Press Story

PM should signal openness to US trade deal, while also boosting trade defences to deter against economic threats, says IPPR

EU must be top priority for UK trade strategy amid growing global tensions

New trade strategy should focus on green, inclusive growth while boosting resilience to future supply chain disruptions

The UK’s leading progressive think tank has today released a comprehensive blueprint to guide the government’s upcoming trade strategy. The report by the Institute for Public Policy Research (IPPR) outlines urgent reforms needed to navigate unprecedented global trade volatility and reverse a declining goods trade performance in the UK.

With incoming US President Donald Trump threatening to impose a range of tariffs on imported goods and ramp up economic tensions with China, global trade faces a new era of turbulence.

This comes at a time when the consequences of Brexit are still having a profound impact on UK trade. Between 2021 and 2023, estimates suggest that EU goods imports to the UK were down by 32 per cent and UK goods exports to the EU were down by 27 per cent compared to what would have happened if the UK had not left the EU.

The UK’s fall in goods trade is not part of a global pattern: while other G7 countries saw an average 5 per cent increase in goods exports by the third quarter of 2023 compared to 2019 levels, the UK experienced a 10 per cent decline by the end of 2023.

The report argues that the UK should signal openness to negotiations over a free trade agreement with the US under President Trump, in order to boost UK-US trade while maintaining clear red lines on issues like food standards and online safety.

At the same time, the report urges the UK to strengthen its trade defences in the event of a trade war. This would include developing a legal mechanism to introduce counter-measures – including tariffs – in response to attempts to coerce the UK economically. Such a policy would follow the approach of the EU, which has recently introduced a similar ‘anti-coercion instrument’.

The report proposes continuing to pursue other free trade agreements with countries such as India, as well as exploring opportunities for ‘green trade’ deals such as the Agreement on Climate Change, Trade and Sustainability.

However, the UK also needs to renew trade with the EU – which still accounts for 41 per cent of total UK exports. IPPR recommends deepening its trade relations with the EU and building on the existing Trade and Cooperation Agreement (TCA) which was struck in 2020 as the basis for the UK and the EU’s post-Brexit trade arrangements, by:

Seeking a mutual recognition agreement (MRA) with the EU, which will remove technical barriers to trade in goods including electrical equipment, toys and pharmaceuticals (for instance, by reducing duplication of batch testing of medicines).

Linking the UK and EU systems for emissions trading to remove new barriers for UK businesses, by avoiding the EU’s carbon border adjustment mechanism. This is an EU policy which charges importers a levy that reflects the carbon intensity of certain goods, which will be rolled out in 2026.

Negotiating a veterinary agreement with the EU to reduce checks on trade in agri-food products.

Marley Morris, associate director at IPPR, said:

“With Donald Trump’s inauguration just days away and the government intent on a ‘reset’ with the EU, the time is ripe for a new UK trade strategy.

“The challenges are stark: declining goods exports, damaging barriers with the EU, and a turbulent global economic landscape. But a new strategy should help develop a new programme of export support, rebuild UK-EU trade relations, and modernise our approach to trade agreements.

“The new Trump presidency is particularly delicate for the UK. The government will need to on the one hand offer an olive branch by signalling appetite for an ambitious trade deal, while at the same time strengthening the UK’s trade defences to brace for a potential tariff war.

“With the right focus on boosting green growth, securing economic resilience, and rebuilding vital relationships, the UK can turn the tide and reclaim its place as a leader in global trade.”

ENDS

Marley Morris, the report’s author, is available for interview

CONTACT

David Wastell, director of news and communications: 07921 403651 d.wastell@ippr.org

Liam Evans, senior digital and media officer: 07419 365334 l.evans@ippr.org

NOTES TO EDITORS

The IPPR paper will be available for download at: https://www.ippr.org/articles/towards-a-uk-trade-strategy
Advance copies of the report are available under embargo on request
Analysis of UK and G7 goods trade is from the OBR’s Economic and Fiscal Outlook in March 2024: https://obr.uk/efo/economic-and-fiscal-outlook-march-2024/
Analysis of the impact of Brexit on UK trade is from ‘Unbound: UK Trade post-Brexit' by the Centre for Business Prosperity at Aston Business School: https://www.aston.ac.uk/research/bss/research-centres/business-prosperity/unbound
IPPR (the Institute for Public Policy Research) is an independent charity working towards a fairer, greener, and more prosperous society. We are researchers, communicators, and policy experts creating tangible progressive change, and turning bold ideas into common sense realities. Working across the UK, IPPR, IPPR North, and IPPR Scotland are deeply connected to the people of our nations and regions, and the issues our communities face. We have helped shape national conversations and progressive policy change for more than 30 years. From making the early case for the minimum wage and tackling regional inequality, to proposing a windfall tax on energy companies, IPPR’s research and policy work has put forward practical solutions for the crises facing society. www.ippr.org