The great forgetting about EU trade limitations
A review of the UK’s trade deals since Brexit
In this morning’s Sunday Times, Matthew Syed wrote: ‘I fear we are living through a period of great forgetting, when it is not just tyrants and fundamentalists who criticise liberalism but those enjoying the fruits of this miracle.’ I fear the same of our politicians who want to give away their power to govern the UK by rejoining the EU Customs Union or paying to join its SPS area and its ETS. They seem to have forgotten that they are the government now. They have also forgotten that EU membership did not align with British common law, freedoms and international trade. Nor have they noticed that the EU’s economy is dying.
So, today’s Substack is a Long Read (it’s almost Christmas, you have the time to read this) based on a speech I gave this summer, where I reviewed the UK’s post-Brexit trade agreements. None of them is perfect, but, unexpectedly, it is the trade agreements negotiated under Labour that will benefit British citizens the most, whereas those negotiated under the Conservatives are the most protective of EU farmers and manufacturers. If only David Lammy and Nick Thomas-Symonds could remember this.
Post Brexit Trade: the good, the bad, and the mercantilist
Brexit gave the UK the authority to shape its own trade policy. Many who voted to join the European Economic Community (EEC) in 1975 were assured that the bloc was merely a free trade area. Nothing could be further from the truth. The EEC was designed to promote trade among member states, levy punitive tariffs and small quotas on imports from outside the union, and shield companies from foreign competition. The advantages of free trade for consumers were deemed less significant than the need to support and defend EEC companies against more efficient producers.
Leaving the EU gave the UK government the freedom to make changes. All things were possible. The UK could pursue a free-trade strategy, return to a more Commonwealth-focused trade system, or adopt a protectionist trade policy similar to the current U.S. approach. Despite its smaller size, the UK remains a major customer for many of its trading partners, particularly the remaining EU states, thereby giving it leverage to be more assertive in trade negotiations.
Unfortunately, due to exaggerated fears promoted by the Remain movement that the UK would be ‘isolated from the world’ and unable to negotiate trade agreements, the Conservative government chose to be overly cautious, rolling over as many of the EU’s trade agreements as possible. These were called Continuity Agreements, and as the name suggests, continuity with the EU was all they achieved, with the exception of the UK-Japan agreement.
Post-Brexit trade looks good from a distance. However, UK negotiators have retained the EU’s mercantilist tendencies and still favour exports over imports. At least, they do in all goods where the UK is not self-sufficient, such as food, but they did not attempt to protect any of the UK’s industrial output. The recently agreed UK-India trade deal tries to change this, but India clearly outperformed the UK in industrial protection negotiations.
Advocates of free trade argue that the primary benefits arise from imports, which can be cheaper, more plentiful, more innovative, or simply more desirable. However, anyone reviewing the UK’s trade deals with Australia, New Zealand, and the CPTPP would think that the UK is self-sufficient in food, rather than importing 35% of the food its citizens consume each year. It is almost as if the UK’s trade negotiators don’t want the UK population to benefit from the new trade agreements. UK farmers have struggled to produce enough food to feed the UK’s population since the 1800s. UK negotiators must have been aware of this. Yet even some foods that cannot be grown in the UK’s climate were restricted by tiny quotas in the new trade deals. The only group obviously protected by the new agreements signed under the Conservative government were the EU’s producers.
The UK-EU Trade and Cooperation Agreement
The UK’s most significant trade agreement since leaving the EU is its agreement with the EU. Surprisingly, the Trade and Cooperation Agreement (TCA) is often overlooked by commentators. The UK is unique in being neither an EU member, an EEA member, nor an EFTA member, yet it has a completely tariff-free and quota-free trade agreement with the EU. The quota-free aspect is particularly valuable. The EU claims to have 78 trade agreements, but most impose small quotas on products the trading partner can produce efficiently, along with regulatory barriers that require the exporting country to comply with EU production processes rather than EU product outcomes.
