Current trade policy is still fighting the last war

It sounds counterintuitive, but tariffs among the major trading economies—the pre-2025 United States, the European Union, the United Kingdom, Japan, and most members of the CPTPP, the eleven-country (twelve with Britain's accession) Comprehensive and Progressive Agreement for Trans-Pacific Partnership—have, for years, sat in the low single digits on most manufactured goods, thanks to decades of trade liberalization.

(It's worth pointing out that agriculture remains one of the most significant exceptions. Tariff peaks, tariff-rate quotas, and seasonal protections persist across almost every advanced economy, sustained by farm lobbies that are concentrated, well organized, and politically formidable. Governments often treat food supply as a matter of sovereignty. These protections remain a legitimate but largely unfinished item of trade-negotiating business. By comparison, manufactured goods, intermediate inputs, and most services have already had the majority of their tariff protections negotiated away.)

Trump's tariff escalation disrupted the system because it revived a tool most trading nations had spent decades retiring. But the shock has not touched the underlying problem: for most of the world's exporters, in most sectors, the regulatory requirements behind a shipment cost more than the duty charged on it. Governments that pour their negotiating energy into tariff schedules are buying less and less with each deal—and nowhere is that clearer than in Britain's experience since Brexit.

The United Kingdom left the EU with a mandate to prove that an independent trade policy could deliver, and set about signing agreements at speed—with Australia, New Zealand, and eventually the CPTPP bloc. What those negotiations mostly chased was tariff liberalization: lower duties on goods trade with partners whose duties were already low. I advised the UK's Secretary of State for International Trade on several of these negotiations. We always expected the Australia and New Zealand agreements to be modest, and the economic modelling agreed—a conclusion echoed in the House of Commons Library's most recent stocktake of Britain's trade negotiations.⁴

The UK's accession to the CPTPP, heralded as the country's most significant trade achievement since leaving the EU, draws the same assessment from trade economists: because Britain already had bilateral agreements with nine of the bloc's eleven original members, the additional market-access gains are small, and the real value of membership is geopolitical rather than commercial.⁵ This is not to say the deals were not worthwhile—only that the economic gains were always going to be modest: the tariffs worth cutting had, for the most part, been cut long before British negotiators arrived at the table.

Modern trade agreements do, to their credit, increasingly contain chapters on regulatory cooperation, technical barriers to trade, and sanitary and phytosanitary measures. But these chapters are usually the thinnest, least binding, and least resourced parts of the text. Phrases like "sanitary and phytosanitary measures" are bloodless; the costs they disguise are not, and REACH is only the first of several.

Start with the chicken. The long-running transatlantic dispute over chlorine-washed poultry shows how differing regulatory systems restrict trade even where both sides share the same safety objective: reducing pathogen contamination.⁶ The United States treats chemical rinsing as an acceptable and effective intervention; the European Union treats it as a proxy for laxer standards earlier in the production chain and bans it outright. Therefore, an entire category of product is excluded from transatlantic trade. The EU's ban on hormone-treated beef follows the same pattern, maintained for decades even after the WTO ruled against it.

Chicken nearly derailed US–UK trade talks during Trump's first term. American negotiators pushed for agricultural access; the farming lobby, the media, and much of the governing party pressed the UK government to hold the line. The dispute will likely obstruct any future FTA between the two countries. Canada's team raised the same issue in the UK's CPTPP accession talks, and again in negotiations for an enhanced UK–Canada deal.

A similar story follows in services, where most advanced economies now generate the majority of their output. An architect, an accountant, or an engineer qualified in one advanced economy typically cannot practice in another without a lengthy, often duplicative requalification process, even where the competencies being tested are essentially the same.

Or consider customs procedures. While less headline-grabbing than a dispute over chickens, they probably impose the single largest non-tariff burden in the world. Advance documentation requirements, physical inspection regimes, and the sheer number of agencies a shipment must clear before crossing a border routinely cost traders more in delay, storage, and informal facilitation payments than any duty on the goods themselves.

The consumer-welfare consequences are straightforward. Compliance costs pass through to prices, and smaller and newer entrants, unable to spread fixed regulatory costs across large production runs, are disproportionately shut out of export markets altogether—reducing the variety and competitive intensity that would otherwise lower prices. UNCTAD estimates that the least developed countries lose around 10 percent of their potential exports to G20 markets because they cannot meet the compliance requirements involved. Their goods are not unwanted or uncompetitive on price; the paperwork behind market access is simply unaffordable at their scale of production. Removing such barriers is beneficial to all countries—even those in the G20. An increase in imports increases competition and forces domestic firms to up their game.

The good news is that this problem is tractable, and there is a reasonably long track record of specific interventions that have worked.

The Trans-Tasman Mutual Recognition Arrangement between Australia and New Zealand, in force since 1998, is the clearest working model of what genuine regulatory integration looks like. Under its core principle, goods that can be lawfully sold in one country can be sold in the other, regardless of any difference between the two countries' underlying regulatory requirements; the same logic extends to the registration of people in regulated occupations.⁷ A companion Arrangement on Food Inspection Measures, in force since December 1997, similarly allows most food products to be treated, for inspection purposes, as domestic products on either side of the Tasman Sea.⁸ The effect is to collapse two separate compliance regimes into one recognized standard, without requiring either country to concede sovereignty over what that standard should be.

