White paper response: preparing for our future UK trade policy

War on Want has a long history of working on trade, with a particular focus on how trade policies can reproduce poverty and inequality both in the UK and globally. Most recently, we actively campaigned against European Union (EU) trade deals the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Economic and Trade Agreement (CETA), due to our belief that the deals were negotiated in an anti-democratic manner and risked widespread job losses; that they threatened the deregulation of social, health and environmental standards; that they locked in public services to privatisation; and that they granted big business new powers to sue the UK government under investor-state dispute settlement provisions.

War on Want welcomes the white paper’s commitments to prioritise “transparent and inclusive” trade and that it intends for trade policy to “support developing countries to reduce poverty”. These are the two areas of the white paper most relevant to our ongoing work on trade which our response will thus focus on. However, it is our belief that the white paper is grounded in a flawed ideological approach to trade, mistaken assumptions about what the British people want and value, and what developing countries want and need from trade policy.  Our response touches on these issues in our general comments.

A flawed, ideological approach to trade

We are concerned that the white paper adopts a staunchly ideological approach to trade couched in an uncritical acceptance of ‘free trade’. It is indeed remarkable that the white paper contends that “the people of the UK have decided to be a global, free-trading nation” when there is no evidence whatsoever to frame British public opinion in this light. The post-Brexit unilateral tariff liberalisation proposed by the ‘Economists for Free Trade’ group would, by its own admission, “effectively eliminate manufacturing” and lead to the loss of 2.7 million UK jobs. It is hard to believe that “the people of the UK” have “decided” to adopt such an approach to industrial development.

The assessment that “commercial liberalisation” alone has lifted “more people out of abject poverty than at any other time in human history” is simplistic and mistaken, as too is the statement that “some have felt left behind” (italics added). The white paper goes on to state that the UK has a “long and proud history as a … champion of free trade with all parts of the world”.

This ideologically grounded statement results from a historical revisionism which obscures both past and present day complexities of how wealthy countries trade, and which approaches to trade they adopted at different stages in their economic development. The UK’s adoption of free trade did not take place until the UK had built up its manufacturing sector using protectionist trade policies; its imposition of free trade on other states prevented them from doing the same, to the benefit of UK industry.

Trade policy and poverty reduction

Similarly, today’s ongoing imposition of free trade policies on poor countries has the impact of preventing industrialisation and leaving poor country economies dangerously dependent on commodity exports, resulting in poverty eradication being jeopardised by fluctuating commodity prices as well as removing often significant government revenues obtained from tariffs.

Those countries that have transformed and diversified their economies in recent years – for example, East and Southeast Asian states – have done so not by dogmatic adherence to the free trade models and “commercial liberalisation” policies promoted by OECD states and International Financial Institutions, but by adopting balanced economic systems which have all prioritised a role for state intervention in the economy, including in using tariffs, subsidies and other forms of trade protection in order to build national industries. Indeed, for the poorest states in the world, economic development stagnated from the 1980s – in contrast with the previous two decades - when policies prioritising “commercial liberalisation” and free trade came to dominate development policy-making.

Public services, investment

In this regard it is a particular concern that the white paper commits to a “push for greater liberalisation of global services, investment and procurement markets”. Developing countries rejected the ‘Singapore Issues’ of competition policy, transparency in government procurement and national treatment for foreign investors at the World Trade Organisation in 2004. African, Caribbean and Pacific (ACP) states subsequently faced the prioritisation of these issues in Economic Partnership Agreements (EPAs) with the EU despite reiterating their desire for them to be excluded from EPAs. It is our contention that services liberalisation, government procurement and investment – in particular investor-state dispute settlement mechanisms – are issues of high public interest which must not be removed from the direct oversight of parliamentarians in any country.

The white paper states that “decisions about how public services, including the NHS, are delivered for UK citizens are made by the UK government or the devolved administrations”: we find this statement concerning, and we question why in this case - when it is commonplace for services to be included in trade and investment agreements and the British public is committed to a public NHS – the white paper did not simply commit to an exemption for the NHS in all UK trade deals?

Since the General Agreement on Trade in Services (GATS), international trade agreements have increasingly incorporated mechanisms to ensure guaranteed access to public services markets for business. Corresponding supposed protections for public services such as GATS 1.3 (b) are inadequate. For example, in the UK context wherein public services are rarely "a service supplied in the exercise of governmental authority", they are thus not captured by the GATS protection covering “any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers”.

The government gave repeated similar assurances about the NHS during TTIP and CETA; it remains our belief that these assurances were incorrect, given that the NHS was on the table in both agreements, a position twice affirmed in the context of TTIP by legal opinions from Michael Bowsher QC and Dr Kyriaki-Korina Raptopoulou respectively.

