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UK Government Research Reveals Business Lack of Confidence in Free Trade Agreements

Updated: Sep 5, 2023

In a rapidly changing global economic landscape, Free Trade Agreements (FTAs) have long been seen as vehicles for boosting international trade, fostering economic growth and facilitating cross-border business activities. However, recent research commissioned by the UK Government has shed light on a concerning trend – a substantial increase in the lack of confidence among businesses regarding the efficacy of FTAs. This growing uncertainty could have far-reaching implications for trade relationships, investment decisions and economic stability.

The UK Government's comprehensive research aimed to gauge the perspectives of businesses across various sectors regarding the effectiveness of FTAs. The findings indicate a significant shift in sentiment over time, with an increasing number of businesses expressing doubts about the tangible benefits of these agreements. One of the key contributing factors to this lack of confidence is the evolving global trade landscape. As trade dynamics become more complex and interconnected, businesses are facing challenges that were not as prevalent in the past. The uncertainty surrounding post-Brexit trade relationships, coupled with the ongoing changes in international trade policies, has left many businesses wary of relying solely on FTAs for their growth strategies.

Factors Driving the Lack of Confidence

Several factors have contributed to the erosion of confidence in FTAs among businesses:

  • Uncertain Post-Brexit Landscape: The UK's departure from the European Union introduced a new level of uncertainty for businesses. The renegotiation of trade agreements and the establishment of new relationships outside the EU have created a sense of unpredictability that businesses find unsettling.

  • Shifting Global Economic Conditions: The global economy has witnessed unprecedented challenges, including the COVID-19 pandemic, which impact affected many businesses, and many are still recovering and fighting to survive under much more complex economic conditions. These disruptions have led to an increased focus on supply chain resilience and adaptability. Businesses are concerned that FTAs may not provide the level of security required to navigate such uncertainties.

  • Changing Trade Priorities: As industries evolve and consumer preferences shift, businesses are re-evaluating their trade priorities. Some sectors may find that the terms of existing FTAs are no longer aligned with their needs, leading to doubts about the relevance of these agreements.

  • Complex Regulatory Environment: Navigating the intricate regulatory requirements of different FTAs can be daunting for businesses, particularly smaller enterprises with limited resources. The administrative burden of compliance can detract from the perceived benefits of these agreements.

Implications and the Way Forward

The growing lack of confidence in FTAs among businesses could have profound implications for international trade and economic growth. Businesses that are uncertain about the reliability of these agreements might delay investment decisions, reconsider market entry strategies, or even opt for alternative trade routes.

Addressing this issue requires a multi-faceted approach:

  • Transparency and Communication: Governments and trade bodies need to enhance communication with businesses, clarifying the benefits of FTAs and addressing concerns. Transparent and accessible information about the practical implications of these agreements can help rebuild trust.

  • Flexibility in Agreements: Policymakers should consider incorporating mechanisms that allow for flexibility in FTAs. This could involve periodic reviews to ensure that agreements remain relevant to evolving business needs and economic conditions.

  • Support for Businesses: Providing businesses, especially small and medium-sized enterprises (SMEs), with resources to navigate the complexities of FTAs can mitigate some of the confidence challenges. This could include guidance on compliance, trade facilitation, and dispute resolution.

Recent surveys conducted by GMCC to delegates attending our training still shows that more that c. 30% still finds trading with the EU for example moderately difficult. The EU continues to be a critical trading and investment partner for the UK and Greater Manchester, and therefore it is important that business support available through government and regional stakeholders is aligned to meet the gaps we currently have.

Susana Cordoba, Head of International Trade at GM Chamber said: “The UK Government's research underscores the urgency of addressing the growing lack of confidence in Free Trade Agreements among businesses. As the global economic landscape continues to evolve, it is imperative for policymakers to actively engage with businesses, understand their concerns, and work towards fostering an environment of trust and stability in international trade relationships. Only through collaborative efforts can the potential benefits of FTAs be fully realised, ensuring sustainable economic growth for all stakeholders involved.

"Here are the Chamber we work daily with traders and are well placed to help exporters and importers voice their concerns straight to key government agencies and equally support the great effort from the UK Government to make sure companies understand and capitalise on the opportunities that FTAs can bring to their business.

"We are working closely with the Department for Business and Trade (DBT), the Greater Manchester Combined Local Authority and other key regional stakeholders to ensure businesses across Greater Manchester are accessing the right support to go global and understand there could be tangible benefits for UK businesses from the FTAs."

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