Levelling up secretary Michael Gove shared a tweet yesterday saying: “We’ve secured new free trade deals with over 70 countries since 2016. That’s over £800 billion worth of new global trade.”
The same graphic was also shared by the Conservative Party, and retweeted by over a dozen Conservative MPs.
It’s misleading to imply these trade deals will account for over £800 billion worth of “new” global trade. This is the total value of trade with these countries, not the additional amount that can be attributed to free trade deals themselves.
Additionally, most of these trade deals effectively mirror deals the UK was party to as a member of the EU prior to Brexit.
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‘New’ trade deals
The Department for International Trade (DIT) confirmed to Full Fact that the UK has signed trade deals with 71 non-EU countries, as well as one with the EU.
The vast majority of these countries are countries which the UK already had a trade deal with prior to Brexit, by virtue of being a member of the EU.
When the Brexit transition period ended, those trade deals stopped applying to the UK, and were replaced by these “new” deals, sometimes called “rollover” trade deals.
The BBC reported in September that the UK has signed rollover trade deals with 69 of the countries which it had traded with under the terms of EU agreements before Brexit.
The government has said that to maintain continuity in its trading relationships with other countries it “developed new bilateral agreements that replicate, as far as possible, the effects of the UK’s existing trade agreements with existing partners, through its previous membership of the EU”.
So simply calling them “new free trade deals” lacks some context.
Since leaving the EU, the UK has also agreed entirely new trade agreements with Australia and New Zealand, though neither is yet in force. The government estimates that in the long term these deals will increase the size of the UK economy by between £200 million and £500 million per year.
The UK also signed a new deal with Japan in 2020 which it says “maintains the benefits” of the EU-Japan trade deal but does include some substantive differences. The UK Trade Policy Observatory estimates that this deal will result in no net gain compared to the EU-Japan deal.
The House of Commons Library adds that the UK has signed a “digital trade agreement with Singapore”.
Deals aren’t responsible for £800 billion in new trade
Whether or not all the UK’s trade deals should be called “new”, it’s misleading to claim they account for “over £800 billion worth of new global trade.”
This figure refers to the total value of trade (both imports and exports) in 2021 between the UK and the countries it has a trade deal with (71 non-EU countries, including those the UK has agreed both the rollover and entirely new deals with, and the EU), which DIT told Full Fact is worth approximately £814 billion, based on figures published by the Office for National Statistics.
So it’s not the amount of “new” trade with these countries that has come about since 2016. To give just one example, trade with the EU in 2015 amounted to £520 billion.
Director of the UK Trade Policy Project, David Henig, told Full Fact: "[£]800bn was the total trade under [free trade agreements], in which case this is in no way 'new global trade'".
A free trade agreement (FTA) is a deal that aims to make trade between countries cheaper and easier, often by removing or reducing tariffs (taxes governments place on certain imported goods).
This figure is also not the amount of trade that would be lost if the UK didn’t have trade deals with these countries, because not all trade is a result of countries having trade deals.
For example, the UK Government estimates the genuinely new trade deal with Australia (not yet in force) could increase trade by 53% in the long term (i.e. it estimates the deal could account for around a third of total UK-Australia trade).
And on the other side of things, the UK does a lot of trade with countries it doesn’t have a free trade agreement with, like China and the United States.
The DIT says: “Evidence suggests that FTAs can lead to large, sustained increases in trade in goods between partner countries. A review of many studies of the impacts of FTAs found that that [sic] they can boost total bilateral trade between partners by around 32%, although estimates from the literature vary widely.
“A recent study by HM Treasury, based on different data sources and methodology, estimated that FTA membership is associated with a 17% increase in total trade, on average.”
These figures represent the sort of increase in trade that would be expected when two countries without an FTA, then sign an FTA. The UK’s rollover FTAs, as explained, are different, as they largely sought to maintain continuity of terms from FTAs that previously applied to the UK as a member of the EU.
We have contacted the Conservative party and Mr Gove for comment.
We’ve written about inaccurate claims about these trade deals a number of times previously, after the Daily Express similarly reported that new trade deals struck by the UK were worth £766 billion to the economy, taking the figure for the total value of trade between the UK and countries it has a free trade deal with at that time.
After being approached by Full Fact it later clarified: “In fact, £766bn is the total value of the UK’s trade with those countries and not the additional value of the deals.”
Image courtesy of Chris McAndrew