The Economist - USA (2020-02-01)

The EconomistFebruary 1st 2020 Britain 51

T

he americanreactiontoBritain’sdeci-

siontogiveChina’sHuaweia roleinits

5 Gnetworkwasa foretasteofthedifficulty

ofpost-Brexittradenegotiations.Republi-

cansenatorssaiditwouldmakea bilateral

tradedealmoreproblematic.

Britainalreadyhasitsworkcutoutsim-

plyreplicatingexistingeudealswithSouth

Korea, Mexico, Canada and others. The

numbersarenotencouraging.Brexiteers

notethat90%ofworldgrowthwillbeout-

sidetheeuoverthenextdecade.Yetthe

government’sownanalysisfindsthatthe

combinedbenefitoffree-tradedealswith

America,Canada,Japan,Australiaandoth-

erbigcountrieswouldaddlessthan0.5%

togdp, a smallfractionofwhatwillbelost

throughmoretradefrictionwiththeeu.

Wheretofocus? America,thebiggest

marketforexports,isanobviouscandi-

date.UntiltheHuaweidecisiontheTrump

administrationwaspositiveabouta quick

deal.Brexiteerslikeitasitwouldmakeit

hardtoswitchbacktotheeu. YetAmerica’s

priorities of opening up food markets and

drug prices do not appeal to consumers (or

the government). A row over digital taxes

may also hamper a deal.

America requires any deal to lapse if its

partner negotiates with China, and Chi-

nese deals are one-sided. India is more pro-

mising, but its government is not trade-

friendly and it sees easier visas for Indians

as a precondition. Sam Lowe of the Centre

for European Reform think-tank points to

Japan, Australia and New Zealand as part-

ners that might set a template for other

deals. The government is keen on Japan,

though one concern is that it cannot do bet-

ter than the eusince the terms of the eu’s

deal requires it to get the same benefits.

Most politicians favour full free-trade

agreements. Yet Peter Mandelson, a former

eutrade commissioner, says ftas don’t

come free, don’t cover all trade and take

ages to agree. So it may be sensible to focus

on removing specific barriers or on mutual

recognition. It may be easier to do this for

financial services with America than get a

full fta. Liam Fox, a former trade secretary,

cites the removal of a Chinese tariff on

Northern Irish milk as an example.

Sectors matter too. Big companies can

deal with tariffs, trade and customs barri-

ers quite easily, but small firms find it hard-

er. Efforts to help them could pay divi-

dends. A new report from the uk trade

policy observatory at Sussex University

and the Federation of Small Businesses

proposes new information centres and hel-

plines specifically designed to encourage

small firms to cope with trade red tape.

Above all is the idea of looking at ser-

vices, not goods. Non-tariff barriers matter

more than tariffs, and they affect services

most. David Henig, a trade economist,

notes that services account for 80% of Brit-

ain’s gdpand 40% of its exports, a share

that is growing fast. Yet progress towards

freer global trade in services has been gla-

cial. America and Britain are, respectively,

the world’s biggest and second-biggest ex-

porters of services. Could they team up to

push greater liberalisation? 7

WhenBritaintriestostriketradedeals,

itmayfindthatsmallisbeautiful

Tradedeals

Thirdcountry

stories

At your service

Britain, exports to selected countries

2018,£bn

Source: ONS

Ireland

France

Netherlands

Germany

United States

806040200

Goods Services

O

ne phrasehas cropped up again and

again in Britain’s migration debate

since 2005. That was the year Tony Blair,

running for his third term as prime minis-

ter, promised an Australian-style points-

based immigration system. As down un-

der, marks could be awarded for, say, qual-

ifications, linguistic ability or relative

youthfulness. The idea is popular on the

right, too: Nigel Farage, one of the archi-

tects of Brexit, often talks about it.

Britain’s membership of the European

Union meant such a scheme could never be

applied to all arrivals. Its rules allowed any

citizen of another member state to move to

Britain, regardless of their characteristics.

In some years, the bloc supplied most of

Britain’s newcomers. But Brexit changes

the calculus. Boris Johnson, the prime

minister, has promised to end freedom of

movement and reshape immigration. His

home secretary, Priti Patel, tasked the Mi-

gration Advisory Committee, an official

panel of wonks, to look to Australia.

Yet the committee’s report, published

on January 28th, is unenthusiastic. It em-

phasises that other countries with points,

like New Zealand and Canada, only use

them in parts of their immigration system.

The authors argue that the current system

for recruiting long-term workers from

abroad—under which non-European mi-

grants must have a job offer—already pro-

vides workers with the right skills, so there

is no need for additional filtering. Nor do

points-based systems guarantee the de-

sired type of migrant. The report explains

that when Britain used a similar approach

to recruit talented migrants from outside

the eubetween 2002 and 2006, it awarded

high scores to those with a phd, an mbaor

for GPs. But only 2.8% of successful appli-

cants had a phd, 2.3% an mba, and 0.5%

were gps.

The committee essentially proposes

that all applicants should be processed un-

der the current system for migrants from

outside the eu, with a few tweaks, includ-

ing allowing them to take up jobs that re-

quire the equivalent of a-level qualifica-

tions, not only degrees. Most potential

migrants would need a job offer with a

prospective salary above the bottom quar-

tile of the range for that role and above a

threshold for all eligible jobs, which would

fall by 15% to £25,600 ($33,300), to reflect

the broader range of eligible jobs. There

would be some exceptions to the thresh-

old, such as health-care workers. A points

system could be used to rank applicants

without a job for a separate visa for “excep-

tionally talented” people, which currently

admits several hundred migrants a year.

The committee acknowledges that

tighter restrictions on European immi-

grants would dent economic growth and

employment levels. Firms starved of cheap

labour would have to generate more from

existing resources, though the committee

expects only slight increases in productivi-

ty. But the lower salary threshold would at

least make it easier to recruit non-Euro-

pean workers, says Ian Robinson of Frago-

men, a law firm. “It will mean less contort-

ing what a person is paid to fit the system.”

The government can choose to ignore

the report. Within hours of its publication,

it reaffirmed its commitment to introduce

a points-based system. But there is not

much time for big changes. A complex new

system would mean retraining Home Of-

fice staff and tweaking itsystems by the

time the transition period—during which

Britain and the euapply the same rules—

ends in December. The government is

more likely to accept most of the commit-

tee’s recommendations but nevertheless

call it a points-based system. As Alan Man-

ning, the committee’s chair, writes, such

branding “is, forgive the pun, pointless”. 7

Britain’s new immigration system will

probably look quite like the old one

Immigration after Brexit

Points of departure