City leaders worry about hidden costs of trade deals

Key leaders in the City of London have expressed concerns about the environmental impact of encouraging trade with distant countries after the UK moved closer to reaching a duty-free deal with the ‘Australia.

Members of the FT’s City Network, a forum of more than 50 senior executives, have supported the UK’s efforts to open its borders to trade from around the world, as well as to bring in new sources of funding overseas such as sovereign funds.

James Bardrick, UK chief executive of Citigroup, said the UK must remain open to “transparent and accountable” foreign direct investment from private and public sources, as well as “open up to trade and services, and s ‘open up to new markets, talent, ideas and innovation’.

But questions have been raised about the long-term consequences of the two policies, which are at the heart of the UK’s attempt to reposition itself as a hub for global trade and investment after leaving the EU.

Many have expressed concern about the environmental cost of doing physical commerce with countries like Australia.

Ann Cairns, executive vice president of Mastercard, said it couldn’t be more environmentally friendly to steal beef from Australia than to source it from local farmers. “There may be another way to ensure that we buy good local produce and reflect real cost and value by factoring in environmental impact into supply chain costs.”

Amanda Blanc, chief executive of the Aviva group, agreed that “the real costs – including for the environment – should be properly taken into account when examining trade”.

Daniel Godfrey, senior advisor to Federated Hermes, said the UK needed to assess the real cost of “externalities inherent in transport and agriculture. . . whether this is done through appropriate carbon and nature taxes or subsidies ”.

Andreas Utermann, former director of Allianz Global Investors, also raised “externalities” such as the carbon cost of transporting food over long distances, which were “certainly not properly assessed”.

He added: “So-called ‘duty-free’ trade agreements will need to be carefully considered, especially when entered into by smaller economic entities such as the UK with larger entities. . . also for the often hidden costs, whether political or economic / financial. “

Paul Drechsler, chairman of London First, pointed to the political cost of being seen as too much of an effort for a deal, saying the language risked sounding desperate and “not the best signal if we search a lot from the other party” .

He added that in pushing for agriculture “Australians know they are going for the chinstrap”, when the convincing political argument “must be responsible and sustainable, and support British farmers”.

Shobi Khan, managing director of Canary Wharf Group, said the consumer ultimately has to decide, however, whether it is sheep and lambs from Australia or Ireland, and based on parameters such as price, organic status or sustainability.

There has been broad support for another key government objective of attracting foreign investment from sovereign wealth funds. Gerry Grimstone, the Minister for Investment, told the FT last month that the UK was in talks with sovereign wealth funds and pension funds to invest in UK green energy projects, including gigafactories and offshore wind farms.

Khan said sovereign wealth funds could not only help improve the environment, but also the country’s infrastructure.

Cairns said the UK should welcome foreign investment on condition that it is not an “inflammatory sale” of UK assets.

“Sovereign wealth funds are a useful source of capital and it makes sense to seek out a large portfolio of investors,” she said.

But city leaders also said the government should not forget about domestic funding sources. Blanc said overseas investment should be welcomed, but added that the UK was not short of capital, with total retirement wealth of £ 6 billion.

“So it shouldn’t be a question of one or the other. I wouldn’t want easy access to sovereign wealth funds to be a reason to quit the reforms aimed at investing more retirement assets in long-term, sustainable investments in our communities. “

Anne Richards, chief executive of Fidelity International, agreed that the government should balance foreign capital with resources closer to home, “so that UK pension funds and individuals can take advantage of domestic investment opportunities.”

Utermann also warned that it would be naive to turn a blind eye to “the provenance of the SWF”. . . Of course, let’s be open to capital inflows, but let’s be very open and transparent about costs as well ”.