The Brexit process is at an impasse. The prime minister’s Chequers proposals were shredded by other European Union leaders at last week’s Salzburg summit. Theresa May’s defiant response from the Downing Street lectern on Friday effectively amounted to saying: “Call us, we won’t call you.” The range of possible endings and outcomes as the Brexit process grinds on has expanded enormously and the only matter upon which there seems to be widespread agreement is that Chequers is not going to be the end-game. 

Three quarters of the specified two-year negotiating period have been chewed up with very limited progress. It’s common, of course, in negotiations such as these for everything to come together at the last minute, but that is no reason to believe that the final deal will be good or even acceptable. Indeed, the more the clock ticks down, the more likely it is the prime minister receives a deeply unsatisfactory “take it or leave it” offer at the last minute.

Believing that a new approach to our exit from the EU and a more proactive engagement with other trading partners is vital, my own Institute of Economic Affairs is launching a research report today. We have titled the paper Plan A+ because, although there is now considerable discussion over the need for the government to adopt a “Plan B”, much of the problem really has been that the UK’s initial handling of Brexit has simply been too narrow. It needs to link its approach to our future relationship with the European Union to our desired new trading partnerships with the rest of the globe.

The unspoken assumption underlying the government’s present strategy is that we need to focus nearly all our efforts on the terms of our post-Brexit relationship with the EU. Only once we have finally concluded a deal there should we turn our attentions to securing better trading arrangements with the Commonwealth, the United States and the wider world.

A central proposition of the IEA’s new paper is that our position as a major global trading nation means that we need to tackle all of our future relationships simultaneously, rather than in sequence.

Striking international trade deals is a vastly complex and technical area and one that the UK has had no direct experience of since entering the common market in 1973. A good way of thinking of the challenge is that we should be playing a series of games of chess at once. On one board, we are engaged in a tight tactical contest with the European Union. On another, we are face-to-face with the Trump administration. On a third, we are exchanging moves with the Trans-Pacific Partnership. And so on. If playing multiple, concurrent games of chess sounds like a challenge, then managing global trading relationships is even more complicated. In international trade talks, a move you make on one chess board has ramifications for your position on all the other boards. So, to be a good player, you need to be excellent at seven-dimensional chess.

The interconnectedness of global trade games essentially can be explained by regulations. Although we often think of removing tariffs as being the key to unlocking free trade, the truth is that non-tariff barriers are far more important. If the rules governing, say, the legal requirements of widget manufacturing are enormously different in Australia compared with Britain, then it is unlikely that you will have much trade in widgets between the two countries, even if the tariffs imposed are zero. To over-simplify, trade talks essentially come down to sitting across a table, brandishing your regulatory rulebook and then seeing what you can agree to alter, remove or align to have a smoother trading relationship with the other side before you leave the room.

If the government’s strategy is to focus on the easiest possible deal with Europe — effectively including a common regulatory rulebook, or even customs arrangements, in many areas — this greatly limits our room for manoeuvre in negotiations elsewhere. Our game of chess with the EU may well be the most important game we are engaged in at the moment, but it doesn’t follow that we should protect a pawn on our European chessboard if the cost is to lose queens, rooks and bishops on other global boards.

Britain is seeking to leave the European Union against a backdrop of paralysis in the global trading system. The present US administration is the most protectionist in generations, certainly in its rhetoric. Global trade growth has stalled and even dipped as a proportion of world GDP. The International Monetary Fund’s Christine Legarde pessimistically describes this situation as “the new normal”. Roberto Azevêdo, director-general of the World Trade Organisation, said in July that “we are heading in the wrong direction and we seem to be speeding up”.

In such a challenging international context and given the many complexities of Brexit, it is perhaps understandable, albeit disappointing, that any British government would set its sights merely on damage limitation. Actually, the opportunities are enormously greater than that. If the UK raised its ambition level and sought to be the catalyst to spread free trade across the world, it could be a powerful and successful agent for change. Alongside delivering a smooth and simple exit from the EU single market and the customs union, the UK should swiftly seek to apply for membership of the Common Progressive Trans-Pacific Partnership (CPTPP) and Nafta. We also should indicate that we will use fully fledged WTO membership to aggressively press for the removal of trade barriers.

To deliver on this more optimistic approach, the government will have to play multi-dimensional chess in a successful, co-ordinated and strategic fashion. At the moment, we are focused only on one set of talks — those with the European Union — and that game seems to be heading for stalemate.
Mark Littlewood is director-general of the Institute of Economic Affairs. Twitter: @MarkJLittlewood