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#TradeTuesday: New Year, New Trade?

10 January 2023

By Tom Haynes

As we say goodbye to 2022 and look ahead to 2023, we have reviewed the UK’s ongoing trade negotiations and what we can expect in the next 12 months. 

The mission of the UK Government to strike as many new trade deals across the world as possible looks to be fairly unaltered, but there are strong indications that the direction from the top of the Department may be shifting. The new Secretary of State Kemi Badenoch and Prime Minister Rishi Sunak have already moved away from the setting of deadlines, something that many critics believe led to a one-sided deal with Australia. Furthermore, she is keen to make sure that the UK is not just signing new Free Trade Agreements (FTAs), but businesses are actually using them. She used the metaphor of motorways saying that it is great that they are being built (the deals are being signed) but now we need to make sure vehicles are using them (exports and investments). This shift in attitude from her predecessors has been initially welcomed by industry and we are likely to see a Department that are doing a lot more beneath the surface to ease burdens on business, make the deals easier to use and remove non-tariff barriers to trade, in addition to the more public workstreams they have underway.

The UK signed FTAs with Australia in December 2021 and New Zealand in February 2022. Parliamentary scrutiny, ratification, and the requisite legislation for implementation is still ongoing but it is expected that both deals will enter in to force towards the middle of the year. 

The UK also announced on 30 November 2022 that they had agreed a digital agreement with Ukraine. This is similar to that which the UK has with Singapore, making it easier for UK companies to do business with Ukraine and help support their economic recovery. 

Negotiations with India started in January 2022 and were hoped to conclude in time for Diwali last year, but this deadline was missed, with concerns over migration and tariffs on whiskey and the automotive sector mooted as the main sticking point. The sixth round of negotiations were held towards the end of last year, with the Trade Secretary in attendance and the seventh round is due to take place early this year. The Government’s intention is for the negotiations to be concluded as soon as possible, and ideally by March this year. 

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a trade agreement between 11 countries: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. This is seen by many as one of the major Brexit dividends with negotiations towards the UK’s accession starting in September 2021. The UK Government had wanted them to be concluded by the end of 2022, however there are suggestions that these negotiations are not progressing as planned with some of the existing member states unwilling to give the UK the sort of access it is seeking.  

Separate bilateral negotiations are ongoing with Canada and Mexico, with positive progress perhaps leading to a breakthrough in the broader CPTPP discussions.  Negotiations with Canada were launched in March 2022, as the UK seeks to negotiate an upgraded trade deal following its departure from the EU. This was a trading relationship that was worth over £21 billion in 2021 and so the UK are keen to increase their access. Negotiations with Mexico kicked off in May 2022 as the UK similarly looks to update the existing agreement that it picked up following its departure from the EU. Mexico has an expanding population and its demand for imports is set to grow by 35% by 2035. It is also strategically positioned, serving as a gateway to both the America’s and the trans-Pacific region. While the National Farmers’ Union have previously been critical towards the New Zealand and Australia FTAs, they have been more optimistic towards trade with Mexico, believing it will open up new export destinations for British agricultural produce. There are no set timelines, but we can expect this to be concluded within the next two years. 

Israel is another country where the UK are looking to update and expand upon the existing deal it negotiated upon leaving the EU. Formal negotiations were launched in July 2022. While the UK and Israel have a trading relationship that is worth around £5 billion, Ministers are concerned that the existing Trade and Partnership Agreement is too limited in scope and is not fit for the digital age. The UK and Israel are two service-led economies and modelling from the Department for International Trade predicts that an FTA with Israel could increase UK services exports by around £78 million.

Other areas that will be positive for British food producers include a deal with South Korea. The UK recently secured an agreement which removed rules banning the export of certain pork products to the country, a move which is estimated to be worth £1 million over 5 years and allow UK producers to sell bacon, ham, and pork sausages to South Korea for the first time. The Department for International Trade launched a ‘call for input’ on 9 December 2022, which runs until 2 February, and will look to shape the UK’s negotiating ambitions ahead a formal launch later this year.

Further afield there are ongoing discussions with the Gulf Co-Operation Council, a group that covers Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman. Negotiations launched in June 2022, with the first round of talks concluding in September 2022, the second round in December 2022, and the third round is due to take place in Riyadh this year. The GCC is already a major trading partner for the UK, and in 2021 it was worth over £33.1 billion. The Government predict that an FTA with the GCC would increase trade by 16%. The UK is also a major destination for GCC Foreign Direct Investment, and it is hoped that the FTA will lead to even more FDI, particularly in innovative and green technologies.

While a comprehensive trade deal with the USA is still looking unlikely, the recent removal of restrictions on British lamb is estimated to be worth £37 million in the first five years of trade. It is likely that we shall be seeing more of these negotiated reforms that improve the trading terms for British businesses and help remove non-tariff barriers to trade as Kemi Badenoch implements her plan to “move away from DIT being seen as the 'Department for Free-Trade Agreements,' and back to the Department for International Trade”. 

If you have any questions on this, or want to discuss any issues your organisation may be experiences on trade, email