Despite strides in emerging markets, UK must avoid EU trade spat
The UK is threatening to abandon parts of its agreed deal with the European Union, pertaining to the movement of goods between Northern Ireland, which could result in retaliation. As Britain’s largest trading partner, the EU is responsible for 50% (£301bn) of the nation’s imports and 42% of exports (£251bn); therefore, a potential trade war would cause significant economic repercussions – particularly given the current inflationary pressures.
The EU has long been the UK’s largest trading partner – followed by the US – and while its’ share of imports and exports has fallen in recent years due to Brexit, it continues to play a crucial role in providing machinery and appliances, transport equipment, chemical products, food and beverages, tobacco and plastics and rubber. However, trade in services shows a slight imbalance in favour of the EU, with €218.7bn in exports compared to €170.6bn in imports from the UK. It is therefore likely that the disruption of the trade deal could hit the UK hardest.
The UK is making huge strides in emerging markets, with bilateral deals already established with Mexico, Kenya, Israel and Chile. However, with ongoing conversations still being held with some of the countries holding the wealthiest trade opportunities – such as India and the Gulf Corporation Council (GCC) – the UK must still maintain cordial relations with its neighbour to diffuse any threats that could intensify the cost-of-living crisis. If the government were to break agreements made with the EU, it would also present the UK as a less appealing partner for other deals.
Discussions are being held today between India’s Commerce and Industry Minister, Piyush Goyal and the UK government, with both countries aiming to finalise the trade agreement so it can officially be implemented in October 2022. Given the bilateral economic growth between both parties is projected to rise by 22.7% within the next decade, India will prove to be an invaluable trade partner for the UK – especially if the potential trade war with the EU becomes a reality.
Nayan Gala, founder of JPIN, comments:
“Historically, the UK and EU have worked together harmoniously to achieve specific trade targets that benefit both parties. However, Brexit has put a strain on this relationship and Britain is now in a race to secure trade deals with some of the world’s most powerful economies to make up for this.
“India’s Commerce and Industry Minister, Piyush Goyal, is visiting London today to begin finalising the Free Trade Agreement which could prove to be invaluable for both sides – especially given the pressures of the current economic climate. However, despite the UK’s strides in terms of making agreements with other countries, it’s vital that a potential trade war between the EU and UK is avoided, as it would be extremely damaging for both economies and affect other corners of the globe too.”