By George Willoughby
The ongoing trade dispute between the United States and China has exacerbated with president Trump threatening a further $100billion worth of tariffs on Chinese imported goods.
The American president has outlined his intentions of protecting domestic industries, as billions of separate duties have already been placed on Chinese goods such as motor vehicles and home appliances.
Unsurprisingly, China has responded with potential further trade protectionist measures being implemented against American imports. The agricultural sector seems to be an area of vulnerability for the U.S. given that China is the second largest market for agricultural exports.
Latest figures in 2017, show that America exports a total of $26.51billion worth of Oilseed, oleagic fruits, grain, seed and fruits. In particular, it is soybeans that could be seriously affected if China are to retaliate with import tariffs themselves.
Haiyan Wang, professor at ‘INSEAD’ states that “half of U.S. soybean exports go to China”. American farmers will definitely suffer, which ultimately is the perfect way for China to hit back and America to escalate the current trade war even further.
Whilst economic giants America and China continue their dispute, the United Kingdom is progressing with Brexit talks, with trade being one of the focal points in the latest discussions with the European Union.
The question is, could the United Kingdom secretly benefit from the United States and China trade war?
Securing new and productive trade deals will be imperative for the United Kingdom to flourish outside of the European Union. It is equally as important to try and secure ties with countries outside of the EU, as well as trying to maintain healthy trading relationships with nations remaining in the EU.
What better way for the United Kingdom to take advantage of the conflict between China and America by showcasing itself as the next best trading alternative. Prices of imported goods between the two countries will continue to rise, as long as both countries continue to use trade protection measures which looks inevitable.
According to the ‘Office of the United States Trade Representative’, the current value of American goods and services imported to China amounted to $478.8billion. With rising tariffs, the expected outcome is for Chinese imports into America to decrease significantly, questioning as to whether domestic industries can match the levels of demand by American businesses, which is being supplemented by Chinese goods and services.
Given the scale of how much the U.S. trade with China, it is more than likely that domestic outlets have the capability to combat the impact of losing trade with China. This is where the United Kingdom has chance to appeal as a cheaper, more beneficial option for both countries. Granted, the United Kingdom does not have the resources available to match the production levels of China, but there is a real opportunity for the United Kingdom to secure large-scale deals with the likes of America.
Arguably, one of the main economic benefits of leaving the European Union, is the freedom to strike better deals with countries outside of it. The EU implement their own trade protectionist measures, which restricts countries within the Union to act freely and within the countries best interests.
Without a doubt, in order to trade with America and China, it has to be mutually beneficial, and a productive trade deal may not necessarily be a free one. But, it’s the ability to negotiate, which the United Kingdom will have once it leaves the European Union.
It goes without saying, the United Kingdom is heavily dependent on the European Union for the bulk of its trade, but, it’s also worth noting the importance of the United Kingdom and the trading partners in the EU.
As mentioned earlier, agriculture is a significant sector across the globe, specifically from an economic perspective. For the United Kingdom, the agricultural industry could benefit greatly from leaving the European Union, despite being labelled as a sector that will be significantly worse off.
According to Development Economics, in their final report of ‘Contributions of UK agriculture’, “agriculture contributed around £24 billion of revenues in 2015… and provided around 475,000 jobs”. There is already a platform for the United Kingdom to expand and prosper from trading with countries outside of the European Union. America and China are going to need new trade deals to help supply the domestic demand for foreign imports.
How is this achievable? Well, the United Kingdom, as a member of the European Union have had international trade agreements completed on their own behalf with important non-EU trading partners. After the United Kingdom leaves, then replacement deals will have to put in place with these nations. The trade predicament between America and China is a great opportunity to strike new and lucrative trade deals as these two global giants seek trade elsewhere.
A lot of focus has been placed upon how much the United Kingdom’s agricultural industry will be affected, and it is true, there will be monumental changes. The agricultural policy framework has stood between the United Kingdom and the European Union since the early 1970s, and this will have to change.
However, there should be more consideration regarding how the European Union could potentially suffer from the United Kingdom’s departure. The EU is the destination for around 72% of the United Kingdom’s agricultural exports, whilst at the same time, the United Kingdom is also a heavy importer of agricultural goods from the EU.
A balanced trade deal is mutually beneficial, given how reliant each other are on their trade. But, there is enhanced pressure on the EU to negotiate a new deal because of the trading ties the United Kingdom could establish with other nations. The overall trading potential between countries like America and China is monumental, and it is surely something the EU will be acknowledge as trade talks continue.
The uncertainty of Brexit is something that the United Kingdom will have to endure for the foreseeable future. However, the possibility of becoming even more prevalent with America and China from a trading perspective, is something potentially very exciting as the United Kingdom prepares for life outside of the European Union.