Tricks of the trade


Trade deals have become front page news as Britain prepares to leave the EU. For arch-free traders like Trade Secretary Liam Fox, trade deals are the most integral element of Brexit, which would allow the Government to unleash a wave of deregulation and liberalisation as we break away from Europe and create ‘Singapore on Thames.’

But this kind of free trade extremism is unlikely to go down well with large chunks of the population  who voted to leave the EU, and whose experience of ‘free trade’ globalisation over recent decades has been ‘offshoring’ of jobs, and permanent well-paid work replaced by low-pay, low-skill service sector jobs.

As trade deals have increasingly become ‘corporate charters’, allowing international capital to do what it wants, where it wants, when it wants, so western workers have fallen out of love with free trade. On the back of this wave, Trump is aggressively raising tariffs and declaring a trade war on any country that doesn’t do as they’re told.

For years, free trade was an orthodoxy enthusiastically embraced by social democrat leaders across Europe, none more so than Tony Blair and Gordon Brown. Today, the left of the political spectrum needs to urgently and radically rethink its approach to trade policy.

This month, Labour joined that debate with the publication of its trade strategy, Just Trading: What would a justice trading system look like. It’s an impressive document in which Shadow Trade Secretary Barry Gardiner rejects both the free trade extremism of New Labour, but also the protectionism of Donald Trump. The key vision is for ‘open and fair’ trade which rebalances the relationship between capital and labour, and disrupts the ability of big business to use trade rules to simply stamp on prerogatives of government and the rights of citizens.

Free trade cannot solve all the word’s problems

For years politicians of all political stripes have told their supporters that ‘free trade can solve all of our problems’, in particular that it can lift millions of people out of poverty. This is simply untrue. Sure, trade and investment can play a role in creating a more prosperous society, but only when governments are able to regulate, tax and constrain the power of those corporations which currently monopolise global trade. The problem is that ‘free trade’ has come to mean opposing regulation. In true Thatcherite fashion, any trade or investment which is constrained by government is now not considered free. Leave it to the market, all will be well.

Labour will no longer have any truck with this idea, Barry Gardiner says in his opening statement to ‘Just Trading’, “Corporations have arrogated to themselves the power to challenge sovereign governments and undermine fiscal policy and public policy” through trade rules, but “regulation is the precondition that stops free trade becoming anarchic, exploitative and ultimately self-defeating”.

To this end, Gardiner promises that Labour will ensure “that new agreements cannot undermine social and environmental standards” and will “require the UK’s international trade agreements to be consistent with international humanitarian law… [and] internationally recognised labour standards.” He pledges to explore “ways to enhance accountability for human rights and environmental sustainability” working “to tighten the rules governing corporate accountability for abuses in global supply chains”.

This is very welcome language, and is followed up with some concrete proposals for transforming global trade.

Trade deals are too big

Modern trade deals have become enormous, with tariffs (taxes on imports and exports) often a marginal concern. Rather modern deals focus on the way that any kind of government action or planning can ‘distort’ trade. For instance, EU food regulations make it impossible for US corporations to export hormone- and antibiotic-stuffed meat into European markets. Free traders see this as a problem. Or look at public services like the NHS, post-crash financial requirements or local authorities using taxes to support small farmers or businesses in their own area. All of this makes it more difficult for the global market to work its magic, so the thinking goes. So modern trade deals are essentially about sweeping such regulation aside.

That’s why these giant trade deals – like the infamous and now defeated TTIP (Trade & Investment Partnership between the EU and US) – can affect our food quality, our public services, our financial regulations. Labour is now clear: “We do not support the controversial ‘new generation’ agreements which failed to strike a balance between trade liberalisation on the one hand and the importance of regulation in the public interest, on the other.” That means opposition to TTIP, but also its Canadian and Trans-Pacific cousins, known as CETA and the TPP.

In fact, Labour promises to stand up for the right of governments to regulate. Gardiner pledges “Labour’s progressive trade agenda will safeguard the policy space for governments to act in the public interest… [and] we will seek to promote the highest possible levels of regulation in trade negotiations, not the downgrading of standards as ‘barriers’ to trade.” This could indeed change the logic of trade deals – though there’s much important work to do as to how they achieve it.

Corporate courts and public services

One of the most pernicious aspects of modern trade deals is  a vehicle called Investor State Dispute Settlement (ISDS), which create ‘corporate courts’ whereby overseas big business and investors can sue a government for treating them ‘unfairly’. In practice this means anything which disrupts their supposed rights to maximise profits whatever the cost. It could mean a government being challenged for putting cigarettes in plain packaging, raising the minimum wage or taking toxic chemicals out of petrol (all genuine laws which have been challenged under ISDS across the world). There’s no transparency in these arbitration cases, which are overseen by corporate lawyers, no right of appeal, and even if a government ‘wins’ it’s faced with a whopping legal fee.

Labour promises to oppose any deal which includes this corporate court system, and furthermore, promises to “review the 94 bilateral investment treaties which the UK currently has in force” with a view to removing ISDS clauses, and engaging in international dialogue “on alternative options”. This is a massive blow to the future of these corporate courts.

One of the key public concerns that derailed TTIP was the NHS, given modern trade deals have a tendency to lock in privatisation of services and make renationalisation more difficult. Labour promises to “guarantee that public services are fully protected from trade agreements” with “watertight safeguards”.

There is also an understanding that trade rules need to make exemptions for government procurement so that local and central government can more easily use tax money to support local businesses and keep value in the local community, a vital component of the now popular ‘Preston Model’. Gardiner promises to “safeguard the capacity of public bodies to make their own procurement decisions in keeping with public policy objectives”.

