'Each makes the other more difficult to recover from': University of Sussex professor L. Alan Winters speaks to Wikinews on trade, COVID-19, Brexit
Wednesday, June 30, 2021
Earlier this month, Wikinews spoke with United Kingdom to leave the European Union (EU) in the and the subsequent negotiations leading up to and following the of December, which he has researched extensively. In a call, a Wikinews correspondent spoke with Professor Winters about recent developments in UK trade policy to learn more about his observations.professor of economics regarding the decision of the
Winters is professor of economics at the University of Sussex, as well as founding director and fellow of the UK Trade Policy Observatory (UKTPO). His career spans over 15 years, including as chief economist at the World Bank, CEO of the Migrating Out of Poverty Research Programme Consortium and advisor for the Organisation for Economic Co-operation and Development, the , the European Commission, the European Parliament, the , the World Trade Organization and the ., director of the Development Research Group of the
Three reports where Winters is listed as an author were used as reference during the interview: "COVID-19 will reinforce the Brexit shock", "The Costs of Brexit" and "Taking stock of the new UK-EU Trade and Cooperation Agreement: governance, state subsidies and the level playing field".
Winters was awarded the title "Companion of the Most Honourable", styled C.B., on June 16, 2012 as part of the .
Interview with L. Alan Winters
You're a member of the UK Trade Policy Observatory and wrote in December 2020's "The Cost of Brexit" the British exit from the European Union "increases UK-EU costs, reduces trade between them, and requires resources for form-filling, queuing" and that "Brexit will be costly for UK society" free trade agreement or not. Do you think the government made a mistake when negotiating the Christmas agreement with the EU, or that Brexit was the mistake?
((L. Alan Winters )) Well I was certainly opposed to Brexit, and I continue to believe that it was a very poor piece of economic policy. You have to concede that there's been a little bit of sovereignty that has been won back, but actually it's very difficult to exercise, and the government hasn't got too much idea, about how it wants to exercise its sovereignty. So overall, I'm not very sympathetic over the Brexit decision but, you know, it's made, it's done.
Do I think there was a mistake with having agreed we're going to do Brexit? Did we get the right sort of Brexit? Well no, again, I think we would have been much better off economically with a tighter relationship with Europe that kept some of the trade costs lower, and therefore there would be less hits on the amount of trade that's going on.
((WN )) Now, you've indicated in a May 2020 article that you also wrote on the Trade Policy Observatory web site that issues such as an interrupted UK-EU negotiations and an increase in as a result of the pandemic would "reinforce the Brexit shock". Does this hold true a year on?
((L. Alan Winters )) I mean, we've negotiated our way to a trade agreement, which in May last year wasn't certain, by any means, so that's an issue that hasn't arisen, except that the hurry is one of the reasons it's not a very good trade agreement for us, I think. The reinforcement of government debt: I think we don't know yet. It's very difficult to sort out what's a Brexit shock and what's a COVID shock, but what certainly is the case is that the UK public finances will take a hit from Brexit, particularly given that it, I think without any doubt, activity in the financial services sector will go down, and they pay a very large amount of tax.
And so add to that that we've now sort of taken on potentially an extra three or four hundred billions worth of debt; and [it] is going to constrain economic policy. So in that sense, the two issues reinforce each other.
((WN )) I believe you said [in the article] somewhat along the lines of that 'you may think that Brexit and COVID are separate, but in actuality they're very interchanged, or at least the effects of it are very interchanged.' But from what you've said right now, how can you define between a Brexit shock and a COVID shock?
((L. Alan Winters )) Yeah, well, economists are working hard on this and, you know, we don't have enough data. But, for instance, Brexit affects primarily UK trade with the European Union; it affects trade with other countries only through sort of second-order effects. So if we see trade with the EU behaving differently from trade with the rest of the world, that suggests we are starting to identify a Brexit shock.
