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Trade policies and practices of rich countries and, increasingly, the large, emerging markets have important implications for the development agenda. CGD’s research in this area examines how these policies affect trade opportunities for developing countries and what that means for growth and poverty alleviation in those countries. A particular focus is what the shift from multilateralism to regional and bilateral trade negotiations means for smaller, poorer, and more vulnerable members of the international system.
The trade and investment architecture has become more complex over the past 20 years. New trade deals, such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), if completed and implemented will cover a large portion of global trade and investment.
Unlike multilateral agreements, richer partners usually set the terms of regional and bilateral agreements. While trade can be an important tool to create jobs and reduce poverty in poorer countries, major provisions in these “mega-regional” agreements often ignore developing country interests. Therefore, a big concern for developing countries that are not party to these agreements is that they could undermine the WTO’s role in setting the rules of trade. CGD’s analysis examines the implications of these negotiations for the global trading system, and suggests ways that policymakers can mitigate the negative effects for developing countries.
Expectations were low for the eleventh World Trade Organization (WTO) ministerial meeting in Buenos Aires, and on most accounts it still managed to under-deliver. The two previous ministerial meetings in Bali and Nairobi produced limited but important multilateral agreements to promote trade facilitation and eliminate beggar-thy-neighbor agricultural export subsidies. But this time around, US and Indian negotiators refused to compromise in service of achieving a consensus agreement in any area. Roughly three quarters of WTO members endorsed a precedent-setting, albeit hortatory, declaration on women and trade; the United States and India did not. And there were statements from varying groups of “like-minded” countries to pursue work in areas that could eventually lead to “plurilateral” agreements. Still, it is not clear these efforts are any more likely to overcome the sharp differences that have prevented compromise among the broader membership. And if they do, they could end up marginalizing smaller, less powerful developing countries.
The Obstinate Actors and a Leadership Vacuum
President Trump made clear his preference for bilateral trade when he withdrew from the 12-country Trans-Pacific Partnership (TPP) shortly after taking office. US trade negotiators reflected the skepticism toward multilateralism in the run up to Buenos Aires when they blocked agreement on a draft ministerial declaration that would have “reaffirmed the centrality of the multilateral trading system and the development dimension of the organisation’s work.” Meanwhile, there is India, which has repeatedly threatened to block WTO agreements (including the Trade Facilitation Agreement) unless WTO members conceded to its demands on public stockholding for food security. In Buenos Aires, India continued to hold things up over the stockholding issue, but the country’s negotiators also refused to accept disciplines on fishery subsidies—even subsidies contributing to “illegal, unreported, and unregulated” fishing. Unsustainable fishery subsidies had been one of the areas receiving extensive attention in the lead up to the ministerial, and where hopes had been highest for reaching agreement.
In the end, it was a relief to many that the United States did not actively seek to dismantle the WTO—as some had feared. But giving up its traditional leadership role could lead to a similar result, only more slowly. The European Union, under Trade Commissioner Cecilia Malstrom, tried to fill the void, but it got little help. China, which I had hoped would back its recent free trade rhetoric with action, mostly stayed on the sidelines. And India remains unwilling to pay any domestic political price to preserve a multilateral, rules-based trading system.
Does Eroding Multilateralism Matter?
So does it matter if plurilateral negotiations among self-selected groups of like-minded countries replace consensus-based, multilateral trade agreements? There are two models for plurilateral agreements at the WTO. In one, a “critical mass” of countries accounting for the vast majority of trade agree, for example, to reduce tariffs on certain products. Under the WTO’s “most-favored nation” nondiscrimination principle, all members benefit from the tariff cuts negotiated. This was the approach taken under the Information Technology Agreement. In the other model, only those willing to sign onto the agreement reap the benefits. This was the approach taken in the plurilateral Government Procurement Agreement, where only signatories get improved access to one another’s markets. In the latter case, smaller developing countries could feel compelled to join agreements to remain competitive—with respect to e-commerce, for example—but without having had any leverage to influence the negotiations.
