Speaker 1: So market's very much Stephen holding their breath for this
Speaker 1: announcement in the Rose Garden. Tomorrow, Donald Trump sets to
Speaker 1: lay out his tariff plans and America's trading partners waiting
Speaker 1: nervously to see what awaits them. The EU Commissioned President
Speaker 1: Ursula Vonderlyon has spoken this morning. She says that Europe
Speaker 1: is ready to retaliate, but what should the UK's approach be,
Speaker 1: And please to say to join us at the studio
Speaker 1: now we're joined by Crawford Faulkner, who was until the
Speaker 1: end of last year the UK's chief trade negotiation advisor.
Speaker 1: So really good to have you with us, Crawford, Thank you.
Speaker 1: I saw the Trade Secretary, the Business and Trade Secretary,
Speaker 1: Jonathan Reynolds last week at Chathamhouse. He was talking about
Speaker 1: the UK's trade strategy and I have to say, frankly,
Speaker 1: he was still keeping it very very vague. Is that
Speaker 1: the best approach right now until there is more clarity
Speaker 1: from the US President Donald Trump?
Speaker 2: I think I think you've got to keep your options
Speaker 2: open to some degree until you see what actually happens.
Speaker 2: But I think you have to be and I'm sure
Speaker 2: he is well prepared behind the scenes for certain scenarios,
Speaker 2: so you know you will need to make up your
Speaker 2: mind whether one you're going to retaliate be what your
Speaker 2: response is going to be in terms of whether you negotiate.
Speaker 2: See how you've aligned yourself with business so that you're
Speaker 2: keeping them on track with what's going on, and d
Speaker 2: closely reading and understanding what your foreign partners are doing
Speaker 2: so that you know you have a sense of what
Speaker 2: the global response actually is. All of those things. You
Speaker 2: need to have game plans ready to go. I assume
Speaker 2: that they have, well, they an't communicated in advance, you know,
Speaker 2: I mean, this is a government for goodness sake, you know.
Speaker 3: Now I'm on the outside.
Speaker 2: You know, it's kind of like, yeah, it's pretty difficult
Speaker 2: when you've actually got to try and discern what's going on.
Speaker 2: So but yeah, you know, you're pretty good at asking
Speaker 2: questions so you can find out if you try.
Speaker 4: But given your experience inside the department, you're confident in
Speaker 4: those bands of all been made.
Speaker 3: I don't know what they're doing now.
Speaker 2: Everything was fine when I was there, of course, you
Speaker 2: understand at least till the end of December. No, No,
Speaker 2: I'm sure recently, I'm sure I'm sure they have.
Speaker 1: Can you help me to decipher maybe a hint that
Speaker 1: Johnny Reynolds was dropping last week I asked him whether
Speaker 1: it would be worth scrapping the digital services tax to
Speaker 1: try and get concessions in terms of tariffs from Donald Trump,
Speaker 1: and he said that, you know, I'm sure that there's
Speaker 1: a fair level that will be set. Do you think
Speaker 1: that that is on the table? Is it worth making
Speaker 1: a concession on the digital services tacks? When Rachel reads
Speaker 1: the Chancellor is so fiscally squeezed right now, well.
Speaker 2: Look from the sounds of it, again, I don't know
Speaker 2: what's been going on on that, and it all happened
Speaker 2: after I left, So just to be clear, there's no carryover.
Speaker 2: If I read what's going on in the media, it
Speaker 2: sounds like the government seems to be saying Our government
Speaker 2: seems to be saying that, you know, they're resigned to
Speaker 2: the fact that Trump's going to apply some tariffs anyway.
Speaker 2: So clearly, if that's the case, then you don't make
Speaker 2: any concisions right now.
Speaker 3: He's going to.
Speaker 2: Apply to tariffs, and there's a fundamental question the once
Speaker 2: he's applied whatever those tariffs are as to well Okay,
Speaker 2: what do you do next? They have intimated, clearly from
Speaker 2: what I'm reading publicly, that they're interested in getting rid
Speaker 2: of digital services tax. Now question is is that tactical
Speaker 2: on their part or is that serious? I mean, what
Speaker 2: is it by you? How important is it to them
Speaker 2: that that happened. I have no sense for that not
Speaker 2: being in a room, but I presume that they will
Speaker 2: come back to that after these tariffs are applied. I
Speaker 2: myself would have been a bit skeptical about whether it
Speaker 2: was a sensible straight trade to say no tariffs on
Speaker 2: the UK and get.
Speaker 3: Rid of digital services tax.
