WEBVTT - UK's Former Chief Trade Negotiation Adviser Talks Tariffs

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<v Speaker 1>So market's very much Stephen holding their breath for this

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<v Speaker 1>announcement in the Rose Garden. Tomorrow, Donald Trump sets to

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<v Speaker 1>lay out his tariff plans and America's trading partners waiting

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<v Speaker 1>nervously to see what awaits them. The EU Commissioned President

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<v Speaker 1>Ursula Vonderlyon has spoken this morning. She says that Europe

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<v Speaker 1>is ready to retaliate, but what should the UK's approach be,

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<v Speaker 1>And please to say to join us at the studio

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<v Speaker 1>now we're joined by Crawford Faulkner, who was until the

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<v Speaker 1>end of last year the UK's chief trade negotiation advisor.

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<v Speaker 1>So really good to have you with us, Crawford, Thank you.

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<v Speaker 1>I saw the Trade Secretary, the Business and Trade Secretary,

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<v Speaker 1>Jonathan Reynolds last week at Chathamhouse. He was talking about

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<v Speaker 1>the UK's trade strategy and I have to say, frankly,

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<v Speaker 1>he was still keeping it very very vague. Is that

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<v Speaker 1>the best approach right now until there is more clarity

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<v Speaker 1>from the US President Donald Trump?

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<v Speaker 2>I think I think you've got to keep your options

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<v Speaker 2>open to some degree until you see what actually happens.

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<v Speaker 2>But I think you have to be and I'm sure

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<v Speaker 2>he is well prepared behind the scenes for certain scenarios,

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<v Speaker 2>so you know you will need to make up your

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<v Speaker 2>mind whether one you're going to retaliate be what your

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<v Speaker 2>response is going to be in terms of whether you negotiate.

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<v Speaker 2>See how you've aligned yourself with business so that you're

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<v Speaker 2>keeping them on track with what's going on, and d

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<v Speaker 2>closely reading and understanding what your foreign partners are doing

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<v Speaker 2>so that you know you have a sense of what

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<v Speaker 2>the global response actually is. All of those things. You

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<v Speaker 2>need to have game plans ready to go. I assume

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<v Speaker 2>that they have, well, they an't communicated in advance, you know,

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<v Speaker 2>I mean, this is a government for goodness sake, you know.

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<v Speaker 3>Now I'm on the outside.

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<v Speaker 2>You know, it's kind of like, yeah, it's pretty difficult

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<v Speaker 2>when you've actually got to try and discern what's going on.

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<v Speaker 2>So but yeah, you know, you're pretty good at asking

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<v Speaker 2>questions so you can find out if you try.

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<v Speaker 4>But given your experience inside the department, you're confident in

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<v Speaker 4>those bands of all been made.

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<v Speaker 3>I don't know what they're doing now.

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<v Speaker 2>Everything was fine when I was there, of course, you

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<v Speaker 2>understand at least till the end of December. No, No,

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<v Speaker 2>I'm sure recently, I'm sure I'm sure they have.

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<v Speaker 1>Can you help me to decipher maybe a hint that

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<v Speaker 1>Johnny Reynolds was dropping last week I asked him whether

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<v Speaker 1>it would be worth scrapping the digital services tax to

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<v Speaker 1>try and get concessions in terms of tariffs from Donald Trump,

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<v Speaker 1>and he said that, you know, I'm sure that there's

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<v Speaker 1>a fair level that will be set. Do you think

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<v Speaker 1>that that is on the table? Is it worth making

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<v Speaker 1>a concession on the digital services tacks? When Rachel reads

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<v Speaker 1>the Chancellor is so fiscally squeezed right now, well.

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<v Speaker 2>Look from the sounds of it, again, I don't know

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<v Speaker 2>what's been going on on that, and it all happened

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<v Speaker 2>after I left, So just to be clear, there's no carryover.

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<v Speaker 2>If I read what's going on in the media, it

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<v Speaker 2>sounds like the government seems to be saying Our government

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<v Speaker 2>seems to be saying that, you know, they're resigned to

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<v Speaker 2>the fact that Trump's going to apply some tariffs anyway.

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<v Speaker 2>So clearly, if that's the case, then you don't make

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<v Speaker 2>any concisions right now.

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<v Speaker 3>He's going to.

