TaPP Insights: What Next for UK Trade Policy?

Keynote Speech from Rebecca Fisher-Lamb (HMG) Ambassador to the Economic Agencies in Geneva and Deputy Permanent Representative to the World Trade Organization

The UK has played an active role in the multilateral trading system, long before withdrawal from the EU, from its central role drafting the GATT to the framing of the WTO. Now, post-Brexit, the WTO continues to be key to the UK as a central part of the UK’s trading agenda. Following the referendum, the UK has been committed to supporting and actively engaging with the WTO. Beyond the chairing of committees and engaging with the daily work of the institution, it has been active addressing concerns raised by businesses as the key beneficiaries of the system. It has worked closely with partners from both North and South on a daily basis and especially during key moments of importance, such as MC12. The participants heard of the UK’s focus on key issues of national interest, such as services liberalisation but also how the UK has been leading on issues which particularly matter to developing country partners, such as working to tackle export restrictions in preparation for negotiations at the MC13. The participants heard how the UK was actively exploring different ways to enhance inclusivity for developing countries within WTO trade discussions, drawing on the UK’s historical ties and extensive connections with developing countries, including its role within the Commonwealth group and collaboration with LDCs.

How effective is the UK’s current approach to developing and scrutinising trade policy and trade agreements? How could it be improved?

Reflections from the Panel and Discussion:

• Trade has implications for all UK citizens so all of us should be involved in deciding the strategic direction. Effective engagement with the business sector is fundamentally important, as firms are the main actors engaged in trade. UK should capitalize on its extensive business networks across the world, especially within the Commonwealth. Public debates on UK trade policy since the referendum have been frustrating, with a fixation on free trade agreements over the prosecution of an effective policy for business, workers, and consumers. Political dynamics have impeded effective policymaking, not least an incredibly high turnover of trade ministers (circa. 21 ministers in 10 years).
• The UK’s Trade & Sustainable Development Domestic Advisory Group (DAG) is a tripartite scrutiny group set up to advise government on sustainable development in the context of UK trade agreements, and it offers useful insights into the efficacy of consultation mechanisms. It is crucial to incorporate sustainability as an integral part of trade agreements, rather than treating it as a separate entity. The DAG has a vast remit but few resources. While it has the potential to focus on specific issues and make a meaningful impact, the DAG’s effectiveness is contingent upon the government’s commitment to support it, which is vital to avoid the DAG becoming a mere ‘talking shop’.
• The UK Parliament’s role in scrutinizing trade agreements is constrained due to limited resources and few formal powers. Though the House of Commons had a dedicated select committee to scrutinise international trade policy, reflecting recent departmental changes the committee has since been disbanded and responsibility for trade now sits with a single select committee that covers both business and trade. This means that Parliament will have less time and resources to scrutinise trade agreements than before. Many of the mechanisms of Parliamentary scrutiny are dependent on good relations with government and good will, as Parliament lacks formal powers. This is unlikely to change due to government majorities within the House (as seem during the passage of the Trade Bill).
• In relation to devolved governments: trade policy decisions have major implications for Wales, Scotland, and Northern Ireland. Devolved administrations and legislatures have not been closely involved in trade policymaking, even where decisions have direct impacts on areas of devolved competence (like agriculture and sanitary and phytosanitary measures). There are signs that relations were improving and information sharing between Whitehall and Devolved Administrations becoming more effective. However, further improvements are desirable. There is also potential for UK trade negotiators to use the Devolved Administrations as a credible constraint to enhance their negotiating leverage, as the US uses Congress and EU has used certain Member States.
• Though opportunities for consultation exist, there is concern that actors seeking to shape UK trade policy – be that devolved administrations, businesses, or NGOs – are more ‘managed’ than seriously engaged with.

What does a labour-rights supportive trade policy look like for the UK? Is there appetite in the UK to enforce labour rights through trade policy instruments? And what risks exist in relation to its own labour regime?