It's also the case that we have an idea of sectors that are going to be particularly affected by Brexit that wouldn't necessarily have been particularly affected by COVID. For instance, some of the processed food trade, fishing, areas where regulations are important like some services where, for instance, the music industry. You know, we think that COVID has had a temporary—well, clearly the COVID has had a temporary effect on travelling music concerts gigs, but Brexit looks set to have a permanent effect because it's changing the way in which these things can be organised.
So, we can't observe it at the moment, but two years from now, three years from now, we hope COVID will [be] behind us, and then sort of the difference between before and after 2019 [in] music, trade ought to be showing up as Brexit effects. So we try to do it, or we plan to do it by finding dimensions where one or the other is very much bigger and you use that to identify the two.
I mean I think they are interactive. I was trying to think what was this blog about, I think I remember now. It was making the point the export markets don't just sort of come and go and it's easy to move in and out. Once you've lost an export market, it tends to be rather long term. And so, losing export markets because of COVID which, at least in May , we wondered whether it was going to be worse in the UK than the EU; it hasn't turned out that way. But losing export markets in COVID, then trying to recover them when trading conditions have got[ten] worse, in a sense makes that recovery a lot less likely.
So I think it's in the sense there's also this fact that they interact with the dynamics: that you lose an export market, that's costly, it's hard to win back, costly to win back. We have got two potential hits on our export trade, and therefore, you know, each makes the other more difficult to recover from.
((WN )) You have some that would say that trade with the EU would decline, but that the UK can make up for it with increased trade with the or with the US, or, you know, this is an idea that some Brexiteers are in favour of: , with Canada, Australia and New Zealand. Do you think that is plausible?
((L. Alan Winters )) No, it's complete nonsense. Make that slightly more polite, but no look, it's just not plausible. The EU is half our trade, approximately half our trade, it's very close, it's very rich, it's very similar, we've spent forty years integrating our way into that market and prior to Brexit, we had very, very close alignment with standards in goods and fairly close alignment in standards with services. These other markets are a lot further away, we know there is economic research now that suggests that the benefitd of signing trade agreements are weaker, the further away is the partner.
So, even if we could sign the same sort of agreement with Australia and New Zealand as we had with the EU, it is likely to have a weaker effect. And the point is, these other free trade agreements are nothing like as deep. They still require a lot of customs formalities, there will be standards issues that arise, there will be regulations like, and you can sort of agree you'll recognise Australian dentists, but all the rest of the professions, you know, still don't get that sort of recognition.
So frankly, it's just a myth. I think I would by all means use that: it's just not gonna happen.
((WN )) A big sticking point in the Brexit negotiations, and I would say they're still pretty debated today, is fishing, and the UK being able to determine its own , fish stocks, control of the fish in its own borders. Even though it's lower than Brexiteers may have wanted, the December agreement still means the UK will get 25% of EU fishing rights in its waters between now and 2026 but would still be, in some ways, bound to the EU's rules. What are your thoughts?
((L. Alan Winters )) The EU rules get into the story in two different ways. You're exactly right that there has been a small amount of quota transfer. It's quite a complicated process, and I'm not an expert—we did produce a blog or a briefing paper perhaps in the UKTPO on fishing, I don't know, six months ago — no, maybe less than that — where a fishing expert helped us go through the numbers. You know, some of the catch quotas weren't binding, some of them spill over—there's a lot of swapping of quotas. So, once you look at it, it wasn't that 25% of the EU quota will be caught by UK fishermen.
But the way that the EU rules get into this is in two ways: one is we have agreed that we will manage fisheries with a degree of co-operation and scientific co-operation with the Europeans so that we do agree, between us, what the maximum sustainable take is, so that that's a scientific decision in principle. And so in a sense, the EU view of what is sustainable, it does feed into this.
The second issue is that, perversely, it might seem, most of the fish that the UK fishing industry catches is sold in Europe, and it can only be sold subject to EU regulations, EU standards. And because we haven't got any agreement on those, we are discovering that these things are very costly to prove that you've got, you know, you have to have a vet sign off on every consignment and that sort of thing. And so, it's not that, in a sense, Britain is obliged to stick to the EU regulations for its own fish consumed in the UK. The problem is that we now have to prove as a third country, an external member, a non-member of the EU, that our fish meet their standards.