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<v Speaker 2>Apply to tariffs, and there's a fundamental question the once

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<v Speaker 2>he's applied whatever those tariffs are as to well Okay,

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<v Speaker 2>what do you do next? They have intimated, clearly from

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<v Speaker 2>what I'm reading publicly, that they're interested in getting rid

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<v Speaker 2>of digital services tax. Now question is is that tactical

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<v Speaker 2>on their part or is that serious? I mean, what

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<v Speaker 2>is it by you? How important is it to them

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<v Speaker 2>that that happened. I have no sense for that not

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<v Speaker 2>being in a room, but I presume that they will

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<v Speaker 2>come back to that after these tariffs are applied. I

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<v Speaker 2>myself would have been a bit skeptical about whether it

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<v Speaker 2>was a sensible straight trade to say no tariffs on

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<v Speaker 2>the UK and get.

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<v Speaker 3>Rid of digital services tax.

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<v Speaker 2>And I don't have the impression, but I don't know

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<v Speaker 2>that that was how it was going. I mean, I

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<v Speaker 2>think it would have been. There was a range of

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<v Speaker 2>things that were being discussed, and so therefore it would

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<v Speaker 2>have been some sort of package exercise. I think if

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<v Speaker 2>you were trapped into a straight deal, which is get

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<v Speaker 2>rid of the revenue from that particular tax, and we

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<v Speaker 2>know what people have said that amount seems to be

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<v Speaker 2>around seven or eight hundred million at the moment that

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<v Speaker 2>you get rid of that to get rid of tariffs,

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<v Speaker 2>which as yet are undefined, that would be a pretty

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<v Speaker 2>narrow and difficult deal, not impossible, But as I say,

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<v Speaker 2>that's not on the table now. The tariffs have now

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<v Speaker 2>been applied, So I think the question is what's the

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<v Speaker 2>combination of elements post application of tariffs that would be

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<v Speaker 2>seriously up for negotiation if the US is genuinely interested

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<v Speaker 2>in getting rid of the Digital services tax, and I

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<v Speaker 2>can imagine that they would be, because they've been trying

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<v Speaker 2>to get rid of it for years prior to Trump. Not,

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<v Speaker 2>of course, you negotiate on it. What you negotiate depends

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<v Speaker 2>on what they have on the table, and as I say,

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<v Speaker 2>my view, but I'm an old fashioned negotiator, would be, well,

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<v Speaker 2>I'm not getting rid of.

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<v Speaker 3>Your tariffs just for that digital services tax.

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<v Speaker 2>You know, you need to go further if I was

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<v Speaker 2>going to do that, and then you're into the logic negotiation.

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<v Speaker 2>But just bear in mind with the Digital services tax,

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<v Speaker 2>that has been seriously negotiated for years, So there's nothing

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<v Speaker 2>new in saying that you're prepared to negotiate on it.

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<v Speaker 2>And indeed the UK government had a deal with the

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<v Speaker 2>Biden administration which sort of settled it pro tem. But

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<v Speaker 2>I don't think there was ever any reason to believe

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<v Speaker 2>that the US Congress would ever have accepted the so

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<v Speaker 2>called OECD consensus on these matters. So, irrespective of what

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<v Speaker 2>Trump would do, I don't think the Congress would ever

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<v Speaker 2>have settled on a deal that would resolve the issue satisfactorily.

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<v Speaker 2>So I don't think there's I don't think of the

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<v Speaker 2>government if it was considering that it's not crossing some

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<v Speaker 2>terrible rubicon. There's nothing really new in that. But only

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<v Speaker 2>people in wank Land know that that's been the case.

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<v Speaker 2>It hasn't made it into general public.

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<v Speaker 4>What else does the UK have to put on the

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<v Speaker 4>table now, Well.

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<v Speaker 3>You know, I think it's a bit.

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<v Speaker 2>You know, again, you tend to think of trade negotiations

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<v Speaker 2>as a there are some game, because that's that's the

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<v Speaker 2>way in which people.

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<v Speaker 3>Talk about them.

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<v Speaker 2>You know, I won the negotiation, I mean, everybody wins

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<v Speaker 2>the negotiation. I made fewer concessions than they made, when,

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<v Speaker 2>of course the economic benefit actually comes from the concessions

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<v Speaker 2>you make far more than the concessions that they make,

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<v Speaker 2>because that's the way the economic world works, but not

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<v Speaker 2>the political world.

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<v Speaker 3>I get that.