The EU sought to bind the UK to its regulations, but there was sufficient flexibility for the UK to modify its agricultural, animal-welfare, scientific, food standards, and emissions-trading laws. Surprisingly, without recognising the advantages this freedom offers, the current government has signed an agreement to once again align the UK’s Food regulations, Sanitary and Phytosanitary (SPS) rules, animal welfare standards, and carbon emissions and CBAM regulations with those of the EU. Although the trade deal is entirely tariff-free, the UK has agreed to pay the EU a fee for adhering to its food and agricultural standards and its carbon trading scheme. This decision is likely to affect the UK’s other new agreements with the US, India, Australia, New Zealand, and the other CPTPP members.
UK FTAs with Australia, New Zealand and the CPTPP
The UK-Australia FTA was advantageous for UK manufacturers, who were able to sell their goods tariff-free immediately into the Australian market, but not for UK consumers, as the most efficiently produced Australian agricultural goods have been excluded from trade liberalisation for up to 15 years. Consequently, the FTA offers few immediate benefits for Australian producers, while Australian consumers began to benefit from tariff-free imports from the UK the moment the agreement came into force. Australia reduced tariffs on all 10,000 tariff codes, except for five products (two cheeses and some steel springs). At the same time, the UK lowered tariffs on all goods that Australia does not export and maintained tariffs and quotas on goods it does export for periods of 4, 8, 12, or 15 years. These were all agricultural products.
Strangely, some of the goods on which the UK retained tariffs were items the UK cannot produce, such as Australian long-grain milled rice. This appears to be a concession to EU rice producers and millers, as the CPTPP agreement allocates a very small quota of 17,000 tonnes to Vietnamese rice and a modest shared quota to other CPTPP member states. Vietnam is the world’s third-largest rice exporter after India and Thailand. The appearance of protection for EU suppliers was confirmed when the UK-India trade deal excluded semi-milled and milled rice, despite India being the world’s largest rice exporter and the UK’s largest supplier of imported rice. Indian rice imports must also comply with CD597 and provide a finalised Common Health Entry Document (CHED), as outlined in Article 57(2)(b) of Regulation (EU) 2017/625, which, like many others, is an EU regulation that is still in UK law.
The UK-New Zealand FTA was similar to the Australian agreement, but this time New Zealand removed all its tariffs on UK goods. At the same time, the UK again lowered tariffs on goods that New Zealand doesn’t make, let alone export, but kept its tariffs on goods New Zealand does export for 4, 8, or 16 years. Once more, these were all agricultural products. Seventy-five per cent of New Zealand’s exports by value are agricultural goods. It seems absurd to sign a trade agreement with New Zealand, but delay trade liberalisation for New Zealand’s agricultural products. New Zealand does not produce everything, but it has specialised in the production of ten agricultural goods, and it is one of the world’s largest exporters in four of them: concentrated milk and cream; butter; frozen beef; sheep meat; fresh berries; wood; cheese; malt extract, food preparations and starches; wine; and unconcentrated milk.
Finally, the UK acceded to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), yet it again imposed small quotas on agricultural goods, which must be shared between multiple CPTPP Parties and will increase slowly over many years. For example, the UK’s CPTPP Beef quota is limited to 13,000 tonnes from year 10 and is divided among six countries. To put this into perspective, the UK consumes over a million tonnes of beef each year, of which about 25% to 30% is imported, mainly from the Republic of Ireland. The UK’s beef quota of 13,000 tonnes from CPTPP countries represents roughly 5% of the UK’s beef imports from Ireland. The UK’s cap on imports of pork from CPTPP countries is also minimal and will increase to only 55,000 tonnes from year 10 of the agreement. In 2024, the UK imported nearly 800,000 tonnes of fresh, cured, and processed pork, almost all of which came from the EU. It is difficult to see why the UK would restrict pork imports from CPTPP countries, given that the CPTPP includes one of the world’s most efficient pork exporters, Canada. The UK also capped chicken imports at a quota of 10,000 tonnes by year 10, despite importing 430,000 tonnes of chicken meat in 2024. Additionally, the UK set quotas on CPTPP-produced long-grain rice, as mentioned earlier, as well as on sugar, bananas, and eggs.
None of the restrictions in these trade agreements actually protects UK farmers, as is often claimed. The UK imports significant quantities of all the agricultural products mentioned above, but does so tariff-free and quota-free from the EU. It would only be by the UK varying its agricultural regulations that foods from the UK’s new trading partners could replace EU products. This is presumably why the EU wants the UK to dynamically align with its food and agricultural regulations with the EU’s under the Labour Government’s ‘Reset’.
