Why we work on trade agreements

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Traidcraft Exchange has spent the best part of two decades researching and lobbying on trade and investment agreements. Director of Policy and Advocacy Liz May explains how trade deals can help sustainable global development, and where the dangers lie.

Traidcraft Exchange works to bring about fairer trading practices.

It’s probably obvious, then, why we’re campaigning on working conditions in the tea sector in Assam or lobbying on how UK supermarkets treat their overseas suppliers. It may be less obvious why we work on trade and investment agreements – the often technical and opaque rules governing how different countries trade with each other. I think there are at least three main reasons.

The first is quite simple and is about access to the UK market. A lot of farmers and workers in developing countries work in sectors such as tea, coffee, cocoa, garments or fishing. Many of these products are sold to the UK. The rules that dictate which countries can sell what products into the UK market and under what conditions are really important to these people. They set out the tariffs paid on imports, the standards required of those imports and the quotas that limit how much can be sold to the UK. Responsibility for negotiating these rules used to lie with the EU. However, if the UK leaves the EU Customs Union that responsibility will pass to the UK government.

We won an important commitment that the UK will continue to provide tariff-free access to the world’s poorest countries, and we are still working on how the rules will work for other vulnerable countries that aren’t classed as the poorest. We are also interested in regulations and standards that the UK requires of imports – and we want to make these as simple as possible for exporters based overseas (while not compromising on important areas like food safety or environmental damage).

The second reason is a little more complex. Trade agreements also set the terms upon which the UK sells to developing countries. Wealthier countries often push for trade deals to provide ‘reciprocal access’, lowering tariffs across the board for both imports and exports.

This can be harmful, exposing fragile economies to international competition and hampering development. Low-tariff imports of heavily-subsidised European tomatoes have undermined local production in Ghana, European chicken parts are undercutting the South African poultry industry and Tanzania is concerned that cheap European dairy products will undermine local farmers. In the short-term this may mean cheaper food in those countries, but it also means a loss of livelihood for farmers and workers, many of whom are the poorest in society and can close off opportunities for countries to move into high value production. Putting food producers out of business also means less food security in those countries, and more vulnerability to fluctuations in global food prices. 

Linked to this, a lot of poorer countries also rely on the income from import tariffs for basic government spending. If as part of a trade deal they have to remove these tariffs, they lose an important revenue stream. The impact of this loss will be disproportionately felt by women who tend to rely more on education and health services provided by Government.

The final reason why Traidcraft Exchange works on all this stuff is that a lot of the detail in trade agreements isn’t really about trade at all. Instead, it cuts to the heart of what governments are allowed to do in all kinds of policy areas - from health to the environment to labour policy. Take ‘investment chapters’ in trade agreements. As a matter of course, these contain a mechanism to settle disputes. This may sound sensible and harmless enough, but many allow foreign investors the right to sue governments over decisions that jeopardise their profits. The El Salvador government was sued by an American mining company for halting gold mining contracts in order to protect the environment, the Egyptian government was sued for changing the minimum wage, and the Uruguayan and Australian governments have been sued for bringing in plain cigarette packaging to protect public health. More examples are covered by my colleague Matt Grady in this blog. Even if a country wins the dispute, they often lose huge sums of money in defending the case, which could obviously be better spent on something else.

And it’s not just the countries who are sued that are affected. Where these dispute settlement mechanisms are in place, more and more governments will think twice before passing legislation which protects the environment, or workers rights, or supports smaller businesses or public health if they feel there is a risk they could be sued by investors.

So as an organisation working to make sure that trade, investment and business are a force for good, Traidcraft Exchange also needs to take a stand when that is threatened or when agreements may damage the lives and livelihoods of the workers and producers that we support through our development programmes.

At the moment our major focus is what UK trade and investment policy could or should look like once we leave the EU.

If you want to learn more about our work in this area, check out these resources:

·         Post-Brexit: Towards a trade policy that supports development

·         Brexit: Let’s change trade for good

·         Submission on the application of EU trade agreements after Brexit

Your can also look at the website of the Trade Justice Movement, of which Traidcraft Exchange is a member, and this briefing from the Gender and Development Network.