Trade trends and trade policy developments › uploads › 1 › 2 › 0 › 2 › 120245019 ›...

Trade trends and

trade policy developments

Ian Ascough

Head of Bilateral Trade Negotiations

BIS/DfID Trade Policy Unit

The big picture

• UK earnings from exports of goods exceeded earnings from exports of services and FDI abroad in 2012. It’s a myth that we don’t export goods!

• Goods exports rose by only 0.5% between 2011 and 2012.

• Services exports and earnings from UK FDI abroad fell between 2011 and 2012 (2.8%, 19.9%)

• In services we normally have a trade surplus and in goods a trade deficit, which in total leads to a deficit

Big picture (2)

• UK is world’s 10th largest exporter of goods

• China the largest exporter of goods in 2011,

followed by Germany and the USA.

• UK goods exports to most countries increased

over recent years, with markets such as Russia,

China, India, Indonesia and Colombia seeing

growth of over 70% since 2009.

• But the UK has lost market share in many of

these countries.

Why this matters at the macro and

political level

• Growth from exports and inward investment

• It was these that took the UK out of recession

during the small peak between the latest dips

• Chancellor set the aim of increasing annual exports

to £1 trillion by 2020 = 1 in 4 SMEs exporting?

• UKTI – one of the few parts of government not cut

• Trade liberalisation a top priority for Government,

e.g. at G8 Summit and in our influencing of the EU.

Link to future EU referendum?

UK earnings from exports of goods and services and FDI abroad

0

50000

100000

150000

200000

250000

300000

350000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mill

ion

£

Source: UK Balance of Payments 2012Q4

Note: 2012 figures are provisional and subject to revision when final estimates are

published by the ONS in its Pink Book publication in July 2013.

Goods

Services

FDI Ear nings

2012 total: £569.2 billion, of which:

52.8% Goods, 33.0% Services, 14.2% FDI earnings

Footnote – reliability of data and “trade

in value added” • When is a goods export not a goods export? Think iPhone

– made in China but most of the value goes to the USA. Second largest amount is in the UK (Carphone Warehouse and Vodafone). Or the wings and engine on an Airbus sold to Asia?

• OECD / WTO research on “trade in value added”. In value added terms, the US remains the UK’s leading individual trading partner, both for imports and exports. The 2009 UK-US trade surplus is higher in value added terms.

• In 2009, the UK trade deficit with France, Norway and China are lower in value added terms than in gross terms

• The UK’s trade deficit is higher in these terms with Germany and Netherlands

Chart D.1: Growth in UK goods exports 2010-11 and 2011-12

(in order of 2012 export value)

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

US

A

GE

RM

AN

Y

FR

AN

CE

CH

INA

SP

AIN

ITA

LY

RU

SS

IA

UA

E

HO

NG

KO

NG

JA

PA

N

S. K

OR

EA

IND

IA

AU

ST

RA

LIA

CA

NA

DA

SIN

GA

PO

RE

TU

RK

EY

S. A

FR

ICA

SA

UD

I A

RA

BIA

BR

AZ

IL

TH

AIL

AN

D

MA

LA

YS

IA

QA

TA

R

ME

XIC

O

EG

YP

T

IND

ON

ES

IA

CO

LO

MB

IA

VIE

TN

AM

Source: HMRC OTS

% change 10-11 % change 11-12

The UK’s top 10 trading partners Table 2: Trade in Goods and Services - Top-10 UK trading partners, 2011

Exports Imports

Rank Goods Services Goods Services

1 USA1

USA1

Germany USA1

2 Germany Germany China France

3 Netherlands Netherlands USA1

Spain

4 France France Netherlands Germany

5 Irish Republic Ireland Norway Japan

6 Belgium/Luxembourg Switzerland France Italy

7 Italy Australia Belgium/Luxembourg Ireland

8 Spain Italy Italy Netherlands

9 China Spain Irish Republic Switzerland

10 Sweden Japan Spain India

Notes: (1) USA includes Puerto Rico Source: ONS Pink Book 2012

Future trends • Import demand in large emerging markets such as

China, India, Russia, and Brazil is expected to grow much faster than in the Eurozone and other developed markets between 2010 and 2020.

• Vietnamese import demand is expected to grow by around 250% between 2010 and 2020 - faster than any other emerging power, including China.

• Several markets are expected to see the size of their import market more than double between 2010 and 2020. These are Vietnam, China, South Korea, Indonesia, Thailand, Russia, India, Malaysia, Japan, Mexico, Turkey, Brazil and Taiwan.