The UK-India Free Trade Agreement
Well, the Labour Government finalised the UK-India Free Trade Agreement. This agreement began under the Conservatives, and several chapters were closed by the end of 2022, when I was a member of the Trade and Agriculture Commission. But the agreement was not finalised until this year under the Labour Government. This agreement is also flawed, but in a different way.
Both the UK and India are manufacturing exporters, and so unlike Australia and New Zealand, which were happy to import as many UK cars as possible, as neither country has a car industry to protect, India put strict limits on imported cars, and it will only reduce its whisky tariffs from 150% to 75% over a period of ten years.
Under the agreement, India will limit its imports of UK Internal Combustion Engine (ICE) cars to a maximum quota of 19,000 large-engine, 9,000 mid-sized-engine, and 9,000 small-engine cars in five years’ time, after which the quota will decrease to 7,500, 3,750, and 3,750, respectively, by year 15 onwards, when India’s tariff rate will be lowered from 30%, 50% and 50% in year 1 to 10% by year 15. Out-of-quota tariffs on ICE cars will be reduced from 95%, 60%, and 60% to 50%, 50%, and 45%, respectively, after 15 years.
Under the agreement, Indian imports of UK Electric, Hybrid, and Hydrogen cars will be tariff- and quota-free if their import cost, including insurance and freight, is below £40,000. Strangely, mid-range EVs have a small quota of just 2,000 vehicles after 15 years, when the tariff rate also reduces to 10%, but luxury UK-made EVs, with import costs above £80,000 cif, have a much larger quota, increasing to 20,000 vehicles over 15 years. India will also reduce its tariffs on UK ICE trucks over 10 years from 37% in year one to 8.8% by year 10, while the quota will increase from 2,500 to 3,500 over the same period.
In contrast, the UK’s only tariff rate quotas for Indian goods apply to EV, hybrid, and hydrogen vehicles. Current UK tariffs on imported cars are only 10%, but these will be phased out for an increasing number of Indian-made vehicles. Indian vehicles imported into the UK for less than £20,000 will see their tariff-free quota grow from 6,800 to 34,000 over 15 years. Vehicles imported for between £20,000 and £40,000 will see their tariff-free quota increase from 6,800 to 34,000 over 15 years, while those valued between £40,000 and £80,000 will see their tariff-free quota rise from 4,000 to 20,000 over the same period. However, more expensive vehicles are excluded from the FTA which is slightly strange as the UK’s largest luxury car manufacturer is owned by an Indian company, Tata Motors Limited.
However, despite the extensive protections for each country’s automotive manufacturers, the UK has agreed to remove its tariffs on all other commodities when the agreement comes into force or to exclude them from the trade agreement. Bizarrely, the UK excluded milled rice from tariff removal under the agreement, as mentioned earlier, but it will immediately eliminate all customs duties on Indian beef exports.
If evidence were needed that the UK trade negotiators don’t understand the benefits of importing goods that other countries can produce more efficiently, this surely provides it. The UK will exclude Indian rice, a commodity the UK cannot grow but that India can, and is the world’s largest exporter of, shipping nearly 12 million tonnes of rice in 2024—almost double the amount exported by the world’s second-largest exporter, Thailand, and equal to about 30% of global exports. The exclusion of rice and the inclusion of beef also show that the trade department and the NFU anti-trade brigade still base their knowledge of foreign agricultural production on 1950s children’s books. They will probably be surprised to learn that India is the world’s third-largest exporter of frozen beef, shipping over a million tonnes in 2024—only about 50,000 tonnes less than Australia, which also exports around 350,000 tonnes of fresh or chilled beef. Why is the UK so fearful of importing Australian and New Zealand beef but not Indian or Irish beef?
The US-UK Economic Prosperity Deal
The UK was also the first country to sign a trade deal with the Trump Administration, and this Economic Prosperity Deal (EPD) was initiated and completed by the current Labour Government within a few months. It isn’t a comprehensive trade agreement, but it will likely benefit British citizens more than any other.