There's been one change I gather that's been fairly unsympathetic of: shellfish, but, you know, the EU has sovereignty as well. So, it's in those ways that EU rules get into it and, you know, we have a bit extra quota, but essentially the way the trade agreement works is if we get difficult over the quota, we'll end up not selling any fish. It's a long bit of the treaty, you know, about who can hit whom, and how it all has to go on, so it was immensely sensitive. They've spent so much effort on this, for a sector that is tiny, tiny, it's the tiniest bit of the economy, but there we are, that's where we're at.
((WN )) I want to ask you now about the which was given on 29th of April and puts updated trade deals worth 218 billion on the statute books. Trade Secretary called the "newfound sovereignty" in a press release enough to "propel a jobs-led, exports-led and investment-led recovery from COVID-19 and bring prosperity to all parts of our United Kingdom." Now of course, some of the trade agreements were entirely new, a lot of them were also simply rehashed versions of already-agreed upon ones when the UK was under the EU. So what are your thoughts on that?
((L. Alan Winters )) There's a very unfortunate way of expressing it. First, the 218 billion is the amount of trade that is affected. It's not the value of the income that is generated, it's the amount of trade. Secondly, that 218 billion is all from agreements that were rolled over from the EU. These agreements were rolled over to the maximum extent possible—they're not quite as good as we had in the EU, but they're nearly—and the UK government was very clear it wouldn't give any more, it wouldn't ask any more, it just wanted to roll them over. So all that's happened is that trade agreements that were originally created and, sort of, justified through the EU legal system, you know, are now justified through the UK legal system.
One Japan was billed as being a new agreement but in fact, de facto, it was basically a rollover. And we're now looking at Australia as the first genuinely new agreement. The is predicted to increase UK [gross domestic product] by between one and two ten-thousandths of UK gross domestic product. Its, you know, its worth in terms of new income is very, very small.with
So, this is a real bit of, that's an unfortunate bit of statistics, I mean, it just is not a fair representation of what was going on.
((WN )) Post-Brexit checks on goods heading to and from Northern Ireland and the rest of the UK angered many and who claim the is a . However, said the 25th of May the complications were caused not by the Protocol, but by Brexit. What do you think?
((L. Alan Winters )) Well, it's a bit of both, in a sense. You know, if we hadn't had Brexit, we wouldn't have had the Protocol, so in that sense von der Leyen is exactly right: this is all the result of Brexit. But, there were different ways of doing Brexit, and the position that Theresa May had eventually, I suppose, worked out as being the best way, was to say that the whole of the United Kingdom would align pretty closely with the EU on many, many dimensions, and that that would have made continuing sort of free, I mean entirely free, bureaucratic-free trade between Great Britain and Northern Ireland, or between Northern Ireland and the Republic of Ireland perfectly straightforward. It wouldn't have changed the status quo.
So, it wouldn't have happened without Brexit, that is correct, but it also wouldn't have happened if we had had a different Brexit agreement. The Protocol arose essentially because Mr [Boris] Johnson suddenly decided that he could live with it. It was something he had rejected while he was in government with Mrs May, and Mrs May had said no British government could accept [this], so it's absolutely not the case that it is just the fault of the Protocol, and even if it were the question is: "where did that Protocol come from?" And it came from a particular conception of Brexit which was one of very very arm's length, very little integration.
((WN )) COVID-19 has restricted the opportunity and the willingness to spend, leading some economists to predict a post-lockdown surge in , not just in the UK but across the world. What impact do you think this will have on UK imports from other countries, and do you think it will impact any trade talks that would go on during this time?
((L. Alan Winters )) I mean I think we don't know yet how COVID is going to turn out, but we know that a pretty close connection between the country's income and the amount that it imports. So, for any country in the world, you cut income, you cut imports. If COVID, you know, while we are recovering from COVID, imports are going to be mostly is going to be somewhat lower. If we don't ever catch up, as it were, to where we would have been without COVID, imports won't catch up either.
