Empire 2.0: UK trade deals squeeze wealth from the Global South

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Man removing dried flowers from bunches of bananas on plantation in Ghana West Africa. Credit:Olivier Asselin / Alamy Stock Photo
Britain’s neocolonial trading regime puts countries in the Global South between a rock and a hard place: risk mass jobs losses in the short term, or undermine longer term prospects for economic sovereignty.

New post-Brexit trade deals with African countries show that the UK is far from a ‘force for good’ in the modern world, as it would like to think of itself. 

In January 2021, the UK government shot-down an amendment to the Trade Bill that aimed to make UK trade policy compliant with our international human rights commitments. This seemingly uncontroversial amendment would have meant that the UK would have to assess whether or not a country has committed serious violations before entering into a trade agreement with them. The government rejected it – the amendment was in their words “unnecessary in light of existing international commitments”. Saharawis and Palestinians, among others, living under the brutal occupation of regimes that enjoy strong trading relationships with the UK, could attest to the fact that the UK has resoundingly failed in living up to its existing human rights commitments. In fact the UK is currently considering a new free-trade agreement with Israel.

The failure of this amendment points to a much deeper interrogation needed of the contradictions between the UK’s trade policy and its ambitions to be a ‘force for good in the world’ – which many would see as a gross mischaracterisation of the UK’s role to date. To address this, we would need to look not only at the UK’s colonial past and the nature of our existing economic relationships, but also at the ability of our MPs to shape and have a say on trade going forward. The government also rejected an amendment to the Trade Bill that would have guaranteed MPs a debate and vote in Parliament over our trade deals.

Between a rock and a hard place

In 2020 the UK signed new trade deals with Ghana and Cameroon offer an insight into what Brexit Britain’s trade policy means for our Southern trade partners. In the run up to the end of the transition period, these lower-middle income countries were presented with a choice: have their exports to the UK slapped with new tariffs from January 2021, or sign rushed trade deals. Higher tariffs would have had devastating impacts for workers in the banana plantation and tuna sectors, risking tens of thousands of devastating job losses in Ghana, a country already badly hit by pandemic-linked falls in oil and cocoa exports. A trade deal, on the other hand, could mean further liberalisation of a kind that has made global inequality worse and a reproduces a dynamic of exploitation.

Ghana, for one, is experiencing the worst of both worlds at the moment – they were bullied into a last minute deal, but the delay has meant that banana exporters have been hit with tariffs of £20,000 per week, putting thousands of jobs at risk. The UK has pressured these countries into trade deals that could subject some sectors to vastly unequal competition resulting in job losses and de-industrialisation, and could commit countries to trade rules on services, investments and patents that favour big business and undermine regional integration.

Deep colonial roots

Recent British efforts to ensure that African economies are externally oriented to cater to the needs of the global market have deep roots: colonialism and slavery guaranteed a transfer of wealth from South to North. For centuries the European exploitation of Africa, wrote pan-African historian and political activist Walter Rodney, made areas of the continent separate economic entities exclusively tied to Europe, where “each local economy ceased to be directed exclusively or even primarily towards the satisfaction and wants of its inhabitants, and their economic efforts serviced external interests and made them dependent on those forces based in Western Europe” (‘How Europe Underdeveloped Africa’, by Walter Rodney), while European countries dumped goods on the African continent that were unsellable at home.

After colonialisation, and under the mantra of 'free trade' countries in the North pushed saw the Global South to continue ‘specialising’ in exporting cheap, unprocessed raw materials. A system of quotas and 'tariff escalation' (meaning that industrialised countries would impose no duties on raw materials like cocoa beans, but high tariffs on processed cocoa products, like powder or paste) encouraged the export of cheap raw materials and penalising investments in value added processing. This is one of the reasons why countries famous for chocolate are not West African countries like Côte d’Ivoire, or Ghana (where the vast majority of cocoa is grown) but Belgium, Germany and Switzerland.

The EU’s ‘Economic Partnership Agreements’ (EPA) with African countries locked-in unequal trading relationships, in which African countries exported raw, unprocessed goods and imported manufactured goods from the EU, which destroyed jobs in Africa, according to Third World Network Africa. Commodity export dependence remains a problem for many African countries, created by and benefitting industrialised countries and for decades endorsed by the IMF and World Bank as a development strategy.

Unfair trade deals today, by entrenching a dependence on primary commodities, continue to make it impossible for many countries in Africa to deliver transformative economic development. Ghana’s economy today is highly dependent on gold, cocoa and oil, which in 2016 made up over 80% of Ghana’s exports. An overdependence on export-oriented commodities is one of the underlying causes of debt crisis. Ghana, among others, is spending a large portion of GDP servicing debt, paying back sums with extortionate interest rates to speculators who are extracting massive profits from the country.

A pattern of destruction

Trade deals have not only locked African countries out of value-added processing, but actively destroyed infant industries. War on Want research showed that in many African countries, rapid and across-the-board trade liberalisation led to a pattern of deindustrialisation and huge job losses in the 1980s and 1990s. In Côte d’Ivoire, the chemical, shoe and automotive supply industry collapsed, while in Kenya, the number of jobs in the textile industry fell dramatically. Industrial employment in Ghana fell by 17% during the first eight years of trade liberalisation reforms, and by 22% for women.

The impacts of deindustrialisation were keenly felt in the early days of the pandemic, which exposed the deficit in production capacity. In many industrialised countries, production capacity could be shifted to produce urgently required PPE. Many African countries were left in the position of having to import vast quantities from China, India, the US, and Germany.