The Labour government seems to understand that trade deals should be implemented swiftly and that they should lower import prices for consumers, rather than worry about protecting inefficient, uneconomic producers.
I’m not arguing that lowering US tariffs on UK cars isn’t beneficial for UK car producers; it clearly is. However, these manufacturers are already efficient, and the US remains their most important market for UK luxury ICE cars. What will truly benefit all UK motorists who drive petrol cars and vans is the UK’s removal of tariffs on US ethanol, as ethanol is now mandatory in UK petrol, and UK ethanol production is inefficient.
The UK cannot grow corn or sugarcane, the most efficient crops for ethanol production, but mainly uses green wheat. It is much more cost-effective for the UK to import ethanol from the US than to protect domestic production with high tariffs and subsidies. We know this because the amount that could be imported tariff-free under the EPD matches exactly the amount the UK already imports from the US, France, Brazil, and other producers. However, when the trade agreement was announced, UK ethanol producers argued that lowering the ethanol tariff would destroy their business model. However, despite the tariff protection, the UK still had to import 1.4 billion litres of ethanol in 2024, since its domestic production from protected producers was only 153 million litres.
Why should the UK Government raise the price of imported ethanol by 24% when it is now a mandatory additive in UK petrol? This increases transport costs for everyone. If a UK producer cannot compete unless its rivals have a 24% price hike, perhaps it is in the wrong industry.
The UK-US EPD also provides a reciprocal tariff-free quota of 13,000 tonnes for beef, which is a much better way to support both US and UK farmers than subsidies. However, as mentioned earlier, this is a small fraction of the beef the UK imports tariff-free from Ireland and could potentially import from India. There is hope that the EDP will be extended to a full US-UK FTA.
The EPD removed US tariffs on UK aircraft engines and parts, one of the UK’s most valuable exports, and reduced US tariffs on UK cars to 10%, matching the UK’s tariffs on US vehicles. Although the US has maintained its 25% tariff on UK steel and aluminium, it will do so until the UK finds a new owner for its last remaining steelworks. Due to the UK’s high industrial energy costs and its Net Zero regulations, basic steel and aluminium products are not major UK exports. However, they are vital for the US defence industry, and it is sensible for the US to avoid relying on China to supply these essential metals. The Chinese ownership of the Scunthorpe Steelworks is the reason the US has kept tariffs on UK steel, not a lack of negotiation skills by the UK Government.
The US-UK Technology Prosperity Deal
During the recent State Visit of President Trump, the US offered the UK hundreds of billions of pounds in technology investments, including:
£150 billion Tech Prosperity Deal covering AI and Data Centres, Quantum Computing research and development and AI training clusters with US technology;
A civil Nuclear Cooperation covering a partnership between the UK’s Centrica and X-energy to build advanced modular reactors in the UK, a research and development cooperation in fusion pilot plants and fast-track licensing protocols between the UK’s Office for Nuclear Regulation (ONR) and the US Nuclear Regulatory Commission (NRC);
A defence technology and cybersecurity covering AI command centres, cyber resilience and Quantum Encryption Trials; and
An additional £10 billion investment in LNG contracts, semiconductor R&D, fab investment pledges and pharmaceutical licensing and distribution for biotech therapies.
This investment would not have been available if the UK were still a member of the EU and subject to the EU’s restrictive tech regulations. Howard Lutnick, the US Secretary of Commerce, commented that the UK is now seen as a bridge between U.S. innovation and European caution. The UK’s AI Opportunities Action Plan (January 2025) avoids broad legislation; instead, it focuses on skills, infrastructure, and targeted regulation. The EU’s AI Act, in contrast, imposes binding obligations on developers and users of high-risk systems, which Lutnick and others see as a barrier to investment.
The EU is falling behind in technological development. Even Mario Draghi has sharply criticised the EU’s current approach to AI and technological investment, calling for radical reform to prevent falling behind global competitors such as China and the US. However, Draghi also called for the radical simplification of the General Data Protection Regulation (GDPR), and the UK should follow suit. Draghi described the GDPR as a barrier to AI development, citing legal uncertainty and restrictions on data access. He claimed GDPR has increased the cost of data by approximately 20% for EU firms compared to their US counterparts.
