Britain’s ambitious trade plans are barely off the drawing board

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What can we glean about the government’s plans from its new white paper on trade? Not much, says Fabian Bohnenberger (King’s College London). The paper is frustratingly short on detail and suggests plans are still in their early stages. While the commitment to give developing countries preferential access to the UK market is commendable, the sections on establishing the terms for Britain’s independent membership of the World Trade Organisation and transitioning EU Free Trade Agreements remain flimsy. This comment was originally published on the LSE Brexit blog.

Preparing for our future UK trade policy’, the Government’s new white paper, offers a glimpse of what it calls the “emerging approach to establishing an independent international trade policy as we exit the EU”.

As one of the more open-ended challenges of the Brexit process, this task requires both long-term thinking and close attention to the many technical and legal problems that are involved in disentangling existing and creating new commercial arrangements with the rest of the world. It promises a “truly Global Britain” whose people “have decided to be a global, free trading nation [that is] more outward-looking than ever before”. Yet only few paragraphs go beyond the use of generic terms, offer concrete examples of what needs to be done or engage with the technical aspects of making an independent trade policy work in practice. While certain parts of this policy will depend on the UK’s future relationship with Europe, the overall lack of detail suggests that planning and policy coordination across government on this issue is still at an early stage.

The key points with important implications for trade policy are:

  • The UK seeks “a strictly time-limited implementation period with the EU” with market access on current terms.
  • During the implementation period, the UK would be allowed to negotiate new trade agreements on its own – but not bring them into effect if they are inconsistent with the current UK-EU terms.
  • The paper puts an increasing focus on no-deal preparations, stating multiple times that “the UK needs to prepare ahead of its exit from the EU for all possible outcomes of the negotiations”.
  • The UK “will seek to transition all existing EU trade agreements and other EU preferential arrangements” – without elaborating how that could work.
  • To support developing countries, the UK “is ready to put in place a trade preferences scheme, which will, as a minimum, provide the same level of access as the current EU trade preference scheme”.
  • In a first step towards establishing an independent trade remedies framework, the UK government will begin to identify “EU measures which are essential to UK business and will need to be carried forward”.
  • To establish the necessary domestic powers, the government will introduce legislation, including a trade bill, a customs bill and a sanctions bill.

The UK economy has become increasingly connected to, and interdependent with, the outside world. This is the main point of the paper’s first part, which otherwise dryly narrates the evolution of global trade over the last decades. The development of cross-border supply chains and the associated rise in the trade in intermediate products, which today accounts for over 70 percent of global trade, is particularly highlighted. In addition, the authors carefully show that UK services exports, which have grown fast and already account for 45 percent of total UK exports in 2016, are also an increasingly “important, and growing, component of supply chains”.

The second section covers five broadly-worded principles: (i) transparent and inclusive trade policy making, (ii) supporting a rules-based multilateral trade system, (iii) securing and seeking market access, (iv) supporting developing countries through trade, and (v) ensuring a global level playing field.

However, it is not always explained what these principles mean in practice. For example, the UK pledges to work within the WTO to “cut red tape across borders, phase out distortive subsidies, scrap tariffs […] and work to ensure the rule book stays relevant as patterns of trade change”. But the policy paper offers little assurances on the more immediate challenges facing the UK in the WTO: the crucial task of establishing UK-only tariff schedules and separating agricultural import quotas between the UK and EU is barely acknowledged. What is more, in light of recent objections by a group of major agricultural exporters including the US, Argentina, Brazil and New Zealand to a preliminary plan agreed by Brussels and London over how to split the EU’s existing tariff rate quotas, the reaffirmation of the government’s intention to largely replicate its existing commitments and “keep changes to a technical nature” seems woefully out of date.