Speaker 2: And I don't have the impression, but I don't know
Speaker 2: that that was how it was going. I mean, I
Speaker 2: think it would have been. There was a range of
Speaker 2: things that were being discussed, and so therefore it would
Speaker 2: have been some sort of package exercise. I think if
Speaker 2: you were trapped into a straight deal, which is get
Speaker 2: rid of the revenue from that particular tax, and we
Speaker 2: know what people have said that amount seems to be
Speaker 2: around seven or eight hundred million at the moment that
Speaker 2: you get rid of that to get rid of tariffs,
Speaker 2: which as yet are undefined, that would be a pretty
Speaker 2: narrow and difficult deal, not impossible, But as I say,
Speaker 2: that's not on the table now. The tariffs have now
Speaker 2: been applied, So I think the question is what's the
Speaker 2: combination of elements post application of tariffs that would be
Speaker 2: seriously up for negotiation if the US is genuinely interested
Speaker 2: in getting rid of the Digital services tax, and I
Speaker 2: can imagine that they would be, because they've been trying
Speaker 2: to get rid of it for years prior to Trump. Not,
Speaker 2: of course, you negotiate on it. What you negotiate depends
Speaker 2: on what they have on the table, and as I say,
Speaker 2: my view, but I'm an old fashioned negotiator, would be, well,
Speaker 2: I'm not getting rid of.
Speaker 3: Your tariffs just for that digital services tax.
Speaker 2: You know, you need to go further if I was
Speaker 2: going to do that, and then you're into the logic negotiation.
Speaker 2: But just bear in mind with the Digital services tax,
Speaker 2: that has been seriously negotiated for years, So there's nothing
Speaker 2: new in saying that you're prepared to negotiate on it.
Speaker 2: And indeed the UK government had a deal with the
Speaker 2: Biden administration which sort of settled it pro tem. But
Speaker 2: I don't think there was ever any reason to believe
Speaker 2: that the US Congress would ever have accepted the so
Speaker 2: called OECD consensus on these matters. So, irrespective of what
Speaker 2: Trump would do, I don't think the Congress would ever
Speaker 2: have settled on a deal that would resolve the issue satisfactorily.
Speaker 2: So I don't think there's I don't think of the
Speaker 2: government if it was considering that it's not crossing some
Speaker 2: terrible rubicon. There's nothing really new in that. But only
Speaker 2: people in wank Land know that that's been the case.
Speaker 2: It hasn't made it into general public.
Speaker 4: What else does the UK have to put on the
Speaker 4: table now, Well.
Speaker 3: You know, I think it's a bit.
Speaker 2: You know, again, you tend to think of trade negotiations
Speaker 2: as a there are some game, because that's that's the
Speaker 2: way in which people.
Speaker 3: Talk about them.
Speaker 2: You know, I won the negotiation, I mean, everybody wins
Speaker 2: the negotiation. I made fewer concessions than they made, when,
Speaker 2: of course the economic benefit actually comes from the concessions
Speaker 2: you make far more than the concessions that they make,
Speaker 2: because that's the way the economic world works, but not
Speaker 2: the political world.
Speaker 3: I get that.
Speaker 2: So I think with the UK and the US, you know,
Speaker 2: there will be elements of trading things. I mean there,
Speaker 2: you know, we have we still have some residual tariffs.
Speaker 2: We still have some you know, regulatory arrangements that affect
Speaker 2: goods and services trade that you know, probably could be
Speaker 2: tuned up to be both more efficient and more liberalizing.
Speaker 2: And so do they. And they certainly have trade barriers.
Speaker 2: I've got trade barriers in agriculture. They have a nice
Speaker 2: juicy twenty seven and a half percent tarifon light trucks. Now,
Speaker 2: I don't think we're in the we're in the business
Speaker 2: of making light trucks.
Speaker 3: But you never know.
Speaker 2: If you got rid of that twenty seven and a
Speaker 2: half percent tariffon so called light trucks in the United States,
Speaker 2: you know, maybe one day we could. I mean, who knows.
Speaker 2: That's what the market will tell you. But you bear
Speaker 2: in mind for autos. You know, US is kind of
Speaker 2: strutting around saying how perfect it is on autos. But
Speaker 2: that's where the Big three have been making their money,
Speaker 2: in these gas guzzling light trucks. That's why there's a
Speaker 2: huge tariff on it. That's why the United States has
Speaker 2: protected that market. That's why the United States consumer goes there.
Speaker 2: So you know, there's all that that's up for grabs
Speaker 2: in a negotiation. Not that I'm saying that that would
Speaker 2: be the key to a negotiation. You know, we could say, look,
Speaker 2: we want fly in, fly out visas for our businesses
Speaker 2: to go into the US in a more liberal way,
Speaker 2: just to give you one example. So small things thereat
Speaker 2: and they wouldn't you know, there are all sorts of
Speaker 2: things that you would do, and there are all sorts
Speaker 2: of things that you could do together as well.
Speaker 3: I mean, these days.