The importance of abundant, affordable energy
But even now, US tech investment benefits are limited by the UK’s ongoing compliance with EU environmental regulations, which, along with the UK’s Net Zero costs, have increased the price of UK industrial electricity. The lifeblood of data centres and AI developers.
The UK AI Energy Council forecasts a twentyfold increase in computing capacity over the next five years. AI data centres can consume up to 100 MW per site, enough to power 75,000 homes. Microsoft’s planned supercomputer alone will utilise 23,000 NVIDIA GPUs, requiring hundreds of megawatts of continuous power. The word ‘continuous’ is crucial here. While the UK aims to add another 50 GW of offshore wind by 2030, along with 70 GW of solar and onshore wind, data centres and AI need dispatchable (on-demand) electricity, meaning constant power.
The pledged new investments will require an additional 770 MW of steady, reliable dispatchable electricity, which can only be supplied by gas turbines, biomass, hydro, or nuclear plants. The annual energy consumption of these projects will be 6.75 TWh, approximately 5.2% of the UK’s dispatchable electricity output in 2025, estimated at around 130 TWh. This constitutes a substantial part of the grid’s firm capacity and coincides with UK policies mandating that all new cars be electric by 2030 and that homes replace their boilers with electric heat pumps. The resulting increase in electricity use underscores why project investors are considering on-site generation, SMRs, and dedicated power purchase agreements to ensure their electricity supply.
However, while we wait for Advanced Modular Reactors and Small Modular Reactors to replace the UK’s soon-to-be decommissioned large nuclear reactors, surely the answer to the UK’s electricity needs is greater use of gas turbines. Jensen Huang, CEO of NVIDIA, one of the companies planning to boost its investments in the UK, made it clear that gas turbines must be part of the UK’s electricity mix if the country is to join the AI revolution. Huang stressed that building AI supercomputers and data centres requires large amounts of dispatchable electricity and that the UK’s high electricity prices would be a ‘challenge’. If the UK is to benefit from this significant increase in investment, the government will need to change its attitude towards gas-fired electricity. It also needs to amend its stance on gas extraction and encourage additional production in the North Sea, but that is a matter for another essay.
Trade and energy
The Governor of the Bank of England believes that the UK needs to reset its relationship with the European Union to boost trade, but had he looked at even the most basic (and publicly available) trade figures, he would have seen that total UK exports of goods and services increased by 18% compared to 2020 (CVM), the transition period and thus the last year of document-free EU trade, using CVM to account for inflation. However, while service exports grew by 37%, goods exports, excluding precious metals, rose by just 1%. This is not due to Brexit, but rather the UK’s green policies and its declining oil and gas production and exports. UK fuel exports were 23% lower in 2024 than in 2020. And 2020, you will recall, was the first year of the Covid lockdown when fuel usage was very low.
Lowering fuel production not only reduces fuel exports but also decreases UK chemical, pharmaceutical, plastics, and fertiliser exports. However, the UK is now a net importer of fertiliser after CF fertilisers closed one of its two plants in 2022. UK total SITC 5 chemical exports fell by 9% between 2020 and 2024, with exports to the EU down 14%. This decline is not due to Brexit but results from the UK chemical sector becoming uncompetitive.
The UK’s manufacturing exports fell by 12%. These include textiles, paper, metals, and glass, all of which require cheap, reliable, plentiful energy for production. It’s easy for Remainers to claim that Brexit caused the decline in UK manufacturing and trade, but the trade figures clearly show that the real cause is the UK’s Net Zero policies and high industrial energy costs. These policies have been supported by the current Labour Government, as well as the previous governments of Sunak, Johnson, May, Cameron, the Coalition, and Brown. Only the short-lived Truss administration showed interest in reintroducing UK gas production through fracking. However, I remain uncertain whether she would have also supported the revival of UK manufacturing industries.
The revival of British industry should capture the interest of many in the Labour Party. The industrial heartland constituencies, known as the Red Wall, were once a Labour stronghold but have now largely abandoned the Labour Party because the ‘Green’ policies cherished by North London MPs have not replaced high-paying industrial jobs with equally well-paid ‘green’ jobs.
