Yahoo Finance Conservatives lurch to the left risks damaging UK's chance of free trade deals
Theresa May’s lurch to the left could damage Britain’s prospect of winning more trade deals after Brexit because it risks showing the Prime Minister is keen to intervene in the economy - rather than promoting the free market policies which match trade agreements.
Trade experts caution that policies such as the energy price cap, the industrial strategy and a renewed target to slash immigration could tell the rest of the world that Britain is not truly open for business.
“The challenge is going to be that some of the policy direction we’re hearing from the outgoing government and in the Conservative party manifesto around industrial policy is at odds with that open trading agenda,” warned Victoria Hewson, a lawyer at the Legatum Institute Special Trade Commission.
“If we’re going to be moving in the direction of market intervention and price caps, that is going to give us potentially some difficulty with trading partners who will look at those kind of policies with some suspicion.”
She made the comments at a previously unreported City Week event late last week, where she was joined by Stephen Booth, director of policy and research at the think tank Open Europe.
“What the UK now does and the decisions it takes on its approach to free trade are hugely important - that is why some of the measures in the Tory manifesto are of slight concern. The attitude to immigration is one, and also on greater intervention in markets,” he said.
The Prime Minister has said she wants Britain to be “the global leader in free trade” after Brexit, as the country will be free to strike its own trade deals once more.
But her manifesto as well as previous pledges to create a “proper industrial strategy” have been seen as a substantial move to the left from the Conservative party as it abandons its traditional faith in free markets in favour of more government control of the economy.
That led to a short-lived policy to put workers on companies’ boards, as well as an Ed Miliband-style pledged to control energy bills.
“The job of Brexit will be to offset any losses in terms of market access we have with the EU, and either gaining market share through agreements with other countries, or making ourselves more attractive to other markets in terms of building our ability to export to those markets,” said Mr Booth.
“That doesn’t have to be through a bilateral trade agreement - there are lots of things you can do through trade promotion or bilateral investment agreements. Clearly we are at a time in which interconnectivity and the movement of people is very important. That is why I think the issues around immigration are going to be key to the UK’s future success, and our attitude to our openness there is going to be very important.”
He noted that bodies such as universities have taken major steps towards going global, setting up campuses abroad - effectively going to foreign customers, rather than expecting those students to come to Britain, which is an example other industries could follow.
“The UK does have to think about what it is offering the rest of the world and obsess less about bilateral trade relationships, because that takes two to tango, if not more - there are lots of things the UK can and should be doing on its own. Brexit is an opportunity and it makes this a necessity,” he said.
Ms Hewson said that the British public tends to be in favour of free trade and so hopes that instinct will win through.
“I don’t sense that protectionism is particularly at the forefront of people's minds - in fact, people are still very much in favour of Britain as a global trading nation,” she said.
