Anthony Browne is MP for South Cambridgeshire, and Chairman of the All Party Parliamentary Group on the Environment.
What are the limits of free trade? The question has divided Conservative MPs, in particular on whether animal welfare provisions should be included in new trade agreements.
Some MPs have called for animal welfare to be inserted in trade deals. Others say it would be a return to the Corn Laws, splitting the party between protectionists and free traders.
It is great that we can debate and decide this nationally – a result of Brexit.
I am a free trader the whole way. Our prosperity has been built up over the centuries by being able to sell and buy goods and services nationally and internationally. Free trade has been the most powerful wealth-creating engine the world has ever seen.
But free trade and free enterprise are like chocolate and alcohol – life-enhancing, but not in their purest forms. Everyone agrees that free enterprise only works if backed by state-enforced property rights. All mainstream politicians accept that free enterprise brings most benefits when tempered by consumer, competition, environmental, and employment protection laws.
The same is true for free trade. Like free enterprise, to work best it needs some tempering. For example, some believe that unilateral removal of all external tariffs will boost our economies most. That is true in some cases – for example, for products we have no domestic producers of, coming from countries we are not about to negotiate a trade deal with.
But giving up tariffs on goods from a country that we are entering trade talks with removes a key negotiating lever. The Government has recognised this in its new global system of tariffs, keeping some tariffs to help get better deals.
On animal welfare, some claim it is protectionist to insist that imports meet the standards we require in the UK. The high profile issue is chlorinated chicken from the US. Chlorinated chicken is safe to eat – we put chlorine in our water supply – but the reason that the chicken meat needs to be washed in chlorinated water is that its low welfare standards leads to higher rates of infection. Low welfare standards enable US chicken producers to cut costs by as much as 20 per cent, potentially enabling them to undercut producers in the UK who bear the cost of higher standards.
If allowing cheaper imports of chicken produced with lower welfare standards meant that chicken production moved from the UK to the US wholesale, then it might save shoppers money on their grocery bills, but it would be bad for animal welfare and food security. In fact, it is entirely counterproductive: we might as well never have had the higher standards in the UK but rather kept the chicken production.
In this example, free trade does not lead to greater economic efficiency, but rather lower standards. Free trade delivers growth because it drives resources to more efficient producers – those with higher skills, better technology, better infrastructure or natural resources – who then produce more and grow. But if competitive advantage is based purely on having lower standards, then free trade leads to a race to the bottom. It is called regulatory arbitrage.
The challenge is that animal welfare has no explicit economic value. Like clean water and air, it is what economists call an “externality”. But it is clearly something as a country we value, since we have been prepared to pay for more expensive meat as a result of imposing higher welfare standards. Economists could put a monetary value on it by calculating how much more consumers would pay for higher animal welfare produce. But in the UK, we do not have mandatory labelling showing welfare standards, so consumers cannot make a fully informed choice.
Between the two extremes – full free trade and bans on low standard products – there is a middle way. We can use the tariff system to reward producers in other countries who follow higher welfare standards, and prevent those that follow lower standards from getting unfair competitive advantage. That would prevent food producers from being forced into a race to the bottom.
The issue is most acute with the US, both because it is such an important trade deal and because their animal welfare standards are so much lower than the UK’s.
Britain was the first country in the world to introduce slaughterhouse regulation and farm welfare requirements in the late Victorian and the early Edwardian period, and these have evolved since. Countries like Australia and New Zealand implemented broadly similar laws. However, the United States, having broken away far earlier in its history, ended up following different animal welfare standards. In the US, the concept of legally protecting the welfare of farm animals has been controversial.
With little action from the US government, a plethora of private accreditation schemes have sprung up. These have been consumer-driven, and companies like McDonald’s have been instrumental in getting many US farmers to adopt standards that are similar to the UK’s. The larger US food companies, such as Tyson and Cargill, recognised that they needed to embrace this agenda, and produce much of their food to accredited standards.
We can use this to prevent regulatory arbitrage on animal welfare by giving preferential access to food produced to standards that are similar to those in the UK. Produce made to those existing accredited standards could then be imported tariff free, with tariffs imposed on non-accredited food produced to lower standards. At the same time, we should also reform British labelling laws so that consumers can assess the welfare standards their meat is produced to.
The Department for International Trade rightly worries that welfare standards might undermine getting a deal at all. But the benefit of this tariff approach is that it could get the support of the major US food producers, making a deal easier. It would also be legal under WTO rules, since it is not a ban based on welfare standards, but a tariff differential. There is a precedent in the EU’s High Quality Beef quota, which gives tariff-free access to non-hormone treated beef from the US. The concept could just be broadened.
Such an approach would enhance animal welfare globally, stop British farmers being undercut by regulatory arbitrage, improve consumer choice, and boost free trade.
Protecting animal welfare is highly valued in the UK, and the Conservatives promised in our manifesto that we wouldn’t compromise on our high standards as we negotiate trade deals. If we put our mind to it, we can agree modern trade deals that both promote free trade and protect British values.