Trade Secrets
The truth about the US trade deal and how we can stop it

10. A new trade agenda

It is now time to think about how we radically reform global trade rules

Britain trades over £200 billion worth of goods and services with the US every year.122 This trade won’t stop, and at the very least it shows that there is no need to rush into a new trade deal. But this trade is done in a way which, broadly speaking, complies with British standards. In fact, before Donald Trump escalated a tariff war, most tariffs were fairly low between the two countries. So it’s very clear that any ‘major gains’ from a trade deal would come through changes to regulations and standards, public services, intellectual property, government procurement – things we should be really concerned about.

Campaigners led by the Trade Justice Movement have put together a set of ‘red lines’, detailing as a minimum those elements of a US‑UK trade deal which should be stopped.123 They are:

  1. Blocking positive action on the environment or undermining existing standards.
  2. Undermining food standards.
  3. Threatening public health or the NHS.
  4. Threatening public services.
  5. Undermining labour and social rights.
  6. Being passed without democratic scrutiny and consent.
  7. Limiting online regulation and undermining digital rights.
  8. Undermining sustainable development and international commitments.
  9. Including corporate courts.
  10. Limiting public procurement strategy.

As discussed in the last chapter, these red lines could actually help us to beat the US trade deal altogether, by drawing together a powerful movement of different constituencies. But they also raise an important question. The vast majority of campaigners do not oppose trade per se. Indeed it is true that trade can be beneficial for societies in various ways. Many global south countries have been able to learn from the technological know‑how, the skills, and the investment that trade can bring. China is a prime recent example of a country that has used trade policy as a tool to massively reduce poverty, though it has also experienced growing inequality. However, the key point is that China has only been able to achieve that by flouting the western consensus on trade policy. In fact, historically almost every country that became rich through trade, from the UK followed by the US and Germany up to South Korea and Taiwan more recently, did so by doing exactly what modern trade rules prohibit countries from doing.

Trade rules do not have to be a problem. But in order for them to play a positive role, we need to fundamentally rethink what we want trade rules to achieve – and how to do so with a cooperative, constructive, internationalist approach. After the second world war, many countries came together to secure a more open trading regime, and while they did want to bring tariff levels down, their aim was to cement international cooperation and achieve full employment, workers’ rights, and economic development. Trade rules were more flexible, leaving large areas free for countries to design the best policies for their own development, and there were enormous exceptions. These were codified in the Havana Charter in 1948, which was supposed to lead to an International Trade Organisation, but was scuppered by the US.124

In 1964, a new UN‑based trade body was created, UNCTAD (the United Nations Conference on Trade and Development). This became an important organisation advising and coordinating developing country trade and investment policy. UNCTAD believed in economic cooperation and openness, but also saw the need for developing countries to break away from colonial terms of trade which would never help them develop. It believed that trade and investment could be important, but only on the right terms. For developing countries to continue selling cheap fruit and metals to rich countries, with those countries then selling them back expensive manufactured goods, was an economic black hole, and they encouraged countries to use the tools at their disposal to break with this model.

The high point of this thinking was the passing of the New International Economic Order125 at the UN general assembly in 1974. This document was a call for a radical transformation of the global economy to change unfair terms of trade, and to control multinational corporations and big finance. Sadly, it was effectively marginalised by the richest countries in the years that followed, as a manufactured debt crisis devastated the power of developing countries and the era of free market economics was ushered in.

There was never anything anti‑trade or anti‑investment about this post‑war form of economics. Rather, the goal was to develop trade and investment rules which created new terms of trade, in order to achieve a more equal world. From the late 1970s, this was turned on its head, helped by the creation of the World Trade Organisation. Trade rules and trade deals started to embed and accelerate trade liberalisation, and the goal became to strip away the ability of governments to control the power of capital.

It is now time to think about how we radically reform global trade rules. Not everything UNCTAD said in the 1960s is appropriate today. In particular, the idea of never‑ending growth wasn’t consistently critiqued, in a way it now must be. But the idea that trade rules can set better terms of trade, rather than cementing liberalisation, is one to which we must return. It provides a stark alternative not only to neoliberal trade, but also to the ‘beggar-thy-neighbour’ nationalistic bullying of Donald Trump.

When neoliberalism was later seriously challenged by the rise of the ‘pink tide’ governments in Latin America from the late 1990s, the reform of trade rules was one of the goals those governments set themselves. Governments in the region formed something called the ALBA (the Spanish abbreviation for the Bolivarian Alliance for the Peoples of Our America).126 ALBA was an alternative trade pact, aiming at breaking the power of the US and rich countries to dictate trade terms to Latin America. The deal did not close markets, but rather prioritised regional trade, promoted redistribution of wealth and attempted to level up labour standards. Though never developed sufficiently to replace the dominant trade system in the region, the concept behind ALBA can help point us towards what an alternative trade system might look like.