Reflections from the Roundtable:

• When considering how the UK engages with labour rights through its trade policy, it is important to balance national labour rights practice and engagement with labour rights compliance abroad: a coherent model built around international collaboration and cooperation is key. Currently, a lack of involvement of civil society in relation to labour rights and workers groups in UK trade negotiations makes this very difficult to do.
• In relation to free trade agreements, the record so far is a concern: the UK has proceeded to concluded new agreements (most notably CPTPP) with countries where non-compliance with fundamental labour rights is already well-documented. This gives the impression that there is little interest in meaningfully securing compliance. The UK has built on the traditional approach including provisions on modern slavery in the UK-Australia FTA. A question remains as to whether this signals a stronger UK commitment on labour rights issues, or whether this was merely a symbolic gesture between parties where similar rules already exist.
• The TCA review presents opportunities to improve protections for workers in the UK and EU and potentially to secure a ratchet (requiring each to match the high levels of the other partner).
• The relationship of labour rights protection in the context of services trade should be considered further. The UK has concluded agreements with enhanced mode 4 commitments which have an important labour rights dimension, as do cross-border trade in services where labour is moved abroad and delivered via digital platforms, often circumventing labour protections that would otherwise apply.
• In considering how the UK could progress a trade and labour rights agenda, it is important to focus on the specific context in the partner country such as levels of unionisation, structure of the formal/informal economy, etc.
• The UK can also learn from other countries including moves to ‘assertive implementation’, enhanced due diligence, the USMCA’s rapid response mechanism, and more meaningful impact assessments. More broadly, the UK can look to the US moves from corporate responsibility to corporate accountability and increasing attention on labour ‘adjacent’ policies such as an industrial strategy aimed at improving levels and quality of employment.

Key reflections for the UK to consider:

• Serious intellectual and policy engagement with labour as a trade policy issue rather than a variable ‘add on’.
• Improving labour standards at home rather than simply viewing labour as an ‘external’ issue, as the current approach undermines the ability of the UK to meaningfully engage with partners.
• Improved analysis of the potential impact of FTAs on labour rights protection before signature, and caution towards ‘standard’ approaches to enforcement, instead tailoring approaches to individual partners.
• Further analysis of the importance of services trade for labour rights protection, across the modes of service provision.

As world powers push for a green transition backed by industrial subsidies, often at the expense of other partners, where will the UK find itself? What scope is there for efforts to support a green trade policy, either at home or abroad?

Reflections from the Roundtable:

• The primary and most crucial issue for tackling climate change is the reduction of total global greenhouse gas (GHG) emissions. There is concern that new instruments such as carbon border adjustments may be perceived as a means of shifting responsibility from the largest emitting states to others. Unhelpfully, a peculiar form of demonization of developing countries in the climate change debate has taken place, despite their limited historical impact on GHGs. To address this, mandatory cuts should be implemented for the countries emitting the most GHG, which would include the US, EU, UK, and now China also.
• While couched as ‘green’ there is a risk that the transatlantic subsidies race is primarily about economic competitiveness rather than environmental protection or addressing carbon leakage (the Intergovernmental Panel on Climate Change defines carbon leakage as materialising when mitigation measures implemented in one country or sector leads to increased greenhouse gas emissions in other countries or other sectors). In the EU, this has manifested itself as a further relaxation of state aid rules by the EU Commission, revision of the temporary crisis and transition framework, and further amendments to the general block exemption regulations until 31 Dec 2025.
• There have been longstanding concerns that investment protection commitments with regards to ISDS may impede environmental actions. While many countries including the US, Canada, Chile, Columbia are using trade agreements to update their investment protection commitments (an important step in climate policy development), the UK approach is more ad hoc. The UK plays a central role in the investment protection regime: it has the seventh highest number of BITs in the world and is the third most frequent home state in ISDS cases (102 UK investors have brought claims against other countries under UK BITs and investment chapters). Many of these cases are not just clear examples of expropriation but include egregious examples of a foreign investor challenging environmental policy. Examples include Ascent Resources (a Canadian company under a UK BIT), using the threat of an energy charter treaty claim to pressure the Slovenian government to relax fracking laws. Given its central role in investment policy, the UK is bring called on to show leadership in investment protection treaty development using FTA investment chapters as well as updating old BITs to incorporate climate change relevant provisions.
• When developing legal frameworks relevant to trade, investment and environment, the UK and other countries need to comply with the Paris Agreement of 2015, and specifically Article 2 (1)(c) which requires governments to align their financial flows with a pathway towards low green-house gas emissions.
• There has been a notable proliferation of voluntary quality standards in the net zero landscape. To address this fragmentation, ISO Net Zero guidelines were launched at COP27. The purpose of these Guidelines is to distil best practices and initiatives from across the world and to find a common methodology that organisations can look to. Hopefully this can then filter down to trade discussions and impact development of more unform trade policy on climate change issues.

