“We’ll now have a more pragmatic, proportionate, and realistic approach”
Yesterday, in perhaps the most significant speech of his premiership, Rishi Sunak articulated his new net zero approach. Disguised as ‘realistic’ and ‘pragmatic’ it has instead added to confusion and uncertainty for businesses, investors and voters. Nobody is now sure how seriously the current administration is about realising a greener Britain. It falls to Labour to lead.
The Party has the right instincts. Johnny Reynold’s green industrial policy is part of Labour’s answer to Britain’s economic malaise.
Yet when we think about industrial policy, we often reach straight for the chequebook. That is how President Biden unleashed a green manufacturing boom across the United States. If President Macron gets his way, Europe will attempt the same.
It goes without saying that Britain lacks the same financial firepower. Its response must be more nimble, more targeted, and exploit the full spectrum of policy levers at Britain’s disposal: including trade policy. After all, if Britain is to become an adopter and exporter of green technology, then trade is an unavoidable part of this equation.
Suffice it to say, the Tories’ record on trade has been mixed. We have been treated to more slogans than substance. Boris Johnson’s trade deal with the EU could see tariffs slapped on British electric vehicles early next year and, to the surprise of no one, a trade deal with the United States has not materialised.
An incoming Labour government would take the wheel for the first time since Brexit. This may not seem an exciting prospect, but trade policy is about more than just tariffs. It is about securing Britain’s supply of critical minerals, intellectual property rights, digital trade, and even national security. Above all else, it is about unlocking sustained growth that will help propel Britain to the front of the G7.
To mark a distinct break with the Conservative era of incoherence, Labour’s trade policy should be guided by three core principles.
Firstly, Labour must set the pace wherever possible. Self-imposed deadlines have become a staple of Conservative trade policy. Anne-Marie Trevelyan wanted to join the CPTPP trading bloc for Christmas. Liz Truss wanted a deal with India by Diwali. These milestones put Britain on the backfoot. Labour should never put Britain at the mercy of a stopwatch.
This doesn’t mean Britain should take its time. Far from it. Take critical minerals as an example. Japan secured a targeted agreement with the Biden administration in March. The EU entered talks shortly thereafter. It was not until June that Britain started talks of its own; by which time, congressional appetite for such an agreement had soured. A Labour government should not be this slow off its mark.
Secondly, Labour must play to its competitive advantage. Rachel Reeves has it right: we cannot import an American solution to a British problem, and while Labour should draw a degree of inspiration from Bidenomics, it cannot simply clone the Biden playbook.
If Labour’s industrial strategy is serious about nurturing Britain’s competitive advantage in life sciences, wind power, and cars, then its trade policy must do the same. This means pursuing deals that safeguard intellectual property; without which, Britain cannot credibly call itself an innovation economy. Inflated but ultimately poor trade deals make the headlines for an afternoon. Their negative consequences could weigh on the economy for decades.
Finally, Labour should not assume that its allies will be guided by sentimentality. That applies in Brussels and Washington alike.
Yes, most of the EU will welcome a Labour government after years of Conservative intransigence. This will buy some political currency in Europe, but not much. Brussels, Paris, and Berlin will ultimately see Britain as an attractive competitor on their doorstep. They have few reasons to give Britain an easy ride on trade.
The much-vaunted review of the Trade and Cooperation Agreement is a clear opportunity to improve the trade relationship, but Labour must be realistic about what this review can actually achieve. If Labour wants to go deeper, as Keir Starmer teased at the Global Progress Action Summit in Montreal, it must be prepared to make a serious offer.
The same realism should apply to the Biden administration; an indispensable ally for any Labour government. Biden’s affinity for Ireland did not stop him backing a global minimum corporate tax at the OECD, just as his transatlanticism did not lend Europe special treatment under the Inflation Reduction Act.
American trade policy is now guided by two primary considerations; rebuilding America’s industrial capacity and preserving its technological superiority over China. A free trade agreement should remain the ultimate prize for a Labour government, but it may have to settle for more targeted agreements in the meantime.
Trade policy is not going to set the election campaign on fire. It certainly won’t be a doorstep issue. Yet it would be shortsighted to assume it has no political value. Keir Starmer had it right in Montreal; global investors are not sold on Britain. Many of these investors, including some of Britain’s largest employers, will be reassured by serious thinking on trade.
That is the difference between permanent opposition and a government-in-waiting; honesty about the challenges facing the country and unflinching seriousness in solving them.
To read more on what Labour’s green industrial strategy should look like, see The Net Zero debate: Early wins make mission zero possible.