Trade deal controversies
Leaving the EU means the UK needs to negotiate many new trade agreements – indeed the freedom to do so was one of the main arguments used in favour of Brexit.
Trade deals are no longer only, or even mainly, about reducing tariffs. They primarily focus now on reducing other ‘barriers to trade’, for example by aligning national regulations in areas such as product standards, professional qualifications and environmental protections.
Trade deal proposals are therefore often highly controversial, with many fearing they will lead to a lowering of existing standards and protections. The UK’s early discussions with the US around a post-Brexit deal were a case in point, with warnings that it would lead to the arrival of chlorinated chicken on UK shelves or the risk of further privatisation in the NHS.
One of the elements of trade agreements which has led to particular opposition is the widespread use of ‘Investor-State Dispute Settlement’ (ISDS). This is a mechanism under which a company from one signatory state investing in another can argue that new laws or regulations could negatively affect its expected profits or investment potential, and seek compensation in a binding (and often secret) arbitration tribunal. This effectively elevates the rights of corporations above a country’s democratic right to decide its own laws.
Economist Dani Rodrick shows how recent developments in trade agreements have focused on national regulations, intellectual property and labour and environmental laws. He argues for a new global trade paradigm that prioritises national prosperity and ‘peaceful economic coexistence’ between nations.
The Trade Justice Network describes the principal issues involved in recent and proposed trade deals, including those between the UK and EU, and UK and US.
War on Want explores the UK’s trade policies with countries in the global South, calling for agreements that will allow low-income countries to support their own industries and economies.
The ISDS Platform sets out how Investor State Dispute Settlement mechanisms work.
The International Institute for Environment and Development produced a report explaining how ISDS could increase the public cost of climate action.
The Corporate Europe Observatory and Transnational Institute explain the little-known Energy Charter Treaty, which allows energy companies to sue governments for changes in energy policy which might lose them money, including policies supporting renewable energy.
New kinds of trade agreements and governance
As the UK embarks on agreeing new trade agreements, there are increasing calls for such deals to be designed around clear principles of public interest, not simply on increasing the volume of trade as an end in itself. Many for example argue that trade deals should be used to protect and enhance labour and environmental standards, rather than to reduce them.
With the final Brexit deal rushed through Parliament at the last minute, there have been calls for MPs to have a much stronger scrutiny role in future, and for trade unions to be involved in agreement design where labour standards are at stake. More widely there are calls for the World Trade Organisation to be reformed to focus on major global challenges and greater accountability.
The Trade Justice Movement has drawn up model UK-EU trade and regulation agreements. These prioritise social and environmental goals and protect public services, thus preserving jobs and trade flows while retaining national flexibility for the UK to make its own rules.
A University of Warwick study recommends that the UK’s post-Brexit deals should aim to ‘protect, promote and empower’ workers, given them a proper voice in shaping deals which will affect them.
Simon Evenett and Richard Baldwin propose reforming the World Trade Organisation to give it a common purpose for what it hopes to achieve through trade, actively pursuing policies that respond to global problems like vaccine availability and climate change.
Trade, the environment and climate change
One of the most insistent criticisms of trade agreements has been in relation to their impacts on the environment. International trade is of its nature carbon-generating, as goods are transported around the world. But trade agreements can also open up new markets for commodities produced in unsustainable ways, from fish to palm oil, tropical timber to cement.
Many people therefore argue that environmental protection should be a core principle of trade agreements. Indeed, trade deals could be a powerful mechanism to promote stronger commitments on climate change or biodiversity conservation, rather than weaker ones.
One proposal gaining increased attention is for ‘border carbon adjustment’. This would enable countries with strong climate policies to impose tariffs on imports of goods from countries with lower standards. This would ensure that trade did not become a ‘race to the bottom’ in which lower standards were effectively incentivised. But many developing countries are worried that any such border tax could simply turn into a form of trade protectionism which froze them out of developed country markets.
The UK Trade Policy Observatory has set out how UK trade and climate policy need to be brought together if trade agreements are to contribute to the UK’s climate objectives.
Common Wealth proposes a series of measures to put trade policy at the service of delivering climate justice, as part of a Green New Deal.
A report from the International Energy Agency found the mineral supplies for electric cars “must increase 30-fold” to meet global climate targets. Carbon Brief summarised the report to communicate the scale of the challenge ahead and what needs to be done to prevent a mineral ‘bottleneck’ stifling the clean energy transition.
The Centre for European Reform’s Sam Lowe explains how an EU border carbon adjustment policy might work, and its benefits and costs.
Emerging economies expressed a ‘grace concern’ over the EU’s plans for a carbon border tax, which supporters argue is necessary to avoid carbon leakage but critics argue amounts to “protectionism disguised as climate action which will damage the economies of countries poorer than the EU”.