Speaker 2: Negotiations don't have to be a pe for you and
Speaker 2: a bean for me. You know, they can actually relate
Speaker 2: to the real economy and they could actually say, listen,
Speaker 2: we want to have some kind of construc coructive future
Speaker 2: relationship on issues like AI and on innovation. I mean,
Speaker 2: you know, United Kingdom has an agreement with with Australia
Speaker 2: which if you read the media you think it was
Speaker 2: all about beef, and sure it's got some beef in it,
Speaker 2: but it's got an amazing chapter on innovation in terms
Speaker 2: of the cooperation between both business and government officials on
Speaker 2: innovation policy.
Speaker 3: So with the United.
Speaker 2: States, with the world's biggest economy, what does the United
Speaker 2: Kingdom need?
Speaker 3: Growth? Growth is what we're after.
Speaker 2: And if you could approach your relationship with the United
Speaker 2: States that actually was a significant liberalizing agreement in areas
Speaker 2: of goods and services, then you're going to shift the
Speaker 2: dial on growth more than you're going to do with
Speaker 2: any other potential negotiating item in the future. Now, Trump
Speaker 2: says he's sort of up for that. I have no
Speaker 2: idea whether that's empty rhetoric or whether it's for real.
Speaker 2: But if it's for real, and even if it's half
Speaker 2: for real, it's the UK's interest to really seize that
Speaker 2: optunity and say, yes, we want to pursue that kind
Speaker 2: of deal.
Speaker 3: We don't want to just find that after you've applied
Speaker 3: these tariffs.
Speaker 2: All we're talking about is how we get rid of
Speaker 2: these additional tariffs and what we have to pay for them.
Speaker 2: It's like, how do we build a bigger deal on
Speaker 2: trade and economic issues in the future. Now, I think,
Speaker 2: you know, we have every reason to give her to go.
Speaker 3: Now. It might not work, but nothing ventured, nothing gain.
Speaker 1: We're focusing a lot on the US here, and there's
Speaker 1: a whole world out there. Right there's also an European
Speaker 1: Union that Donald Trump doesn't seem to be very happy with.
Speaker 1: Is it realistic for the UK to be trying to
Speaker 1: hedge relations between the US that you China as well,
Speaker 1: And is it actually possible to have equal, grown up
Speaker 1: businesslike relations with all three simultaneously.
Speaker 2: Not necessarily equal, but grown up as good. And I
Speaker 2: think there's a track record that you can yes. So
Speaker 2: the short yes, I mean, you know, United Kingdom has
Speaker 2: every reason to be doing what it wants to do
Speaker 2: right now with the EU, which is to sort of
Speaker 2: tidy up some of the frictions that have been left
Speaker 2: over from Brexit and to see whether they can actually
Speaker 2: be cleaned up in a way that particularly small businesses
Speaker 2: are finding transactionally difficult.
Speaker 3: So of course you can do that. Now.
Speaker 2: The government's been very clear that it's not interested in
Speaker 2: going back into the Single Market and it's not interested
Speaker 2: in going back to the customs un And now if
Speaker 2: that was the case, then some things that you might
Speaker 2: end up doing with the United States. But I don't
Speaker 2: know whether you would would become more difficult, but that's hypothetical.
Speaker 2: I don't see any huge problem there, So there's no
Speaker 2: reason why you shouldn't be able to tidy those things up.
Speaker 2: You already have are very by global standards, a very
Speaker 2: good free trade agreement with the European Union, so I mean,
Speaker 2: from the European point of view, I don't see that
Speaker 2: as as an obstacle. There are a couple of things
Speaker 2: which you might end up doing with the EU at
Speaker 2: the very micro product level that might be problematic with
Speaker 2: the US at the micro product level, but I don't
Speaker 2: see them as kind of deal breakers and show stoppers,
Speaker 2: and you should be. I mean, we're talking about the
Speaker 2: United States because we're going to have a major theatrical
Speaker 2: performance in the next little while in the Rose Garden
Speaker 2: and where they're permitting. So but for the rest of
Speaker 2: the world, the United Kingdom still can and should be
Speaker 2: pursuing broad and successful trade and economic agreements with the
Speaker 2: fast growing economies of the world. So, you know, we are,
Speaker 2: as I understand it, still negotiating with India, We're still
Speaker 2: negotiating with the Gulf. We're in and here we're into
Speaker 2: real want territory because you know we're in we're in
Speaker 2: an Asia Pacific agreement which is called CPTPP, which you know,
Speaker 2: I don't know why it's called CPTPP. I think you
Speaker 2: can blame the Canadians for that or under Trudeau for that,
Speaker 2: but a fact it's an Asia Pacific trade agreement with
Speaker 2: some of the fastest growing economies around, and there's a
Speaker 2: cue of people wanting to join it. So you know,
Speaker 2: we should the United Kingdom be really pressing now to
Speaker 2: accelerate the processes for countries to accede to that agreement
Speaker 2: so that we can get the benefits from a broad agreement.