The 2017 mutual recognition agreement between the European Union and the United States on pharmaceutical manufacturing inspections offers a narrower but equally instructive case. Rather than harmonizing standards, the two sides agreed to trust each other's inspectors: a facility inspected and approved by a recognized EU member-state authority is now accepted by the US Food and Drug Administration without a duplicate American inspection, and vice versa.⁹ The agreement does not require either regulator to change what it inspects for. They merely have to agree that the other side's inspectors are competent to check for it—freeing scarce inspection capacity to focus on higher-risk facilities elsewhere in the world rather than re-auditing plants that had already passed a rigorous and broadly equivalent test.

Trade facilitation is the unglamorous cousin of regulatory cooperation. It concerns not what a product must be, but how it physically clears a border: the documentation, inspections, and agency handoffs that stand between a shipment and the market. It has produced some of the best-documented economic gains of all. The OECD estimated that full implementation of the WTO's 2017 Trade Facilitation Agreement could reduce global trade costs by between 10 and 18 percent, with the largest gains flowing to lower-income countries.¹⁰ Almost a decade later, the WTO's own accounting of national results bears this out at the level of individual reforms: Montenegro has more than doubled the share of express shipments cleared within an hour; Indonesia has cut import-licence processing time by an average of four days; Ecuador has reduced processing times by 67 percent annually; Brazil has cut its export and import costs by the ad valorem equivalent of roughly 9 and 7 percent, respectively.¹¹ Best of all, none of these gains required a single tariff line to be cut.

East Africa provides perhaps the most vivid illustration of what fixing customs procedure, rather than tariffs, can do for the poorest traders. The region's network of one-stop border posts—which combine the customs, immigration, and inspection functions of two neighboring countries into a single facility, so that a truck clears both sides of a border in one stop rather than two—has cut border-crossing times by up to 70 percent along some corridors and generated estimated annual savings across the East African Community of more than $63 million.¹² Analysis by the Overseas Development Institute found that these reductions in trade costs have measurably fed through to consumer prices along the affected corridors, particularly for lower-value goods where transport costs make up a larger share of the final price.¹³

None of this means countries should abandon tariff negotiations altogether. Agricultural tariffs in particular remain a genuine, economically significant distortion, and the 2025 US tariff escalation has reintroduced real costs. But it does suggest that Western trade policy has been fighting the last war.

First, negotiating capital should shift from tariff schedules to regulatory architecture. A negotiation that spends eighteen months haggling over the phased elimination of a 2 percent tariff line, and three weeks on a non-binding regulatory cooperation chapter, has its priorities backward. The distinction that matters here is between mutual recognition and harmonization. Recognition asks two regulators to trust each other's competence: your inspectors are as rigorous as mine, so I will accept their sign-off. Harmonization asks them to agree on the underlying policy itself—a single shared rule—which is far harder political work. The Trans-Tasman and transatlantic pharmaceutical examples both point to recognition as the higher-value target. It is achievable between countries with roughly comparable regulatory capacity and broadly aligned objectives, even where their rules differ in detail. Britain's most promising near-term opportunities—with fellow CPTPP members, and with the EU in specific sectors—lie heavily in this category.

Second, transparency is as close to a free lunch as international trade offers. Opacity shows up as rules an exporter cannot discover until they bite, e.g. a requirement that exists, and is enforced, but is published in no accessible registry, notified to no international body, and usually discovered when a shipment is stopped. UNCTAD finds that unnotified or opaque measures carry a tariff-equivalent burden nearly triple that of properly published ones. Investment in national trade-information portals, single-window customs systems, and proactive publication—so that a small firm can find out what it needs to do before it ships a container, rather than after the container is impounded—is cheap relative to its return. Plus it requires no political coordination with other countries.

Third, some of the largest gains require no negotiating partner at all. Digitizing customs declarations, coordinating border agencies, publishing advance rulings: these are things a government can simply do, and the East African and Trade Facilitation Agreement examples show the returns are both real and rapid. Governments that treat non-tariff reform purely as something to be traded away in negotiations are leaving unilateral, no-cost gains on the table.

Fourth, policymakers should stop counting FTAs signed as the metric of success. A newspaper headline announcing a new trade agreement is politically satisfying in a way that a mutual recognition annex on veterinary inspection protocols will never be. Yet the annex is typically where the majority of the economic value actually sits.

This is a lesson the UK has been learning since Brexit. Under pressure to show that an independent trade policy could deliver, the government pushed to sign as many deals as possible, as quickly as possible. Some negotiations were rushed and achieved little of substance beyond the photo opportunity in front of flags—the Australia agreement was later criticized, including by a minister who had overseen it, as giving away too much for too little.¹⁴ More recent negotiations have taken longer but are likely to yield greater economic benefits. The enhanced FTA with Switzerland, focused on the mutual recognition of professional qualifications and a relaxation of visa requirements, is one such example.

There is a broader geoeconomic stake. The trading system is fragmenting along political lines: the US tariff regime, an increasingly assertive EU regulatory perimeter, a China-centered bloc operating to a different rulebook, and a UK still finding its place among them. In a fragmented system, blocs compete for the same investment, supply chains, and middle-power partners—and the bloc that is cheapest and most predictable to trade with wins allegiances that tariff preferences alone no longer buy. The countries best placed to compete will be those whose own trade architecture is the most efficient, not merely the most open on paper. Friction has become a strategic liability.

A regulatory system that is transparent, mutually recognized among trusted partners, and cheap to comply with is now as much a source of competitive advantage as a low tariff schedule once was. The West spent seventy years building the institutions to negotiate tariffs down. It has not yet built the equivalent institutions for the barriers that replaced them. President Trump's tariffs notwithstanding, that is where Britain's resources should now be focused—and the calculation is no different in Washington, Ottawa, Canberra, or Brussels.