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<v Speaker 2>So I think with the UK and the US, you know,

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<v Speaker 2>there will be elements of trading things. I mean there,

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<v Speaker 2>you know, we have we still have some residual tariffs.

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<v Speaker 2>We still have some you know, regulatory arrangements that affect

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<v Speaker 2>goods and services trade that you know, probably could be

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<v Speaker 2>tuned up to be both more efficient and more liberalizing.

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<v Speaker 2>And so do they. And they certainly have trade barriers.

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<v Speaker 2>I've got trade barriers in agriculture. They have a nice

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<v Speaker 2>juicy twenty seven and a half percent tarifon light trucks. Now,

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<v Speaker 2>I don't think we're in the we're in the business

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<v Speaker 2>of making light trucks.

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<v Speaker 3>But you never know.

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<v Speaker 2>If you got rid of that twenty seven and a

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<v Speaker 2>half percent tariffon so called light trucks in the United States,

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<v Speaker 2>you know, maybe one day we could. I mean, who knows.

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<v Speaker 2>That's what the market will tell you. But you bear

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<v Speaker 2>in mind for autos. You know, US is kind of

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<v Speaker 2>strutting around saying how perfect it is on autos. But

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<v Speaker 2>that's where the Big three have been making their money,

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<v Speaker 2>in these gas guzzling light trucks. That's why there's a

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<v Speaker 2>huge tariff on it. That's why the United States has

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<v Speaker 2>protected that market. That's why the United States consumer goes there.

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<v Speaker 2>So you know, there's all that that's up for grabs

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<v Speaker 2>in a negotiation. Not that I'm saying that that would

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<v Speaker 2>be the key to a negotiation. You know, we could say, look,

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<v Speaker 2>we want fly in, fly out visas for our businesses

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<v Speaker 2>to go into the US in a more liberal way,

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<v Speaker 2>just to give you one example. So small things thereat

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<v Speaker 2>and they wouldn't you know, there are all sorts of

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<v Speaker 2>things that you would do, and there are all sorts

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<v Speaker 2>of things that you could do together as well.

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<v Speaker 3>I mean, these days.

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<v Speaker 2>Negotiations don't have to be a pe for you and

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<v Speaker 2>a bean for me. You know, they can actually relate

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<v Speaker 2>to the real economy and they could actually say, listen,

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<v Speaker 2>we want to have some kind of construc coructive future

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<v Speaker 2>relationship on issues like AI and on innovation. I mean,

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<v Speaker 2>you know, United Kingdom has an agreement with with Australia

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<v Speaker 2>which if you read the media you think it was

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<v Speaker 2>all about beef, and sure it's got some beef in it,

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<v Speaker 2>but it's got an amazing chapter on innovation in terms

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<v Speaker 2>of the cooperation between both business and government officials on

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<v Speaker 2>innovation policy.

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<v Speaker 3>So with the United.

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<v Speaker 2>States, with the world's biggest economy, what does the United

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<v Speaker 2>Kingdom need?

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<v Speaker 3>Growth? Growth is what we're after.

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<v Speaker 2>And if you could approach your relationship with the United

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<v Speaker 2>States that actually was a significant liberalizing agreement in areas

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<v Speaker 2>of goods and services, then you're going to shift the

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<v Speaker 2>dial on growth more than you're going to do with

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<v Speaker 2>any other potential negotiating item in the future. Now, Trump

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<v Speaker 2>says he's sort of up for that. I have no

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<v Speaker 2>idea whether that's empty rhetoric or whether it's for real.

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<v Speaker 2>But if it's for real, and even if it's half

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<v Speaker 2>for real, it's the UK's interest to really seize that

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<v Speaker 2>optunity and say, yes, we want to pursue that kind

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<v Speaker 2>of deal.

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<v Speaker 3>We don't want to just find that after you've applied

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<v Speaker 3>these tariffs.

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<v Speaker 2>All we're talking about is how we get rid of

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<v Speaker 2>these additional tariffs and what we have to pay for them.

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<v Speaker 2>It's like, how do we build a bigger deal on

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<v Speaker 2>trade and economic issues in the future. Now, I think,

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<v Speaker 2>you know, we have every reason to give her to go.

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<v Speaker 3>Now. It might not work, but nothing ventured, nothing gain.