Similarly, the government is “seeking continuity in its current trade and investment relationships, including those covered by EU third country [Free Trade Agreements] FTAs” and aims to negotiate new trade agreements on its own. However, by focusing entirely on the domestic legislative process and ignoring the many complexities involved in actually transitioning EU trade agreements with third countries, the authors seem to suggest that these problems are not really worth thinking about. Instead, they merely promise “measures through legislation which will allow the Government to fully implement any EU third country and other EU preferential arrangements which we transition”. Only the Treasury’s white paper on customs contains some ideas, including “a new customs partnership” that would force the UK to mirror most of the EU’s tariffs and customs processes. Considering the technical and economic hurdles of transferring EU FTAs, some of which are summarised here, the available level of detail will do little to reassure anyone of a smooth transition.

On how to negotiate future trade agreements, the trade paper remains equally reticent: highlighting the need for consultations, it envisions “a legislative framework that will enable future trade agreements with partner countries to move quickly from signing to implementation and then to ratification, whilst respecting due process in Parliament”. The only country that is specifically named as a candidate with which to potentially strengthen trade relations is India – an interesting choice, given India’s priority of increasing worker mobility.

The paper is much more forthcoming on the subject of plurilateral trade agreements, which the government seems to wholeheartedly support. It explains that the UK wishes to remain part of the Government Procurement Agreement, to finalise the Environmental Goods Agreement and to resume the negotiations on the Trade in Services Agreement.

Specific priorities for future trade negotiations are rarely mentioned, but the paper highlights the UK’s interest to “push for greater liberalisation of global services, investment and procurement markets” as well as to “seek ambitious digital trade packages”. On the other hand, it emphasises the need to avoid any ‘race to the bottom’ and retain control over ‘behind-the-border’ policy issues, namely decisions about public services as well as the “protection of intellectual property, consumers, the environment, and employees”.

Overall, the paper adds few new ideas and is particularly sketchy on the principles’ real world application. While the specifics may depend on the UK’s future relationship with Europe, the lack of any clear policy options or timeline to establish the many interlinking pieces of an independent trade policy indicates that planning is still at a very early stage. More positively, it explicitly invites stakeholders to give their views on inclusiveness and transparency, trade preferences for developing countries, and trade remedies. Also commendable is the government’s unilateral commitment to guarantee the preferential market access that developing countries currently enjoy to the UK. But this document indicates that the UK has a long, arduous way to go before it regains an independent trade policy.

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Britain’s ambitious trade plans are barely off the drawing board

Starting my PhD on International Trade Governance

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This week I am officially starting my PhD in International Political Economy research at King’s College London. I am really happy that the application process has worked out so well and that I am also part of the 1st cohort of the London Interdisciplinary Social Science Doctoral Training Partnership (LISS DTP) with funding by the Economic and Social Research Council (ESRC)!

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My PhD project will examine the role of trade experts and expert knowledge in WTO proceedings with a particular focus on the question how the content and contestation of this ‘trade expertise’ has affected the development and interpretation of the concept of national regulatory autonomy in the international trade system. Despite its importance for policy-making, multilateral negotiations and regime maintenance, this question has remained under-explored in academic research. More information on my project coming soon! I will set up a dedicated page on this blog explaining my PhD topic and aim to publish regular updates on my research progress.Esrc_logo

 

Starting my PhD on International Trade Governance

Inclusive and fair trade, not protectionism, will restore trust in global trade

In our most recent comment in International Politics and Society, Clara Weinhardt and I argue that institutional reform at the WTO level and fair distributional policies on the domestic level are crucial to reduce income inequality and restore trust in global trade. Read the full article below. A longer version of our argument will soon be published in the Spanish edition of Nueva Sociedad.

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Why Trump’s anti-globalism is wrong

Inclusive and fair trade, not protectionism, will close the gap between rich and poor

By Fabian BohnenbergerClara Weinhardt | 26.09.2017

When the World Trade Organisation (WTO) was created in 1995, many assumed the promises of open international markets would prove irresistible. Two decades later, the consensus behind the idea of free trade seems to be crumbling. Those on both the left and right are increasingly questioning the benefits of our current approach to economic globalisation.

