The Legatum Institute (Legatum) is “an international think tank based in London and a registered UK charity [that] . . . focuses on understanding, measuring, and explaining the journey from poverty to prosperity for individuals, communities, and nations.” Legatum’s annual “Legatum Prosperity Index . . . measure[s] and track[s] the performance of 149 countries of the world across multiple categories including health, education, the economy, social capital, and more.”
Among other major Legatum initiatives is a “Special Trade Commission” (STC) created in the wake of the United Kingdom’s (UK) vote to leave the European Union (Brexit). According to Legatum, “the STC aims to present a roadmap for the many trade negotiations which the UK will need to undertake now. It seeks to re-focus the public discussion on Brexit to a positive conversation on opportunities, rather than challenges, while presenting empirical evidence of the dangers of not following an expansive trade negotiating path.” STC Commissioners (I am one of them) include former international trade negotiators and academic experts from Australia, New Zealand, Singapore, Switzerland, Canada, Mexico, the United Kingdom and the United States (see here). The Commissioners serve in their private capacities, representing their personal viewpoints. Since last summer, the STC has released (and will continue to release) a variety of papers on the specific legal and economic implications of Brexit negotiations, available on Legatum’s website (see here, here, here, here, and here).
From February 6-8 I participated in the inaugural STC Conference in London, summarized by Legatum as follows:
During the Conference the [STC Commissioners] began to outline a vision for Britain’s exit from the European Union and the many trade negotiations that the UK will need to undertake. They discussed the state of transatlantic trade, the likely impact of the Trump administration on those ties as well as the NAFTA [North American Free Trade Agreement among the United States, Canada, and Mexico) renegotiation, the prospects for TTIP [Transatlantic Trade and Investment Partnership negotiations between the United States and the European Union, no longer actively being pursued] and the resurrection of TPP [Trans-Pacific Partnership negotiations between the United States and certain Pacific Rim nations, U.S. participation withdrawn by President Trump] the future of the WTO [World Trade Organization] and the opportunities for Britain to pursue unilateral, plurilateral and multilateral liberalisation. A future Prosperity Zone between like-minded countries was repeatedly highlighted as a key opportunity for post-Brexit Britain to engage in a high-standards, growth-creating trade agreement.
The Commissioners spoke publicly to a joint meeting attended by the House of Commons and the House of Lords as well as the International Trade Committee in the House of Commons and at a public event hosted at the Legatum Institute where they shared their expertise and recommendations for the UK’s exit strategy.
The broad theme of the STC Commissioners’ presentations was that the Brexit process, if handled appropriately, can set the stage for greater economic liberalization, international trade expansion, and heightened economic growth and prosperity, in the United Kingdom and elsewhere. In particular, the STC recommended that the UK Government pursue four different paths simultaneously over the next several years, in connection with its withdrawal from the European Union:
- Work to further lower UK trade barriers beyond the levels set by the UK’s current World Trade Organization (WTO) commitments, by pledging to apply a tariff for some products below its WTO “bound” tariff rate commitments to levels well below the “Common External Tariff” rates the UK currently applies to non-EU imports as an EU member; and by unilaterally liberalizing other aspects of its trade policy, in areas such as government procurement, for example.
- Propose plurilateral free trade agreements between the UK and a few like-minded nations that have among the world’s most free and open economies, such as Australia, New Zealand, and Singapore; and work to further liberalize global technical standards through active participation in such organizations as the Basel Convention (cross-boundary hazardous waste disposal) and IOSCO (international securities regulation).
- Propose bilateral free trade agreements between the UK and the United States, Switzerland, and perhaps other countries, designed to expand commerce with key UK trading partners, as well as securing a comprehensive free trade agreement with the EU.
- Unilaterally reduce UK regulatory burdens without regard to trade negotiations as part of a domestic “competitiveness agenda,” involving procompetitive regulatory reform and the elimination of tariff to the greatest extent feasible; a UK Government productivity commission employing cost-benefit analysis could be established to carry out this program (beginning in the late 1980s, the Australian Government reduced its regulatory burdens and spurred economic growth, with the assistance of a national productivity commission).
These “four pillars” of trade-liberalizing reform are complementary and self-reinforcing. The reduction of UK trade barriers should encourage other countries to liberalize and consider joining plurilateral free trade agreements already negotiated with the UK, or perhaps consider exploring their own bilateral trade arrangements with the UK. Furthermore, individual nations’ incentives to gain greater access to the UK market through trade negotiations should be further enhanced by the unilateral reduction of UK regulatory constraints.
As trade barriers drop, UK consumers (including poorer consumers) should perceive a direct benefit from economic liberalization, providing political support for continued liberalization. And the economic growth and innovation spurred by this virtuous cycle should encourage the European Union and its member states to “join the club” by paring back common external tariffs and by loosening regulatory impediments to international competition, such as restrictive standards and licensing schemes. In short, the four paths provide the outlines for a “win-win” strategy that would be beneficial to the UK and its trading partners, both within and outside of the EU.
Admittedly, the STC’s proposals may have to overcome opposition from well-organized interest groups who would be harmed by liberalization, and may be viewed with some skepticism by some risk averse government officials and politicians. The task of the STC will be to continue to work with the UK Government and outside stakeholders to convince them that Brexit strategies centered on bilateral and plurilateral trade liberalization, in tandem with regulatory relief, provide a way forward that will prove mutually beneficial to producers and consumers in the UK – and in other nations as well.
This piece originally appeared in Truth on the Market