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<v Speaker 1>We're focusing a lot on the US here, and there's

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<v Speaker 1>a whole world out there. Right there's also an European

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<v Speaker 1>Union that Donald Trump doesn't seem to be very happy with.

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<v Speaker 1>Is it realistic for the UK to be trying to

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<v Speaker 1>hedge relations between the US that you China as well,

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<v Speaker 1>And is it actually possible to have equal, grown up

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<v Speaker 1>businesslike relations with all three simultaneously.

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<v Speaker 2>Not necessarily equal, but grown up as good. And I

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<v Speaker 2>think there's a track record that you can yes. So

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<v Speaker 2>the short yes, I mean, you know, United Kingdom has

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<v Speaker 2>every reason to be doing what it wants to do

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<v Speaker 2>right now with the EU, which is to sort of

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<v Speaker 2>tidy up some of the frictions that have been left

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<v Speaker 2>over from Brexit and to see whether they can actually

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<v Speaker 2>be cleaned up in a way that particularly small businesses

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<v Speaker 2>are finding transactionally difficult.

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<v Speaker 3>So of course you can do that. Now.

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<v Speaker 2>The government's been very clear that it's not interested in

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<v Speaker 2>going back into the Single Market and it's not interested

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<v Speaker 2>in going back to the customs un And now if

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<v Speaker 2>that was the case, then some things that you might

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<v Speaker 2>end up doing with the United States. But I don't

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<v Speaker 2>know whether you would would become more difficult, but that's hypothetical.

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<v Speaker 2>I don't see any huge problem there, So there's no

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<v Speaker 2>reason why you shouldn't be able to tidy those things up.

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<v Speaker 2>You already have are very by global standards, a very

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<v Speaker 2>good free trade agreement with the European Union, so I mean,

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<v Speaker 2>from the European point of view, I don't see that

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<v Speaker 2>as as an obstacle. There are a couple of things

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<v Speaker 2>which you might end up doing with the EU at

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<v Speaker 2>the very micro product level that might be problematic with

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<v Speaker 2>the US at the micro product level, but I don't

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<v Speaker 2>see them as kind of deal breakers and show stoppers,

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<v Speaker 2>and you should be. I mean, we're talking about the

0:11:12.880 --> 0:11:15.040
<v Speaker 2>United States because we're going to have a major theatrical

0:11:15.080 --> 0:11:18.760
<v Speaker 2>performance in the next little while in the Rose Garden

0:11:18.880 --> 0:11:22.280
<v Speaker 2>and where they're permitting. So but for the rest of

0:11:22.320 --> 0:11:25.480
<v Speaker 2>the world, the United Kingdom still can and should be

0:11:26.160 --> 0:11:32.120
<v Speaker 2>pursuing broad and successful trade and economic agreements with the

0:11:32.200 --> 0:11:35.400
<v Speaker 2>fast growing economies of the world. So, you know, we are,

0:11:35.800 --> 0:11:39.880
<v Speaker 2>as I understand it, still negotiating with India, We're still

0:11:39.960 --> 0:11:43.840
<v Speaker 2>negotiating with the Gulf. We're in and here we're into

0:11:43.880 --> 0:11:47.199
<v Speaker 2>real want territory because you know we're in we're in

0:11:46.720 --> 0:11:52.840
<v Speaker 2>an Asia Pacific agreement which is called CPTPP, which you know,

0:11:52.960 --> 0:11:55.240
<v Speaker 2>I don't know why it's called CPTPP. I think you

0:11:55.240 --> 0:11:58.240
<v Speaker 2>can blame the Canadians for that or under Trudeau for that,

0:11:59.520 --> 0:12:03.160
<v Speaker 2>but a fact it's an Asia Pacific trade agreement with

0:12:03.280 --> 0:12:06.920
<v Speaker 2>some of the fastest growing economies around, and there's a

0:12:06.960 --> 0:12:10.080
<v Speaker 2>cue of people wanting to join it. So you know,

0:12:10.160 --> 0:12:14.880
<v Speaker 2>we should the United Kingdom be really pressing now to

0:12:15.000 --> 0:12:18.400
<v Speaker 2>accelerate the processes for countries to accede to that agreement

0:12:18.480 --> 0:12:21.319
<v Speaker 2>so that we can get the benefits from a broad agreement.

0:12:20.960 --> 0:12:21.760
<v Speaker 3>With that part of the world.

