 Hi, we're here today to talk about trade and trade policy. I'm here with my colleague. I'm Emily Frye, I'm an economist at the Resolution Foundation. And I'm Sophie Hale, Principal Economist at the Resolution Foundation. We're here to talk about trade which is really important to the economy, it's important to living standards, it's important to productivity, it's about what we produce but also what we import and what we consume as a result of the kind of trade that we do. And this has been really important recently because of Brexit which has fundamentally changed the way that we trade with our biggest trading partner. And so we need to have a think about, okay, what are the implications of Brexit for the UK economy and what should we do about it? What should the future UK's trade policy look like? So starting with that, if we want a good trade strategy, we need to understand what kind of trading country we are. So Emily, what is the UK like as a kind of trading economy? So we often hear in conversations that the UK is a medium-sized and open economy, but what does that actually mean? The openness represents how much we import and export as a proportion of our GDP and we are much more open to trade than some other countries like, for example, the US. This means that we can get kind of a diversity of products that we can import into the country and means that for consumers you can get a lot cheaper, maybe fruit and vegetables, you can also get much more diverse options for your fruit and vegetables rather than having to create everything ourselves. But one way you can think about what the UK is particularly good at is thinking about where our export strengths are, so where we have a specialism within particular exports. And so some might say that we are kind of narrowly specialised in things like financial services. You often hear that we're financial services, one trick pony, but that's not really true. We do have a lot of strengths in our financial services exports, but the actual share of our financial services export has been declining since the financial crisis and we have shown a lot of strength in a lot of other services exports as well. So we're really strong in architecture, in engineering, it's called a category called other business services, but we're also really strong in things like intellectual property, we've got a really brainy country, we've got great universities here and a lot of good education exports as well. We're also really good at some of the creative sectors, so things like film, things like TV, and we have seen some real successes in 2023 from that, for example in terms of the Barbie movie being filmed in the UK and then exported all over the world. But we aren't so good at some other areas, so as we said you know we might think about kind of importing those fruit and vegetable imports and that's because we aren't necessarily the best at agriculture for example, we couldn't feed our country just growing it all here ourselves and we aren't necessarily particularly strong in exporting our agricultural products as well. But we are quite strong in some goods categories, so we do have some strengths in some particular kind of high value added manufacturing sectors, so for example cars, which is particularly important for the green transition around electric vehicles, as well as things like chemicals where we have historically seen a lot of strength in our pharmaceuticals and life sciences industries. And so basically we consume a lot more goods than we produce, so we run a deficit and we pay for that by selling the services that we produce. So what's happened now that we have sort of changed the trading relationship with one of our biggest trading partners, we've experienced Brexit, what's the outlook for UK trade as a result of that? The timing of Brexit at the end of 2020 was a particularly challenging time if you care about the data and that's because we were right in the middle of the global pandemic and so that did mean that there were a tonne of supply chain disruptions affecting kind of good exports and imports in particular around the world and has meant that it's taken us a couple of years to really start to weave through the post-Brexit trade data and see how is Brexit actually affecting kind of the structure of our economy through our exports and imports. And so what we've seen from the first couple of years is that we've particularly been impacted in terms of our imports so for both services and for goods we have seen some weakness in our imports so we're taking in less from the rest of the world and that's going to be affecting people through the quality and quantity of the products that they might have. We have seen however some strength in our services exports and so this has continued post-Brexit even despite predictions that Brexit, the change in our relationship through the trade and cooperation agreement might particularly affect some of our key services industries that hasn't seemed to happen so far and we have really shown some underlying strengths there which is great news for our economy. On the downside however we have seen some real weaknesses in our goods exports and what's particularly concerning about that is in those high value added manufacturing areas so in the cars in the chemicals we have been performing particularly weekly compared to our G7 peers and this all ladders up to me that Britain is the only major European country to have seen a decline in our openness so in our trade openness since the global pandemic and we have sustained that even today in 2023 so the amount that we're importing and exporting now is less than that we were doing before Brexit and before the pandemic. Over the long term however so this is kind of the short-term effect we might see some structural changes to the economy and so that's where we're going to start seeing kind of the UK manufacturing sector in particular reorient its production away from high value added manufacturing things like cars things like chemicals that are so important for different areas of the UK and towards like lower productivity domestic manufacturing so things like food manufacturing in particular are set to rise and so this reorientation will in the long term make the UK kind of poorer as a country and does have a negative impact on our wages as well. So we've talked a bit about kind of the impact of Brexit and you know this opportunity as well that that is presented by the fact that we can determine our own trade strategy but where are we at with making up our trade strategy and what should we be thinking about in the future? I guess as Paul had saying there's been a lot of policy and public focus on trade policy in the last sort of five years in the UK probably more than there ever has been before or at least definitely in you know in recent decades. A lot of that has been focused on you know what kind of trading arrangement should we have with the EU and we've ended up with trading cooperation agreement it's kind of a typical free trade agreement with a few elements that go a little bit deeper than that but you know it's really a lot less closely aligned with the EU than the EU membership was and the other thing that we've been hearing a lot about are these other free trade agreements that the UK has been going out and signing. So for example CPTPP or the trade agreements that we've signed with you know Japan or the trade agreement that we're negotiating with India as these are all kind of new or upgraded arrangements that the UK is seeking to sign with kind of non-EU like third country partners. The two big ones we don't have, China and the US both still look pretty unlikely and that covers about a quarter of the UK trade so we need to kind of rethink where we go from here and think about what can we do that may be used as something that's a little bit less traditional in terms of trade policy tools. So there has been a lot of trade policy and I think really what we think is important now is to sort of reflect on the type of country we are and what our real priorities and ambitions need to be so it's more of a kind of re-evaluating what