Key reflections for the UK to consider:

• A clear policy in relation to investment treaties and their interaction with climate change action, especially in relation to ISDS.
• Ways to act as a bridge between the EU and US, working with them to find ways to harness trade and investment policies to drive climate action, while also finding ways to avoid being adversely impacted by increasing use of subsidies and new regulatory regimes such as the EU CBAM.
• Ways in which quality standards (such as the ISO Net Zero Guidelines) can be leveraged to support UK trade policy in an inclusive climate-supportive manner.

What are the implications for UK trade policy of fast-moving changes, whether in biotech, AI, or cybersecurity? What challenges and opportunities face the UK as a service driven economy? And can the UK turn to new technologies to support its own goods trade?

Reflections from the Roundtable:

• Digitalisation is transforming our economies, particularly through the rise of new platform companies that are displacing traditional firms (e.g., Uber displacing taxi companies) and leading to arise in market concentration. Digitalisation raises a new set of policy challenges around how to regulate platform companies and new digital technologies.
• Trade policies must adapt and adopt new strategies to remain relevant, as markets lacking competitiveness stifle innovation. Although recent trade agreement’s focus on digital, they tend to be one-dimensional and focus on liberalisation (e.g., of data flows) and improving interoperability to reduce trade frictions. There are other major issues that are not sufficiently addressed, including how to address market power of platform companies. The vulnerabilities arising from innovative trade policies and their potential unfairness are often overlooked, along with their global impact.
• Digitalisation and innovation are radically transforming the medical and life sciences sector (e.g., a medical scan conducted in Oxford may be sent to Bangalore for interpretation; the ability to assess new products in real-time has transformed clinical trials). Yet trade policies and wider cross-border regulatory arrangements have yet to catch up. For instance, aspects of mutual recognition and conformity assessment arrangements are out of date; there are major gaps in the cross-border governance of remote healthcare due to differences in regulatory approaches (some national regulations are based on the location of the doctor, while others on the regulation of the patient, creating gaps and inconsistencies); and we are yet to see a coherent global approach to the regulation of AI used in medical devices.
• The focus of digital trade policy has been on promoting innovation. Attention also needs to be paid to addressing emerging digital divides and inequalities between and within countries. In a UK context, this means paying attention to the capacity of firms to absorb and make use of digitalisation and new technologies and addressing related skills shortages. Thus, to fully harness digitalisation, UK trade policy needs to be coherent with industrial, skills, and migration policies.
• For the UK to benefit from digitalisation of trade, it is vital to involve and work with businesses. The language of digital trade and provisions in trade agreements can seem a world away from the day-to-day operations of businesses, so businesses don’t always see how or why digital trade it is relevant. A recent pilot between the UK and Singapore on the transport of goods using fully digitalised documents revealed the potential of digitalisation for enhancing trade, and the importance of such use-cases.
• Singapore has succeeded as a pioneer in digital trade because it first became a smart nation, and then looked to promote digitalisation in its cross-border relations. Their trade policy fits their wider industrial / economic policy. The challenge for the UK is that we are leading with trade policy rather than our domestic policies. • A particular challenge for innovation and digital is that the debate is not only economic: trade policy decisions have implications for values, ethics, inequalities, and security (e.g., AI, biotech, cyber). It’s challenging to decide which aspects are best addressed through trade policy, and which are best addressed elsewhere (and how to maintain coherence). • Intellectual Property (IP) laws have traditionally been seen as a major policy lever for promoting innovation, but this approach is erroneous and limiting, as knowledge-sharing is a vital driver of innovation. • Greater attention needs to be paid to the extractive logics associated with digitalisation and digital trade, including the extraction of rare earth metals from developing countries. This is often overlooked.

Key reflections for the UK to consider:

• Digital and innovation elements of trade policy should be coherent with, and ideally led by, domestic policies, including industrial, skills, and migration policies.
• Trade policymakers should work closely with businesses and other groups to ensure that policies translate into practical / tangible gains.
• Digital trade policy should go beyond trade facilitation and liberalisation to address wider issues, including market power of platform companies, inequalities that are exacerbated by digitalisation.
• Regulatory cooperation is an important mechanism for ensuring that regulators can learn from each other and coordinate approaches in real-time, which is important given the fast pace of change.

