Most Favoured Nation: (Oh To Be) Lost in Translation

Rollovers, coercion and why Welsh could be the solution

Hello! Welcome to the third edition of my fortnightly newsletter, Most Favoured Nation. Thank you for all of the kind comments and suggestions so far, they are much appreciated. And if you and your friends haven’t subscribed yet, please do.

[As the last session seemed to go down well [if you missed it, you can catch up here], I will once again be joining Dmitry Grozoubinski and Anna Isaac to discuss trade shenanigans over at Dmitry’s twitch feed – tune in here 19:30pm UK time on Monday. ]

Rick rolling

The UK did a decent job rolling over/replacing the EU’s trade deals. Of the around 40 EU trade deals in existence when the UK exited the transition period, the only ones the UK hasn’t yet replicated are those with Algeria, Bosnia and Herzegovina and Montenegro (a deal with Serbia deal was announced earlier this week).

The UK also pioneered some of the most liberal rules of origin provisions the world has ever seen. To over simplify: the UK convinced most of its FTA partners to accept that any EU-originating parts, ingredients, etc. used to make British products could be considered, well, British, to help UK exports meet the rules of origin criteria of the rolled over trade deals. This is known as extended cumulation.

(Extended cumulation differs from diagonal cumulation, because it doesn’t say anything about how UK parts, ingredients, etc. used to make EU products are treated under the EU’s trade deals.)

Without extended cumulation, the new UK trade deals would have been useless to many British exporters because their products wouldn’t be able to qualify for tariff-free trade due to the high proportion of EU-originating content in them.

Nice.

For some of the rollover agreements, these provisions are permanent, for others they are time limited (see table below for a selection). 

And the time-limited nature gives some of these negotiating partners leverage. Once the provisions expire, lots of UK exports will no longer qualify for the trade deals. So it is in the UK’s interest to push for the extended cumulation provisions to be made permanent (a la Japan and Chile); and it is in the trade partners interest to get something nice in return. Ahhh, trade. Don’t you just love it.

Don’t push me around

Are you subject to [Chinese] state-sponsored boycotts of your products? Are you concerned your [Chinese] investments might suffer if you comply with EU supply chain rules? Are you tired of being told what to do [by China]? Would you like to see countries [China] threatened with tariffs and sanctions in response?

If so, you might want to respond the EU’s public consultation on its proposed anti-coercion instrument [which is definitely not just about China].

The consultation runs until June 15th and the instrument itself is part of a broader package of economic weapons tools the EU is developing to help better defend itself from the perceived unfair practices of others.

English: a double-edged sword

On the one hand, the fact that lots of the world speaks English, that international legal texts tend to be written in English, and that the language of business is quite often English is really useful for the UK. But not always.

Say, for example, you wanted to big up your trade minister boss to a journalist in order to win (even more) domestic support from the party faithful, but while doing so unnecessarily insulted the trade minister of a country your boss really wants to strike a trade deal with. In this purely hypothetical scenario, the English language is unhelpful. (Particularly if the country you are negotiating with also uses English as their national language.) Because the insult might get back to the trade minister of the country your boss really wants to strike a trade deal with, and they might get annoyed.

But I have found a solution: Welsh.

You could probably get away with insulting someone you actually want to be mates with for domestic brownie points if you did it in Welsh. Hardly anyone can understand Welsh. And any issues can be blamed on poor translation. But you can’t get away with insulting the politicians of other countries in English and expect them not to hear about it. Especially in the era of the Internet and Twitter. Which is a shame.

(FWIW, I still think the UK and Australia will get a trade deal over the line … probably quite soon.)

Nor-way, Jose

As per the last newsletter, under the terms of the EU-UK trade deal, from 2027 electric vehicles will need to include batteries made in the EU or UK to qualify for tariff-free trade between the two.

Well, the Norwegian battery industry (whose EV batteries would not qualify) has noticed and they’re not happy. They’re also slightly annoyed no one noticed before (I first wrote about it last October). This is particularly grating for them, given the time and money being invested in developing a Norwegian battery industry.

As a result, the Norwegian government is now lobbying the EU and UK to amend their trade deal. To which I say, GLWT. (Seriously – it’s difficult to think of a legitimate justification for cutting Norway out of the loop.)

Wam, bam … CBAM

Some guy wrote a moderately interesting report about the potential impact of the EU’s proposed carbon border adjustment mechanism on developing countries. He predictably proposed that exports from countries benefiting from the EU’s unilateral preference schemes should be exempt. Apparently exempting these exports wouldn’t undermine the EU’s climate objectives because in the grand scheme of things the EU doesn’t import that much from the countries that would be exempt. Hmmm.

[Ed: please read my report.]

Pedant’s corner: SANITARY AND PHYTOSANITARY

British political commentators now find themselves having to discuss sanitary and phytosanitary checks and controls, particularly in the context of food entering Northern Ireland from Great Britain, for which I am truly sorry. And I get that ‘sanitary and phytosanitary is a mouthful’, and it would be much easier if you could just shorted it to ‘phytosanitary’. But you can’t. Sorry.

(I don’t make the rules, I just attempt to enforce them using this newsletter.)

‘Phytosanitary’ means you’re just talking about plant health, which makes no sense if you’re actually talking about sausages. Better to just say something like ‘food hygiene checks’, which is still kinda wrong, because SPS checks can also apply to say human blood, or bull semen … but it’s better than phytosanitary. Unless you are actually talking about plant health. In which case phytosanitary is fine.

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As ever, do let me know if you have any questions or comments. And do join me, Dmitry and Anna on Monday at 19:30 UK time.

Best,

Sam