The WTO’s declining importance in an ever more fragmented global trade system makes it particularly difficult to withstand the strengthening winds of economic nationalism. To restore trust in the global trading system, governments need to make global trade more inclusive and narrow the gap between rich and poor.

The global financial crisis, coupled with increasing inequality, has made people sceptical of globalisation. WTO members are disappointed that after 16 years of negotiations they have still not managed to conclude the Doha Round – which aims to reform the international trading system through the introduction of lower trade barriers and revised trade rules.

Bigger trading nations including the US, the EU, Canada, Japan and China are now turning their attention to bilateral and regional free trade agreements, such as the much-touted CETA agreement between the EU and Canada, and the China-led Regional Comprehensive Economic Partnership (RCEP) between 16 Asian-Pacific countries currently under negotiation.

Continue reading “Inclusive and fair trade, not protectionism, will restore trust in global trade”

Inclusive and fair trade, not protectionism, will restore trust in global trade

New Article on the Precarious Legitimacy of Transnational Trade Governance

Prof. Christian Joerges of the Hertie School of Governance and I recently finished our work on a book chapter that examines the impact of modern trade agreements on democratic policy-making and the ways in which their effects on national governance can be legitimised. The new paper (SSRN download link) is based on a previous version with a slightly different focus that was extensively rewritten by us over the last months. The final version will be published in the forthcoming Research Handbook on the Sociology of International Law edited by Moshe Hirsch and Andrew Lang in the coming months.

A Conflicts-Law Response To The Precarious Legitimacy Of Transnational Trade Governance

The abstract: 

This paper discusses the fundamental tensions between economic globalisation and democratic politics in the field of international trade. New bilateral and regional trade agreements increasingly incorporate other ‘trade-related’ policy areas and threaten to constrain state action and democratic politics. The move towards deeper and more comprehensive trade deals has greatly accentuated grievances and is of exemplary importance in the realms of transnational governance. We examine the decoupling of these agreements from national and democratic control and the resulting legitimacy impasses of transnational governance, based upon the theoretical frameworks of Karl Polanyi and Dani Rodrik. Arguing that politics is not a mistake that gets in the way of markets, we submit our own conceptualisation of transnational legitimacy. In doing so, we suggest a new type of conflicts law which does not seek to overcome socio-economic and political diversity by some substantive transnational regime, but responds to diversity with procedural safeguards, thus ensuring space for cooperative problem-solving and the search for fair compromises.

 

New Article on the Precarious Legitimacy of Transnational Trade Governance

Fair handeln

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In vielen afrikanischen Ländern herrscht Armut, ihre Einwohner sehnen sich nach einem besseren Leben – und flüchten. Schaffen neue Handelsabkommen Abhilfe?

Gastbeitrag für das Magazin enkelfähig zusammen mit Clara Weinhardt

Seit 15 Jahren verhandelt die Europäische Union mit Ländern in Afrika, der Karibik und dem Pazifik über Wirtschaftspartnerschaftsabkommen (EPAs). Viele afrikanische Handelspartner befürchten jedoch Nachteile aus der eigenen Marktöffnung. 2014 wurden zwar mehrere regionale EPAs in Afrika unterzeichnet; die Kontroversen reißen jedoch nicht ab. Aus Sorge um die eigene Industrialisierung weigern sich Staaten wie Nigeria und Tansania, die bereits verhandelten Abkommen zu ratifizieren.

Und tatsächlich können sie sich in einigen Bereichen negativ auf die wirtschaftliche Entwicklung auswirken. Dabei sind weniger die Handelsgrenzen der EU das Problem, denn die Abkommen sehen weitgehende Zollsenkungen vor. Risiken birgt stattdessen die Marktöffnung, zu der sich die afrikanischen Partner im Gegenzug verpflichten.

