The British Government is urging UK companies to export more to Asia whilst it attempts to reduce trade barriers in key Asian markets in a bid to narrow its significant trade deficit and forge a new direction post-Brexit.
The UK Government wants to trade with the whole world, but Asia is important part of that, given that that it is where more than half the world lives, Minister of State in the Department for International Trade, Greg Hands, told Asia House.
Japanese inward investment
In an exclusive interview on Wednesday, The Rt Hon Greg Hands MP said the British Government’s priorities in Asia varied according to whether it was about trade or investment.
“For example, Japan as an investor in the UK is a big priority for us. We are engaging extensively with Japanese investors in the UK, not only with Nissan,” he explained.
Nissan recently announced that it would be building the new Qashqai and the X-Trail SUV at its Sunderland plant after its Chairman and CEO Carlos Ghosn met UK Prime Minister Theresa May who provided reassurances to the car manufacturer which were important to securing the investment for Britain.
More than 1,000 Japanese companies have a presence in the UK employing 140,000 people, with many of these companies choosing to base their European headquarters in the UK because of access to the EU single market.
Mr Hands said he had met many other Japanese investors in the UK since the EU Referendum was held.
Response from Japanese investors ‘positive’
“The response from Japanese investors has been very positive,” Mr Hands said.
“Over the summer, Japan’s Ambassador to the UK spoke in Parliament and was interviewed on the radio and he was very positive about the UK being a good environment to do business in and as a destination for Japanese companies to set up their UK and European operations.
“I think the UK business environment is a strong card in our favour and the willingness of Japanese investors can hardly be better illustrated than by SoftBank’s £24.3bn takeover of ARM Holdings – a British chip manufacturer – in August, after the Referendum,” he pointed out.
The UK’s trade balance (the difference between exports and imports) has been in deficit since 1998.
In 2015 the UK recorded the largest current account deficit as a percentage of GDP among the G7 economies of 5.4 per cent.
Its deficit on trade in goods and services was estimated at £3.3 billion in April 2016.
Mr Hands said he was “concerned” about the trade deficit and the Government planned to narrow it by increasing exports rather than decreasing imports.
“Only 11 per cent of UK companies are exporting at the moment,” he said. “So increasing UK exports is key to us,” he said.
“When it comes to trade, I am acutely conscious of the fact that we need to export more to China,” Mr Hands, who is MP for Chelsea & Fulham, stated.
“Although there has been growth in UK exports to China, our exports are still only a quarter of what Germany does, so we have the potential to do a lot more,” he said.
The UK has experienced a growing trade deficit with China since 1999. It currently stands at £23 billion.
China, which has the largest population in the world, is the seventh largest export market for the UK and the third largest source of imports, accounting for 3.6 per cent of UK exports and seven per cent of all UK imports.
China is forecast to become the world’s largest luxury goods market by 2020 whilst Jaguar Land Rover is currently the UK’s biggest exporter to China.
Mr Hands said his department had “big plans” to support exporters as Britain hopes to empower 100,000 new companies to sell overseas by 2020, compared with 2010.
The former Chief Secretary to the Treasury then outlined three ways the Government was assisting exporters.
He spoke about a new digital portal, GREAT.gov.uk, announced on Monday, set up to help UK businesses and exporters access potential lucrative business overseas, connect international investors and buyers with UK businesses and match the products and services of UK businesses with global demands.
In July, the Department for International Trade signed an MoU with five UK major high street banks in which they pledged to work with the Department to help boost exports.
Companies that struggle to get finance from the banks can get help from UK Export Finance, the UK’s export credit agency, he pointed out.
For the first time since 2006, UK exports grew faster than world exports in 2015 due to increased trade in goods with non-EU countries.
India, a country of 1.3 billion, is also top of the Department for International Trade’s agenda.
The UK is among India’s major trading partners. In 2014-15 the UK ranked 18th in the list of India’s top 25 trading partners.
Mrs May undertook her first bilateral trade mission to India as British Prime Minister last week, accompanied by a delegation of more than 30 business leaders.
But there was criticism from some quarters of the trip.
The Indian Government has persistently pushed for easier access to UK work visas for its citizens and it is believed this would be what India would want in any bilateral trade deal with the UK.
