Tuesday 15 November 2016 4:59 am

Britain needs a culture shift if it's going to lead the world on free trade

Daniel Korski is a former special adviser to Prime Minister David Cameron and a Vice-President of the Jewish Leadership Council.

In her most pro-business speech since she came to power, Theresa May last night made a grown-up argument for Britain to promote free trade.

This is excellent. But as the Prime Minister knows, it will take a lot more than pro-trade rhetoric to make things happen. Britain will have to take concrete steps at home and abroad to fix things.

Under Margaret Thatcher, Britain was placed fifth in a league table of goods exporters. Today it occupies eleventh position, behind Belgium, Italy and Russia. Strong ties to the Commonwealth do not seem to matter a lot: UK exports to India are negligible. Nor does expertise. British pharmaceutical firms are world class, but France and Germany export more pharmaceutical goods to Mexico than the UK.

Our share of global services exports is high but the UK’s share of goods exports is declining. And of the 5m companies in the UK, only one in five are exporters. In Germany it is one in four and even more in Belgium. The government’s goal to double exports to £1 trillion by 2020 is laudable but completely unreachable, as every trade expert knows.

Part of the reason is a surge in goods leaving China and other emerging markets. But still, British underperformance is below what would be expected. And like the country’s low rates of productivity, it is a feature of modern Britain. It has happened when interest rates were high and when they were low. It has happened under Labour and Conservative administrations. And it has happened when sterling was strong and when sterling was weak.

Read more: The dramatic fall in sterling is a cause for celebration – not depression

So what to do? Yet another reform of the government’s system to support exporters is unlikely to help. Every trade minister I worked with loved reorganising parts of Whitehall – move this department here, close that programme, rename this organisation.

Better to focus on shifting the culture of the country’s mid-sized firms. We need to make chief executives of successful firms realise they will be even more successful if they export their goods and services. The data on this is incontrovertible.

Driven By Exports, China Expected To Become 2nd Largest Economy In World
Britain has fallen down the ranks of goods exporters (Source: Getty)

There is no single action that will engender such a shift. But the key is to ensure that when chief executives do something they are required – file their accounts, register their company – they are offered an easy and attractive way to expand into a foreign market. Perhaps no employer’s NICs for six months to pay for research into overseas markets or for a person to try to sell overseas.

Or the introduction of digital vouchers to translate and pay for launch websites in languages other than English (to be redeemed only with other small and medium-sized firms). Perhaps we should take a leaf out of the German playbook and make company membership of a foreign chamber of commerce obligatory or at least subsidised. That way, firms will have an automatic link to a foreign market.

Read more: Repeat after me: Post-Brexit tariffs would primarily hurt UK consumers

Changing culture also means talking up the importance of trade. David Cameron led from the front, taking trade delegations to India, America and China. Theresa May clearly knows that, as she showed when meeting US chief executives in New York and on her recent trip to India. Having a Prime Minister show that he or she is passionate about what we sell overseas and ready to help in a very tangible way is crucial in today’s competitive world.

A cultural shift cannot mainly come from politicians. It matters what people read, what they watch on TV. Dragon’s Den and the Apprentice may not be accurate reflections of the world of business, but they have made a lot of people realise that they too could become businesspeople. We need a similar kind of reality TV programme to entice people to export.

Lord Sugar
We need an Apprentice for exports to inspire people to sell (Source: Getty)

But Britain’s trade problem isn’t the only concern. Much worse, the world has a trade problem. Global trade is too low and has been anaemic since 2008. Data suggest that trade is not even keeping up with global output growth.

The Trans-Pacific Partnership, which would link 12 nations, is now presumably dead. Senior ministers in Germany and France are now actively undermining TTIP, and there is unlikely to be much progress on either the EU-Japan deal or the EU-India agreement.

In the United States, protectionism has gone mainstream, with Donald Trump clear that he is very sceptical of free trade’s benefits. A study by the Centre for Economic Policy Research identified more than 600 measures by the US that discriminated against foreign firms between November 2008 and May 2016.

Read more: Trump’s ambiguous trade policy is a massive opportunity for Britain

And critically, trade is falling everywhere, in contrast to the period following the 2008 financial crisis in the US and Europe, when trade by the Brics remained strong. Scholars at the Peterson Institute have talked of the “longest postwar period of relative trade stagnation”.

What will the government do to address this? David Cameron was able to galvanise world leaders on a range of issues, from action in Libya to G8-led reform of the international tax system. Tony Blair led global efforts to combat climate change and helped shape a new global consensus on international development. The UK has the history and diplomatic networks to lead on key international issues.

The government could volunteer to host the next WTO ministerial and aim for an ambitious package of liberalisation focused on reducing domestic subsidies for agriculture, easing e-commerce and eliminating domestic subsidies for fisheries. That will be a shot of adrenalin in the tired arms of the WTO.

Leading efforts to stave off global protectionism and maintaining the argument for free trade, as well as fixing the UK’s own export underperformance, are as important as figuring out the details of the post-Brexit trading relationship with the EU.

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