Below is the transcript of an exclusive CNBC interview with The Rt Hon Liam Fox MP, Secretary of State for International Trade and President of the Board of Trade.
SS: Dr Fox, thank you very much indeed for joining us. Events like today at London Tech Week, they're all about proving that the UK is competitive, and perhaps more competitive than other players, globally, trying to attract these finance, this competition, these individuals as well, what is the UK edge?
LF: Well, if you look at the performance in the past year, the UK as a whole has landed more foreign direct investment projects than in any year in our history. So something is going right. We ask our investors, why the UK? They will say; your legal system, a flexible workforce, a regulatory system that's very permissive, a low taxation system, great universities, great access to tech. And more venture capital on tech has come into London in the past year than the whole of Germany, France, Spain and Ireland combined.
So we know what we're doing right. The question is how can we help make that even better, how do we help investors invest in the right sectors that will give us the greatest return. How do we make some of our SME's more visible to some of that investment? How do we get them to scale up and make capital available to them, and of course today we were able to announce another £2.3 billion worth of private investment, securing another 1,600 jobs.
SS: Yet, I'm sure you have frank conversations with individuals with companies with state owned enterprises as well, they must to a person, turn around to you and say that uncertainty over Brexit is creating issues which perhaps stop even more investment.
LF: No they don't actually. What they will say is, and particularly for pension funds, for sovereign wealth funds. They will say - we are long term investors, we're looking at the fundamentals of the UK economy, in terms of an innovative economy. Our IP protection for example, is a big draw for the United Kingdom and they regard some of the issues around Brexit as short term issues that need to be sorted out, both for the rest of European Union and for the UK. In terms of investment actually, what investors are telling us is that they're more sure about the direction of travel of the UK; our attitude towards free and open trade, and our economic fundamentals than they are about the direction of travel of the EU 27, when the UK is no longer there.
SS: But the attraction for the U.K. is also for many Japanese companies for instance, and Japan has been very negative about the impact that Brexit could potentially have on investment in this country as well. The attraction for those kind of companies is a gateway to Europe. If we don't have some form of Customs Union, we don't have free trade deal which benefits those companies, they're just going to go elsewhere aren't they?
LF: Well, we'll want to have a free trade deal and of course the European Union has a massive goods surplus with the UK. We have a 17 billion surplus in services with the European Union. They have almost a hundred billion surplus in goods.
Now, that is a big incentive to want to come to an open, liberal and comprehensive trading agreement, because otherwise, were we to move, to WTO tariffs for example, it would mean that they have to pay an awful lot more to access the UK market, which they currently get for nothing, than we would have to access the EU, that is not in anybody's interest.
SS: But political considerations, are they overriding that economic logic you're talking about? Is the need to deter other nations from going down a Brexit type path; is that actually going to override those economic considerations you just mentioned?
LF: That is, if I may say, quite the best question anyone has asked me for some time, because that is the key point here. Are we going to have a Brexit that is about the economic interests of the people of Europe? Or is it going to be about the academic interests of the bureaucrats of Brussels? In other words; is this a Brexit that is about punishing Britain for leaving so that no others will do so, which of course is the language of a gang not a club. Or is this about the future prosperity of the people of Europe. And remember this is not the United Kingdom doing something that was totally unheard of in terms of our treaties. We are exercising a right that was enshrined in the Lisbon Treaty. A right that was underwritten by the other 27 members. We have a right to leave. They have a duty to support us in doing so, and as we do so, we have to do it in a way that's beneficial for the people of Europe. We're not about protecting the bureaucracy.
SS: But let me ask you then, a follow up on that; do you believe then those academic interests that you referred to, those political interests, will override the economic logic as far as the commission's concerned. Is the commission that you want nothing to do with in terms of this close relationship we currently have, you want Britain out because of the commission, because of all those rules, those academic interests that have overridden. Do you believe they will override the economic interest?
LF: I think we're moving from a phase of our negotiations, which was largely about process, to now about outcome. And, the countries that have the greatest proportion of their trade with the UK, that have the greatest amount to lose - countries like Ireland, or the Netherlands, or Belgium, will now be seriously thinking about what that economic future looks like. And we're moving away from that, perhaps academic interests of the commission, to governments that need to have prosperity exports and profits, for their country. Because they are elected politicians who want to get re-elected. And so, we're moving I think, into different territory where the emphasis will move away from the commission, and move towards the EU 27 and their economic interests and the United Kingdom's.