I think its impact on trade talks is a second-order thing. I mean, you know, if you import a bit less, there might be a little bit less interest in having a trade agreement, it might just be the thing that stops you from signing one, but it's all so small that I certainly couldn't make any prediction in that dimension; I don't think that really anybody else could. But, you know, trade is affected by income, we know that, that's clear.
((WN )) The country's Brexit minister said 12th of March that "[f]reight volumes between the UK and the EU have been back to their normal levels" since the beginning of February and that recent drops in UK-EU trade were made "inevitable" because of the "unique" circumstances of pre-Christmas stockpiling and lockdowns across Europe. What are your thoughts?
((L. Alan Winters )) We're waiting for the data. The UKTPO published a paper last week, possibly ten days ago, looking at [the] first three months' trade data, and in most cases it turned out that trade had not recovered to, sort of, pre-2020 levels after the end of the transition period. The drop was not as large as it looked like in January, and it is certainly true that because of stockpiling prior to the end of the transition period January and February always were going to have very low trade volumes.
So, I think I don't agree with Frost that things have got back to normal, and in particular this statement on March the 12th I believe is about, actually, the volume of movements, not the value of trade. When you talk to the logistics companies, they say "yeah, but, you know, half of those containers are empty!" One of the disruptive things over the last three months is lining up containers on both directions, and that is one of the things that Brexit has done. When we were members of the EU, a British lorry could take exports out to, say, Italy, it could call in France, it could call in Germany and call in Belgium to pick up stuff to bring back, cross back. Now it's no longer able to: it picks up to bring EU goods into the UK, they only can pick up in one place; on the way out, it can only deliver [to] two places.
So, there's as much shipping—you have to ship these things around, but they're not generating the same value of trade as previously. So the value numbers are fairly clearly down, yet, we just don't know. We think, my prediction is, trade is going to be lower. But, we don't yet have the absolutely firm evidence that that is the case.
((WN )) The UK started talks yesterday with members of the (CPTPP). The Trade Secretary on  January, which is when the UK first applied to join, said that in joining the agreement it would "create enormous opportunities for UK businesses that simply weren’t there as part of the EU". What impacts on trade do you foresee if the UK actually does join the CPTPP?
((L. Alan Winters )) There will be some impact, there's no doubt, but we, in general, we don't think there'll be a huge impact, and so in a sense it all hangs around how enormous is 'enormous'. Why don't we think there will be enormous impacts on trade?
Well one, these countries are a long way away! And so, trade is costly, it's difficult to co-ordinate, it's expensive to carry out.
Secondly, of the members of the CPTPP, we already have trade agreements, I think, with seven of them. We are busily negotiating a trade agreement with Australia and New Zealand, so that's another two that would be taken care of, you know. The number of areas where CPTPP opens up trade is really rather small. Malaysia is a country we would get, you know, some tariff concessions from, and offer tariff concessions to, which we don't have any other way.
The CPTPP also liberalises 95% of tariff lines in the goods classification that we use for international trade: about twelve thousand, fifteen thousand entries; CPTPP aims to have zero tariffs and 95% of them−I think UK-Japan has got zero tariffs, eventually [they're] going to have them on 99.7%; with Europe it's a 100%, and so on. So, CPTPP doesn't really add much liberalisation in goods. It will affect trade, probably digital trade, digital rules will be a bit different, it will have a bit of an effect, probably, onissues, pharmaceuticals, just slightly different regulations.
So it will have some effect, but we, frankly, wouldn't have expected it to be enormous. Yeah, it's what Ms Truss has to say, but, yeah, frankly it's sort of, it's not, in any standard usage of the word, it would not be 'enormous'.
((WN )) , Cornwall will host in a week's time. What do you think the Prime Minister needs to bring up as it relates to trade opportunities?
((L. Alan Winters )) Well, I think the important thing for the G7 is actually for the Prime Minister not to focus on British trade at all, but to focus on trying to repair the multilateral trading system.