Speaker 3: With that part of the world.
Speaker 2: And we have to think about what we want to
Speaker 2: do with Brazil and mercasor for instance. You know, there's
Speaker 2: a whole range of countries in Asia, whether it's Thailand
Speaker 2: or Indonesia for instance, which are fast growing prospects. So
Speaker 2: of course you have to go after all of those things.
Speaker 2: And I see no reason why.
Speaker 4: Not opportunities there as well, thinking I had though to
Speaker 4: tomorrow's announcement, where is the UK vulnerable? If you were
Speaker 4: in your old job and you're watching the announcement tomorrow,
Speaker 4: what would have you with your head in your hands
Speaker 4: saying this is really bad for the UK.
Speaker 2: You know, it's funny. I don't work for the UK
Speaker 2: government anymore, but I kind of I still feel somehow
Speaker 2: weirdly disloyal. If I was to be passing out information
Speaker 2: of what would really hurt the UK that could be
Speaker 2: advantageous to the United States, you know, not as if
Speaker 2: I imagine for a minute that anybody would listen to
Speaker 2: a word I say, so probably I should say yeah, No,
Speaker 2: I mean I think, you know, I think generally I
Speaker 2: would look at the whole picture. You know, if he
Speaker 2: goes to it, you know, a very high end of
Speaker 2: tariff's across the board, you know, you know, my head
Speaker 2: would be in my hands for the consequences for the
Speaker 2: global economy. I mean, in other words, if you're if
Speaker 2: you've got really high tariffs applying to the European Union
Speaker 2: and Japan and the United.
Speaker 3: Kingdom, you know.
Speaker 2: And you're talking twenty percent plus, and it's across the board,
Speaker 2: and it's like, oh my god, I mean, this is
Speaker 2: this is the kind of shock you'd really be scared about.
Speaker 2: And that kind of dwarfs everything else, just simply because
Speaker 2: that puts you, you know, that that puts you in
Speaker 2: the scenario, the upper scenario that all the economists have
Speaker 2: been assessing for what the impact would be globally.
Speaker 3: Now, all the.
Speaker 2: Noises that are coming out of the White House are
Speaker 2: that he's not going to that extent, but I don't
Speaker 2: know whether it's true or not.
Speaker 3: Nobody really knows.
Speaker 2: For the UK, you know, it sounds like, you know,
Speaker 2: everybody's on the Donald Trump naughty step. It sounds it
Speaker 2: sounds like in terms of the good students that are
Speaker 2: on that step, you know, we might be down the
Speaker 2: good student end of that. So you know, if you
Speaker 2: if you're down at five percent or lower, that's what
Speaker 2: they apply. That is kind of like that's still damn annoying.
Speaker 2: But I think that's reasonably survivable for the time being.
Speaker 2: Once you get above ten percent or you know, then
Speaker 2: I think you sort of say to you that that
Speaker 2: that's you know, that's something that you know will will
Speaker 2: affect business in goods.
Speaker 3: And and that's that's something to take seriously.
Speaker 2: I don't think i'd have my head in my hands,
Speaker 2: but I think that's the sort of area that you know,
Speaker 2: you think, Okay, I thought we might have got off
Speaker 2: a bit lighter than that, because again, if you stretch it,
Speaker 2: if you think, if we're at ten, then I start
Speaker 2: to worry that the bad guy's so called the Gang
Speaker 2: of fifteen or whatever he's calling them, then they're they're
Speaker 2: presumably they're going to be they're going to be up
Speaker 2: around twenty or more. So you know that that would
Speaker 2: sort of that would sort of bother me for both
Speaker 2: those reasons, but you know, it's entirely in his hands.
Speaker 2: Bear in mind, and I think it's important I don't
Speaker 2: diminish any of this, and the numbers speak for themselves,
Speaker 2: but bear in mind that you know, this is goods
Speaker 2: trade and as far as we know, services trade directly
Speaker 2: appears not to be affected, which is a vast amount
Speaker 2: of global trade, and of course the impact will still
Speaker 2: affect services industries. And you know, most people seem to
Speaker 2: think that goods and goods and services and services, but
Speaker 2: in actual fact you could argue that in real value
Speaker 2: added terms, most goods are actually majority services. But having
Speaker 2: said all that, I think it's not to diminish the
Speaker 2: fact that it's it's a serious that's a serious attack.
Speaker 3: On growth in the world economy.
Speaker 2: So if you're up at that top end, I don't
Speaker 2: think the markets are going to clearly are clearly going
Speaker 2: to send a message on that.
Speaker 3: So let's hope not