Bowsher argued that TTIP posed "a real and serious risk to future UKG decision-making in respect of the NHS.” It is a particular concern that if CETA’s ‘negative listing’ approach to services is followed in subsequent UK deals - an approach we wholly oppose - there must be full transparency of negotiating texts alongside an open approach to FOI requests on the issue (a request on the legal advice received on the status of the NHS in TTIP was refused in early 2016) given the huge public interest and concern around this issue.

Trade that is transparent and inclusive

The white paper states a commitment “to continue to respect the role of Parliament”. With particular regard to TTIP and CETA, it is our belief that the government manifestly failed to respect the role of Parliament in conducting a transparent and inclusive trade policy. Furthermore, the white paper fails to give any proposals on how the government intends to respect the role of Parliament.

As a basic minimum, the UK must go beyond the EU process for granting parliamentarians access to the consolidated texts and offers from negotiating partners on trade agreements under negotiation. The EU 'reading room' process acts as a brake on transparency and has been widely criticised, including by MEPs.

Despite War on Want receiving repeated assurances from the Department for International Trade that a reading room for British MPs to access TTIP texts would open in early 2016, MPs were unable to access TTIP texts until November 2016: five months after the EU referendum vote made the texts effectively irrelevant as a matter of UK national interest. We believe that consolidated texts of treaties must be made available to MPs and the public; indeed, there is no reason to oppose such a process, as by this stage of negotiation claims of disadvantaging negotiating positions are baseless as consolidated texts have been seen by both parties to the negotiation.

The attitude displayed towards UK parliamentary scrutiny of trade deals, exemplified by CETA, also gives much cause for concern. During five years of negotiations, no UK MP or MEP was granted access to CETA’s consolidated texts. Secretary of State for International Trade, Liam Fox MP, admitted intentionally side-stepping UK parliamentary scrutiny to sign the UK up to the deal at its first stage of ratification. His reason for overriding scrutiny was that the “the treaty was worth a lot in terms of jobs, investment and prosperity”. However, this assertion is based on a 2010 study of CETA’s impacts on the UK which claimed a £1.3 billion GDP boost from the deal. The study remains unpublished, again, despite War on Want receiving repeated assurances of its publication from the Department for International Trade.

War on Want believes that due to the huge impacts that trade deals can have on public life - in particular through undermining and effectively removing existing social, health and environmental regulations, and through the use of ‘sunset clauses’ which undermine parliamentary supremacy - trade deals are of immense public interest and must be submitted to the very highest standards of parliamentary scrutiny.

Parliament must be given the right to hold the government to account. We believe that this is a position shared by the majority of MPs. Indeed, polling conducted by an allied   charity working on trade has demonstrated that 86% of MPs want a greater say and scrutiny over trade and investment agreements after Brexit.

War on Want fully supports the suggestions of EDM 128 and EDM 166 on this issue, motions supported by a combined total of 137 MPs. Indeed, more than 4,000 War on Want supporters have contacted their MPs to ask them to sign these EDMs. Both EDMs focus on the same five key points:

• calls on the Government to ensure the right of Parliament to set a thorough mandate to govern each trade negotiation, with a remit for the devolved administrations;

This is a standard approach to trade deals in the EU, and is also an approach that helps strengthen domestic support for trade and investment agreements. We believe that Parliament-approved mandates must cover objectives for the agreements, red lines and boundaries, and must be informed by impact assessments covering anticipated economic, social, environmental, gender and human rights impacts of the proposed deal. The impacts of any trade agreement on developing countries must also always be assessed prior to the setting of a mandate for negotiation

• the right of the public to be consulted as part of setting that mandate;

We believe this to be a sensible approach towards successfully concluding trade agreements without entrenched public opposition; the perception of secretly negotiated trade deals does immense damage to the prospect of successful negotiations supported by the public. In the USA, public consultations lasting 90 days are required before initiating any trade negotiations. It is our belief that such consultations must be informed by published, publically available impact assessments. In this regard, the approach to CETA’s impact assessment is unacceptable.

• a presumption of full transparency in negotiations;

As aforementioned, we have serious concerns about the UK approach to transparency in trade agreement negotiations due to the regressive approach it adopted during TTIP and CETA. Due to the impacts trade deals have across multiple policy areas – an issue increasingly understood by the public - it is imperative that transparency of negotiating texts is prioritised. Consolidated texts of treaties must be made available to MPs and the public; by this stage of negotiation, texts have by definition been seen by both parties to the agreement and there is thus no good reason to prevent transparency.