In Buenos Aires, there were no plurilateral agreements, but there were ministerial statements endorsed by varying groups of 70-80 members pledging cooperation on investment facilitation for development, exploratory work on future negotiations on trade-related e-commerce rules, and an informal work program on micro, small, and medium-sized enterprises (all of the ministerial documents are available here). US negotiators endorsed only the statement on e-commerce while India signed on to none.
Even in an area that would seem ripe for consensus, divisions emerged with key members. Led by Canada, Iceland, and Sierra Leone, 118 of the 160+ WTO members signed a declaration calling for efforts to increase trade opportunities for women. While not legally binding, the declaration’s endorsers committed to improving data collection and information sharing around women in trade. But even that promise was apparently too much for the United States and India, which along with Saudi Arabia, South Africa, and Venezuela, and others, declined to endorse the declaration.
Plurilateral agreements on an issue-by-issue basis among coalitions of the willing may be the only way forward. But how meaningful can such agreements be if key countries are missing? And none of this bodes well for smaller developing countries that will have little or no voice.
Britain just announced a new policy for trading with developing countries after Brexit. It maintains the current framework of duty free, quota free access to British markets for least developed countries. It is a good basis for the further steps we’d like to see Britain take.
There’s a tedious old fallacy that developing countries need “trade not aid.” The fallacy is that these are alternatives, when in fact we can, and should, do both, as we at CGD have argued for the last 15 years. No country has ever developed without trade. We should provide opportunities for developing countries to trade with us and provide aid which can help them to use those opportunities. Aid also helps many of the world’s poorest people over and above the benefits their country might get from exporting more to us.
Enabling poor countries to trade is an excellent way to help the poorest countries to attract investment, create jobs and provide incomes for their people. Trade preferences mean far more to investors than aid subsidies. And they are good for British consumers too—market access is one of those win-win policies which helps developing countries and helps us too by keeping prices down and so enabling hard-pressed consumers make their money go further.
That’s why we welcome Britain’s announcement on Saturday that Britain will give duty free quota free access to least developed countries after Brexit—which continues the arrangements now in place under EU rules. This is an indefinite commitment which applies to everything other than arms.
The British Government also intends to maintain existing preferences for other developing countries (not just the least developed countries) but as they rightly say under international trade rules this has to be part of a reciprocal agreement so they can’t announce this unilaterally. These countries, like Kenya and Ghana, are still desperately poor (with national income per head around $1,500 a year) but they are the ones that are most likely to be able to take advantage of trading opportunities in the near future. Maintaining market access for these countries is critical to helping these countries and regions grow and create more jobs and income—making transition arrangements for these existing EU agreements should be a major priority for the Government in the next twelve months.
But we can do even better for the world’s poorest and help our own people too. Here are some ways we would like to see the British government build on this welcome first step.
Simplify red tape.
The EU rules aimed at preventing abuse of the scheme—the so called “rules of origin” to demonstrate produce originated in the exporting country—still make it hard for developing country exporters to take advantage of the market access we claim to be offering. Canada does this better and outside the EU, Britain can learn from the Canadians, and consider developing countries own proposals for these rules. Britain can also help smaller consignments of imports by increasing the very low EU minimum threshold (of 22 euros) for paying VAT—a figure so low, it is unlikely to justify the bureaucracy of collecting it.
Extending trade preferences to other developing countries.
Britain has announced a firm commitment that least developed countries will maintain their current preferences (which Britain can implement unilaterally) as well as the intention to maintain existing arrangements for other developing countries (which requires agreements that legally must wait until after Brexit). As well as all these welcome commitments to maintain existing access, the UK after Brexit can, and should, go further by offering duty free, quota free access to all low income and lower-middle income countries. This would address the substantial risk to developing countries that the EU’s existing deals, which cover 52 countries, are not replicated quickly by Britain. This would be good for the world’s poorest countries and good for British consumers too.
Improve trade facilitation.
There are a host of other mutually beneficial ways to make it frictionless for poor countries to sell to British consumers. For example, we could make it easier to obtain necessary certifications (e.g., organic, food safety, etc.) without undue cost and delay. We can improve access to trade credit (including ensuring that capital adequacy rules do not choke it off). We can facilitate links into retail supply chains. We can make business visas easier, which are vital to lubricate trade. An important first step would be much more extensive consulting with developing country governments and business representatives to find out where the most salient obstacles currently lie.