What do academics add to trade policy discussions? When are our interventions helpful – and to whom? Are there examples of good practice, or examples of what not to do when working with policy colleagues?

Reflections from the Panel and Discussion:

• In recent years, there has been a noticeable shift in the UK with greater involvement of academics in government affairs, particularly in areas like trade. While this change postreferendum is a positive development, there is still room for further progress.
• Academics can be a really useful source of ideas and evidence. However, academics often feel the need to restrict their interventions within the narrow confines of their specialist area. In contrast, government officials often find value in concise information encompassing multiple subject areas. Academics were encouraged to be open-minded and consider sharing (suitably caveated) insights on wider issues.
• When providing policy advice to government, or submitting evidence to Parliament, concision and simplicity are key (not always a strength of academics!). Including summarized bulletpoint overviews at the beginning of evidence submissions help readers quickly grasp the main points being discussed.
• The high turnover of government officials in roles presents challenges for developing collaborations. When officials move, academics can follow up with their former contacts as they are usually able to signpost contacts to the right individuals to speak to.
• There are many avenues for academics to feed into policy. The Commons Library, for example, has implemented several initiatives to engage academics, such as POST fellowships, the parliamentary academic scholar scheme, and opportunities for submission of evidence and informal discussions.
• Academics often face the challenge of demonstrating policy impact. It is important to explain this to government officials – who are generally receptive – and work with them to identify practical ways that they can assist in demonstrating impact. This is an important element of establishing a mutually beneficial relationship between academics and government officials.

How can the UK best align its domestic agricultural and food policies with its trade agenda? What are the challenges and opportunities? And how far can concerns over animal welfare be effectively managed through UK trade policy?

Reflections from the Roundtable:

• For the first ‘phase’ of UK trade policy (2017-2022), there was little meaningful coordination between trade policy and agricultural policy, exacerbated by the devolved nature of many agricultural issues.
• Tensions arise because trade policy has focused on liberalisation of agricultural products (most notably in its Australia and New Zealand FTAs) with few ‘flanking measures’ in place (notably, payment support to farmers). At the same time, a new drive to move the UK away from being a net food importer, including specific targets, has made the UK’s policy on agriculture hard to pinpoint.
• There has been a marked shift in the last year, with greater consideration given to food strategy, food production, animal welfare, and the impact of agricultural practices on the environment and human health. Nonetheless, we continue to see a lack of coordination. This is a challenge that is present in policy making but also the structure of trade rules (e.g., under the WTO Agreement on Agriculture) which do not reflect the nature of agricultural supply chains.
• There are signs of innovation: the focus on the provision of public goods as the basis for agricultural support schemes, and the linking of improved welfare for animals, all illustrate new thinking both in terms of substance and procedure (including the use of ‘green box’ subsidy notifications by the UK, showing an novel approach to the use of old WTO rules).
• Concerns were raised over the lack of progress on animal welfare measures which could have been pursued on exit from the EU (e.g., on live animal exports). At the same time, the non-governmental measures in relation to animal welfare (e.g., assurance labelling) were taking hold, demonstrating both public and corporate interest in them. Positive conditionality could be considered (e.g., additional market access in return for improved welfare standards), however it is unclear whether there would be uptake by traders.
• It is important to examine the structures of engagement and oversight, not least through the work of the Trade & Agriculture Commission which has conducted detailed examinations of the Australia and New Zealand agreements, although these were limited to post-signature scrutiny.
• Careful analysis is vital, including on the links between agriculture and climate policy to assess the extent to which carbon emissions are linked to agricultural production and transport.
• The challenges facing the UK on a global stage in relation to these issues was also noted: whereas previous confrontations arose principally within the EU, and were mitigated by Commission involvement, now the UK has to respond to large agricultural global powers on an equal footing which presents capacity and relational challenges.

Key reflections for the UK to consider:

• Greater coherence between agriculture, food, climate, and trade policies. o The importance of detailed impact assessments that extend beyond a narrow interpretation of a trade agreement’s impact.
• Considering the role of conditionality within agricultural liberalisation.
• Stronger coordination across government, especially with devolved administrations.

How can the UK best address the risk of trade policy being driven a small set of interests? How can diverse voices be included, whether on the basis of race, gender, class, or geography? And how can the UK ensure that its trade policy includes voices from across the UK but also its partners?

