The Future of (Fair) Trade

By Mike Phipps, editor, For the Many… : Preparing Labour for Power

“The system of rules that has been at the core of world trade for the past 70 years is at breaking point,” says Barry Gardiner, Shadow International Trade Secretary in the Introduction to this new report Just Trading: What would a just trading system look like? Corporations now have the power to challenge sovereign governments, China can undercut western markets and the US President, imposing arbitrary tariffs, is behaving “like a unilateral wrecking ball”. It’s a critical time for Labour to set out what kind of trade policy we would like to see, with human rights and social justice at the core of its vision.

Trade is a vital part of UK economic activity, accounting for 30% of GDP, with nearly ten million workers employed by companies that trade internationally. So a progressive trade policy is central to Labour’s overall industrial strategy, with priority given to the same sectors – above all, green technologies that encourage a transition to a low-carbon future.

In the growing international free-for-all, this report insists on a rules-based international trading system. In the pursuit of new trade agreements, however, Labour should take a different approach to previous governments in two areas. Firstly, it should seek a proper balance between trade liberalisation and regulation in the public interest. For this reason, Labour could not support the EU’s discontinued Transatlantic Trade and Investment Partnership (TTIP) with the USA, nor the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.

Secondly, “We do not support those bilateral trade agreements which have

locked trade partners into exploitative relationships, often supplying commodities or basic goods at the bottom of the chain of production where little value is added in the originating country.” Rights-based values have to be woven into trade agreements, so that they help build wealth in partner countries.

The myth of the self-regulating market was exploded once and for all in 2008’s financial crash. Regulation is vital to prevent such crises and to stop free trade from being exploitative. Official projections for TTIP suggested that at least one million people would lose their jobs in the resulting economic dislocation, yet the EU pushed on with fifteen separate rounds of negotiations before conceding the whole deal was politically unacceptable. Labour has to “safeguard the policy space for governments to act in the public interest”, so that no trade agreements can undermine future governments’ ability to regulate on environmental or social grounds.

“A Labour government will guarantee that public services are fully protected from trade agreements.” It will also focus on the benefits trade can bring to workers, not just their employers. First, Labour will ensure trade agreements cannot undermine human rights and labour standards. In this respect, all new agreements should be subject to rigorous impact assessments.

Addressing the needs of poorer countries, Labour must ensure duty-free and quota-free access for exports from the world’s least developed countries. It will never use overseas aid as a means to force countries to open up their markets to foreign competition.

The report is clear about the dangers of blanket liberalisation and the mistaken belief that countries can simply trade their way out of poverty. The pursuit of export markets at all costs has also been responsible for significant human rights abuses. In contrast, fair trade can transform the lives of local producers and their communities. Labour will use UK ‘aid for trade’ to support the development of local markets and regional trading opportunities as the most sustainable building blocks of economic growth.

“Labour will ensure that the UK’s trade agreements are fully consistent with the country’s international obligations on environmental protection, biological

diversity, animal welfare and climate change.” The push for increased trade in fossil fuels is a real threat to this aspiration and a Labour government should review how its use of export finance could be targeted towards trade in renewables. Contrast current policy: over 99% of UK export finance provided to the energy sector during the five years of 2010-2014 went to fossil fuel projects.

Then there’s the arms trade. Britain is the largest arms exporter in Europe and the second largest in the world. This entails a responsibility, the report argues, to ensure that no British arms exports can be used in violation of human rights or international humanitarian law. Yet the current government’s failure to apply its own criteria not to supply arms where they could  be used for external aggression or internal repression is making a mockery of this commitment – especially in relation to Saudi Arabia. Labour will suspend arms sales to Saudi, review its sales to Israel and cease arms exports to any country where there is a concern that they could be used to violate international law.

Trade agreements need to be more transparent, subject to proper parliamentary oversight and consultation with external stakeholders. Interestingly, this includes “the creation of formal structures of consultation with business, trade unions and civil society organisations.” Additionally, new negotiations will be subject to an independent sustainability impact assessment and subject to public consultation. We need to put an end to the secret negotiation of trade deals which are deliberately concealed from public scrutiny.

A second section of the report explores the issue of investment. It’s a highly technical area, but Labour plans to review its treaties to ensure “that host communities can derive equal benefit from the opportunities that foreign investment provides.”  It will also tackle the way investors can challenge sovereign host governments, using parallel judicial systems to push aside environmental protection and other regulations. A new model to settle disputes between investors and host governments is needed, which takes account of human rights and social justice.

This report is a real step forward for the Labour Party. It commits it to a just trading environment, rather than a race to the bottom. Further contributions are welcome and should be emailed to barry.gardiner.mp@parliament.uk.

Just Trading is a worldwide initiative, bringing together like-minded politicians and legislators to work towards a just trading system. ‌Launched by Barry Gardiner MP in 2016, the initiative has members from across the world who share a common interest in enshrining a fair and just trade agenda. This report, launched in October, embodies the initiative’s key principles and can be accessed here https://www.just-trading.org/about