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Apr 3, 2018

The Telegraph | Whitehall "chaos" puts the UK's Brexit trade strategy in doubt

telegraph.co.uk

Whitehall 'chaos' puts the UK's Brexit trade strategy in doubt

Anna Isaac 3 April 2018 

Cabinet members 
Far from united: Theresa May's Brexit cabinet has major decisions to take on trade, and quickly, in order to develop an effective strategy Credit:  REUTERS
"Strategy? What strategy?"
So responds a senior civil servant when asked how plans for the future of UK trade are coming together. They then proceed to smash their coffee's foam with the back of a teaspoon aggressively.
"[The] trade strategy is basically tweeting out flag emojis."
Their frustration is not about being for or against Brexit, they stress. It is about understanding the challenge and importance of the UK getting trade right, so that businesses and jobs are protected. At the moment, that is not happening. Instead, "[there is] a distressing and embarrassing level of chaos across Whitehall on trade".
This could not be a worse time for disunity. In trade terms the UK finds itself a relative minnow caught between two big fish. The first is an increasingly protectionist US casting doubt on the world order of free trade, and the other an EU determined to avoid "cherry-picking" in the final Brexit agreement in an attempt to avoid widening its internal schisms.
In just under a year, after so-called Brexit Day - March 29 2019 - the UK will have the power to strike its own trade deals for the first time in more than 40 years. And it will need to be quick. The moment the ink is dry on a final deal with Brussels there are around 70 trade deals with non-EU countries to try to "roll over". Something once thought to be a copy and paste job has since been shown to be far more complex.
Developing a new trade strategy and implementing it in such a short period will demand close collaboration across government. The work of the two Brexit departments, international trade (DIT) and exiting the EU (Dexeu), will determine the future of trade with the EU. The terms of that deal may well decide the ease with which other, non-EU deals can be struck.
However, several independent sources sum up the relationship between the two departments as "a wall". Major work is also required from the departments for business, energy and industrial strategy (BEIS), and environment, food and rural affairs (Defra). Relations between those and DIT and Dexeu are little better.
"The department [Dexeu] squabble with most is Defra but that's too busy fighting with itself to actually ask important questions about Brexit," says one mid-ranking civil servant.
Dexeu is not well liked by other departments within Whitehall, it seems. "There's a sense that Dexeu's really busy and important. They've all been given ear defenders - like people working on drilling - so they can be important and concentrate," the source says. Another corroborates the claim that ear defenders have been issued. The department did not respond to a question on the issue.
This infighting is attributed to one cause: Cabinet divisions which are feeding into and exacerbating departmental silos. It was Defra which leaked concerns about chlorinated chicken which have plagued every interview Trade Secretary Liam Fox has given, immediately before meetings with US trade counterparts, The Daily Telegraph understands.
Michael Gove, Defra's Secretary of State, has frequently reiterated that attempts to secure a US trade deal should not come at the expense of food and agricultural standards. This sticking point between DIT and Defra is crucial, as agriculture issues often top US trade negotiators' lists.
Fox has said that the top priority in terms of trade deals for the UK is the US, followed by the likes of Australia. On other occasions he has championed the predicted growth rates for emerging markets. However, until the level of divergence in the final EU deal is determined, no deals can be finally agreed on. And unless the UK sheds enough of the EU's standards, the US is not likely to sign up to one.
Trade experts across the full spectrum of the Brexit debate are clear: navigating through a minefield of existing and new relationships, this is going to be one of the toughest challenges in the history of trade policy. Those who have dealt with both the EU and US on trade matters simultaneously do not describe the experience in warm terms.
Securing a trading relationship with the EU, reforging deals with non-EU nations and forming new agreements within the Brexit timetable represents a phenomenal challenge.
David Henig left his position assistant director of DIT in early March. He too notes that there is no coherent political leadership on trade: "The need for a single government position backed up to a reasonable degree politically [is essential]."
Not having such a position has led to a desperately slow realisation of just how controversial future trade agreements could be, says Henig, who is now UK director at the European Centre for International Political Economy think-tank. For Henig, the problem with UK trade strategy, or a lack thereof, is simple: "No one knows where the next fish is coming from." The next front page controversy will be the next red line in trade negotiations, and the more lines, the harder a deal becomes.
"Fishing is going to be protected. We know that mobility and movement of people's a problem, so that's going to have to be protected as well. Can we get all the things we want to get? The more things you're prepared to talk about, the more chances you have of getting what you want to achieve," Henig says. "Do we even know what it is we want to achieve? We'll need clarity."
No one, Henig says, has done the analysis to work out which sectors a trade deal is prepared to damage or not prioritise in exchange for broader economic benefits. "Somebody's going to have to present that analysis and say what it is that we're going to lose."
The clear political leadership which results in the mandate of what a chief trade negotiator needs to bring home in a trade deal is far from forthcoming. Informal structures dominate, sources say, resulting in a lack of leadership. The Cabinet Office and Cabinet committees rarely arrive at conclusive decisions and if they do, one source says, "No. 10 brings them to a screeching halt".
Infighting aside, one thing everyone in politics and the civil service can agree on is that the UK is seriously short of trade negotiating expertise. DIT confirms that it has around 100 staff with direct experience of trade deal negotiations. With some 259 trade-related bilateral agreements to resolve when the UK leaves the EU, and 70 non-EU trade agreements to roll over, that's a poor ratio.
DIT has a 500-strong trade policy group tasked with vital work. This includes supporting trade negotiations with the EU and building new trading relationships worldwide. Huge efforts are underway, led by Crawford Falconer, DIT's star hire and seasoned trade expert, to upskill the civil service. Falconer and others are trying to develop a trade training scheme in tandem with the Foreign Office. But he is running against the clock.
Dexeu cannot hold on to its staff. It has become an internal promotion machine, according to insiders, as a result of trying to hold on to workers. Most departments lose 9pc of staff each year in the civil service. Dexeu, with no clarity about its future once a deal is struck with the EU, is haemorrhaging 9pc each quarter.
Meanwhile, the cost of this scrambling in Whitehall is clear. Both for the business groups who complain of no continuity of engagement and sudden data requests, and, in the long term, for the country as vital decisions are rushed through by staff without enough experience.
Multiple sources say that there is still a question mark over whether or not some kind of customs union might have to be fudged to try to avoid infrastructure on the Irish border.
The fate of trillions' worth of contracts on insurance and derivatives is unresolved. As is how the City will access EU markets without so-called passporting rights - part of what's covered under the EU's single market.
Preparations on independent trade protections for the UK are also lacking. This, along with supporting Brexit negotiations, is another of the priorities for DIT's trade policy group.
"Red", "amber", "red", said top trade experts when asked by MPs to offer a traffic light assessment of readiness for the UK's trade protection body, once it leaves the EU.
As trade war tensions mount, the urgency for the Trade Remedies Authority to be properly established does too.
A DIT spokesman said the department was working "from the centre of government to design and deliver the UK's first independent trade policy in 40 years".
A Dexeu spokesman said: "The Government is committed to ensuring that the right skills and resources are available across all departments to deliver a successful Brexit."Fox told The Daily Telegraph in November that the Government "will be judged by the success of Brexit".Unless he and Cabinet colleagues agree what success actually means in trade terms and fully commit to them in order to create a coherent strategy, that will be a hard phrase to live by.