The view from China
Ongoing restrictions
The long-suffering inhabitants of Beijing have been restricted to staying within city limits until early March at the latest.
At the time of writing, UK-China direct flights to Hong Kong have been suspended due to an uptick in Covid-19 cases. As a result, international travel (and the opening of direct flights to mainland China from the UK) will remain a key business issue for much of 2022.
China’s desire for increased regional integration
The beginning of the New Year also marked the start of the Regional Comprehensive Economic Partnership (RCEP), which China is keen to join and reinforce its own regional integration.
This new vast trading block will cover some 30% of global GDP and see close to 90% of tariffs phased out. Provisions relating to state owned enterprise (SOE) reform as well as labour and employment regulation have been watered down.
Despite this, the fifteen country-strong trade pact - including Japan, South Korea and China - will offer a huge trading platform and a catalyst for closer regional integration.
Reducing Chinese impressions of the UK
In December, Visit Britain published its annual review of the UK’s image overseas – and it makes for sobering reading, with Britain down from 2nd place (out of 60 countries) in 2020 to 5th in 2021.
For the first time, China’s impressions of the UK were markedly lower in 2021 than in 2020. Sectors covered included culture, people, tourism, exports, immigration-investment and governance.
Clearly the UK and organisations such as the CBI must do all they can to reverse this trend.
The view from Europe
The departure of Lord Frost and the Foreign Secretary’s new Brexit brief
Later this week, the Foreign Secretary, Liz Truss will hold the first set of talks between the UK and EU following the resignation of Lord Frost at the end of last year. Truss taking up the Brexit brief could indicate a slight shift in direction for the government’s policy on Brexit this year. For example, that Brexit is no longer a cross-government priority – and is now seen as a foreign affairs issue.
Currently, it’s unclear what Lord Frost’s resignation will mean for the UK’s longer-term Brexit strategy. In his resignation letter, Frost re-iterated his support for a ‘Singapore-on-Thames’ style Brexit with “a lightly regulated, low-tax, entrepreneurial economy”. It is unclear what the government’s position on this will be under Liz Truss. The CBI is often hearing from members the challenges posed by the UK creating different rules to the EU’s which often leads to added costs and risks investment into the UK.
The ongoing threat of Article 16
Secondly, this all comes against the backdrop of the government repeating its threat of triggering Article 16 if they cannot reach an agreement with the EU on the Northern Ireland Protocol. Triggering Article 16 would suspend parts of the Protocol, and there are fears it could lead to a wider retaliation between the UK and EU involving tariffs and tougher checks on goods. Whether the government is willing to compromise to ensure this doesn’t happen remains to be seen, especially with growing disquiet among Conservative backbenchers.
The end of various grace periods
Away from the politics, businesses have been working hard to prepare for the ending of various grace periods. Firms now need to fulfil pre-notification requirements for animal and plant-based goods (known as SPS) since 1 January and these goods will have to go through Border Control Posts from 1 July. Full customs declarations and controls are now in place and importers must hold a supplier’s declaration when issuing a statement on Rules of Origin.
Although many of the CBI’s larger members have been well-prepared for these changes, there were fears that smaller companies would not be ready for the changes. So far there has not yet been any wide-spread disruption as a result, however it could become a challenge for compliance further down the road.
The view from India
Attempts to keep COVID-19 under control
The New Year opens with India seeing an exponential rise in COVID cases, causing authorities of various states to bring in restrictions to keep infections under control, including the introduction of a night curfew.
An important week for UK-India bilateral relations
On the policy front, it’s an important week for UK-India bilateral relations, with the DIT Secretary of State, Anne-Marie Trevelyan, due to launch FTA negotiations later this week. While still taking place in person, the programme has been substantially reduced given the exponential rise of the Omicron variant in India. Many social gatherings in the country are banned and therefore in-person engagements around the launch will be low.
The CBI’s involvement
The CBI continues to engage directly with DIT and the High Commission on the launch, meeting with the chief negotiator and team for the India FTA last week to discuss the current state-of-play. The current plan is for the Secretary of State to meet with Commerce and Industry Minister Piyush Goyal in the morning of 13 January to launch the negotiations, followed by a press release and public bundle.
The UK-India Joint Economic and Trade Committee (JETCO) meeting will take place shortly after. While CBI President Lord Bilimoria was due to travel to India, the rise in cases along with the postponement of the Vibrant Gujarat summit led to the difficult decision to postpone his trip until late February/early March.
The view from the USA
Continued engagement in-region
CBI Washington continues to engage with the UK Department for International trade about the state of negotiations for new bespoke trade agreements with Canada and Mexico. Securing member feedback ahead of these negotiations will be a top priority for the CBI entering the first part of 2022.
The CBI international policy team are also looking forward to the possibility of hosting in-person member delegations in the US this year.
The role of trade in UK foreign policy
The CBI trade team (together in Washington and London) are gathering member feedback for an ongoing House of Commons evidence inquiry on the role that trade should play in the development of UK foreign policy.
Podcast series on trade and investment opportunities for UK businesses in Latin America
The CBI Washington office has partnered with its network in the Latin American business and government community to launch a podcast series on trade and investment opportunities for UK firms in Latin America. Produced exclusively for CBI members, this series will look to educate and inform members about how they can take advantage of the enormous potential that these markets present in the 21st century economy.
The team will also be producing a second podcast series on opportunities for infrastructure investment in Latin America later this month.