UK and EU Trade Strategies: Two Different Answers to Global Challenges

In February, the EU published the “Trade Policy Review,” its new trade strategy. A month later, the “Integrated Review” by the UK was put forward, sketching what “Global Britain” means post-Brexit. The two strategies are similar in their diagnosis of what is going on in the world – yet differ when it comes to what to prioritize.

How to strategize – comparing apples with pears.

Comparing the “Integrated Review” and the “Trade Policy Review” is not entirely fair. They are two different documents with different levels of ambition. The Trade Policy Review is a 23-page document outlining the EU’s trade strategy (which we discussed here).

The Integrated Review, on the other hand, is a 114 pages long, dealing with questions far beyond trade – it contains a holistic outlook on global megatrends. It outlines implications for UK policymaking across all policy fields with an international outlook, including security, diplomacy, trade, and several others. So, comparing the two documents is a bit like comparing apples and pears – they are not the same thing.

Yet, both documents largely share the same vision of what is happening in the world. Both detect an increased linking of foreign policy and economic policy and geopolitics through economic means. They also agree that Europe’s weight in the world economy is diminishing as Asia is increasingly becoming the economic center of gravity.

China challenging the established global order is another commonality – explicit in the UK’s strategy, but less so in the EU document. Technological transformation and climate change as a central challenge also feature in both strategies. Clearly, the diagnosis of what is going on in the world is mostly shared by both players, which makes the differences in the strategies all the more interesting.

If the central challenge for international policies is the trend towards geoeconomics and that, consequently, foreign and trade policy cannot be treated separately, does it not make more sense to combine trade and foreign policies in one single strategy (Read more on the implications of geoeconomic here)?

A central weakness of the EU trade strategy is that while it diagnoses geoeconomics as an important trend, it does not come up with an adequate response to this threat – perhaps precisely for the reason that it thinks not enough about trade as a tool for foreign policy. So, when it comes to the method of conceiving a strategy for the age of geoeconomics, the EU’s “geopolitical commission” can learn from the UK’s approach.

Some will argue that the EU could not link foreign and trade policy in a similar way, as the member states have a large degree of autonomy in the former. However, an exercise to develop a common strategic vision might be helpful to also achieve more coherence between the foreign policies of EU member states.

Diagnosis of global megatrends, taken from the UK’s Integrated Review.

Self-confidence vs. institution-building?

The central areas of action defined by the EU strategy are WTO reform and trade policy actions to underpin the EU sustainability and digital transitions. All three have to do with building institutions capable of addressing the important challenges of our time:

• WTO Reform aims at giving a rules-based global trading order a new lease of life. This is meant to act as a stabilizing force in an increasingly unstable global economic order. The aim is also to use the EU’s current relatively high influence in the world to implement rules that remain influential even when the EU’s relative bargaining power in international relations is decreasing.
• Twin Transition: Von der Leyen’s Commission takes climate neutrality and a digital makeover of European industry seriously. In the next Multiannual Financial Framework and the Recovery Plan of the EU, a large share of the funds are dedicated to these activities. Trade policy is supporting this transition through multilateral initiatives and a corresponding bilateral agenda.

The UK strategy also has commitments to WTO reform, climate change, and fostering digitalization. But they are much more low-key than in the EU strategy. What is, however, front and center in Integrated Review is the enhancement of technological capabilities as a source of soft and hard power.

While the UK is under no illusion that it will be more than a middle power, it believes that its technological prowess can give it an important edge in international relations and be a source of above-expected bargaining power. This realization is certainly not as prominent in the EU strategy.

What is also interesting is that the Integrated Review is very clear in that it aims at linking the UK much more closely to the Asia-Pacific region in trade terms – which makes sense given that it is becoming more central to the world economy.

The UK is very cautious in its approach to China, but embraces Asia beyond China – for example, by wanting to join the CPTPP (about which we have written more here). This is missing in the EU strategy, which in turn prioritizes the neighborhood and Africa as growth regions.

Which geography is more relevant as a growth region in trade terms?

Africa and the neighborhood–  distance matters in trade. Africa especially is going to become economically much more important, although this is mostly driven by its demographic development. Asia, on the other hand, is going to become much more prosperous and will remain a world region with an important population.

There are good arguments for both, and while the EU needs to pay more attention to Africa than the UK needs to, it certainly should not ignore prospects in Asia beyond China. On the other hand, the UK strategy does not pay enough attention to the competitive implications of climate action, an area that cannot be underestimated.

Which strategy is the better one?

Only time will tell. But I argue that it is a good thing that the UK and the EU pursue different strategies with different emphases.  The resulting competition to have a better strategy and implement it more effectively is going to be an important driver of better policymaking both in London and Brussels.

The new competition between the UK and the EU will leave less room for complacency. And complacency in trade and foreign policymaking is the real enemy in the global race for ideas, interconnectedness, and influence.

A Word Clound of the Integrated Review (above) and the Trade Policy Review (below). While the UK is more security/foreign policy focused, the EU is more focused on sustainability and digital sphere.