The U.K. is reviewing the potential benefits of trade agreements with countries such as the U.S. and Japan after Brexit because it believes previous analysis underestimated the possible gains.
Speaking to a House of Lords committee on Thursday, International Trade Secretary Liz Truss said prior economic assessments conducted by the British government — such as an estimate that aU.S. deal would add at most 0.16% to U.K. GDP — are likely outdated and inaccurate.
“We don’t feel they fully reflect the benefits,” Truss said. “The base numbers are from 2011, and we need a revised analysis based on the post-Covid economy.”
U.K.’s Global Trade Deals Still Pose a Huge Pre-Brexit Challenge
The opportunity to secure free-trade agreements with non-EU countries was a key argument made in favor of Brexit, and the U.K. is in negotiations with countries including Australia, New Zealand, Canada, Japan and the U.S. A Bloomberg Economics estimate suggests the cumulative benefit of these accords won’t fully offset the economic costs of leaving the EU.
Truss said previous estimates don’t capture the full benefits of services, particularly in data and digital trade. She also said the assessments don’t reflect the gains FTAs provide as insulation against protectionist measures such as tariffs.
To help its efforts, the U.K. has asked Tony Venables, an economics professor at Oxford University, to lead a panel of academics considering how best to model the impacts of trade.
A scopingassessment published by the U.K. government ahead of trade negotiations with Australia estimated a long run boost to U.K. GDP of 0.02%. A similar assessment for an accord with New Zealand suggested the impact would be negligible.
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