a trade strategy would look like that tries to be a bit more kind of connected with the economy but also tries to you know be a bit more cohesive within itself rather than necessarily just trying to go out and deliver a lot of deals. First of all with the EU as you've said what we've seen is this really big damage to our goods trade and part of that is coming from the fact that the UK has been really embedded in these EU supply chains for some of these goods products particularly for our advanced manufacturing and so we need to think about a strategy that allows our manufacturing firms to still operate within these supply chains and so what we suggest is a quite a defensive strategy on the on the good side and that's one that would look to try and create something that is similar to the access that Northern Ireland gets with Northern Ireland protocol for the entire United Kingdom and this would be a big renegotiation and it wouldn't be easy and it's not something that's on the table right now but our key argument is that the options that are on the table today are not really good enough so we need to be being optimistic and we need to be being ambitious and we need a long-term kind of strategy that we work towards. The other side of this of the strategy needs to be services so you've already told us that we're really good at services and you've already told us that actually surprisingly our services have been pretty resilient in terms of the performance post-Brexit and so we need a strategy that will build on those strengths as well and again it's not easy to do because traditional free trade agreements have not been that good at increasing services market access and so we need to be a bit more innovative in this space and create something that is a new kind of services trade agreement so that really focuses on the areas that will benefit UK trade the most and so that is trying to support these professional services by doing stuff like mutual recognition of professional qualifications allowing our services exporters to work overseas and again we've mentioned that we have trade deals with a lot of the countries that we're trading with already but the good thing about these deals is that you could kind of layer them on top of existing trade deals they also might get around some of the concerns that the US has with doing kind of traditional free trade agreements so you know it's a it's a kind of gradual process where the UK can renegotiate with some of its largest partners and to kind of improve its services market access and as I said it does look a bit different and it does require kind of creating a new model but the UK is a natural place to do that as the second largest exporter of services in the world you know we should be world leading in terms of the kind of support and policy and products that we're putting there in place for our services exporters that sounds really exciting and like a very comprehensive trade strategy what I'm wondering is why should we care about it given that ultimately at the end of the day what we want is to raise living standards for low middle income people so why does why does this trade strategy matter and how will it affect people yeah so trade is really important for living standards and it's really important that we worry about both exports and imports but let's start with exports and the way that people typically think about trade our firms are producing goods and services that is giving people jobs that is giving people employment opportunities it's creating investment in the economy and it's creating economic growth and kind of productivity gains and some of that output is going to other countries and that's effectively what our exports are so if we are exporting less we're producing less we have you know slower will it affect our productivity it'll affect the rates of employment that we see and ideally we also have a specialism that is in kind of more highly productive industries so both these kind of you know finance and other business services professional services industries but also you know advanced manufacturing and the fact that we have this profile that allows us to specialize in jobs and to work so specialize in industries and therefore work in jobs that tend to pay better than we would if we had to provide you know everything for ourselves and that's the important role that imports are playing so the fact that we can bring in imports for cheaper from other countries and we can consume you know fruit and vegetable from all around the world that we would never be able to produce in the UK but also the quantity that we can produce is really impacted by the fact that we can bring in kind of imports and so trade is playing this hugely important role in in driving productivity and kind of creating and specialism specialization and the jobs in industries that we want to work in and actually you know the UK is quite lucky in terms of the the structure of the economy that we have and the industries that that we specialize in so that clearly is like contributing to the economic growth and and our strategy is all about how can we drive growth so that we can see those improvements in living standards the stagnation that we've seen over the last 15 years has really been critical in like preventing us from experiencing kind of improvements in in living standards in in this decade and particularly for you know for lower income households when we think about this trade strategy in particular the one that we're focused on particularly focusing on services and the really important role that a professional services play in our in our trade strategy but also in our economy we do need to face up to some of the kind of issues that will that will arise from focusing just on that so in particular our services exports are really highly regionally concentrated in London and actually over time over the last like five or so years they've become even more concentrated in London so it's not only that the most of our of our exports come from London almost all of our export growth has been based from kind of London based firms and this is an issue if we're focusing on a strategy that's going to do even more to promote these kind of services exporters so we need to think how can we make sure and that the you know that this growth that we might be able to create from such a strategy is shared growth and that you know those on kind of lower incomes but also in other kind of regions can benefit from it as you say kind of services are really geographically concentrated in cities and I think that's why kind of the advanced manufacturing piece of our trade strategy is so important and that's because you know whilst we might have domestic domestic policies now that are really focused on supporting those advanced manufacturing industries you also need to have your trade strategy pointing in the same direction because at the end of the day if you don't have a big enough market to sell your cars to you you're not going to be making many more cars and so that's particularly important because these pockets of high value manufacturing are quite distributed across the UK so if you look at Derby for example it's got almost triple the amount of output that it's producing is in manufacturing and also about double the amount of jobs are in manufacturing as well than they are in the rest of the UK so for that specific area these jobs and these industries are particularly important and that's why defending them is so important too. I think it's key to say that you know it's not necessarily the trade strategy that is the way to try to achieve all of those goals you need a comprehensive economic strategy that works together and not try to deliver you know kind of every single individual goal that you have for your economy just through your trade strategy. Thank you for listening to this video on trade that's all we have time for today but please do check out our economy 2030 work including our final report anything. Ending stagnation it's a great read so I would highly recommend but thank you for making it to the end of this video and we'll see you next time.