Former Liberal Democrats Leader Lord Ashdown described May’s trip as “shambolic” criticising May for taking a hardline stance on immigration saying it had “undermined trade talks” and pointing out there was a shortage of chefs in curry houses in the UK.
But Mr Hands, who alongside International Trade Secretary Liam Fox, accompanied Mrs May on the trip, was positive about the future economic relationship and ongoing trade talks.
“There were a number of announcements made by Theresa May in India on visas. For example India is now the only country in the world where you can get a same-day visa to come to the UK,” he pointed out.
He said he was “hopeful” that the economic relationship between the UK and India would grow in importance after Britain left the EU.
“We already have a trade policy group working with India. There is a lot more we can do with India even before making an FTA – that was the purpose of the Joint Economic and Trade Committee (JETCO) talks held in Delhi last week,” he said.
The UK-India JETCO took place in Delhi the same week as the India-UK TECH Summit, which Mrs May and Indian Prime Minister Narendra Modi inaugurated.
UK-India JETCO provides a forum to UK companies to enhance their links and develop new partnerships with Indian business and decision makers.
“We are looking to reduce barriers in India to UK financial, legal and insurance services and in return we are offering a substantial market place and greater access to Indian goods. Immigration is a matter for the Home Minister,” Mr Hands said.
Mr Hands then went on to say that he was “absolutely aware” that the Asia Pacific was not just China, India and Japan, but covered everywhere up to New Zealand and Australia.
“There are other key large markets to look at like Turkey, Korea, Taiwan, Malaysia and Indonesia,” he added.
“We have set up trade working groups which we are talking to in a general way, and in specific ways on reducing trade barriers between the UK and Asian markets. There is an awful lot that can be done outside of any talks about FTAs in the future,” he said.
These trade policy groups are currently in India, Australia and New Zealand, he explained. “I expect others will follow as and when we expand our capabilities and resources,” he said.
“We are looking at trading with all of these countries in the future. The precise form of the agreements will take place in the future but there are a variety of things we can do now,” he pointed out.
So could the UK grandfather all the existing FTAs that the EU has with third party countries after it leaves the EU? That might include the FTAs the EU has with Vietnam, South Korea and Singapore.
“That would depend on what our future relationship with the EU is,” Mr Hands said. “It would be too early to speculate on the read-across of these agreements.”
After the Department for International Trade was set up in July, there were media reports of an acute shortage of trade negotiators in the UK to negotiate free trade deals.
This task had been delegated to the European Commission ever since the UK became a member of the EU.
When Australian Trade Minister Steven Ciobo gave a public speech at Asia House in September this year he offered to lend Australian trade negotiators to the British civil service.
Mr Hands was not prepared to comment on whether there was still a shortage or whether he had taken Mr Ciobo’s offer up.
“We have had some kind and generous offers from our international partners and we are thankful for those,” he said.
“We are always interested in hearing from talented people that want to come and work in our department. We don’t give a running commentary on hiring and the specifics of that but it’s an exciting place to work and anyone interested in working for us should contact me.”
The interview took place following a private briefing for Asia House corporate members at which Mr Hands discussed his role and priorities within the new UK government department.
Topics covered at the roundtable discussion included trade talks with Asian countries in the light of Brexit, inward investment to the UK from Asia, trade finance, the UK’s future relationship with the EU and with the EU Customs Union and the UK’s export strategy.
Corporate members represented at the table included Barclays, Rio Tinto, Lloyds Banking Group, De La Rue, Standard Chartered, Arup, GSK, Zaiwalla & Co LLP, Pfizer, Prudential, Heathrow Airport, HSBC, Nikkei and Aggreko.
The former Chief Economic Advisor to Boris Johnson Dr Gerard Lyons will join Asia House corporate members on 1 December for a briefing and roundtable discussion on Brexit. For more information click here.
For to see all the events in the Asia House Brexit Series click here.
To read all the stories on this website on Brexit click here.
To read an exclusive interview with Paddy Ashdown about Brexit, Theresa May and the UK’s future relations with Asia click here.
To read what Australian Trade Minister Steven Ciobo said about FTAs and Brexit in his public speech at Asia House click here.