Brexit without a single free trade agreement

The UK international trade secretary Liam Fox revealed on 20 January that the UK will not have a single free trade agreement in place when it leaves the EU. hanse data show that the lack of free trade agreements is set to exacerbate the UK’s already fragile international trade position.

Fox indicated that the UK has not been able to reach conclusion on any free trade agreement. This contradicts Fox’s assertion in 2017 that the UK will have replicated the 40-odd free trade agreements of the EU by the time it leaves the EU scheduled for 29 March 2019.

hanse data show that the UK has been losing market share in international goods trade for some time. Since before the global financial and economic crisis in 2007 through the year of the Brexit referendum in 2016, the UK saw its share in EU imports decline from 5.1 percent in 2007 to 3.8 percent in 2016. During the same period, the UK lost market share in US imports from 2.9 percent to 2.5 percent and in Japan’s imports from 1.2 percent to 1.1 percent.

The UK increased its market share in China’s goods imports from 0.8 percent in 2007 to 1.2 percent in 2016. However, China’s imports from the UK merely represent US$19 billion in 2016 compared with US$166 billion the EU imports from the UK and US$55 billion the US imports from the UK.

The UK’s increase in China’s imports is a sign of underlying UK strength in international trade. Its relatively small share in imports naturally allows for a somewhat greater expansion. The top 10 sectors, at HS level 2 out of 99 chapters, were the UK increased its share in China’s imports fastest were 97 works of art, 87 vehicles, 93 arms and ammunition, 76 aluminium, 66 umbrellas, 33 essential oils, 54 man-made filaments, 51 wool, 27 mineral fuels and 41 raw hides. Those 10 sectors represented in 2016 almost half of China’s imports from the UK. This high trade concentration will make the UK vulnerable to sector-specific trade policies.

The lack of free trade agreements is set to make it even harder for the UK to compete. While the increase in China’s imports is a good sign, the UK has not been able to compete successfully in its two largest markets. The UK needs free trade deals rather urgently.