U.K. Said to Direct Aid to Win Support for WTO Brexit Talks

  • Theresa May’s team plan to leverage aid to help businesses
  • Money will woo poorer countries before trade talks at WTO

Prime Minister Theresa May is seeking to shield British business outside Europe as she prepares to end four decades of trade privileges the U.K. enjoyed as part of the 28-nation bloc.

Photographer: Chris Ratcliffe/Bloomberg

The U.K. is planning to use its international aid budget of 12 billion pounds ($14.6 billion) to win friends among the world’s poorest countries ahead of crucial trade talks, according to two senior government figures who are familiar with the matter.

Financial help will go to countries that Britain will need on its side as Europe’s second-biggest economy seeks to re-establish trading rights at the World Trade Organization once it abandons the European Union, according to the officials, who asked not to be named because the proposal is confidential. Currently, the U.K.’s negotiations at the WTO are conducted by the EU.

Theresa May.

Theresa May.

Photographer: Jasper Juinen/Bloomberg

Prime Minister Theresa May is seeking to shield British business outside Europe as she prepares to end four decades of trade privileges the U.K. enjoyed as part of the 28-nation bloc. After Brexit, the U.K. will take up its place at the WTO as an independent country with its own negotiating powers, and will seek to re-sign deals with more than 50 countries that have accords with the EU, as well as claiming its share of the EU’s quotas for agriculture and other sectors.

Here is a primer on the argument for and against free-trade agreements.

Uncertainty over the nature of the U.K.’s future trading arrangements have contributed to the pound’s drop to a three-decade low against the dollar since the June 23 referendum. EU President Donald Tusk stoked investor concerns with a speech in Brussels late Thursday in which he said the U.K. choice was “hard Brexit” or “no Brexit” and it’s time for May’s government to realize the withdrawal “will be painful for Britons.” The pound was down 0.5 percent at $1.2197 as of 9:10 a.m. in London.

Slow Progress

Before the U.K. voted for Brexit in a referendum in June, WTO director general Roberto Azevedo warned that it could take years for the U.K. to complete these negotiations. Decisions in the trade body are generally taken by consensus of the entire 164-strong membership.

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He said that post-Brexit trade would take place on worse terms with U.K. exporters at risk of having to pay as much as 5.6 billion pounds each year in duty on their exports.

In a plan to speedup the WTO talks and win support for British demands, May’s teams are now preparing to woo less-developed countries with aid money for development projects, according to the government officials. The government would use aid spending in parts of Africa and other developing regions to prepare the ground for trade talks, they said.

The aim is to ensure that these countries are more willing to back the U.K.’s demands when it comes to the WTO talks. 

Soft Power

The talks are being led by Liam Fox’s Department for International Trade, which is working with the Department for International Development on using the so-called soft power of aid to win support ahead of the WTO negotiations.

One senior official said May and her ministers such as Fox, the international trade secretary, were promoting Britain’s credentials as a global champion of free trade in order to convince poorer countries they would receive backing at the WTO for their own plans for more liberal trade deals in future.

Fox and the International Development Secretary Priti Patel, are planning a joint visit to Africa next year.

Leading the Charge

Speaking last month, Fox said he would not let slow progress in talks at the WTO hold back his global trade agenda. 

“We cannot allow foot dragging by those unwilling to seize the benefits of free trade hinder progress on important issues for the rest, such as eradicating non-tariff barriers in services, digital or intellectual property,” Fox said in his speech in Manchester, England. “If other nations are hanging back, then the U.K. will happily lead the charge for global free trade.”

In the run up to referendum, pro-Brexit campaigners including Foreign Secretary Boris Johnson said the U.K. would thrive from the freedom to negotiate its own trade deals with other countries. On Thursday, Johnson said countries including Australia, New Zealand and Malaysia were "stepping up and volunteering to do these deals".

The senior government figures agree that a key goal for the government after Brexit will be striking bilateral deals with former Commonwealth nations. It would not be egal to make trade a condition for receiving aid, the people said. Instead, the proposals are being drawn up for a form of augmented aid, which would work as a stepping stone for businesses seeking access to sell their goods and services in new markets, one official said.  

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