Victor Anderson says trade talks have become more important for two reasons: Brexit and Biden
Brexit campaigners talked about ‘taking back control’ and the importance they attached to defending ‘parliamentary sovereignty’. They were right to say that Brexit enables the UK to negotiate its own trade deals rather than doing so as a participant in the EU bloc. However, the power to negotiate and agree is solely with the Government (theoretically acting on behalf of the Crown). Parliament has little input and has no power to amend agreements or give instructions to Government negotiators.
For example, at the end of March, the Government announced a deal for UK membership of the Pacific trade bloc, CPTPP (Comprehensive & Progressive Agreement for Trans-Pacific Partnership), which includes Canada, Japan and Malaysia. The House of Commons International Trade Select Committee was at that stage only about three weeks away from finalising its scrutiny report on the subject – due after the agreement was reached. The same thing happened with the Australia-UK Free Trade Agreement, agreed in December 2021 – except in that case, the scrutiny report followed six months later.
Parliament’s weakness on international trade means that the concerns of different sections of society don’t get fed into the negotiating process properly, or at all. The CPTPP, for example, includes as a key principle the reduction of tariffs on products sold between member states. That includes palm oil, most of which is produced through plantations destroying and replacing tropical rainforest, which is vital both for absorbing carbon and as a home for biodiversity. The existing CPTPP includes opt-out postscripts negotiated by different governments, such as a provision to protect rice production in Japan. The UK Government could have tried to negotiate an opt-out for UK imports of unsustainably produced forest products, such as palm oil, soy and timber. They didn’t.
CPTPP brings little economic benefit to the UK: the civil service estimate was a 0.08% rise in GDP. What it does bring is a potential propaganda benefit for Brexiteers. Two newspapers made the CPTPP deal their front-page lead story: the Daily Mail headline was “At Last, Deal to Turbo Charge Brexit Britain“, while the Daily Express had “PM: Brexit Is Boosting UK“.
There are now trade deals coming up with India and the Gulf Co-operation Council (basically Saudi Arabia and its smaller neighbours). The negotiations are, again, taking place in secret. MPs and NGOs have worries. What will happen about India’s high levels of pesticide use in food exports or its ability to produce medicines or protect small farmers from the pressures of the world market? What will happen about the Saudis’ awful human rights record or their major contribution to the climate emergency? We are all shut out until the final agreements get published.
A second reason why trade arrangements are more important now than they used to be is Joe Biden’s Inflation Reduction Act. This has given a $369 billion boost to renewable energy and other green sectors of the US economy, involving subsidies and incentives to firms already in the USA or moving resources there.
This opens up the possibility of a race to decarbonise economies, with pressure to match the US incentives, which is the approach the EU has taken, potentially offering the best prospect so far of greening the world economy as a whole. Needless to say, the UK is lagging behind, because an ambivalence about decarbonising runs right through the Government and Tory Party.
The US move has also increased interest in the idea of Carbon Border Adjustment Mechanism (CBAM) systems. The idea here is that countries shouldn’t get an unfair advantage for their exports through not taxing the carbon emissions from their production. CBAM adjustments would compensate by the importing country imposing a tariff on these products coming in. A CBAM system is being introduced gradually by the EU. The UK Government has announced it intends to hold a consultation this year on the proposition of bringing in a similar scheme here.
Pressure has recently increased for scrapping the Energy Charter Treaty (ECT). Increasing numbers of countries, including France, Germany, and Poland, have announced their intention to leave. Italy left in 2016. The treaty enables firms which expect to lose out from changes in government policies to claim compensation for the loss in value of their investments – for example, as a result of measures to reduce carbon emissions. There is no UK plan to leave the ECT, but it is an obvious thing for Labour to do after the next election.