The Reset
However, another factor could still threaten the UK’s future prosperity under its new trade agreements – specifically, a group of MPs who have not given up on rejoining the EU, or at least aligning with EU regulations. Under the ‘EU Reset’ proposal, the EU will decide the UK’s SPS regulations, food and agricultural standards, its emissions trading scheme, and its Carbon Border Adjustment mechanism, undermining Brexit’s few regulatory improvements in these areas.
A country cannot be truly sovereign or have an independent trading policy that supports UK industries and benefits UK consumers if another nation sets its trading rules. How could anyone have thought this ‘Reset’ was a good idea?
For years, the UK allowed Brussels to make decisions on its behalf, and these decisions weren’t necessarily market-driven or politically popular. The US Trade Representative (USTR) published a list of global trade barriers in March of this year, before the US started raising tariffs. The EU’s chapter was the second-longest, surpassed only by China’s. One of the US’s many complaints was not just that the EU excluded US goods, but that each EU member state did so in different ways.
Many backbench MPs from all parties mistakenly believe the UK is a nation of farmers and that agricultural exports are our main export to the EU. We aren’t, and we don’t. The UK imported 35% of the food it consumed in 2024, and UK imports of SITC 0 Food and live animals from the EU were three times larger in 2024 than UK food and animal exports to the EU.
Regardless of the facts, Nick Thomas-Symonds, Minister for European Union Relations and now a member of the Cabinet, wants to fix something that wasn’t broken by making the UK obey and pay for obeying the EU’s rules regarding:
Sanitary and Phytosanitary regulations,
Food safety regulations,
Consumer protection rules for the production, distribution and consumption of agricultural products,
Animal welfare regulations,
Pesticide regulations,
Organic products, and even
Food and agricultural marketing standards.
In other words, if this ‘Reset’ becomes UK law, it will give the EU the authority to control all aspects of food production in the UK and all UK food trade, even with countries with which we have free trade agreements. Currently, all imported food must meet UK standards, but under Thomas-Symonds’ ‘Reset’, it will need to meet EU standards instead. Additionally, the UK will have to pay the EU for the ‘privilege’ of following its rules.
Joining the EU’s SPS Area will give the EU’s subsidised agricultural producers unrestricted access to the UK market and push out competition from non-EU producers, just as the slow reductions in UK tariffs under its free trade agreements were nearing a level where Australian and New Zealand products compete with EU products.
In 2024, the UK imported 9,700 tonnes of New Zealand cheese for the first time. This is about a tenth of the cheese the UK imports from Ireland, but it signals that the trade deals are beginning to work. The UK also imported 17,800 tonnes of Australian lamb and 5,200 tonnes of beef in 2024. Both are a fraction of the meat the UK imports from Ireland. However, these amounts will grow as the quotas increase each year. Add to this the food the UK will be able to import from other CPTPP countries this year and the potential for a full US FTA, and it’s clear why the EU wants its captive market back. It was just idiotic of Starmer to give it to them.
Relying on EU suppliers with the same seasons and weather patterns as the UK will drive up UK food prices and make supplies vulnerable to regional disruptions. Only competition among multiple suppliers will reduce prices for UK consumers and safeguard UK food security.
Conclusion
The story of post-Brexit UK trade is one of both opportunity and missed potential. While Brexit gave the UK the freedom to develop its own trade policies, successive governments—both Conservative and Labour—have largely preferred to maintain the status quo over implementing bold reforms, often favouring protectionist instincts or EU alignment over prioritising UK consumers and global competitiveness. The UK’s trade agreements with Japan, Australia, New Zealand, the CPTPP, India, and the US have provided some benefits, especially for certain manufacturers and exporters, but have often failed to deliver significant gains for consumers, such as lower food prices and greater choice.
The persistent reluctance to fully embrace free trade, along with a tendency to protect EU producers and maintain restrictive import quotas on new trade partners, has limited the transformative potential of these agreements. Furthermore, the UK’s continued adherence to EU regulations—whether by choice or due to political pressure for a so-called “Reset”—risks undermining the very sovereignty and flexibility that Brexit was meant to secure. This is especially clear in food standards, agricultural policy, and energy regulation, where alignment with the EU could hinder innovation, increase costs, and reduce the UK’s ability to respond to global challenges.