In January I was asked to write an article for Oxford Analytica reflecting on the UK-Africa Investment Summit held on 20 January 2020. I am now able to share this here.
Category: UK Trade Policy
Brexit, Democracy and UK Trade Policy
Last week the UK government published its Trade Bill, which formally starts the process of moving towards an independent trade policy. Member states of the European Union (EU) are part of a customs union. This means they operate a unified trade policy, which includes common external tariffs on imports from outside the EU. The UK government has already made it clear it intends to leave the customs union as part of the Brexit process. Prior to the start of the legislative process, the Department for International Trade published a Trade White Paper on 9 October 2017, which set out the principles guiding the UK’s future trade policy. This included numerous references to stakeholder engagement and as part of a consultation exercise it included an invitation for submissions on all aspects of the developing approach set out in the White Paper.
In this post I outline the major points of my submission to this consultation process. The deadline was Monday 6 November 2017 and it was therefore with some surprise that I discovered the following morning that the government was publishing its Trade Bill in parliament. This led to criticism from trade unions and NGOs who had also contributed to the consultation. For example, War on Want argued that given the timing of the publication of the bill it was clear that ‘the input of thousands of responses from members of the public could not have been considered’.
Given my long-standing research interest in the EU’s trade and development policy to African, Caribbean and Pacific (ACP) states, my response focused in the main on the fourth of the five principles outlined in the White Paper, namely ‘supporting developing countries to reduce poverty’. In doing so, I also explored some of the tensions between this ambition and the other four principles (‘trade that is transparent and inclusive’, ‘supporting a rules-based global trading environment’, ‘boosting our trade relationships’ and ‘ensuring a level playing field’).
My criticism of the White Paper ultimately rests on some of the problematic assumptions it makes about the relationship between trade and development. These assumptions were also demonstrated in an important speech made by Liam Fox, the Secretary of State for International Trade, in Manchester on 29 September 2016, where he suggested that ‘free trade is often a ladder to the top’. A similar claim was made by former International Development Secretary, Priti Patel, in her speech at the Conservative Party conference on 3 October 2017, when she boldly claimed that ‘trade, investment and free markets provide the route out of poverty’.
These claims are advanced in the first half of the White Paper where the role of trade in the global economy is discussed. The conclusion one is supposed to draw from this is that free trade was at the heart of the historical development of the British economy and hence this is something that should be recommended to developing countries today. However, as respected economist Ha-Joon Chang has convincingly demonstrated, Britain employed tariffs for a significant period before it was able to adopt a regime of free trade during the nineteenth century. Chang notes that ‘the overall liberalization of the British economy … of which trade liberalization was just a part, was a highly controlled affair overseen by the state, and not achieved through a laissez-faire approach’ (Ha-Joon Chang, Kicking Away the Ladder, p.24). Hence, what the White Paper suggests are protectionist measures (such as subsidies for domestic industry) could conversely be understood as legitimate development strategies.
The section of the White Paper on UK trade policy and how it can support developing countries includes a commitment that as the UK leaves the EU it ‘will maintain current access for the world’s Least Developed Countries (LDCs) to UK markets and aim to maintain preferential access of other (non-LDC) developing countries’ (p.32). This is to be welcomed. However, the aim of replicating the EU’s existing Economic Partnership Agreements (EPAs) is much more problematic. It is clear to anyone who has followed the EU’s negotiation of EPAs with ACP countries, that they met significant resistance from both many ACP governments, and civil society organisations (CSOs) across Europe and regions within the ACP. In part, their concerns relate directly to the assumptions noted above about the ‘policy space’ needed for development. Both the Tanzanian and Nigerian governments have indicated that they are concerned that signing an EPA will undermine their ability to adopt government policies to support industrialization. In Nigeria, the Manufacturers Association of Nigeria has been particularly effective in lobbying against the EPA, arguing that it will harm the domestic industrial sector.
Moreover, they have also voiced concerns over attempts by the EU to introduce the so-called ‘Singapore Issues’ (competition policy, transparency in government procurement, equal treatment for foreign investors, and trade facilitation measures) that were rejected at the World Trade Organisation (WTO) in 2003 at the Cancún Ministerial. There is therefore a potential conflict of principles in the White Paper between the expressed concern for developing countries and the suggestion that the ‘UK will look to secure greater access to overseas markets for UK goods exports as well as push for greater liberalisation of global services, investment and procurement markets’ (p.27). These are precisely the issues that African states and CSOs have identified as problematic because they would constrain the ability of ACP states to seek to diversify their exports and support the development of an industrial sector.
The White Paper’s strong support for the conclusion of the Trade in Services Agreement (TiSA) also undermines the claim to be supporting developing countries. TiSA has emerged as a separate arrangement after talks on services stalled within the WTO due to resistance from developing countries. They have expressed concerns that it would allow transnational corporations to turn essential public services into commodities that can be traded.
It is therefore highly likely that the UK will meet significant resistance if it seeks to simply replicate EPAs. African states have been able to demonstrate significant agency in the EPA negotiations and there would be greater scope for this in negotiations with the UK. They have made it clear that rather than deep and comprehensive trade liberalisation, what they want is a gradual process of engagement with global markets, which if it is to be developmental, needs to be facilitated by state support. Therefore, a much better alternative would be for the UK to introduce an improved Generalised System of Preferences that goes above and beyond the EU’s current ‘Everything but Arms’ agreement with LDCs. Hence, I would support the recommendations made by Traidcraft in its February 2017 report for the adoption of ‘a preference scheme offering duty-free, quota-free market access to imports from economically vulnerable countries, including but not limited to the least developed countries’ (p.16).
My final concerns relate to the democratic accountability of any future UK trade policymaking. These were reinforced by the superficial nature of the process of consultation on the White Paper itself. While it is reassuring to note in the White Paper that there is a plan for regular engagement with stakeholders, it is unclear what is meant by the phrase ‘we will ensure that Parliament, the devolved administrations, devolved legislatures, business and civil society are engaged throughout’ (p.29). Prior to this there is reference to the need for a legislative framework that allows for the quick negotiation and ratification of trade agreements. Trade negotiations are notoriously long and difficult to conclude and this desire for speed should not come at the cost of democratic accountability. As I, and 54 other academics have argued in a recent letter published in The Telegraph on 20 October 2017, modern trade agreements cover a wide range of policy areas. It is therefore vital that government makes a clear and unequivocal commitment that parliament and the devolved administrations/legislatures will have a say in both formulating negotiating mandates and ratifying any future trade agreements agreed by the UK. Moreover, information related to trade negotiations should be made public so that stakeholders are able to provide proper democratic input into the process.