Liam Fox: On the future of Europe
Speech by the International Trade Secretary at a forum On the Future of Europe jointly held by Citi and the Financial Times on Tuesday (13 November)
As the UK leaves the EU in 5 months’ time, it will create a new dynamic for the UK and for the EU itself. Neither will determine the future of Europe, which is not synonymous with the EU in any case, for the future of Europe will be shaped not only by its internal relationships but by forces far beyond either its control or its geographical borders.
In the brief time available I would like to consider two elements - the UK’s relationship with the EU and the global forces acting on both.
The challenging political dynamic of the EU 27, with the rise of the political fringes, in stark contrast to the consolidated position of the two main parties in the UK, I will leave to others.
At the time of the referendum we were told that the mere act of voting to leave the EU would create an economic shock that would see half a million jobs lost, investment desert us and confidence crash to the extent that we would require an emergency budget to mitigate the effects.
What actually happened? We have added another 600,000 jobs to our economy.
Our exports have grown by £110 billion.
We retained our position as the number one destination for FDI in Europe and number 3 globally.
And according to the UN’s Conference on Trade and Development, in the first 6 months of 2018 the UK was second only to China, attracting $65.5 billion of investment compared to China’s $70 billion.
I say this because there is a tendency here in the UK to see everything through a Britcentric or Eurocentric lens, assuming that because Brexit dominated the political and media agenda here, that is true for the rest of the world too. The reaction post-referendum shows that not to be true.
As I speak, preparations are stepping up right across Whitehall for Brexit, with or without a deal. In the recent Budget, the Chancellor announced a £500 million increase in Brexit funding, which will now amount to more than £4 billion.
The Government is hiring extra staff, from the Border Force to in my own Department for International Trade.
We have passed crucial Brexit legislation, from Road Haulage to Nuclear Safeguards - and of course the Withdrawal Act itself.
There has been significant progress on the Withdrawal Agreement, which is now 95% agreed.
I am sure you will understand that I will not be offering a running commentary on the negotiations. I will say that it is in everyone’s interests to reach a deal.
The UK is the EU’s second-largest trading partner - only slightly behind the United States - and well ahead of any other country, and the EU accounts for 44% of the UK’s exports, albeit a declining proportion of the total in recent years.
And Europe benefits enormously from access to the deep, liquid capital markets of the UK – the world’s most international financial centre.
So it is clearly in both sides’ interests to reach a good deal.
However, it is only sensible that we prepare for every scenario. It would be irresponsible for Government not to.
And at the Department for International Trade, we are doing just that: making sure that businesses can continue to trade as effectively as possible, whatever the outcome of the negotiations.
We are making sure we have a working trade system, on Day One.
Our Trade Bill has passed through the House of Commons and through its 2nd Reading in the Lords.
We are setting up a new Trade Remedies Authority, to give us the independent power to counteract and deter dumping from abroad. We recently appointed the Chair and Chief Executive, David Wright and Claire Bassett.
And the Treasury’s Customs Act recently became law, giving us the power to set our own tariff rates.
We are also helping businesses with their own preparations, through technical notices on Trade Remedies, Export Controls, Tariffs and EU Trade Agreements.
And we are pushing forward to make sure that we can transition the trade agreements the EU has signed with third parties, such as Canada and Japan.
These are agreements we pushed for as an EU member, because of our commitment to free and liberalised trade.
And we are continuing to push for further agreements, such as the ongoing negotiations between the EU and Mexico, Chile or South America’s Mercosur. We will be a constructive member of the EU until the day we leave - and we will be a constructive partner afterwards – fully committed to a global free trade agenda as we take up our independent seat at the WTO at the end of March next year.
Under the draft Withdrawal Agreement, the EU’s third-party agreements continue to apply to the UK until the end of the Implementation Period.
Nonetheless, we are preparing in case they do need to be in place next March.
The Trade Bill will give us the legal powers we need to transfer those agreements.
We have had a positive reaction in places ranging from South Korea to Canada to the Southern African Development Community.
And officials in my Department are working hard to iron out technical issues in good time and make sure we are prepared for every scenario.
But we are also taking active measures to seize the opportunities of Brexit.
We are preparing for new trade agreements, which we will be allowed to negotiate from March.