SS: Your relationship with the Taoiseach isn't that great from what I understand. Looking at the papers, you're in each other's crosshairs in commentary about the seamless border, the ramifications of not being in the Customs Union, the unresolved issues of whether we go some Max Fac facilitation or Customs Partnership. It seems very grey with one of our most important allies, and I don't understand that you and the Taoiseach are on the same page.
LF: Actually, this morning, I had a very constructive meeting with my Irish counterpart and we talked about the various issues we understand where we are on them. We also think that the best way to achieve resolution is for us to have a very open comprehensive trading relationship. And again it takes us back to that same issue. Is this a political Brexit about the Brussels bureaucracy, or is it an economic Brexit in the interests of the people of Europe? And that is for us to decide. That will shape not just the future of the United Kingdom, but the future of Europe. Because you mentioned Japanese investors, Japanese investors made it very clear to me when I was last in Tokyo that, if there are impediments to trade and investment created in Europe that don't exist today, that's not just a British issue, that's a European issue. Because there are lots of other places in the world where global investors can put their money.
SS: What about British businessmen as well. Paul Drechsler saying there is zero evidence that trade deals with non EU countries provide economic benefits to the UK, that's one of his latest comments.
LF: Yes well he's been extraordinarily negative about the whole referendum, whole Brexit process. He's totally against us leaving the European Union, and he is entitled to that view. But we look at the IMF's evidence that says that 90% of global growth in the next 10 to 15 years will be outside the European Union. We need to be able to take advantage of growth in those markets because it is our export growth...
SS: So the CBI is wrong, Sir?
LF: I think they're wrong in this, yes. And I think that we need to be able to take advantage of those growing markets. We need, if we are to drive our exports up, and we've been quite successful recently in the growth in UK exports. We've gone up from 28.8% of our GDP that we export just two years ago, to nearly 30.5% today. That's quite a big increase, and that continued growth though, is going to come from those growing markets beyond Europe.
SS: What about the patently absurd behaviour, as you would quote, of the U.S. administration over steel and aluminium. Do you think is patently absurd behavior regarding the attitude of the administration to G7, to N ATO, to trade deals more generally, that the behavior seems somewhat erratic - when you're courting dictators, and at the same time turning your back on your allies.
LF: We understand some of the reservations and the analysis made by the U.S. administration in relation to Chinese over production for example, in relation to market access issues in China to force tech transfer. We understand their reservations and as a former defense secretary, I entirely understand their reservations about funding of N ATO. When the United Kingdom leaves the European Union, it will mean that the EU members of NATO, are carrying less than 20% of the budget of NATO. Now that's clearly unsustainable. And Robert Gates, when he was defense secretary in the United States, and I warned that a future United States president and future United States taxpayers would not put up indefinitely with that. And so we've got sympathy with that. Where we have our difference is the mechanism applied to that - we think to use the (inaudible) mechanism is not an appropriate vehicle, because it has resulted in us all spending a lot of time on blue on blue action between allies and not addressing the source of the problem.
SS: But, I mean we're in Downing Street, where one of its previous inhabitants played very heavily on the special relationship - Churchill to get Roosevelt's support in 1940. But the truth of the matter is we don't have a special relationship anymore, the patently absurd tariffs on British steel going to United States, they're still there. We're getting no special concessions whatsoever. The President is turning his back on the UK it seems anyway. What hope of a meaningful trade deal on a level playing field have you got with the U.S.?
LF: Well, of course the tariffs are being applied to the United Kingdom, because we're a part of the European Union. And whether or not the United Kingdom had been granted an exemption, we would still have been required to apply countermeasures if the European Union did so. So, we are tied at the moment into European Union trade policy. When we leave the European Union, we'll be free to follow our own trade policy for the first time in more than 40 years. And at that point we will want to see what flexibility we can have and where the United States wants to go. But the trade benefits that we can bring of greater liberalisation is still a separate issue from where we are today. We worry that what the United States has done, the mechanism by which the U.S. has displayed its irritation, may lead us to not just countermeasures, but countermeasures on those and an escalating tit for tat trade war. There are no victors in a trade war, there are only casualties.
SS: So the President is wrong in taking on Mexico, Canada, the EU, the United Kingdom; it's wrong taking on its allies on trade?
LF: We would like to know what the end point is. Is the end point a policy that every country is in balance with every other country in terms of trade? Because that is not a classical free trade view. And it's that classical free trade view that's enabled us in the past generation to take a billion people out of abject poverty, and see our economies grow and prosper, by seeing what Adam Smith would have described as a much better allocation of resources in a much more efficient way. I'm still a great believer in that free trade vision.
SS: Thank you Dr Fox, good to see you again.
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