Building a different trade system

This final section lays down some fundamental principles that should be at the heart of a radically different international economy. This is just a starting point for issues that need to be urgently taken up by progressive movements and politicians.

We need to start from the fact that tariffs are at very low levels, and further reductions are mostly likely to create little gain for society in general.127 What’s more, the removal of ‘non‑tariff barriers’ (regulations) can seriously damage the ability of governments to improve society for the majority, or to fight climate change. While reductions of tariffs and harmonising regulations could still be pursued when genuinely mutually beneficial for societies and the environment, it doesn’t make sense to have this as a primary goal of trade policy. Instead, the goal must be regulating trade and investment flows to ensure a fairer and more sustainable international economy that works for people and planet, and all trade rules and trade deals should be geared towards this end. This will require more than trade rules, and must include, for instance, coordination on taxation and controlling speculative financial flows. But as a minimum, trade rules must not scupper these efforts.

Trade and investment can improve productivity and technological know-how. But these benefits will not be shared equally unless governments can control, tax and direct the resulting business activity. Without this, it will simply accrue further wealth at the very top of society. That’s what trade rules have too often done, as government action has been prohibited. New trade rules should encourage governments to regulate and tax in a non‑discriminatory way, and create rules and norms that take power from big business and hand it back to ordinary people.

Current trade rules encourage the free movement of capital and big business, allowing them to play off governments against one another, and forcing down pay and standards. Current mechanisms for standardising regulations risk making things even worse. We need to reverse this process, and encourage a ‘race to the top’ in standards and protections.

This means finding ways to prevent the undercutting of government regulation between countries (the race to the bottom). This might include for example, setting minimum wages and conditions that companies need to meet in order to take advantage of trade preferences. It might also mean greater regional integration behind a common set of standards, as has been achieved on certain standards (water quality, air quality and many farming standards) in the EU for example.

Trade deals must not protect corporate monopolies, be they in medicines, energy or the high‑tech economy. The transfer of technology is key to countries being able to develop. There must be significant encouragement for countries to learn from technology and produce generic versions of that technology, especially when it comes to dealing with the climate crisis and giving access to medicines. Strong exemptions to intellectual property laws could provide a first step in this direction, and ultimately intellectual property could be taken back out of trade rules.

There will always be sectors of an economy that lose out from trade deals. This might not even mean an overall trade deal is not beneficial – but it does mean that those sectors need investment and retraining. In the era of globalisation, the ‘losers’ have been ignored and made to feel the loss is somehow their fault. Trade deals should not be entered into without proper assessment and consultation on losses, as well as serious investment, employment and proper safety nets for those affected.

The world urgently needs to take action on climate change. We need to respect human rights, give people economic security, and create a more equal world. Whether trade is good or bad depends on how it contributes to those broader goals. At a minimum, trade must never get in the way of securing these goals. Clauses should be included in trade deals to make them subservient to other, much more important, international laws, ensuring trade deals can’t block a government’s ability to create and support public services, take climate action or improve standards and protections within a society.

Trade deals currently give special privileges to the already powerful: multinational corporations and gigantic investors. This is obscene and must cease, with the abolition of corporate courts. But we should aim higher. If trade and investment really is supposed to improve people’s lives, we should give communities and individuals the right to a hearing if they believe their rights have been violated by the behaviour of international corporations or investors. Moreover, if a trade deal is not working to improve lives, there must also be a complaint process and a review mechanism. As trade deals affect so much of our lives, and these rules touch upon vital areas of public policy, there must also be much greater public involvement in trade deals, including public consultations, publicly available impact assessments, a presumption of transparency in talks, and parliamentary vetoes over trade deals.

International rules also need to help poorer countries in the global south to diversify their economies. This includes an even greater allowance for technology transfer, a preference for regional over global trading, and agreements which improve commodity pricing.

This is all a very long way from where we currently are. But with right‑wing leaders such as Donald Trump threatening the international system as a whole, and with climate change posing a threat to our entire political and economic system, radical reform is the only way forward. Liberalising deals like the US‑UK one must be rejected out of hand. Progressive leaders and movements must begin to create the foundations of a very different economy if we are to avoid a retreat into xenophobia, the politics of bullying, and a collapse of any sort of international coordination. A return to 1990s-style globalisation is not an option. Only radical proposals have a hope of turning things around.


References

  1. ‘United Kingdom’, Office of the United States Trade Representative, ustr.gov

  2. ‘US-UK trade deal: Red Lines’, Trade Justice Movement

  3. United Nations Conference on Trade and Employment: Final Act and Related Documents, Apr 1948

  4. ‘Declaration on the Establishment of a New International Economic Order’, Resolution adopted by the General Assembly 3201 (S-VI), United Nations, 1 May 1974

  5. ‘What is the ALBA?’, albainfo.org, 2014

  6. ‘The paradox of globalisation is that pushing it too far undermines its own institutional foundations’, Dani Rodrik, LSE EUROPP, 2 Jan 2014