A couple of things that would be important here: one is to try and make the Americans think more favourably about restoring the health of the World Trade Organization. They refused the reappointment of the judges who run the in the World Trade Organization — the WTO —, and so that whole system has just ground to a halt. I think it would be very constructive if we could get a G7 agreement that, no no, we now intend and we can see how, we're going to repair that.process within the
The second is that one ought to be able to think about advancing the way to do so-called 'plurilateral agreements' within the WTO. The WTO, by convention, works by consensus: everybody has to agree, or, at least, not oppose. And that may have made it impossible to change the rules in the WTO for 27 years, since 1994. That's an exaggeration: it's made it impossible to do significant changes. And the reason, often, is there's only a small number of countries, a small number of interests who don't want to do particular things.
Making it easier for subsets of countries to agree to improve trading conditions would be a big step forward−you can still have a system whereby either they agree they're going to change their trading conditions, improve conditions for imports into their country, and apply it to everybody, even those people who haven't agreed to make those changes, and that just seems like a straightforward game. But even getting that through the WTO has proved very difficult.
And secondly, we have a few, small number of trade agreements that apply only between a few members of the WTO: less than the whole of the membership of the WTO. And they can only be instituted and introduced into the WTO if everybody agrees, even those people who are outside, and that just hasn't happened.
So, allowing smaller−but still quite large−I mean, 60, 70, 80 members to go ahead and make agreements among themselves to change their conditions of trade would start to ease up the log-jam that we have in the world['s] trading system, and that would help bring it into line. Yeah, we really don't have agreements about, we don't have very much agreement on services, and all the things that are the dynamic elements of international trade that sort of lie outside WTO's effective range, because there are a few countries that resisted; we can't bring them in.
And so, one wants to sort of set up a system that is largely a political system that makes it possible for those countries to say: "we're not very interested, but as long as it doesn't hurt us, we don't mind if you go ahead with it." And at the moment, they don't have incentives, they don't have trust enough to do it.
So, the other thing I would do would do is have G7 work, in a very focused way, on how you can reassure people, members of the member countries in the WTO, that other subsets of countries can do things which don't harm them, and therefore they ought to let it go ahead, rather than block it. So those are the two things I would put on Johnson's agenda.
((WN )) This meeting will be with quite a lot of large countries, and the Prime Minister has invited India and Australia [to attend], countries which he is making an active effort to make agreements with, for the UK to have greater relations with them. Would you believe, in any way, a part of recovery from COVID-19 could be reached next week that would involve the countries in the G7?
((L. Alan Winters )) You know, the COVID recovery is not an area which I feel I have great expertise in. There are certainly things that can be done to ease recovery, one of which would be agreements on providing [COVID-19] vaccines for the whole of the world rather than just the rich countries; agreements on trading vaccines or components of vaccines or other medical equipment without restrictions, and if G7, or G7 plus India, Australia and South Korea decided to agree to go down those routes, they would certainly help a bit.
I confess I don't have much of a feel for what the politics would be, and whether that's very likely.
What you say about the three extra members is this is not, as you say, as you hinted, sort of a self-interested group of the next three democracies: they're three democracies Britain is trying hard to court! Now, I'm all in favour of co-operation, and I think for world trade purposes, certainly getting the Indians to feel more comfortable with the multilateral trading system would be quite a leap forward.
I'm not very happy if this is an attempt to further encircle China. I'm concerned about Chinese-versus-West tensions, and while I think it's perfectly legitimate for China and the democracies to say "no no, we believe in different things", at the moment it seems to me, rather, ramped up, and it would, in the slightly longer run, we need to be aiming to make it more co-operative, and less confrontational. And, the Democracies Club, is presented sometimes in a somewhat anti-China light, and I think that would be an unfortunate way of starting it off. There are useful things that the democracies can do together, quite irrespective of their policies with China, and if they certainly do need to think about how [the] West and China get on, but it's not clear to me that this is necessary the best modality.
We have to wait and see. I mean, in a sense for China, the really critical thing is where's India going to come out in this, I think, and it's difficult to know. The Indians do not always like international groups and international laws. So, I think we have to wait and see how it works out.
((WN )) Do you believe that there is any 'perfect' trade relationship in the world between two countries or organisations that the UK could look to for guidance?
