Fragmentation and decline? The UK and the global trading system after Brexit.

Author:Trommer, Silke
 
FREE EXCERPT

Speaking to Politico in September 2017, the UK's international trade secretary Liam Fox announced that due to capacity constraints Britain is unable to negotiate trade agreements with preferred partners such as the US, Australia, and New Zealand until after Brexit negotiations have been accomplished. (1) For the time being, the government seeks to temporarily adopt forty-or-so existing EU trade agreements. In this context, Fox warns that countries such as Japan, South Korea, and Switzerland may extract more wide-reaching trade concessions from the UK in these negotiations than the liberalisation baseline in the existing EU agreements. This constitutes a notable change in tone compared to Fox's Free Trade Speech in Manchester in September 2016, when a vision of Britain reaping the benefits of its post-Brexit role as global free trade champion reigned supreme. (2)

The government's scaling down of international trade policy ambitions over the past year is unsurprising, given the increasing political and institutional fragmentation of the global trading system and Britain's economic status as a middle-sized global trader. (3) If the shift comes as a surprise to some observers, this is due to how the post-Brexit trade debate has played out in the country to date. Much discussion has centred around who the UK's preferred international trade partners would or should be post-Brexit. Yet, the global trade regime is riddled with its own power struggles and political trends, with or without Brexit. Commentators have largely disregarded the question of how this international political environment affects the government's ability to pursue its trade policy goals.

This essay provides a corrective to the debate. It first outlines the degrees of institutional and political fragmentation in the global trade regime that the UK will be confronted with if and when trade policy autonomy returns from Brussels. Second, it asks what levels of influence and power Britain may possess post-Brexit to influence global trade rules on its own terms. In lieu of a conclusion, the essay reflects on a number of trade topics in bilateral and multilateral deals that a radical trade politics might be concerned with at this point in time.

Failed negotiations and global value chains

While the second half of the twentieth century experienced a surge in the number, reach, and political and economic impact of international trade agreements, the first decades of the twenty-first century have seen the increasing institutional fragmentation of this regime. Trade negotiators hold no expectations for the forthcoming Ministerial Conference of the World Trade Organization (WTO) in Buenos Aires in December. The Trade Facilitation Agreement concluded in Bali in 2013 has been the most tangible outcome of the ill-fated Doha Round of multilateral trade negotiations launched in Qatar in 2001. Negotiations on side-agreements have not fared much better. While the number of countries subscribing to the WTO's Information Technology Agreement expanded in recent years, the Trade in Services Agreement and the Environmental Goods Agreement negotiations have stalled, and their future remains uncertain. Meanwhile, the current US administration appears set to prevent appointments to the WTO's dispute settlement system, potentially putting an end to the legal certainty in global commercial exchanges that the multilateral trading system was hailed for since the WTO's inception in 1995. (4)

Mega-regional agreements such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) have not yet come to fruition. If they do, they lack the institutional backbone of an international bureaucracy akin to the WTO Secretariat, capable of monitoring commitments and facilitating enforcement. These developments indicate that the global trading system is currently shifting (back) to more power-based, rather than rules-based, types of international interactions. Country-by-country agreements continue to flourish, but do not resolve the institutional issue. In addition, they create what the economist Jagdish Baghwati has famously called 'spaghetti bowls of protectionism', that is to say overlapping networks of trade agreements that are so dense that they obscure rather than clarify and simplify the global rule book for commercial exchanges.

Meanwhile, ideological contestations around free trade as a policy goal are realigning in view of the increasing pervasiveness of global value chains in the world economy. Global value chains are complex transnational production and consumption networks that are usually controlled by one core corporation or one core group of corporations. A familiar example is one favourite British day-to-day item: the smart phone. Depending on the maker, Britons smart phones are developed in North America, Europe, or Asia. Rare minerals are mined in Africa, assembly takes place in Asia, and distribution is managed in Europe--a range of suppliers, manufacturers, retailers and consumers are connected along an economic chain spanning four continents.

Embracing the global value chain model as the dominant form of production and...

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