Stop undermining developing country exporters with unfair competition.
Developing countries face competition from subsidised British farmers—in UK markets, in their own countries, and in third countries where we compete. It doesn’t make sense for us to be subsidising our farmers to compete with exports from developing countries to which we are also providing much-needed aid. Efforts have been made to reduce the trade distortions caused by agricultural subsidies, but there is further to go—and doing so is another example of a policy that is good for Britain and good for development.
So, as a first step, let’s toast the welcome announcement made by the UK government, but let’s not forget there are many more steps to take to enable the poorest countries to trade their way out of poverty.
We’ve spent the past year focusing on beyond aid approaches to promoting gender equality worldwide, through discussions on how to improve outcomes for women and girls in areas ranging from migration to UN peacekeeping forces. Next we’re looking at how trade agreements can help to ensure they benefit women and men equally, whether they participate in the economy as wage workers, farmers, or entrepreneurs. That might take both carrots and sticks—because, at the moment, women are all too likely to lose out.
On the supply side, the direct beneficiaries of trade skew male: women running their own businesses are disproportionately located in the informal sector and in smaller firms, and few such firms participate in trade. And women employed as wage workers are also less likely to be employed within companies that export: in almost half of exporting companies across 20 developing countries, women made up just 20 percent of those employed.
The issues underlying that disparity go far beyond trade policy—but trade policy can still help address them. Our colleague Kim Elliott recently pointed to the fact that the Global South is leading the way by integrating considerations of gender into trade agreements. The trade agreement between Chile and Uruguay, for example, recognizes gender as a factor impacting workers’ ability to benefit (or not) from trade channels and articulates a commitment to address barriers to women in the workforce. But even these agreements are not backed up by legal requirements or enforcement mechanisms. (One potential exception comes from the East African Community partner states, which have taken a first step towards legally mandating the incorporation of gender considerations into trade policy through a bill introduced earlier this month.)
US trade agreements have included non-discrimination in employment and remuneration clauses since 2007, which places them ahead of recent EU agreements. But there is more to be done on both sides of the Atlantic. It is time to transition from aspirational language to solid commitments and enforcement.
We propose three ideas in our new policy note:
1. Use pre-ratification conditions to incentivize the reform of gender-discriminatory laws
In order for trade to benefit men and women equally, discrimination against women seeking to enter and participate in the workforce must be addressed. One place to start is with legal discrimination: 79 countries legally prevent women from holding certain jobs on the grounds of their sex alone.
Prior to ratifying agreements, trade partners could stipulate the need for partner states to repeal discriminatory laws preventing women from equally benefiting from trade. Similar (non-gender) conditions have been imposed in the past: countries including Morocco, Oman, Chile and Guatemala were required to reform their labor laws before signing trade agreements with the United States.
2. Consider imposing sanctions on sectors that continue to discriminate
If discriminatory laws are not repealed, then countries might refuse to import goods coming from sectors that continue to bar women’s participation. These sanctions would need to be compliant with existing trade treaties.
3. Empower local “watch dogs” to monitor compliance and promote accountability.
The legislation accompanying trade agreements should include funding for local human rights and women’s rights groups, as well as labor unions, capable of keeping a pulse on public and private sector compliance with trade agreements’ terms regarding non-discrimination and holding non-compliers to account.
The intersection of gender and trade is one that under-researched, as trade traditionally has been thought of as “gender neutral.” But women face particular constraints as owners and workers due to their gender. Those negotiating trade agreements need to consider and combat gender disparities in order to ensure that women aren’t losing out on the benefits of trade.
The UK Government has today published a white paper on its broad approach to Brexit—what ’s missing though is a commitment to developing countries on the UK’s trade policy. Having emphasised trade at the heart of its economic strategy on international development, it now needs to commit to providing “duty free quota free” access for developing countries, or risk damaging investment and trade over the next two years and beyond.