0:12:21.800 --> 0:12:23.520
<v Speaker 2>And we have to think about what we want to

0:12:23.520 --> 0:12:28.280
<v Speaker 2>do with Brazil and mercasor for instance. You know, there's

0:12:28.280 --> 0:12:31.480
<v Speaker 2>a whole range of countries in Asia, whether it's Thailand

0:12:32.440 --> 0:12:36.360
<v Speaker 2>or Indonesia for instance, which are fast growing prospects. So

0:12:36.760 --> 0:12:39.040
<v Speaker 2>of course you have to go after all of those things.

0:12:39.080 --> 0:12:40.560
<v Speaker 2>And I see no reason why.

0:12:40.480 --> 0:12:43.040
<v Speaker 4>Not opportunities there as well, thinking I had though to

0:12:43.040 --> 0:12:47.079
<v Speaker 4>tomorrow's announcement, where is the UK vulnerable? If you were

0:12:47.080 --> 0:12:49.640
<v Speaker 4>in your old job and you're watching the announcement tomorrow,

0:12:49.640 --> 0:12:51.959
<v Speaker 4>what would have you with your head in your hands

0:12:52.040 --> 0:12:54.120
<v Speaker 4>saying this is really bad for the UK.

0:12:55.840 --> 0:12:57.600
<v Speaker 2>You know, it's funny. I don't work for the UK

0:12:57.720 --> 0:13:01.800
<v Speaker 2>government anymore, but I kind of I still feel somehow

0:13:02.000 --> 0:13:05.559
<v Speaker 2>weirdly disloyal. If I was to be passing out information

0:13:05.600 --> 0:13:07.720
<v Speaker 2>of what would really hurt the UK that could be

0:13:07.760 --> 0:13:10.400
<v Speaker 2>advantageous to the United States, you know, not as if

0:13:10.440 --> 0:13:12.320
<v Speaker 2>I imagine for a minute that anybody would listen to

0:13:12.320 --> 0:13:15.839
<v Speaker 2>a word I say, so probably I should say yeah, No,

0:13:16.000 --> 0:13:19.240
<v Speaker 2>I mean I think, you know, I think generally I

0:13:19.280 --> 0:13:22.760
<v Speaker 2>would look at the whole picture. You know, if he

0:13:22.840 --> 0:13:25.440
<v Speaker 2>goes to it, you know, a very high end of

0:13:25.559 --> 0:13:29.440
<v Speaker 2>tariff's across the board, you know, you know, my head

0:13:29.480 --> 0:13:31.439
<v Speaker 2>would be in my hands for the consequences for the

0:13:31.480 --> 0:13:34.160
<v Speaker 2>global economy. I mean, in other words, if you're if

0:13:34.200 --> 0:13:38.760
<v Speaker 2>you've got really high tariffs applying to the European Union

0:13:38.800 --> 0:13:42.520
<v Speaker 2>and Japan and the United.

0:13:42.280 --> 0:13:44.040
<v Speaker 3>Kingdom, you know.

0:13:44.120 --> 0:13:48.000
<v Speaker 2>And you're talking twenty percent plus, and it's across the board,

0:13:48.040 --> 0:13:50.880
<v Speaker 2>and it's like, oh my god, I mean, this is

0:13:51.000 --> 0:13:53.120
<v Speaker 2>this is the kind of shock you'd really be scared about.

0:13:53.760 --> 0:13:56.240
<v Speaker 2>And that kind of dwarfs everything else, just simply because

0:13:56.280 --> 0:13:59.439
<v Speaker 2>that puts you, you know, that that puts you in

0:13:59.480 --> 0:14:02.520
<v Speaker 2>the scenario, the upper scenario that all the economists have

0:14:02.520 --> 0:14:04.680
<v Speaker 2>been assessing for what the impact would be globally.

0:14:05.160 --> 0:14:05.800
<v Speaker 3>Now, all the.

0:14:05.679 --> 0:14:07.679
<v Speaker 2>Noises that are coming out of the White House are

0:14:07.720 --> 0:14:10.200
<v Speaker 2>that he's not going to that extent, but I don't

0:14:10.200 --> 0:14:11.160
<v Speaker 2>know whether it's true or not.

0:14:11.240 --> 0:14:12.280
<v Speaker 3>Nobody really knows.