UK earnings from exports of goods and services and FDI - Brazil

0

500

1,000

1,500

2,000

2,500

3,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil

lio

n £

Goods

FDI Earnings

Services

2011 total: £5,002 million, of which:

49.3% Goods, 24.6% Services, 26.1% FDI EarningsSource: ONS Balance of Payments (Pink Book) and ONS FDI MA4

Top-5 UK commodities exported to Brazil

0

200

400

600

800

1,000

1,200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Millio

n £

Machinery & transportequipment

Chemicals & relatedproducts

Manufactured goodsclassified chiefly bymaterial

Clothing , furniture &other misc.manufactured goods

Mineral fuels

Source: HMRC Overseas Trade Statistics

Top 5 = 95% of total in 2012


Main changes 2011-12:

-£123m road vehicles

+£97m other transport equipment (mainly, ships and aircrafts)

+£92m pharmaceuticals

Market share of goods imports into Brazil

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

sh

are

Germany

Italy

France

UK

Source: BIS analysis of UN Comtrade dataTop 3 import sources in 2012: China 15.3%; USA 14.6%; Argentina 7.4%

UK earnings from exports of goods and services and FDI - China

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil

lio

n £

Goods

FDI Earnings

Services


69.6% Goods, 24.3% Services, 6.1% FDI EarningsSource: ONS Balance of Payments (Pink Book) and ONS FDI MA4

Top-5 UK commodities exported to China

0

1,000

2,000

3,000

4,000

5,000

6,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Millio

n £


Crude materials








+£1,144m road vehicles

-£161m metalliferous ores and metal scrap

+£109m general industrial machinery

Market share of goods imports into China

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

sh

are

Germany

France

Italy

UK

Source: BIS analysis of UN Comtrade dataTop 3 import sources in 2011: Japan 11.2%; South Korea 9.3%; Other Asia, nes 7.2%

UK earnings from exports of goods and services and FDI - USA

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil

lio

n £

Goods

Services


39.9% Goods, 40.0% Services, 20.1% FDI Earnings

UK was the largest inward investor in 2011 (17.4% of total stock)

FDI Earnings

Source: ONS Balance of Payments (Pink Book), ONS FDI MA4

and OECD FDI Positions by Partner Country

Top-5 UK commodities exported to the USA

0

5,000

10,000

15,000

20,000

25,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mil

lio

n £




Mineral fuels






-£806m petroleum products

+£789m miscelalneous manufactured articles (mostly works of art)

+£588m road vehicles

Market share of goods imports into USA

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

sh

are

Germany

UK

France

Italy

Source: BIS analysis of UN Comtrade dataTop 3 import sources in 2011: China 18.4%; Canada 14.1%; Mexico 11.7%

Future trends

• Import demand in large markets such as China,

India, Russia, and Brazil is expected to grow

much faster than in developed markets.

• Russian demand for imports is expected to grow

by almost 160% between 2010 and 2015 - faster

than any other emerging power, including China.

• Five emerging markets are expected to more

than double in size between 2010 and 2015 -

India, Vietnam, Korea, China and Russia.

Expected % change in import demand, 2010-

2020 (FCO analysis of IMF data)

Policy work to improve market access

• An EU competence. Trade FAC and TPC.

• Ambitious EU programme of bilateral trade

negotiations with developed and emerging

markets. UK the main champion. European

Commission closer to our view than to the

centre of gravity among EU Member States

• EU Free Trade Agreements (FTAs) should

eliminate most tariffs and quotas placed on our

goods exports and imports

Policy work to improve market access (2)

• EU FTAs can address many “non-tariff barriers” –

harmonised standards / mutual recognition, address

discriminatory practices, open up public procurement

and tightly regulated sectors, etc.

• FTAs can give greater security, e.g. bilateral

investment protection provisions, intellectual property

protection, etc.

• BIS lead. Input from No.10, CO, FCO, ministries –

whole of Government approach. Lord Green and

Vince Cable lead. Ken Clarke role too.

Progress on EU FTAs

• EU-Korea FTA in place – biggest deal yet.

• EU-Singapore virtually concluded

• EU-Andean (Colombia and Peru) coming in this year

• EU-Japan negotiations launched March 2013. Could lead to increase in EU GDP amounting to €42 billion

• EU-ASEAN (once all completed and stitched back together) worth up to €29.5 billion per year to the EU

Progress on EU FTAs (2)

• EU-Canada to conclude soon?

• EU-Mercosur – issues around

protectionism and cohesiveness of the

bloc? Fresh momentum in response to start

of EU/US negotiations

• EU-India – something achievable this

year?

• EU-Japan – launched in March 2013

Progress on EU FTAs (3)

• EU-US FTA (or Transatlantic Trade and Investment Partnership – TTIP) – biggest deal in the world. Negotiations launched at G8 Summit in Northern Ireland

• £10bn annually to the UK

• Like doing the Single Market again but across the Atlantic?

• “One tank of gas” / a “living agreement”?

• Government needs to know urgently what barriers UK firms face when doing business in the US in order to work up UK priorities and a shopping list.

Meanwhile in Geneva…

• Real pick-up in bilateral negotiations worldwide given the stalling of the Doha round

• But a deal on trade facilitation could be possible this year

• All WTO members would benefit. It could add $70bn annually to global GDP, but EU, China and sub-Saharan Africa will be particular beneficiaries. Half the Doha benefits.

• Closing this deal will give the WTO a much needed credibility boost. G8 support for the incoming WTO Director General, Azevedo.

The role of business in trade policy

• We need intel on what it is like doing business

with different countries – what are the barriers,

where are markets not as open as they might be?

• Company papers, trade association papers, EU-

level papers, joint papers with counterparts in

third countries…

• We need business to help keep the momentum

up on the bigger negotiations, especially when

they get difficult

Thank you

• Ian Ascough, 020 7215 4146

• [email protected]

• 1 Victoria Street, SW1H 0ET

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