DFID’s first economy strategy is welcome…
The UK Department for International Development (DFID) published its “Economic Development Strategy” this week. This is DFID’s first published strategy of this kind and the Government deserves credit for recognising that stimulating economic growth is essential to eradicate extreme poverty and delivering the ‘Global Goals.’ It is reassuring that the strategy focuses on growth in developing countries and not on the potential benefits for British business.
…and rightly has trade front and centre
The first of the strategy’s 11 priorities is “Focusing on trade as an engine for poverty reduction.” The strategy emphasises the UK’s role in funding developing countries negotiating capability (which played a part in getting rid of the developmentally horrendous export subsidies at the WTO’s biggest ever agricultural agreement in Nairobi). It also confirms its commitment to ‘aid for trade’ (which is meant to address in-country trade infrastructure).
But what about the UK’s own trade policy?
But the commitment that’s most important to developing countries – on the UK’s own trade policy—is incomplete. Here DFID’s commitment is to work with the Trade Department to “deepen our trade relationships with developing countries. We will continue to open our markets to the world’s poorest countries” and to use “our voice in the World Trade Organization, international institutions such as the World Bank, and the G20 to promote free trade … and to push back on emerging protectionist approaches.”
These are excellent sentiments but the UK is potentially just two years away from Brexit, and the Prime Minister has made it very clear the UK will have its own trade policy. Today’s White Paper is similarly non-committal suggesting the UK “...can prepare the ground… to ensure continued preferential arrangements for developing countries.“
Potential UK and other investors in developing countries need more clarity. The UK’s large developing country partners are already feeling the effects of depreciation and uncertainty. In Africa, the UK’s stock of investment has more than doubled since 2005 to some £42.5billion. Trade access could be quickly addressed and reduce the chance of the UK losing ground to other investors in the region (China and India are already sub-Saharan Africa’s largest export destinations). So it is a shame that neither document went further. The government should do so as soon as possible.
Post-2019—the first steps
The very first step in 2019, whether as part of transition arrangement or otherwise, is to continue to provide the “duty free quota free” access that some developing countries already enjoy, as my colleagues suggested in CGD’s first Brexit paper last summer. This step will have no bearing on the UK’s negotiation with the EU; it would encourage UK and other businesses to move ahead with investment plans in those countries; it will be good for British consumers and business who import from developing countries; and it will be entirely within the UK’s gift as it establishes a new schedule at the WTO. Indeed, the UK should also commit to exploring how it might improve on the EU’s current approach by, for example, extending free access to more developing countries, cutting red tape at the border (like improving “rules of origin” and simpler administration).
Political cover is also needed to make progress in other areas. Officials need to be able to discuss substance with both the WTO and developing countries. We proposed four steps for the UK to be a global leader on trade for development. Some elements—like low overall tariffs, agricultural subsidies, and reduced thresholds for VAT at the border—are clearly whole-of-Government issues but others, like defining and extending duty free access to more poor countries, can be progressed more quickly.
A British Trade Promise
The Government has rightly taken its time to establish its broad approach to Brexit, and has now made clear the UK will have its own trade policy. Decisions and negotiations are complex and interdependent. Still, on trade for development, the way is clear and urgent—Britain should make a British Trade Promise to confirm the continuation of duty free quota free access, and commit to improve on the EU approach by including more countries, and making administration simpler.
This post is part of CGD’s work looking at the UK’s role in delivering shared prosperity beyond Brexit. We’ll be looking into further ideas in the coming weeks.
Unless the UK government takes action to prevent it, Brexit could penalize some of the world’s poorest countries. Currently, UN-designated least developed countries (LDCs) receive duty-free, quota-free access to the UK market for virtually all goods under the Everything But Arms (EBA) program. Committing now to provide the same access to LDCs immediately upon Brexit, and to improve it thereafter, would be good for the UK and good for development. This is a practical policy proposal; it’s easy to implement and wouldn’t compromise the UK’s negotiations with the EU or the process of gaining World Trade Organisation approval for the UK’s approach to trading relations as an independent member. Whether the UK will be part of the EU customs union is unclear. Committing now to extend full market access to LDCs will shield them from harm, regardless of the outcome.
How would this work?
