David Collins

Professor of International Economic Law, City St George’s, University of London

I am giving this evidence as part of my role as a public intellectual and an expert in international trade and investment law.

The UK Government's ambition to achieve the highest sustained growth in the G7 faces significant challenges in the current global landscape. While new industrial and trade strategies are being developed to boost productivity and create good jobs, it is crucial to critically examine the impact of existing policies, particularly those related to net zero targets and the current regulatory environment.

The push for net zero, while well-intentioned, may be detrimental to the UK's economic growth and competitiveness. The rapid transition to low-carbon technologies and practices is imposing substantial costs on businesses, particularly in energy-intensive industries. These costs are often passed on to consumers, leading to higher prices for goods and services, which in turn can dampen economic growth. Moreover, the stringent emissions targets are forcing some companies to relocate their operations to countries with less restrictive environmental regulations, resulting in job losses and reduced economic output in the UK. These efforts will have limited impact on the planet’s climate given that the UK’s carbon emissions are approximately 1 % of the world’s total. Net zero must be abandoned.

The current tax regime in the UK is also a significant hindrance to growth and competitiveness. High corporate tax rates and complex tax structures are discouraging investment and innovation. Many businesses, especially small and medium-sized enterprises (SMEs), find themselves allocating substantial resources to tax compliance rather than focusing on growth and expansion. A reduction in corporate tax rates and a simplification of the tax system could stimulate business activity, attract foreign investment, and ultimately lead to higher economic growth. This strategy is essential given that other G7 economies (such as the US) will continue to attract mobile investment because of its favourable tax and regulatory regime.

Furthermore, the regulatory burden on UK businesses is excessive and often counterproductive. While regulations are necessary to ensure fair competition and protect consumers and workers, the current regulatory landscape is overly complex and frequently changes, creating uncertainty and additional costs for businesses. Again, this regulatory environment is particularly challenging for SMEs that lack the resources to navigate complex compliance requirements. Streamlining regulations and reducing unnecessary bureaucracy (e.g. eliminating the GDPR and the Employment Rights Bill) could free up resources for businesses to invest in growth and innovation as well as stimulate job creation and hiring. The UK must not commit to dynamic regulatory alignment with the EU, as would seem to be envisioned by the Product Regulation and Metrology Bill.

The UK's trade strategy should focus on creating a more business-friendly environment that encourages growth and innovation. This involves negotiating trade agreements that prioritize reducing non-tariff barriers and mutual recognition of regulations, particularly in the services sector where the UK has a comparative advantage. These include the re-negotiated UK-Canada FTA (held up because of prohibiting Canadian hormone treated beef), finalizing negotiations on the new FTA with India (held up due to the UK’s climate change demands), revising the UK-EU TCA, and most importantly, forging a comprehensive FTA with the US (now possible given the openness of the new Trump Administration). Increasing miliary defence spending in-line with NATO targets should help secure the latter deal. The UK should furthermore consider repealing the Digital Services Tax (or else lower it).

‘Progressive’ elements like labour and climate must be left out of FTAs. Trade policy should not be the place to address these matters. Indeed, the government should consider including provisions in these trade agreements that allow for greater flexibility in environmental regulations, enabling businesses to adopt more cost-effective approaches to reducing emissions. All regulations must be based on science and prioritize consumer choice via product labelling.

Digital trade should be a key focus of the UK's trade strategy. The UK has a strong digital economy, and leveraging this strength in trade negotiations could open up new opportunities for growth. Trade agreements should include robust provisions for data flows, digital services, and e-commerce, while also addressing issues such as cybersecurity. Trade agreements should aim to reduce barriers to digital trade and promote innovation in emerging technologies. All new UK FTAs must include robust digital trade chapters. The UK could consider joining the Digital Economy Partnership Agreement (Singapore, Chile, New Zealand, and South Korea).

The UK should focus on leveraging the CPTPP to diversify and strengthen its supply chains. The agreement's modern rules of origin provide an opportunity for British businesses to integrate more deeply into regional value chains across the Asia-Pacific and Americas. The UK government should actively promote these opportunities to businesses, particularly in sectors like automotive and electronics, where the ability to source components from multiple CPTPP countries could enhance competitiveness and resilience.

To address concerns about the trade deficit, the UK should prioritize export promotion to CPTPP markets. The government should provide targeted support to sectors with high export potential, such as financial services, creative industries, and high-value manufacturing. This could involve expanding the Export Academy and Internationalisation Fund, with a particular focus on helping SMEs navigate the complexities of exporting to CPTPP countries.

The UK should also use its position within the CPTPP to push for the expansion of the agreement to include more countries. Economies such as Thailand, Taiwan, and South Korea have expressed interest in joining. By advocating for the inclusion of these markets, the UK can further expand its trade opportunities and strengthen its economic ties in the region.

To address concerns about the impact on sensitive sectors like agriculture, the UK should carefully monitor the effects of increased market access and be prepared to use the safeguards negotiated in the agreement. This includes the staged implementation of tariff reductions and annual limits on imports of sensitive agricultural goods. The government should also provide support to help UK farmers and food producers compete in CPTPP markets by promoting the high quality and standards of British products. The UK government might consider increasing the budget of the Trade Remedies Authority to enable it to deliver on its mandate more effectively.

To address broader economic security concerns, the UK should use its membership in the CPTPP and the WTO as a platform to promote fair trade practices and counter unfair competition. This could involve working with other members to strengthen rules against unfair subsidization, especially in relation to state owned enterprises and non-market economies. The UK should join the Multi Party Interim Appeal Arrangement (MPIA) to resolve WTO disputes as a gesture of its commitment to the multilateral trading system.