((L. Alan Winters )) On the whole, I think that trade relations should be very close. I think we're all beneficiaries of, essentially, removing barriers to international commerce, so that they are very low. And we have to recognise that if that harms people, we have to support them: we need systems that allow one to adjust to foreign shocks.
But what are the ideal relationships in my mind? You sent me the question, I thought about it, and I suddenly realised: every relationship that I can think of that is deep and is a model, is essentially between neighbouring countries. So, the real message is, just be more sensible about Europe! But, you know, France and Germany [have] a very strong relationship; Australia and New Zealand, pretty good relationship; Trump rather disturbed it, but, frankly, NAFTA has had a big effect in North America.[North American Free Trade Agreement]: [Donald]
Neighbours, and co-operation.
((WN )) Do you think the UK should work harder to align itself more with the World Trade Organization?
((L. Alan Winters )) The UK is moderately-well-aligned with the World Trade Organization. There was a view, a few years ago, that Britain suddenly having an independent voice in the World Trade Organization would suddenly dynamise the organisation and solve all its problems: it was just immense . That has clearly not come to pass, as, frankly, the whole international trade profession predicted it doesn't work like that.
And so Britain ought, as a middle-sized country with a long tradition of openness, [to] have [an] extremely important role to play in the WTO. It's a role of leadership and leadership by example, but it's a quiet and self-effacing role, and that's not something that Brits, yet, have got their heads around. Thein produced a series about Britain after Brexit, and the most recent one, you know, essentially said, you know: "what now?" And the biggest single theme out of that was humility. The Brits have got to get their head around, they cannot just boss people around!
And if you look–I'm going around to one of your previous questions–if you look at the comments about accession to the CPTPP, you very often hear to say: "oh no, we need to be in that group so we can influence it", and 'influence' is a polite word for 'date'. This idea that Britain is going to lead the CPTPP is, my view: embarrassing. And it's not the way that you achieve influence, at least in world trade. I can't comment on other aspects of foreign policy, but in world trade, in a sense, showing off and squaring your shoulders: it doesn't work.
The people who are good at managing world trade organisations are the countries that are naturally, or perhaps have learned, to be much quieter, much more subtle than the Brits are at the moment. You think about Canadians, or think perhaps about the Japanese. So, you know, I think we ought to align with the WTO, but we should do it, as it were, quietly and co-operatively rather than pushing our way to the front and saying "we're the leaders, follow us!" They won't, that's the truth: they're just not going to!
((WN )) Is there anything else you'd like to say about Brexit and UK trade, more broadly?
((L. Alan Winters )) I suppose only that, you know, most trade policy is a, sort of a quiet business, it's plodding away, it's sorting out little difficulties. It's not grand, it's not photo opportunities. And this focus that, in a sense, signing these trade agreements is 90% of what trade policy is, in the end, is not very helpful. Real trade agreements take a long time to negotiate, even longer to implement and even larger to, sort of, enlarge and deepen. And so, we ought to have, you know, in a sense acquire a more thoughtful, more analytical view of trade policy.
We also need to work out in Britain what we think about lots of other things, and then make trade policy commensurate with it. You know, I wrote a letter to The Times a couple of weeks ago–less than a couple weeks ago, I think, when I said: "look, you know, it's fine the government says 'oh, it signs this deal with Japan, with the most advanced digital trade chapter, you know, known in European or in UK trading history', but the trouble is there's been no debate within Britain at all about what sort of digital policies we want". Trade policy in Britain is almost unconstrained: the executive has almost no constraints on doing what it wants with trade policy.
And I am concerned that they are trying to use trade policy, as it were, to influence other areas of policy that actually ought to be subject to real, internal debate, and internal agreement, and then use the trade policy to reinforce, you know, back it up when it comes to dealing with other countries. So, I think it needs to be sort of longer-sighted, and it needs to be put into a larger context, and neither of these generate headlines and photo opportunities like signing free trade agreements, even rather small ones.
So, I mean, I guess that's sort of my overview of where we are with UK trade policy.
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