Reflections from the Roundtable:

• The mandate of the Trade Remedies Authority provides a case study of integrating considerations of inclusion into trade policy decisions. In making an assessment TRA is required to consider, inter alia, impacts on geography (spatial outcomes), consumers, SMEs, employment, and impacts on demographic groups especially protected characteristics (e.g., ethnicity, gender, religion). All trade policy decisions have trade-offs, including with respect to distributional implications. It is important and helpful to have more fine-grained impact assessments and analysis. But it also raises important questions about which overall objectives should be prioritised in UK trade policy – economic growth at the national level or addressing distributional inequalities between socio-economic groups? And who should decide?
• Transparency of the decision-making process is key to ensure that trade policy is inclusive. However, very little information is released during trade negotiations, which makes it hard for societal groups to assess how they might be impacted and make their voice heard by decisionmakers. • In addition to improving opportunities for access to trade policymakers, it is vital that disadvantaged groups have adequate representation and are empowered to identify and articulate their interested. This takes time and expertise which many societal groups do not have. Thus, when government ministries and agencies put out consultations and invite input, many groups that may be impacted by trade policy decisions do not respond.
• Inclusive trade policy is inhibited by the technocratic / legalistic language of trade policy and trade agreements, which makes it hard for many societal groups to identify how they might be affected. The trade policy community needs to improve how it explains trade policy decisions in ways that are accessible to non-experts.
• Researchers are getting better at assessing the fine-grained spatial impacts of trade policy decisions, including by looking at how specific geographic areas are integrated into global value chains and the value they derive from this integration. This is a valuable resource that policymakers could draw on more extensively than they do at present.

Key reflections for the UK to consider:

• Training and funding for underrepresented societal groups (SMEs, consumers, wider citizens) to empower them to engage in trade policy.
• Local content and other measures to enhance value derived from disadvantaged groups from integration into global value chains (which requires careful thought given WTO rules).
• Improved impact assessments of trade policy decisions that pay more attention to differential impacts on societal groups.
• Integrate trade policy more closely with other areas of policy, notably skills and employment policies, and industrial policies.
• Experts (academics and policymakers) need to do more to ‘bring trade to life’ and explain in clear terms how specific decisions are relevant to a wide range of societal groups.

The UK has long prided itself as a global security player. How will its new-found status as a middle power in trade mesh with its security ambitions, especially at a time when economic relations have been explicitly drawn into global conflicts and tensions?

Reflections from the Roundtable:

• Governments are placing greater emphasis than before on future-proofing their economies from a security perspective. With the rise of technologies like AI, governments anticipate an increasing reliance on economic means in conflicts, so economic security is likely to be a major issue for trade policy for the foreseeable future. Achieving long-term preparedness is likely to involve promoting domestic production and elements of self-sufficiency.
• While the concept of economic security is not new, the current multilateral system’s rules primarily dictate when governments can take action, rather than what they can (and can’t) do, generating uncertainty. A lack of clarity poses a particular challenge for developing countries as it is unclear how they can demonstrate compliance with economic security rules.
• The EU’s newly published strategy document took several years to develop and is intended to serve as a master document yet remains unclear. It emphasizes the need for tools and becomes overly preoccupied with rules, particularly when determining the appropriateness under Article XXI GATT.
• When assessing risks, it is important to define them narrowly, focusing on specific areas of concern. In terms of international perspectives, there are noticeable differences between the UK and its counterparts. For instance, the US views China as its primary adversary, whereas the UK and EU recognize China as a potential threat but also acknowledge the opportunities it offers.
• Governments should refrain from intervening in purely business matters, such as supply chain resilience, and instead focus on monitoring areas of genuine risk. Additionally, careful consideration should be given to the security exceptions outlined in Article XX(j) GATT.

Key relfections for the UK to consider:

• While collaboration and coordination are important, the UK should develop its unique economic security strategy rather than adopting other countries’ approaches as they may have different interests and priorities.
• It is crucial to avoid blurring the lines between economic security and industrial policy, as the former should not overshadow the latter. Collaboration between government and enterprise is essential given the role of companies driving innovation and technology.
• The existing and increasing divisions between large players (most notably the US and China) further hinders multilateral progress over economic security: as a middleplayer on the global stage, the UK should engage in discussions on these matters across the multilateral trade regime (including G20).