Taking the example of footwear: by default imports from outside the EU customs union are subject to a tariff of between 3 and 17 percent. The EU’s Generalised System of Preferences charges lower tariffs on many imports from all developing countries, while the EBA goes to zero tariffs for (virtually) all imports from countries on the UN’s list of LDCs. This means that leather shoes produced in Ethiopia, for example, are subject to a 0 percent tariff. The same shoes produced in the USA would be subject to an 8 percent tariff and therefore be, all else equal, 8 percent more expensive. This gives LDC exporters an advantage over their competitors in other countries, helping them increase exports and create jobs.
Good for development
The EBA scheme provides LDCs’ otherwise disadvantaged exporting industries with a small, much-needed advantage, but it could be even more effective as a development tool. Some countries still struggle to gain EBA access for some goods, because they can’t source enough of the inputs for those goods internally or from other EBA countries to satisfy the scheme’s complex rules of origin. Nontariff barriers resulting from EU regulation, for example of product safety, can be difficult to overcome. Most importantly, LDCs struggle to provide the stable business environment needed to attract investment and suffer from slow, expensive internal transport and other costs.
Still, EBA helps. Some LDCs rely heavily on EBA trading preferences to the UK for their exports. Gambia sends 14 percent and Bangladesh 10 percent of their exports to the UK. If EBA preferences abruptly ceased to apply to those exports, businesses in some of the poorest countries in the world would suffer. Moreover, the UK could expand the benefits to more countries by simplifying the rules for gaining entry and providing more aid for trade to LDCs.
Good for the UK
Reducing tariffs on imports makes goods in the UK cheaper. This is great for people who need a new pair of shoes, but it’s also great for people who need imports of basic commodities or simple manufactured items to produce more complex manufactured items for re-export. Reducing tariffs on imports of goods can hurt domestic firms that compete with imports. However, LDCs are not, by and large, serious competitors for UK producers. Declaring that market access to the UK would continue even in the event of the UK leaving the customs union would also show a commitment to openness and continued leadership in the effort to foster sustainable development around the world. Moreover, providing duty-free, quota-free market access for LDCs would be consistent with WTO rules and would not require negotiation with or approval from other WTO members.
EBA is not enough
Building on EBA-like preferences would help to make the UK a world leader in development-friendly trade policy. The LDC category is unavoidably arbitrary and excludes many very poor, commodity-dependent countries, such as Nigeria, that do not meet the criteria for vulnerability. So, the UK should also look for ways to support countries that are poor, but not on the LDC list. That could be by offering a more generous general preference program, or by expanding the list of countries eligible for duty-free, quota-free market access, as one of us proposed in a CGD working paper. That said, committing to extend this access to LDCs immediately upon Brexit taking effect is a good start. More than that, it’s a win-win, and so supporting the idea is just good common sense.
Love it or hate it, Brexit implies some of the biggest changes to European trade and development policy in a generation. Decisions made over the next three years will have important consequences for people living in developing countries, possibly for decades to come. That is why we are scaling up our work at CGD to assess the policy choices realistically and find new opportunities to improve development outcomes.
Shortly after the vote, Owen Barder pointed out that UK exit from the European Union creates both threats and opportunities for development. It is probably fair to say that most development thinkers found it easier to identify the threats at first blush—particularly where hard-won policies on aid, trade preferences, and climate change appeared to be at risk. Those risks are real. There will be more challenges in other policy areas: cross-border investment, pharmaceutical licensing, and mutual legal assistance, to name a few. At the same time, Brexit offers a chance for policy makers in the UK, in the EU, and in developing countries to think afresh about what could be done to mark real improvements, both quickly and over the longer term.
In our recent paper, we set out a handful of immediate policy opportunities for the UK government: ideas that meet the triple test of being good for sustainable development, good for the UK national interest, and capable of implementation without damaging UK-EU negotiations on Brexit. We focused on four areas that meet the triple-win test:
First, the UK could move quickly on trade preferences for development. It could unilaterally declare its intention to continue Duty Free Quota Free access for least developed country (LDC) exporters. At the same time, the UK could signal it intends to make that access more meaningful by introducing simplified rules of origin that would benefit LDC exporters and UK consumers, while sending a strong message that the UK is open for global trade.