We recently consulted on 4 of these: new Free Trade Agreements with Australia, New Zealand and the United States, and a potential accession to the Comprehensive and Progressive Trans-Pacific Partnership, or CPTPP – a group of 11 countries with half a billion people, and 13% of the world’s GDP.
And on an international level, the US administration has formally notified Congress of their intention to negotiate a trade agreement with us.
I say all these things because world trade is at a pivotal moment. We are at the intersection of a series of major global trends – trends so large that they have transformed or will transform economies and societies, in Britain, in Europe and around the world, across decades or even generations.
First, we are at the start of a Global Century, after 4 Atlanticist ones. By 2030 China will have more than 220 cities with over 1 million people – the whole of Europe will have only 35.
And major new opportunities will also arise in the rapidly developing commercial and consumer markets of Africa. PWC has predicted that there will be 1.1 billion middle class Africans by 2060, for example.
Second, we stand at the summit of an era of widespread and rapid globalisation.
The international rules-based system, underpinned by the GATT and the WTO, has cut tariffs and made great progress in addressing the technical barriers to trade.
That in turn led to an era where trade grew significantly faster than global GDP, creating unparalleled prosperity and lifting hundreds of millions of people out of poverty. I believe this is one of the greatest achievements in human history.
The rise of developing economies throughout the world is occurring at a staggering pace. The IMF predicts 90% of global growth will happen outside the EU – not in the distant future, but in the next 5 years.
And third, we are at the beginning of a century of unprecedented opportunities. The seeds of another great era of global change are clearly evident.
The world’s economy is becoming more service-based – and those services have themselves become easier to trade, thanks to the revolution in telecommunications.
The digital sector, which contributed nearly £120 billion to the UK economy in 2016, is inherently transnational.
And even for trade in goods, e-commerce and online platforms, from Amazon to Instagram, are giving small businesses marketing tools and distribution networks that were previously only available to large multinationals – if even then.
Just as containerisation and global cooperation transformed trade in goods, so new technologies and new reforms can unleash trade in services.
All these factors will shape the trading future of the EU as much as they will shape the trading future of the UK.
Just as the government is gearing up for Brexit, we are also stepping up right now for our trading future as a truly Global Britain.
We are taking practical steps to invest in the infrastructure of trade.
The National Productivity Investment Fund will have a total of £37 billion going towards vital components of our future prosperity – from roads to our 5G broadband infrastructure.
Last month’s Budget included an extra £2 billion for our world-leading export credit agency, UK Export Finance.
And in August we published our Export Strategy, which will transform our export support offer.
We are the world’s 5th largest economy, which makes us ones of the world’s largest markets, in our own right. That means we can be a powerful voice for free trade and a rules-based international system.
And I believe this voice will come at an opportune moment.
As you all know, the rules-based trading system that has delivered so much prosperity is facing headwinds.
According to a joint UN-WTO-OECD report in July, there has been a significant increase in trade-restrictive measures.
Let’s be clear, this is not just a blip and it is not just caused by the recent US and Chinese measures.
The siren call of protectionism is a serious threat to future global prosperity – to the UK, the EU and the rest of Europe.
And it is not just the prosperity of our wider Europe that could be affected. For prosperity, political stability and security are all part of the same continuum.
Trade is not an end in itself but a means to an end – a means of spreading prosperity ever more widely. That prosperity underpins social cohesion, that social cohesion underpins political stability, and that political stability is the cornerstone of our collective security.
We have to work alongside all our like-minded trading, political and security partners to ensure that cooperation.
That is why none of this means abandoning Europe – very much the opposite.
Indeed, whilst the UK is leaving the EU, we are certainly not leaving Europe.
My department’s export and investment support for business, and UK Export Finance, cover Europe just as they do the rest of the world. We have a dedicated Trade Commissioner for Europe, Andrew Mitchell, the former Ambassador to Sweden.
We will carry out the democratic will of the British people as expressed by the referendum, enacted by parliament and underpinned by the last general election.
We will work with our EU and other European partners to help shape the global trends that will affect all our futures.
The future shape of the UK will not be shaped by the UK alone anymore than the future of Europe will be shaped by the EU alone.
In an era of interdependency, unparalleled in history, we will have to develop new tools for global management.
That is where we must concentrate our efforts.