0:14:13.040 --> 0:14:16.800
<v Speaker 2>For the UK, you know, it sounds like, you know,

0:14:16.840 --> 0:14:20.520
<v Speaker 2>everybody's on the Donald Trump naughty step. It sounds it

0:14:20.640 --> 0:14:24.000
<v Speaker 2>sounds like in terms of the good students that are

0:14:24.040 --> 0:14:26.480
<v Speaker 2>on that step, you know, we might be down the

0:14:26.520 --> 0:14:29.640
<v Speaker 2>good student end of that. So you know, if you

0:14:29.840 --> 0:14:33.840
<v Speaker 2>if you're down at five percent or lower, that's what

0:14:33.960 --> 0:14:38.000
<v Speaker 2>they apply. That is kind of like that's still damn annoying.

0:14:39.520 --> 0:14:42.600
<v Speaker 2>But I think that's reasonably survivable for the time being.

0:14:43.000 --> 0:14:46.160
<v Speaker 2>Once you get above ten percent or you know, then

0:14:46.160 --> 0:14:48.600
<v Speaker 2>I think you sort of say to you that that

0:14:48.600 --> 0:14:53.360
<v Speaker 2>that's you know, that's something that you know will will

0:14:53.400 --> 0:14:56.280
<v Speaker 2>affect business in goods.

0:14:56.960 --> 0:15:00.680
<v Speaker 3>And and that's that's something to take seriously.

0:15:00.680 --> 0:15:02.560
<v Speaker 2>I don't think i'd have my head in my hands,

0:15:03.280 --> 0:15:05.680
<v Speaker 2>but I think that's the sort of area that you know,

0:15:05.720 --> 0:15:07.840
<v Speaker 2>you think, Okay, I thought we might have got off

0:15:07.880 --> 0:15:10.840
<v Speaker 2>a bit lighter than that, because again, if you stretch it,

0:15:10.880 --> 0:15:13.600
<v Speaker 2>if you think, if we're at ten, then I start

0:15:13.640 --> 0:15:17.880
<v Speaker 2>to worry that the bad guy's so called the Gang

0:15:17.920 --> 0:15:20.880
<v Speaker 2>of fifteen or whatever he's calling them, then they're they're

0:15:21.040 --> 0:15:23.240
<v Speaker 2>presumably they're going to be they're going to be up

0:15:23.240 --> 0:15:27.120
<v Speaker 2>around twenty or more. So you know that that would

0:15:27.120 --> 0:15:28.920
<v Speaker 2>sort of that would sort of bother me for both

0:15:28.960 --> 0:15:34.000
<v Speaker 2>those reasons, but you know, it's entirely in his hands.

0:15:34.600 --> 0:15:37.320
<v Speaker 2>Bear in mind, and I think it's important I don't

0:15:37.320 --> 0:15:40.600
<v Speaker 2>diminish any of this, and the numbers speak for themselves,

0:15:41.240 --> 0:15:44.880
<v Speaker 2>but bear in mind that you know, this is goods

0:15:44.920 --> 0:15:48.960
<v Speaker 2>trade and as far as we know, services trade directly

0:15:49.000 --> 0:15:52.080
<v Speaker 2>appears not to be affected, which is a vast amount

0:15:52.120 --> 0:15:55.960
<v Speaker 2>of global trade, and of course the impact will still

0:15:56.000 --> 0:15:59.600
<v Speaker 2>affect services industries. And you know, most people seem to

0:15:59.600 --> 0:16:02.600
<v Speaker 2>think that goods and goods and services and services, but

0:16:02.640 --> 0:16:05.000
<v Speaker 2>in actual fact you could argue that in real value

0:16:05.040 --> 0:16:09.840
<v Speaker 2>added terms, most goods are actually majority services. But having

0:16:09.920 --> 0:16:13.320
<v Speaker 2>said all that, I think it's not to diminish the

0:16:13.360 --> 0:16:17.800
<v Speaker 2>fact that it's it's a serious that's a serious attack.

0:16:17.600 --> 0:16:20.600
<v Speaker 3>On growth in the world economy.

0:16:20.680 --> 0:16:22.120
<v Speaker 2>So if you're up at that top end, I don't

0:16:22.120 --> 0:16:24.680
<v Speaker 2>think the markets are going to clearly are clearly going

0:16:24.720 --> 0:16:25.880
<v Speaker 2>to send a message on that.

0:16:26.160 --> 0:16:27.120
<v Speaker 3>So let's hope not