This is a another big step forward, and needs to be spread to cover exemptions in other areas like intellectual property, not currently mentioned in Labour’s strategy, but which allows big pharmaceutical corporations to grow enormously wealthy by exploiting their monopoly position.

Britain’s free trade past

There is a very welcome recognition that Britain’s ‘free trade’ history has not been a happy one for those with whom we’ve traded, and that still today trade rules are used to force neo-colonial relationships onto African, Asian and Latin American countries. “We do not support those bilateral trade agreements which have locked trade partners into exploitative relationships” Gardiner says, and the answer to global poverty and inequality is not simply ‘sell rich countries like Britain more of your stuff’ but rather “to support the development of local markets and regional trading opportunities as the most sustainable building blocks of economic growth”. This is a big move away from the New Labour idea that free trade was the answer to global poverty.

Moreover, Britain must stop dodging arms control standards; “A Labour government will implement the UK’s arms exports controls to the highest standard, ceasing arms exports to any country where there is concern that they will be used to violate international humanitarian law.” And there’s a specific pledge on suspending “arms sales to Saudi Arabia pending a full review into their possible use in the Saudi-led war on Yemen, and… a review of UK arms sales to Israel.”

Just as important, Labour have become one of the few potential parties of government in Europe to “actively support the working group on human rights and business set up by the UN Human Rights Council in 2014.” It sounds arcane, but this working group is trying to write an international treaty to hold corporations to account for their human right abuses, placing CEOs on trial where necessary,  and it would present an important counterweight to the way investment deals operate.

Trade democracy

A key problem post-Brexit Britain will face is the opaque nature of trade deals. International treaties are actually more important than national regulation – it is often impossible for a future parliament to get out of these obligations in any reasonable time frame. Yet “these binding international treaties are subject to the least parliamentary oversight or external consultation of all government initiatives. Future generations are signed up to lasting obligations without even the rudiments of democratic accountability.”

Currently, Liam Fox can fly around the world, negotiate a trade deal, without any mandate from MPs, and without any scrutiny of his actions. When he brings that deal back to parliament, MPs have no automatic right to have a debate, no ability at all to amend a deal or to permanently stop it entering into force.  Labour rightly thinks this is a disgrace and commits to the “presumption of the maximum possible transparency, including both parliamentary scrutiny and external consultation… independent sustainability impact assessment commissioned at the outset… Any mandate for negotiations will be approved by parliament, and parliament will have full scrutiny powers throughout the process of negotiations and up to the moment of ratification… and there will be comprehensive reviews of the impact of trade agreements after the event”.

Multilateral rules – but not these multilateral rules

True to its history, Labour remains a staunch supporter of multilateralism in trade negotiations. In the age of Trump and his trade wars, this is understandable, and indeed multilateral forums should give weaker countries more power than bilateral deals where they can be more easily bullied.

The problem is that the multilateral rules we have – enshrined and enforced by the World Trade Organisation – are very problematic, which is why campaigners have spent two decades fighting the WTO to a standstill. The WTO is still trying to prevent the Indian government from protecting it’s people’s food security, even while the US and EU are allowed to subsidise big landowners to the hilt.

Labour is particularly attached to two sorts of rules. First, the Environmental Goods Agreement attempts to allow low-carbon goods to travel the world tariff-free. There’s a good argument for this – it makes environmentally-sound trade cheaper. But there are problems too – mostly notably that ‘environmental’ goods are badly defined and currently include aircraft engines and biofuels. Second, Gardiner stresses the need to “build on the liberalisation of trade in services” given their importance to the British economy. But services liberalisation is problematic. For instance, most recently it includes a so-called e-commerce agenda, which would hand massive powers to the Big Tech companies to use and abuse our data at will.

We do need multilateral rules. But they require root and branch reform. In fact, a UN agency recently reported on the desperate need to learn from the original post-war agreement on trade, called the Havana Charter, which unlike the WTO saw trade rules prioritising full employment and giving all countries the right to find their own route to development, rather than push a pro-corporate one-size-fits-all model onto every country in the world.

Labour can’t simply fall back on the WTO, and needs to start working on a bigger transformation of global trade rules. But here we hit a problem. If Labour assumes government in the wake of Brexit, the scramble for trade deals risks undermining these fine principles. How do you achieve a perfect trade deal, when facing massive pressure for ‘any trade deal we can get’? If we remain in the customs union without being in the EU, meanwhile, Britain becomes a pure rule-taker, unable to influence the trade policy by which we’d be bound. As is so many other areas of public policy, a radical Labour government inside the EU would surely have a greater chance of transforming global trade policy than it will have under soft or hard Brexit options.

Brexit aside, many countries in Africa, Asia and Latin America would be pleased to have a European ally in this project of changing global trade rules. ‘Just Trading’ is an impressive start, which shows that the Labour leadership fully understands that the mantra of free trade will not lead to more open and fairer markets, but more economic nationalism as the backlash against globalisation grows.

The next step will be harder still: to create the alliances and concrete proposals necessary for the transformation of global trade rules. But it’s vital work and we must continue to push them from below to be more ambitious still. The transformation of the international economy is as necessary now as it was at the end of the Second World War. Our future depends upon it.

Nick Dearden is director of Global Justice Now, which produces model resolutions which CLPs can pass in order to build support for a radical trade policy for the many. More from activism@globaljustice.org.uk.

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