Written Statement: Update on Developments in the UK’s Trade Policy

As members will be aware, the First Minister has asked me to take on responsibility for representing Wales’ interests in relation to international trade as a consequence of the change to Ministerial responsibilities last month. As we near the end of the Transition Period we leave behind the security of being part of the largest trading block in the world. Instead, for the first time in nearly 50 years the UK is conducting an independent trade policy and, as a key part of this, is seeking to negotiate free trade agreements (FTAs) with the USA, Australia, and New Zealand. All credible analysis suggests these potential trade deals combined would in no way compensate for loss of access to the EU market which we are about to suffer. FTAs with these priority countries should be complementary to a comprehensive trade agreement with the EU and not a substitute for it.

The purpose of this statement is to provide members with an update on the UK Government’s talks with new trade partners; how the Devolved Governments are feeding into those discussions; and how we are listening to Welsh businesses and communities.

Continuity Agreements

The trade deal with Japan, which replaces the agreement we previously had as part of the EU, was signed on 23^rd October. We welcome this agreement as it will provide continuity and certainty for Welsh businesses after the Transition Period ends. 

We also recognise that the deal provides particular benefits on data and cyber technology and there is scope for our uniquely Welsh products, such as lamb and Anglesey sea salt, to be recognised in Japan. However, we should remember that if we had remained in the EU we would have had a near identical agreement. In reality the UK Government is having to make great efforts just to match the deals we already had access to as part of the EU.

The deal with Japan is part of the UK Government’s trade continuity programme from the UK Government to “roll over” all existing trade deals with the EU.  Around 21 such agreements have been signed so far and negotiations on approximately 17 agreements are ongoing. Many of these countries are small and have little trade with Wales, with the exceptions of EEA/ EFTA and Turkey. The UK Government aims to have all continuity arrangements in place by the end of the Transition Period, however time is now running short. If it fails to do so then businesses could face new barriers to trading with affected countries.

New Trade deals

As already noted, the UK Government is currently engaged in negotiations with a number of priority countries – USA, Australia and New Zealand. Of these the USA is clearly the most potentially significant and could have a large impact on Welsh trade. The fifth round of US negotiations took place in October.

While there are important potential gains for Welsh businesses from increased access to US markets, there are also real threats to our economy and society. We have been very clear with the UK Government that the NHS in Wales must be protected from any concessions that could leave the door ajar to US corporations. Over the past months we have seen the absolute necessity of a NHS which is publicly owned, free at the point of use and is responsive to coherent planning across the system and we will continue to argue strongly for this.

We are also determined to maintain our high standards in food safety, and animal health and welfare and to protect our agricultural industry from unfair competition. We also need to ensure that the FTA does not in any way impede our efforts to respond energetically to the climate emergency. A trade deal with the USA could therefore risk undermining a deal with the EU. We will continue to be clear that we must prioritise relations with the EU as our most important trade partner.

UK negotiations with Australia started on 29^th July and entered their second round in September. Talks with New Zealand launched on 18^th June. Our exports to both countries are just 1% of total Welsh exports. Given the distances involved and the size of their economies any gains are likely to be marginal. We must ensure that any deals with Australia, or New Zealand, do not result in a significant and immediate liberalisation of tariffs on the most sensitive agricultural goods since this could undermine the viability of our rural communities. There are potentially greater risks than rewards for Wales in opening up trade with Australia and New Zealand.

Our relationship with UK Trade policy

We set out in our policy paper ‘Trade Policy: Issues for Wales’ our view of why inter-governmental co-operation in respect of trade was so important and how it could best be structured. It is vital we can build consensus across the UK and enter into new trade relationships with a shared vision. This both strengthens the UK negotiation positions, and safeguards the union.

While relations with the UK Government on international trade beyond the European Union are better than in many other policy areas, there is still scope for a more transparent and mature approach from the UK Government.  Many countries or trading blocs work closely with their constituent nations (or more generally, states or regions) to come up with shared positions before entering into international negotiations, so this is nothing new. We want to be constructive partners and our involvement must not be a “tick box” exercise. That is why I will continue to press the UK Government to formalise how we work together by signing the concordat.

I am pleased the UK Government agreed to setting up a Ministerial Forum for Trade. The forum has met three times so far this year in January, April and July and the discussions have been constructive. Whilst this is positive there are much more concerning developments taking place in the form of the Internal Market Bill, which not only seeks to break international law in terms of the Northern Ireland Protocol but is a serious assault on the devolution settlement. Members will know that the Welsh Government is promoting substantial amendments to the Bill in the House of Lords.

As all these talks develop it is essential Welsh industries and public services are protected. To do this we need to understand what is happening on the ground with Welsh export business and other stakeholders. So we have established the Trade Policy Advisory Group to bring together leaders from key industries, public services and voluntary sector organisations. I am grateful to those who have agreed to serve on this Group.