scope of the UK-China trade relationship and the timing of the potential UK-US deal.
    If UK-China “trade relationship” goes beyond basic trade access and provides the Chinese with further access to areas like, say, British infrastructure, then it can become an issue for the US.

    On the other hand, the US will likely set several political conditions for a US-UK trade deal, and some of them may directly target China. If it’s true that both the UK and the US want to sign a deal soon, then the UK-China relationship may be subsequently constrained.

    Sputnik: What impact could the security arguments over the role of China’s Huawei in building the UK’s new 5G network have on talks?

    Andrea Trunzo: High. Security matters and the concern in the US about the role of China in 5G networks is significant. It seems likely that the US will link the future trade deal to certain political decisions - about China, amongst others.

    Sputnik: In your view, how economically effective – and realistic - is it for Britain to shift the focus of trade relations from the EU to other countries?

    Andrea Trunzo: The British government can and should shift focus immediately - after all, that’s one of the key objectives of Brexit – but it will take time to negotiate, sign and ratify new treaties, and it will take time to implement new unilateral measures to foster trade links between the UK and non-EU countries. Therefore, it is realistic, it may become effective in the mid/long term, but it’s not effective in the very short term.

    Sputnik: To what extent will new trade agreements be able to smooth the transition period while the UK is leaving the EU?

    Andrea Trunzo: It depends on the definition of new trade agreements. If those are the so-called “trade continuity agreements”, basically deals aiming at avoiding disruptions in the trade relationship between the UK and non-EU countries after the withdrawal from the EU, then the UK will be able to sign some of them before the 31st of October. Certain continuity trade deals – e.g. with Switzerland or Israel - have been already signed.

    Sputnik: How likely is it that the UK will conclude new trade deals before the 31st of October?

    Andrea Trunzo: I’m afraid it’s very unlikely that the UK will sign and ratify new international trade treaties before the 31st of October.

    There are two issues, one legal and another political: trade is an EU power. As long as the UK is a EU member state, the UK can’t sign and ratify new treaties establishing a whole new set of trade rules with third countries. The UK can run some scoping exercise, of course, but I can’t see what else can legally be done before the withdrawal.

    Brexit
    Brexit

    Politically, the problem is that it’s still unclear what the status of the UK will be after withdrawal - e.g. if there will be a customs union with the EU – and some options may affect significantly trade conditions with third countries.
    That is a major challenge for any UK counterparts, even those eager to improve trade links with the UK as soon as possible.

    Sputnik: Boris Johnson has said that Britain could remain in the customs union and single market for another two years after Brexit. In your view, if the UK signs new trade deals, how will it impact Brussels’ negotiating stance over Brexit?

    Andrea Trunzo: Virtually, the UK can stay in a customs union and in a sort of single market with the EU for a couple of years after Brexit. You can see that as a sort of transition towards an end state where the UK is out of the customs union and out of the single market. In the meantime, the UK would negotiate, sign and ratify trade agreements with third countries, setting the international legal framework for trade after the end of the transition. The idea itself is not illogical: if the transition and the end state are clear, unequivocal and agreed with the EU, there should be no problem.

    In reality, the transition has been already negotiated with the EU27, and Boris Johnson’s proposal may look like an attempt to re-open the Withdrawal Agreement. So far, the EU has been against new negotiations and it has the final say. Thus, it’s the proposal itself that it’s confusing at this stage of the Brexit negotiations. The new government should clarify as soon as possible its post-withdrawal policy.

    The views and opinions expressed in this article are solely those of the speaker and do not necessarily reflect Sputnik's position.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.

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