To support businesses in the current challenging global landscape, the government should consider implementing targeted support measures. This could include tax incentives for research and development, export support programs, and initiatives to help businesses adapt to changing market conditions.

The UK government should set ambitious yet achievable goals for improving the country's export performance, focusing on both value and volume of exports as well as diversification of export markets and products. A key goal should be to increase the total value of UK exports to £1 trillion by 2030, building on the current "Race to a Trillion" strategy. This target provides a clear, measurable objective that can galvanize efforts across government and industry. Progress towards this goal should be measured through regular reporting of total export values, broken down by sector and destination market. Additionally, the government should aim to increase the number of UK exporters, particularly among SMEs. A target of reaching 300,000 exporters by 2030 would be ambitious yet potentially achievable. This could be measured through business surveys and export registration data.

To ensure balanced growth, the government should also set goals for improving regional export performance. For example, it could aim to narrow the gap in export intensity (exports as a percentage of GDP) between the highest and lowest performing regions by 25% by 2030. This could be measured using regional export statistics and GDP data.

In terms of delivering trade support services, a hybrid approach combining direct government provision with partnerships with existing business support organizations is likely to be most effective. The government should continue to provide core services like the Export Support Service and UK Export Academy directly. However, it should also leverage the expertise and local connections of organizations like Chambers of Commerce, trade associations, and Local Enterprise Partnerships to deliver tailored support at the regional and sector level. The Trader Support Service for Northern Ireland trade demonstrates how the government can effectively deliver specialized support through a contracted provider. This model could potentially be expanded to other complex trade areas.

Government-to-government relations play a crucial role in driving up trade. The UK should prioritize establishing and maintaining strong diplomatic and economic ties with key trading partners. This includes negotiating comprehensive free trade agreements, as noted above, but also goes beyond formal treaties to include regulatory cooperation, sectoral mutual recognition agreements, and strategic dialogues.

The government should also leverage its international network of embassies and trade offices to provide market intelligence, make business connections, and resolve trade barriers for UK exporters. The expansion of the UK's presence in growth markets like the Indo-Pacific should continue.

To "level up" export performance around the country, the government should provide additional resources and tailored programs to regions with lower export intensity. This could include expanding the Export Academy and Internationalisation Fund in these areas. Each region should be supported to develop and promote its areas of competitive advantage in international markets. This could involve creating regional export clusters around key industries. Improving transport and digital connectivity in underperforming regions can make it easier for businesses to engage in international trade.

Investing in education and training programs focused on international trade and sector-specific skills can help build export capacity in lagging regions. The government should empower and support Mayoral Combined Authorities and other local leaders to drive export growth in their regions. This could include devolving more trade support functions and budgets to the local level. Setting specific export growth targets for each region can help focus efforts and ensure progress is being made across the country. University funding, especially to the humanities and social sciences, should be contingent on up-skilling graduates and employability.

To address the UK's persistent trade deficit and enhance economic security, a comprehensive reindustrialization strategy is essential. This should focus on revitalizing key manufacturing sectors, particularly in high-value industries such as advanced materials, biotechnology, and clean energy technologies, especially nuclear. The government should provide substantial tax incentives and grants to companies investing in these areas, coupled with a streamlined regulatory environment to encourage rapid growth and innovation. Again, reworking the GDPR is but one example of what could be done.

In parallel, the UK should aggressively pursue an export-led growth strategy. This could involve establishing a dedicated Export Promotion Agency with significant resources to support businesses, especially SMEs, in accessing international markets. The agency should offer tailored market intelligence, export finance solutions, and hands-on support in navigating foreign regulations and cultural barriers. Additionally, the government should consider implementing an export tax credit system, providing financial incentives for companies that successfully increase their export volumes.

Regarding critical supply chains, the UK should adopt a 'strategic autonomy' approach. This involves identifying key sectors where domestic production is essential for national security and economic resilience. For instance, in the semiconductor industry, the government should invest heavily in research and development, and provide substantial incentives for chip manufacturers to establish facilities in the UK. Similar approaches should be taken for pharmaceuticals, renewable energy technologies, and advanced materials.

To diversify supply chains and reduce vulnerabilities, the UK should establish a Strategic Supply Chain Diversification Fund. This fund would provide financial support to companies seeking to relocate their supply chains from high-risk countries to more stable partners or back to the UK. Priority should be given to critical sectors such as medical supplies, rare earth elements, and key technology components. The government should also consider implementing a mandatory supply chain risk assessment for large companies operating in critical sectors. This would require these firms to regularly evaluate and report on their supply chain vulnerabilities, with penalties for those failing to adequately diversify their sources.

To measure the security of the UK economy, the government should develop a National Economic Security Index. This comprehensive metric would assess factors such as supply chain diversity, domestic production capabilities in critical sectors, energy independence, and technological sovereignty. The index should be published annually, with clear targets for improvement set over a five-year period.

In terms of specific imports to de-risk, the UK should focus on reducing dependence on China for critical minerals, electronic components, and pharmaceutical ingredients. This could involve fostering closer trade relationships with alternative suppliers such as India, Vietnam, and African nations, while also investing in domestic capabilities where feasible.

To finance these initiatives, the government should consider establishing a National Strategic Investment Fund, potentially funded through a combination of government bonds and private sector contributions. This fund would provide long-term, patient capital for strategic industries and infrastructure projects that enhance the UK's economic security and trade position.

Finally, to address regional disparities in export performance, the government should implement a Regional Export Champions program. This would involve appointing high-profile business leaders in each region to spearhead export growth initiatives, supported by targeted government resources and tailored to each region's industrial strengths.

February 2025