Schokolade statt Kakaobohnen

Der Abbau eigener Handelsgrenzen verspricht zwar günstigere Importe, ver­ringert aber das Exportpotenzial. Der flexible Einsatz protektionistischer Maßnahmen, wie etwa Steuern, wäre für afrikanische Länder deshalb wichtig, um eine Marktöffnung mit der gezielten Förderung einzelner Sektoren zu verbinden, deren Wertschöpfungspoten­zial hoch ist. Wertschöpfung bedeutet: anstelle von Rohstoffen wie Zucker oder Kakaobohnen weiterverarbeitete Produkte wie Schokolade zu exportieren, deren Marktwert um ein Vielfaches höher liegt.

EPAs erschweren es jedoch, Steuern auf den Export von Gütern wie Rohstoffen einzusetzen. Äthiopien zum Beispiel hat diese in der Vergangenheit erfolgreich als Anreiz für eine Weiterentwicklung der eigenen Lederindus­trie genutzt. (Dazu hier mehr von mir – FB.) Viele afrikanische Länder haben dennoch ein EPA abgeschlossen, insbesondere um dem drohenden Verlust von zollfreiem Marktzugang in die EU zu entgehen.

Die EU betont, dass die EPAs im Vergleich zu anderen Handelsabkommen weiter reichende Schutzklauseln und Ausnahmen enthalten. Das ist richtig, kann aber nicht in allen Fällen die Risiken auffangen. Zwar konnten die afrikanischen Staaten rund 20 Prozent des Handelsvolumens von der Marktöffnung ausnehmen; diese Ausnahmen betreffen vor allem landwirtschaftliche Produkte.

Doch in Zukunft könnte es für viele afrikanische Staaten sinnvoller sein, Produkte der weiterverarbeitenden Industrie zu schützen. Die Länder, die ein EPA unterschrieben haben, sollten bei der Umsetzung darauf drängen, dass die angekündigte Überprüfung der Abkommen tatsächlich verwirklicht wird. Auf diese Weise ließen sich bei negativen Auswirkungen zumindest Anpassungen anmahnen.

Afrikanische Regierungen sind gefordert

Es wäre jedoch zu einfach, die EPAs zum zentralen Entwicklungshindernis der afrikanischen Partner zu stilisieren. Die individuellen nationalen Rahmenbedingungen spielen eine zentrale Rolle für wirtschaftliches Wachstum und soziale Gerechtigkeit. Viele Regierungen haben ihren eigenen Spielraum in der Vergangenheit nicht genutzt. Mit anderen Worten: Die afrikanischen Länder müssen auch eigene soziale, politische und wirtschaftliche Reformen initiieren und umsetzen.

Die Grundidee der EPAs, handelspolitische Reformen anzuregen, ist zukunftsweisend, aber der Impuls für eine strategische Neuausrichtung einer nationalen Ökonomie kann nicht von außen kommen. Viele afrikanische Regionen sind gerade erst dabei, eine eigene handelspolitische Strategie zu entwickeln. Der Druck der EU, die Abkommen dennoch abzuschließen, könnte somit kontraproduktive Auswirkungen haben, weil einige Länder schlicht noch nicht dazu bereit sind.

Fair handeln

A Brief Look at Diversity in the German Parliament

In light of the upcoming German federal elections in September 2017, I take a brief look at the age and gender distribution in the German Parliament – the Bundestag – from its establishment in 1949 to the last general election in 2013. The figure below sums up the most interesting findings, starting with the observation that while the age composition changed over time, the average age of the representatives  stayed relatiely constant over the past seven decades (at around 50 years at the start of the legislative term). In addition, it highlights that the number of female representatives has risen considerably from a meagre 28 out of 382 members in the 1st Bundestag (1949-1953) to 230 out of 631 in the current (18th) term.

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Continue reading “A Brief Look at Diversity in the German Parliament”

A Brief Look at Diversity in the German Parliament