A groundbreaking ‘reset’ deal between the UK and EU signals a new era in deepening ties, paving the way for substantial economic gains and reduced trade barriers.
The recent ‘reset‘ deal between the UK and EU marks a significant breakthrough in deepening ties in the UK’s most important trading relationship. The agreement paves the way for more gains while allowing scope for pursuing other trade deals.
Breaking Down Trade Barriers
The deal dismantles only a fraction of the trade barriers erected post-Brexit, but it brings about substantial relief for those producing and selling foodstuffs between Britain and the EU. A major breakthrough is the agreement on plant and animal health standards (SPS), which goes further than initially envisaged. By agreeing to follow EU rules, the government has reduced red tape and checks for over 1,500 products crossing borders.
Reducing Paperwork and Increasing Efficiency
The new deal will significantly reduce paperwork and inspections for agricultural products exported from Britain to the EU. This is expected to boost exports and alleviate the burden on small companies that have been particularly hard hit by the increased costs of complying with extra certification and checks. The ‘Food & Drink Federation’ claims that exports of such items have dropped by a third since 2019.
Export growth is driven by factors such as trade agreements, market access, and competitive pricing.
The use of e-commerce platforms has increased export opportunities for small businesses.
According to the World Trade Organization (WTO), global exports have consistently risen over the past decade.
Key statistics include a 2019 WTO report stating that global merchandise exports reached $19.47 trillion.
The European Union's single market and customs union facilitate trade among member states, while emerging markets like 'China' and 'India' offer vast export potential.
Economic Benefits
The government predicts that this agreement, along with another centred on energy, will be worth £8.9bn to the UK by 2040. This represents approximately 0.3% of GDP and could recoup only a small fraction of the 4% of GDP foregone as a result of Brexit.
Impact on Prices
Some studies suggest that increased red tape has contributed to higher prices for foodstuffs imported from the EU in recent years. However, this deal may limit future price increases if suppliers pass on savings. The key concession made by the UK was an extension to the agreement on fisheries by 12 years, which will be a disappointment to some fishing communities concerned about encroachment of rights.
A Path Forward
While the ‘reset‘ deal does not provide the ‘huge‘ boost to growth the government had hoped for, it sets the stage for further gains. The youth mobility scheme and mutual recognition of professional qualifications hold significant potential, but it is unlikely that these will repair the majority of the damage caused by Brexit.
The UK economy has faced significant challenges in recent years, including the impact of Brexit and the COVID-19 pandemic.
According to the Office for Budget Responsibility (OBR), the UK's GDP growth is expected to slow down in the short term due to uncertainty surrounding trade agreements and investment.
However, the OBR also forecasts a gradual recovery, with GDP growth projected to reach 1.8% by 2025.
The service sector remains a key driver of economic growth, accounting for around 80% of UK GDP.
A Significant Triumph
The UK has tied up trade agreements with India and the US in a short period, securing improved deals with key partners. This achievement may have been driven in part by ‘President Trump‘s trade hostility’ , adding a new focus on breaking down barriers previously thought insurmountable. The deal also paves the way for strengthening ties with the EU while allowing the UK to build on its economic strength in areas such as financial services and technology.
The UK, India, and the US have been strengthening their economic ties through various trade agreements.
The UK-India trade relationship has grown significantly since Brexit, with bilateral trade increasing by 30% in 2020.
The US is also a key trading partner for both countries, with the 'US-UK trade deficit' standing at $23 billion in 2020.
To further boost trade, the three nations have signed several agreements, including the 'UK-US Trade and Investment Working Group' and the 'India-US Trade Policy Forum.'
A Strategic Focus
The strategic focus on building on our economic strength is not to be underestimated, particularly at a time of geopolitical uncertainty. While the ‘reset‘ deal may not be a gamechanger for growth, it represents an important step forward in reaching more common ground with the EU while maintaining strong ties with the US.
