Shanker Singham is CEO of Competere. He is a former adviser to Liam Fox when he was Secretary of State for International Trade, and to the Office of the United States Trade Representative.
Boris Johnson’s magnificent Greenwich speech extolling the benefits of the UK as a force for trade liberalisation and outlining the UK’s overall external trade and domestic regulatory strategy now needs to be delivered.
The Government is succeeding against many expectations to deliver large parts of this expansive and ambitious agenda. But as the Prime Minister’s vision sails on, there are a number of rogue waves that could still sink it. Undue politicisation of the little-known UK trade remedies body could be one of them.
An often neglected but critical aspect of a nation’s trade policy is its approach to trade remedies. It is a mistake to think of these as some arcane academic area. As so often in trade, the devil is in the details.
The grand strategy of Global Britain is to maximise the opportunities that Brexit affords. This requires the maximisation of UK external trade policy, and therefore requires a liberalising posture from the UK. If the UK looks as though it is more closed than open, its trading partners will see fewer opportunities in attempting trade agreements with it. This means tjay the UK must have open domestic settings, and one of these is its approach to trade remedies.
A critical part of these is dealing with anti-competitive market distortions in other countries that adversely affect UK firms. This position has been stated clearly by both previous Secretaries of State for International Trade, Liam Fox and Liz Truss, and repeated by Anne-Marie Trevelyan as recently as the G7 trade ministers meeting in Sorrento, Italy in October.
It can clearly be banked on as a core part of UK foreign trade policy. This requires asks in trade agreements and the like, but it also requires robust defensive tools – which is where the work of the Trade Remedies Authority (TRA) comes in.
The authority will respond to applications from affected industry in the UK which asserts that it is damaged either because foreign producers are charging lower prices in the UK than they do in their home markets, or because those foreign producers benefit from subsidies. It will also have to deal with this relatively new area of law and policy, and can also mount sectoral investigations to inform government decisions
Generally, such processes are very political, with the affected industry seeking to secure tariffs and protections for itself, no matter what. Consumer interests risk being forgotten in the crashing political waves that will smash into the trade remedies body. If politicians simply do whatever the loudest industry voice tells them to do, the consumer-facing aspects of UK trade policy will be lost. We will be in a world in which the Government utters fine-sounding words about free trade, but in actual practice we act like the worst protectionist.
There are now real and shared concerns around the world that producers have that the playing field for global competition has been distorted by certain countries who intervene in markets to systematically lower the costs of key national champion producers.
We cannot ignore the reality of this issue, or bury our heads in the sand of some free traders’ paradise that does not exist. If we fail to properly address these issues, protectionism will be deemed by publics to be the only way to address it, and we will get a succession of global leaders whose primary focus is to protect their own businesses at any cost. These leaders will make Donald Trump look like a free trader.
But we can develop a mechanism to help deal with this issue, and the TRA plays a crucial role in it. Tackling anti-competitive market distortions was suggested as part of our import policy in the work of the first Trade and Agriculture Commission (“TAC1”). This
recommendation is important, because it included the four devolved members of the National Farmers Union, as well as environmental NGOs, and some of us who would typically be categorised on the free trade side of the policy spectrum.
TAC1 proposed that, in the event that there was an anti-competitive market distortion in another market – and one that had an impact on competition could be proved; and there was causation and damage to an affected industry – that industry could apply for a tariffication of that distortion.
This would be a tailored and narrowly focused application of tariffication, and would cease when the distortion was eliminated by the relevant government. Such a mechanism, which would be in line with a trade remedy, would be administered by the TRA.
The TRA also has the statutory power to launch investigations into sectors of its own motion. This power is very important, since the TRA must differentiate, in operating it, between those firms that need some sort of tariff to reflect the distortions in the other market and those firms who demand protection simply because they are not competitive.
There has been speculation about the future of the TRA now that Secretary of State for International Trade has taken it under her wing once more. Some have suggested that the move will damage the body’s impartiality. However, independence for fledgling agencies is challenging. The key question is: independence from whom?
Most new bodies established by countries, such as anti-trust agencies or indeed trade remedy bodies, are set up as independent, but their arms-length relationship with the government of the day actually does the opposite of conferring independence.
Instead, it exposes them directly to political forces at a time when their credibility is not yet established. Legislators besiege these new bodies with demands for protection for their constituents. Though independent, they are unmoored from the sponsorship and protection of a Minister who will have a clear sense of the strategic goals of the government for trade and regulation. It is this Ministerial sponsorship and support that protects the new trade remedies body from being caught defenceless in the cross-hairs of political forces where whoever shouts loudest generally gets what they want.
It is both impossible and undesirable to keep politics out of trade. The decisions that policymakers and administrative bodies make have real impacts on people’s lives and livelihoods. The challenge is how we can make the politics better channel economic forces, so that the net result is economic growth and people lifted out of poverty.
The UK is about to embark on this process and, in many ways, has an opportunity that other countries do not have. We can leapfrog the traditional political forces that are derived from long established incumbent power. As elsewhere, leaving the Customs Union and Single Market has allowed the UK to forge a new path, and provided it with an unfrozen moment to make corrections in policy that other countries would struggle to do. But the longer it delays in doing so, the more difficult it will be.