Divide and rule

For many academics, economists, activists and workers across the Global South, trade liberalisation that favours Northern countries like the UK are one facet of economic domination and control, in concert with debt regimes and IMF-imposed structural adjustment measures. These ensure that the relationships between European countries and their former colonies in the Global South are of continued expropriation and dependence.

War on Want shares this analysis, which is why we have long campaigned against the EU’s Economic Partnership Agreements. David Otieno, from War on Want’s partner Kenyan Peasants League, told us that the UK deal negotiations reminded him of the discussions around the EU-East African Community (EAC) EPA. East African countries initially refused to sign it because of the extent to which the deal was skewed in favour of the EU. Seeking an agreement, the EU then pitted countries against one another, undermining the collective power of EAC countries by pitting Tanzania, Burundi and Uganda against Kenya and Rwanda, who eventually agreed to sign individual agreements. Like the EPAs, the UK-Kenya deal would be a “classic example” of an FTA used to undermine regional cooperation, according to Otieno.

African regions are currently aiming at greater economic integration, and have agreed to charge the same tariff on goods coming in from outside. Because a UK FTA would entail a reciprocal cutting of tariffs on imports from the UK, a common external tariff agreed between regional blocs would be undermined, and trading between the countries becomes more difficult. As some members of African regional blocs have made trade deals with the UK, regional trade between countries in Africa has been dealt another blow.

As it stands, around 16% of trade in Africa is between African countries (intra-EU pre-Brexit trade by comparison makes up 70% of all trade in the EU). A continental free trade agreement, the African Continental Free Trade Area (AfCFTA), due to come into force next year, aims to address the issues of continental economic integration – to make it possible for Africa to trade more with itself. However, just how much this deal can achieve is in doubt. Critics say the deal ignores the fact that that countries have developed not through FTAs but with the benefit of tariff barriers, and. They point to the fact that the deal comes into effect against a background of decades trade liberalisation that has undermined and prevented economic diversification and industrialisation, while the economic straitjacket of debt repayments continues to limit policy space.

A different approach: stop the plunder

The UK leaving the EU could have been an opportunity to create an independent trade policy that distinguished itself from that of Brussels. If the UK aims, as the government claims, to be a ‘force for good in the world’, it will require a radically different approach.

The UK government should abandon divide and rule tactics that have served to impoverish and de-industrialise African economies in the service of European markets. It should instead prioritise the expansion of policy space for Southern countries to determine the shape and nature of the (re)development of trade relationships and industry (including the ability to support infant industries). Beyond this, the UK should also support the flexibility of trade rules around intellectual property necessary for Southern countries to address the crises of inequality, climate and Covid-19, it should take responsibility for the UK’s role in the debt crisis, and democratise (or disband) failed institutions that reproduce inequality and poverty. The UK should also stop pushing for investment protection laws that enable UK investors to sue countries for millions of pounds in ‘Corporate Courts’.

The UK government is in a uniquely influential position to force creditors to come to the table to discuss debt cancellation and restructuring with countries in crisis. Over 90% of the bonds now owed by sub-Saharan African governments are owed under UK law. While African governments struggle to get these creditors to even discuss renegotiating their loans, the UK could introduce legislation that forces these private creditors to come to the table. This can happen alongside urgent calls to cancel debts to governments, the IMF and the World Bank.

Taking a different approach will mean going beyond the idea (which is also promoted by some well-intended voices in European civil society voices) that African farmers can ‘trade their way out of poverty’ through improved market access. These paths at best offer limited and short-term solutions, while overlooking the power dynamics that international trade agreements entrench between African farmers and corporate agribusinesses in Europe. We instead need an assessment of the structural factors that have maintained massive global inequalities, to pay the reparations debt the UK owes to its former colonies, to rectify injustices built into our economic relationships and to reveal the ‘free trade’ myth for what it is. By situating the UK–Africa relationship in its historical context, where we see the UK and other European countries not as benefactors but as plunderers, we might better imagine a radically different, just future.

Parliament needs a say on trade

An amendment to the Trade Bill that asks government ministers to assess the human rights implications of prospective trade deals may not do much if those same ministers have already endorsed UK trade and investment agreements with both Israel and Morocco, countries that subject Palestinians and Saharawis respectively to brutally repressive occupations and human rights abuses. We must ensure the UK’s trade deals do not make us complicit in violent, militarised repression, but we also need a new narrative on trade, and our elected representatives must not be deprived of power to act.

Our MPs must have a say over trade deals that shape the lives of people all over the world, whether through our economic support to oppressive regimes or through deals that lock poorer countries into commodity export and debt traps.

Our trade policy needs a vast amount of work if it is to function in the service of people and planet. Making these changes will be much harder without a say over our trade deals. As it stands, unless the Trade Bill is amended to include a provision guaranteeing Parliament a debate and vote on our trade deals, our MPs will be locked out of decision-making on trade.

The prospects for fixing the Trade Bill at the moment unfortunately don’t look good. An amendment that would have guaranteed trade democracy won support from just 11 Conservative MPs, meaning it was roundly defeated. We are urging people to take action on the Trade Bill, but also to continue to remind the government that our most pressing challenges – inequality, Covid-19 and the climate – are global: addressing them means ensuring that the countries we trade with have the freedom to respond to these crises with the urgency they demand.