What do you need to know about the international business economy?
Vicky Pryce, Chief Economic Adviser at the Centre for Economics and Business Research, has explored the future of trade several times in her writings for CRF this year. Here are some of the key questions she has answered:
Could you share a few of the highest-impact issues in the business economy we will, or may be, confronted with in the coming months?
“Over the short term, key issues are supply chains, inflation, and ease of trade. There are some indications that supply chain pressures are easing. But if anything stops their relaxing, such as war or some kind of unexpected reaction from China, that will be a problem. Inflation is linked to supply chain issues to some extent – it will be good news if inflation is temporary. Finally, interacting with the wider economic community across the world is essential. Anything that makes trade harder or more expensive will be an issue. We will have to watch and see what happens in relation to globalisation and, for the UK, the cost of trade because of Brexit. Over the long term, climate change is a key concern. More generally, I worry about the competitiveness of the UK as the EU seems to be getting its act together and really behaving as a single market in ways we haven’t seen before.”
What’s the forecast for trade and Brexit?
“Brexit is still causing trade challenges which are likely to have a dampening effect on imports and exports for some time…[which is fuelling] a continued squeeze on the UK economy and living standards.”
“[That said], trade will continue to fuel growth – reshoring to restore better stability in supply chains may happen but will be limited.”
What are the key problem areas in our trade relations?
“[T]he new external economic, political and defence alliances which the UK is currently building post-Brexit are straining relations with Europe. Tensions over Taiwan between China on the one hand and the US, Canada, Australia and (to a point also) the UK on the other have heightened recently.
Brexit was a major event in the global business landscape – what other events have had a major impact?
“The fall of Afghanistan to the Taliban and the US withdrawal has reignited concerns over global terrorism. Iran is still subject to numerous sanctions with the nuclear issues still unresolved. And despite some easing in the trade wars since the end of the Trump era, tariffs on a variety of traded goods and investment restrictions between the US and China and also the EU and China remain. The WTO regularly reports that non-tariff barriers are still very much in operation worldwide.”
Now that we’re out, how is the EU doing in a trading context?
“[A] potentially unsettling race for supremacy seems to be emerging between the three main blocks – US, China, and the EU – in technology, in innovation, and also in currency domination. The EU is keenly aware that its shares have underperformed internationally in the recovery phase, and that in sectors such as tech that have shone, the EU lags seriously behind the US and China.”
Are there any potential upsides from Brexit, away from the problems identified here?
“In other areas, interestingly and against expectations, the UK’s exit from the EU has if anything accelerated moves by the block to push for greater unity across a wide spectrum of activities including in the areas of energy, capital markets, digitalisation, banking, and climate change.”
To find out more about CRF’s geopolitical research, check out our research library:
Post Meeting Notes: Geopolitical and Trade Outlook, Jan 2022
HRD Briefing 2022: Geopolitical and Global Trade Outlook, Nov 2021
UPCOMING CRF CONFERENCE:
Trading in the New
Featuring Prof. Amelia Hadfield, University of Surrey, delivering The Geopolitical Challenge