Second, the UK could use its independent voice to step up international action against slavery, leveraging its Modern Slavery Act to press for more effective legal sanctions and supply chain scrutiny on a global basis, to reduce organised crime in the UK and to protect vulnerable individuals everywhere. Since our report, Prime Minister May signalled a move in that direction in her maiden speech to the UN General Assembly.
Third, the UK could press its leadership position on carbon pricing to push for new international coalitions for ambitious action on climate change. Setting a clear policy direction now would give businesses and consumers in the UK the confidence to plan, while enabling fresh cooperation unencumbered by EU climate laggards.
Fourth, the UK could plan for new migration arrangements that work for mutual benefit. The UK will continue to need skills in key areas including health care. The ready supply of EU workers could be replaced by new Global Skills Partnerships—proposed by our colleague Michael Clemens—to meet UK needs while dramatically increasing the supply of high-quality skills in developing country partners. Prime Minister May has recently stated that she is opposed to points-based migration systems. While complex scoring systems therefore seem to be out, any new visa system could include a preference for individuals from developing countries when the endowments of two applicants are otherwise equal. This proposal would put an end to hidden forms of discrimination while encouraging high quality talent and remittances.
The paper also identified other promising areas for UK policy innovation—reformed agricultural subsidies, new aid arrangements, a fresh approach to UK-based smart sanctions, and more cost-effective humanitarian assistance.
CGD will do much more work over the coming months to elaborate some of these ideas, and to develop more as the path to Brexit becomes clearer. For the UK, while some policy opportunities arise immediately, others will depend on the choices made about membership of the European customs union and single market. The trade issues are complex, but in any scenario there will be room for concrete and actionable proposals.
What will Brexit mean for EU development policy? CGD will also be examining new opportunities arising in Brussels—where the UK has been a formidable influence on development cooperation policy—and where new arrangements for trade, climate change, migration, agriculture, tax, financial transparency, and security policy will create opportunities for fresh ideas.
While the United Kingdom (UK) is working out its relationship status with Europe, it will also have to resolve its trade relations with the rest of the world. As my colleague Owen Barder discussed here, the UK’s Parliament will need to pass legislation to provide unilateral trade preferences for developing countries, hopefully embracing the model of the EU’s Everything But Arms program and providing full market access for the world’s least developed countries. In addition, the UK faces the daunting task of deciding which of the EU’s bilateral trade agreements it wants to try to replicate. Again, I favor agreements that ensure developing countries are not made worse off in the process.
But even before taking such steps, the UK will need to establish the foundation on which new trade relationships will be built—that means bringing its membership in the World Trade Organization (WTO) up to date. There is no precedent, so much about how this process will play out remains murky at best. The UK is already a member of the WTO, though the European Union (EU) is responsible for negotiating trade deals on behalf of all EU member countries. While the UK does not have to negotiate an accession agreement to join the WTO, there will be a number of issues that will need to be resolved, as Alan Beattie noted recently in the Financial Times.
The large majority of UK tariffs will stay where they are now in the EU tariff schedule and no negotiations are necessary. PIIE’s Chad Bown estimates that this will leave the UK with an average tariff of 5.5 percent. Two areas that could raise additional complications, however, are agriculture and services.
In the wake of Brexit, the UK will have to develop its own agricultural policy with respect to both trade and domestic support for the sector. Currently, just over 10 percent of EU tariff lines are covered by tariff-rate quotas (TRQs) for agricultural products. These measures limit imports of sensitive products by setting a quantitative limit above which very high, often prohibitive, tariffs apply. Imports below the quota level are subject to much lower or zero tariffs. The UK could presumably avoid having to negotiate over these products if policymakers adopt the lower, in-quota tariff rates and forgo quantitative limits. Such a move could be boon to developing countries, but British producers of at least some products would no doubt object.
For sensitive agricultural products, the UK is likely to have to negotiate TRQ quota levels and how difficult that proves will depend, in part, on how the EU responds. If the EU chooses not to adjust (i.e., lower) current TRQ levels to reflect the UK’s departure, then any new TRQs created under the new British policy would represent new access for exporters and might be easier to negotiate. If the EU chooses to adjust at least some of the existing TRQs, where the UK accounts for a relatively large share of imports, things are likely to get messier.