• the right of Parliament to amend and to reject trade deals, with full debates and scrutiny guaranteed and a remit for the devolved administrations;

It is imperative that Parliament is given, as a minimum, an affirmative voting procedure for trade and investment agreements – this is the process used in both the US Congress and the European Parliament. War on Want believes that a ‘super-affirmative’ procedure is best suited to trade and investment agreements, wherein consultations are mandatory and committees have the power to amend and veto. Correspondingly, War on Want believes that enhanced scrutiny is needed for trade and investment agreements, placing them at the same level as domestic policies, and that scrutiny of negotiations must be kept distinct from the existing remit of the International Trade Committee to examine the expenditure, administration and policy of the Department for International Trade.

• the right of Parliament to review trade deals and withdraw from them in a timely manner.

Parliament must continue to be granted its constitutional right to reverse previous decisions made by previous governments and parliaments. As aforementioned, modern trade and investment agreements – as was the case in both TTIP and CETA – incorporate ‘sunset’ or ‘stabilisation’ clauses which effectively bind parliaments for a period of up to 20 years, during which period investment commitments – and the potential of being sued under ISDS provisions – continue to apply regardless of any decision to withdrawal. This fundamental undermining of British parliamentary democracy must not be permitted.

Supporting developing countries to reduce poverty

The UK supports a number of international agreements pertinent to developing country efforts to reduce poverty: a commitment to uphold all these agreements, in particular, international human rights law generally, the human rights-oriented Sustainable Development Goals (SDGs) and the Paris climate agreement, is fundamental to ensuring that UK trade and investment policies do not undermine wider development commitments. We believe that the UK must adopt a framework similar to the EU’s ‘policy coherence for development’ to ensure that all policies are vetted to ensure they correspond with wider international development commitments.

The Department for International Development’s (DFID) current strategy clearly prioritises securing trade and investment agreements with developing countries; however, its stated aim of boosting developing country manufacturing may be inhibited by trade policies. War on Want believes that rather than being compelled into building export industries within existing global value chains, an approach suggested by the DFID strategy, developing countries must not be prevented from industrialising in the way they see fit and from adopting industrial and trade policies that match their ambitions.

In this regard, we have a particular concern that the government is “seeking continuity” in existing international trade agreements including Economic Partnership Agreements (EPAs) with ACP states. We believe that EPAs represent a fundamentally flawed approach to trade with developing countries which must be rejected.

The white paper states that EPAs “aim to promote increased trade and investment by putting our trading relationship on a more equitable, mature and business-like footing, supporting sustainable growth and poverty reduction”. We wholly reject this analysis of EPAs. War on Want believes that supporting EPAs undermines any intention to reduce poverty in developing countries. Indeed, this is a point that has been repeatedly made by developing countries and civil society groups during long-running EPA negotiations over the past 15 years.

EPAs have been constructed to ensure that European companies gain access to developing country markets, notably natural resources, on the same or even better terms as local businesses. At the same time, through forcing negotiation on issues abandoned by the WTO (now parked under an EPA ‘rendezvous clause’), EPAs have been used as a vehicle for enforcing deeper liberalisation than that agreed under the WTO. As such, states remain opposed to EPAs in both West and East Africa; both Tanzania and Nigeria state that EPAs will inhibit national industrialisation plans. The president of the Manufacturers Association of Nigeria, also a member of the Nigerian negotiating team, said the West Africa EPA would flood Nigeria with cheap EU products, leading to “the accelerated shut down of the few surviving industries in the region”. War on Want supports this analysis.

By removing the ability of developing countries to industrialise in line with their own strategies – which, for example, may go against EPAs by prioritising the use of tariffs and other protections – EPAs also contradict SDG commitments to “respect each country’s policy space and leadership to establish and implement policies for poverty eradication and sustainable development” (SDG 17.15).

Similarly, while we believe it important that the UK adopts the correct unilateral trade preference scheme to maximise development impact, this should not be considered outside of the need to ensure that trade policies do not restrict developing country exports to primary products and the accompanying commodity dependence it can enforce on developing country economies. Thus, it is not simply a question of whether exports can reach the UK market, but to what extent those exports are value-added and thus to what degree UK trade policies realise or oppose developing countries increasing value-addition/enabling industrialisation.

We believe that the UK should seek to adopt an improved preference scheme as many other leading economies do. Additionally, it should:

• extend the country coverage of the duty-free quota-free scheme
• extend the product coverage of general preference schemes (GSP and GSP+) to include products that are exported by a broader range of developing countries
• improve the operation of the duty-free quota-free scheme by simplifying rules of origin and maximum regional cumulation
• improve the operation of the GSP/GSP+ scheme by reducing tariffs
• when conditionalities are applied to preference schemes, for example around labour or human rights, it is imperative that the implementation and monitoring of adherence to such conditions is carried out correctly; on such grounds, we recently contacted the European Parliament trade committee to inform it of our belief that the restoration of GSP+ status to Sri Lanka (subsequently approved) was mistaken. We are happy to provide further evidence and advice on this issue.