There was a time when the terms ‘Britain’ and ‘trade’ would have been almost synonymous. For over two centuries we were the trading nation. From the intellectual pioneers such as Adam Smith, whose book ‘the Wealth of Nations’ made the case for free trade, to the Royal Navy’s patrol of the world’s trade routes to the might and resilience of the British Merchant Navy, this country was at the forefront of a free and open trading world. And this party also played its part. When Sir Robert Peel fought against the vested interests of the day to repeal the corn laws and prevent the exploitation of the poor, he set the tone for a Conservative party that was to become the most successful that the democratic world had ever seen.
It is astonishing then that for the last 43 years, trade has not been a primary responsibility of the United Kingdom but outsourced to the common market that would develop eventually into today’s European Union. All that is about to change. As a result of our historic decision on 23 June to leave the European Union, our new Prime Minister, Theresa May, has decided to put trade back at the heart of government. The new Department for International Trade will undertake that task and I am proud to be the first dedicated Secretary of State for Trade in decades.
We meet here in Birmingham at a moment of great national change. The result of our referendum in June was clear. The British people instructed us that they wanted to be given more control over the decisions that affect them and that is what we are working hard to deliver. That includes getting the right deal for Britain abroad, making a success of our exit from the EU and shaping an ambitious global role that puts Britain’s interests first.
In the task ahead I’m fortunate to be assisted by three of the most talented ministers in government – Greg Hands, Mark Price and Mark Garnier. Not only do they bring expertise and endless hard work to the task but they are amongst the nicest people I have worked with in government – and we are ably assisted by our terrific PPSs – Iain Stewart and Helen Whately and our wonderful Government Whips – Heather Wheeler and Baroness Mobarik. In the 43 years since we last had responsibility for our own trade the world has changed beyond recognition. We have seen the fall of the Berlin Wall and the collapse of communism, a technological revolution with the rise of the Internet and e-commerce and the emergence of new economic giants such as China and India who will influence the world of the future.
The phenomenon that we have come to know since the mid-1990s as globalisation represents an acceleration of the trend in which the world is increasingly compressed economically, culturally and politically. It brings with it an increasing interdependence that means we cannot insulate ourselves from instability in far-flung parts of the global economy. But it has also brought the chance to share prosperity, liberty and empowerment with millions of our fellow human beings across the world who had only ever known poverty, hopelessness and oppression. The ability to trade every minute and everywhere means that we have the opportunity to increase our links with those trading partners and markets who are functionally like us but not necessarily geographically close to us. Technological advances are dissolving away the barriers of time and distance. I have often said that if Francis Fukuyama had called his book “the end of geography” rather than “the end of history” then he would have been more accurate about the world in which we now find ourselves. I think the term globalisation could almost have been written with Britain in mind. It is an era where we have a tremendous opportunity to help shape the world around us for the benefit of all.
It is into this environment that the new Department for International Trade has come. The Department has three tasks:
First, to promote the export of British goods and services around the world to help create sustained prosperity for all our people;
Second, to facilitate investment – continuing the phenomenal flow of foreign direct investment into the United Kingdom that has helped produce a sustained and strong economy as well as ensuring that our overseas investments produce future income and help expand and mature the markets that we want to sell into;
And thirdly, to generate the trade negotiating capability that we will require as we leave the European Union and take our place as an independent trading nation, championing the cause of free and open trade.
Intuitively, we are a trading people. We dug canals and built railways to get our goods to market more quickly and, in the process, helped build our great industrial cities. Raw materials would enter Lancashire mill towns and then be transported to far-flung places on the globe using the might of the British merchant Navy. This small island nation, sitting at the northern edge of Europe became the world’s largest and most powerful trading nation. Not only did we create and dominate whole areas of global trade but we even managed, literally, to sell tea to China and boomerangs to Australia. And in our best performing sectors we continue that tradition. 1.68m vehicles were made in the UK in 2015. Forecasts suggest that on current performance two million vehicles a year will be made in Britain by 2020, beating a record that has stood since 1972. Car manufacturing generated more than £63 billion in turnover in 2015 and delivers £12billion in net value to the British economy. It’s big business again. In the Northwest of England, a car rolls off the production line in JLR’s Halewood plant every 80 seconds, exported to 170 countries worldwide. Trade has been the building block of who we are.
But there are two problems that we have to tackle. The first is a slowdown in world trading activity. The World Trade Organisation has just downgraded its forecast for the growth in international commerce. It will be the first time that we have seen the share of trade as a share of global activity falling since 2001 and the events of 9/11. The voices of protectionism are out there and we need to drown them out by a clear and passionate defence of free trade. We have learned from history that isolationism and protectionism never end well. We must take every opportunity to make the case for open markets with reducing tariffs and the dismantling of non-tariff barriers, the practices and regulations that make it more difficult to do business. And we need to deal with a second problem here at home.
Despite the spectacular successes of some of our biggest exporters, which are now global brands, the UK has experienced a deteriorating trade performance since 2011, with our exports growing more slowly than some of our G-7 counterparts including United States, Germany and France. As I set out in a speech on free trade last week in Manchester, exports now account for only 27% of our GDP compared to the EU average of over 47%. Even if we take the most favourable measure, a value added estimate, we still trail behind by 21% to 33%. We cannot duck the challenge of a current account deficit, which currently stands at a record level of 5.9% of GDP.
Improving the UK’s productivity must be at the heart of this, which is why the Chancellor Philip Hammond has rightly made this a priority but we must also rebalance our economy with exporting playing the sort of role it has done in the past. It will come as a surprise to many that only 11% of British companies export anything beyond our borders.