British politicians have long complained about the EU Common Agriculture Policy that provides billions of euros in subsidies to the region’s farmers. Like most countries around the world, however, the government could face strong opposition to forswearing agricultural subsidies. Assuming the UK does not, it might have to negotiate a “schedule” that sets ceilings on the amount of trade-distorting support it can provide, as required by the Uruguay Round Agricultural Agreement. As an alternative, if the UK keeps the levels low enough, it might be able to accept the WTO ceilings for de minimis support and avoid negotiations over a schedule.
The Uruguay Round also developed new rules for trade in services and required participating economies to submit schedules specifying the sectors where they would provide minimum levels of market access for imports. As with tariffs, the UK might just adopt the EU schedule. Since this would not result in changes in access for either exporting sectors or import-competing British firms, this could be the path of least resistance. Moreover, in most services sectors, OECD estimates suggest that, on average, the UK is more liberal than other countries in the database, as well as the OECD countries as a group. That could limit the demands from other WTO members for the UK to do more market opening. On the other hand, the EU’s Uruguay Round commitments still represent a compromise and the new British government may be under pressure from to renegotiate access in some areas. The UK’s trade partners could also challenge a UK decision to simply adopt the EU schedule as its own and push for additional access in sectors of interest to their exporters.
Overall, the more open the UK chooses to be with its new, independent trade policy, the easier negotiations to update its WTO membership will be. As an added bonus, developing countries would see improved access to one of their key markets.
The release of leaked documents from negotiations of the Transatlantic Trade and Investment Partnership (TTIP) captured news headlines last week, but the materials tell us little that we didn’t already know. The documents mainly confirmed that scant progress has been made. I’ve already gone on record as skeptical that negotiators will secure a TTIP deal, even in principle, this year. So instead I want to offer two suggestions as talks move forward.
1) Boost Transparency
One of the reasons the content of the leaked documents fell short of novel was because European negotiators already release the texts of their own proposals along with summaries of what is discussed in each negotiating round. And we pretty much know what US negotiators are seeking because it will be similar to what they sought in the Trans-Pacific Partnership agreement. Still, I am grateful to the Dutch chapter of Greenpeace for releasing the documents.
Even though we know quite a bit about the negotiations, I wish the US Trade Representative’s (USTR) office would be as forthcoming as their EU counterparts. Doing so would allow developing countries to better understand what is being negotiated and how it might affect their interests. That, in turn, would allow them to raise any concerns before the negotiations are completed. It could also help the United States ward off accusations of negotiating secret backroom deals. Fundamentally, however, progress on regulatory cooperation, which primarily involves domestic regulation that just happens to affect trade, is going to require far more openness and transparency to find acceptance with the voting public.
2) Shift Efforts to a Global Deal on Nuisance Tariffs
While I haven’t found any shocking revelations about plans to dilute food safety regulations or allow corporations to run amok in the documents that I’ve read, their content reveals just how far apart the two parties remain. And if the negotiations will produce little more than tariff elimination, why not try to do something similar at the global level and get rid of all the really low tariffs that create red tape and opportunities for corruption?
It’s a long shot, but I would suggest shifting some of the energy and resources behind the current TTIP talks to refocus on achieving a global agreement to eliminate “nuisance tariffs,” those below 2-3 percent that cost more to collect than they generate in revenue. That would create gains for everyone, including developing countries, as well as give a boost to the multilateral trading system.
The United States and European Union have been trying to negotiate regulatory cooperation agreements for more than two decades with limited success (see slide two of this presentation). What the EU tactical summary makes clear is that this latest attempt isn’t looking very different—just as I expected when I wrote my recent paper asking “how much 'mega' in the mega-regional” trade agreements. So if there ever is a TTIP, despite what the negotiators claim, it is likely to be TTIP-light. While Cato’s Dan Ikenson explains here why a scaled back agreement would be worthwhile, maybe it’s also time to think about some alternatives.