We know from the performance of our best that we could do much better overall. So we need to stimulate and support our export potential. That is why we will be setting out a range of measures to help encourage those businesses who do not currently export to help play a greater role in our national prosperity. If the Germans and Americans can do it in the same global trading environment then so can we. We are already moving our staff who support our exporters to where the best market opportunities exist. That is why, for example, we are opening three new offices in the US- in San Diego, Minneapolis and Raleigh/Durham and more new centres to help our exporters will follow.
These are challenges that we would have to face whether or not we remained in the European Union but tackling them now will help us take advantage of the opportunities that await us following the brave and historic decision of the British people to leave. The Prime Minister has said clearly that Brexit means Brexit – and for those who believe it can be indefinitely postponed or that there might be a second referendum or that we might stay by some back door mechanism, let me tell you, Theresa May is not someone who is known for saying anything, other than what she absolutely means.
While we remain inside the European Union we are bound by its rules not to negotiate any new trade agreements, although we are able to discuss the impediments that we might wish to eliminate ahead of agreements we might reach with other countries when we leave. That is why you will hear even the most fervent advocates of a free trade agreement with the United Kingdom reiterating that they have to deal with the EU first. And as long as we remain a member we will continue to push for EU agreements that open up global trade such as CETA, the EU free trade agreement with Canada. Their prosperity increases our prosperity, and a more open global market can genuinely be a win-win for us all.
And both while we remain in the EU and after we leave, we will continue to push the case for Britain as a great place to do business. In case you haven’t noticed, the sky didn’t fall down on 24 June. For instead of investors fleeing the UK we have seen a record inward investment of £24 billion by the Japanese company, Softbank in Cambridge as well as a host of other new investments. And why does investment come to Britain? It comes because we have many natural advantages, advantages that we will continue to exploit. We have a system of law, including commercial law that is admired across the whole world.
We have a skilled workforce, low levels of industrial disruption, low regulation, low taxation, some of the best universities in the world, a strong research base, we speak English and we are in the right time zone for global trading.
And it is the success of global trading that is key, not only to our own future prosperity but in liberating the millions of our fellow human beings who still live in the scandal of global poverty. According to the World Bank, in the three decades between 1981 and 2010, we have succeeded in producing the single greatest decrease in material human deprivation in history. At a time when the population of the developing world has increased by almost 60%, the number of those in extreme poverty has dropped from around 50% to around 20%. It is a staggering achievement. Yet, free trade by itself will not be enough on its own to be the empowering and liberating tool that many of us want to see. Research tends to suggest that while trade does indeed reduce poverty, it can only do so effectively where there a number of pre-existing conditions. These are; high levels of education, developed financial sectors, and, hugely importantly, good governance and minimal corruption. In a classical Adam Smith analysis, these factors would enable an economy to reallocate resources effectively and the good news is that there are many more developing countries that satisfy the tests.
A continued focus on good governance, mediated and encouraged by international aid and assistance programs, combined with increasing attempts to see a more open and liberal trading environment, are our best hope to see grotesque levels of poverty consigned to history. Trade and development can, and should, work together which is why I am delighted that the secretary of state for International development, Priti Patel and I will be making a joint visit to Africa in the New Year.
There is much to celebrate in the success of the era of globalisation- the emergence of China from poverty into a new era of prosperity and expectation, the rise of India, the increase in global trade and a reduction in poverty. Yet we must also be aware that many people are wary about the rate of change in the era of globalisation. They may fear that the traditional occupations in which they have spent their entire lives will disappear as a result of developing technologies. They may be unsettled by the impact of high levels of immigration or worried about the loss of jobs as other markets become more competitive for labour. Of course change can be unsettling which is why we must reassure people that the government will play its part in equipping the country for change. We must reassure them that we will make it a priority to upskill our workforce through education and training and that we will make the necessary investments in the infrastructure we will need in the future, including both traditional hard infrastructure and equally crucially, digital infrastructure. All of this is part of our plan to ensure that we have an economy that works for everyone.
I believe that free, fair, and open trade is as fundamental to the prosperity of the United Kingdom and the world economy today as it has ever been. We, more than most peoples of the world, should be confident and optimistic about what can be achieved – we have been there. The global influence that we enjoy today is a product of our trading history and the efforts of the pioneers, innovators and traders who made it possible. Yet, there are those who try to portray the referendum as a sign of a Britain looking inwards, of a people who are turning their back on a more open world. Some do it out of ignorance, others because they simply don’t like the result of the vote. How little they understand the British people.
We have always been a confident and outward looking nation, always refusing to be constrained by our size or island status. The national pride felt after coming second in the Rio Olympics and Paralympics reinforces what can be achieved by a determined population of less than 65 million. We will harness all our natural advantages as we seek to shape a new role for our country outside the European Union. We will be working across Whitehall with Boris at the Foreign & Commonwealth Office, and David at the new department for exiting the EU to ensure that the UK not only leaves smoothly but is at the forefront of global trade when we do.
The British people presented us with a shining opportunity to make history. Will not ignore it or fritter it away. We are not afraid of the challenges: To earn, to compete, to export, to innovate, to trade. We will lead the charge once more towards a world of open and fair trade – just as we have done in the past. We are not afraid to lead or to take our place on the world stage, to shape the world rather than be shaped by it. No, we’re not afraid we are inspired, we are emboldened and we are ready. So, let’s rise to this challenge, to our golden opportunity, as never before.
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