The Alternative Debunk: Trade, sovereignty and the World Trade Organisation

There is a line of thinking that runs, 'the real obstacles to trade in the twentyfirst century are no longer tariffs, but non-tariff barriers'.

It is a view that has been expressed by Jacob Rees-Mogg, Brexiter and Tory backbencher, as part of his reasoning for Britain leaving the EU. Breaking these non-tariff barriers, as luck would have it, was also the founding mission of the World Trade Organisation (WTO).

If non-tariff barriers are an obstacle to the UK economy and trading on WTO terms would put us at the heart of an organisation working to undo them, it seems like a simple enough equation. It would appear to be a marriage of supreme convenience.

That view is, however, put to us by Britain's conservative and far-right establishment. That means it requires scepticism and further examination. So what are we missing?

Well, the first thing to note is that there is nothing simple about trade. Trade branches out into all aspects of international relations, domestic lawmaking and standards regulation, and as such encroaches on national sovereignty. And negotiations can take years.

The second, is that the 'non-tariff barriers' being referred to here are domestic laws and standards, created by sovereign parliaments and assemblies to regulate how things are made and sold in their jurisdictions - as well as subsidies favoured sectors.

Going blindly down the road that leads to the untrammelled trade that would-be barrier-breakers like Mogg would like, could lead to a place no one pursuing greater sovereignty had ever considered ending up. So let's be clear about where that road leads.

Background: Barriers to Trade

Historically, the old barriers were taxes - known as tariffs - put on imports. They would produce revenue for the national coffers and protect domestic production. Economics is never simple though, and tariffs were deeply entwined with foreign wars and domestic unrest.

Competition between nations over resources - resulting a mad scramble to occupy and to exploit, to invade and to seize valuable territory, even from neighbours - was the driving force behind war, colonialism and imperialism.

In Britain, the old barriers of tariffs mixed in a toxic brew with aristocratic landownership. The result was landlords with collosal power to inflate prices at the cost of middle class merchants and the working class who could barely afford the cost of bread.

That led to the Anti-Corn Law League, of which liberal free traders Richard Cobden and John Bright were leading activists, which in the 1860s fought to undo taxes on corn imports that poured subsidies into the pockets of landlords and starved ordinary people.

The Anti-Corn Law League eventually won out, but their campaign didn't bring a permanent change of mindset. Rather they influenced the Liberal Party, who continued to vie for power with the Conservatives who supported the system of tariffs.

While Britain went back and forth, other countries such as Germany and the United States used tariffs to protect their domestic industries from foreign competition - trying to catch up and compete with the British Empire, whose colonies allowed for the casting of a far wider net in which to find resources.

The international ramifications of this inward-looking national-oriented system were disastrous. On the foreign front, war between countries as they scrapped for resources. On the domestic front, poverty and civil unrest. It took two world wars, and the rise of democracy for that message to sink in.

Bretton Woods: Peace Through Interdependence

After the Second World War, delegates and economists from around the world gathered in Bretton Woods, New Hampshire, to figure out how to achieve a lasting peace. What they struck upon was the core of what the free traders had been arguing for a century: interdependence.

The result was the General Agreement on Tariffs and Trade (GATT), the International Monetary Fund (IMF), unprecedented international cooperation and the largest surge in world economic growth in history as the Western economies recovered, interwined in peace.

From the 1940s through the 1970s, tariffs were cut and cross-border movement and free access to resources flourished. The predecessors to the European Union were founded on ending the French and German fight over access to, and control of, the Rhine Valley's resources.

Government intervention went hand in hand with this system. It was necessary to ensure tight regulation internationally and to correct market imperfections domestically - most recognisably in the form of the welfare state, aimed at ensuring citizens' economic wellbeing.

There were consequences, good and bad. International cooperation was joined by deep domestic links between states, industries and unions that played it's part in a prosperity that was more widely shared than ever before. Inequality was lower. The wealth gap narrower. Opportunity for social mobility was tangible.

And yet the deep corporate-state links meant that collusion was substantial, while international cooperation gave rise to multinational corporations - businesses with a power that reaches beyond the limitations of national jurisdictions.

WTO: Drive for Efficiency

At the end of the 1970s, stagflation brought to an end the soaring economic growth of the era. Global growth hit a wall that capitalism has been trying to find a way around ever since.

The next phase for trade would be driven by the overthrow of the careful system of controls and regulations. The Bretton-Woods system had fostered within it the huge multinational corporations that now, as growth stagnated, threw their weight behind the Reagan-Thatcher system and the deregulation boom.

It was struck upon that, even with tariffs world wide brought down to historic lows, there were yet other barriers to doing business that might be limiting growth. Beginning with the Uruguay Round of negotiations, the drive was now achieve maximum global efficiency through the elimination of non-tariff barriers.

The GATT was superseded at this point by an organisation founded on and dedicated to achieving these goals - these new underlying principles. This was the World Trade Organisation, the WTO.

If Bretton-Woods and the GATT was about achieving peace through interdependence, achieved by a gradual reduction in tariffs, then the purpose of the Uruguay Round and the WTO was to take that interdependence and use it as leverage to eliminate non-tariff barriers and pursue market efficiency.

As with the Bretton-Woods model, there were consequences. One of the most obvious impacts has been the global stagnation in wages for low-skilled workers in the new era - with labour embattled, their hard won rights being undermined and squeezed.

Not all of this is the result of globalism. But the benefits were not widely enough shared, technology undermining rather than enhancing workers' security, and gains were often made through doors being opened to exploitation. Income inequality accelerated.

In the now

The body known as the World Trade Organisation is the arch-mover of globalism. A forum for diplomats and lobbyists, it is where the negotiations are done for deals that break down not only borders, but the so-called non-tariff barriers - in reality, domestic laws and standards that protect the quality of products.

The groups of elite Brexiters, most of them very wealthy, who are selling the idea of leaving the EU on WTO terms, have hitched onto the back of the campaign for national sovereignty. But leaving on WTO will do nothing to enhance sovereignty in terms that most people would recognise.

Within the EU, the UK has a say alongside other members on how it interacts with each of them and how it's domestic standards and regulations are set, while also having a say on how the whole EU bloc interacts with trading partners around the world.

Exiting the EU will downgrade the trading relationship between the EU and the UK. And if the UK reduces it's standards to attract new trade with other non-EU countries, it will make it harder to trade with the EU - as most of the EU's trade barriers depend on products meeting their high internal standards.

Any change of policy will require long term negotiations with the more than one hundred and fifty WTO members - all of whom will want their say to prevent their own trade being adversely affected. And let's not forget the WTO mission to reduce non-tariff barriers.

The drive to align standards within the EU has been one of getting countries to agree and enforce the highest common denominator. On the outside, the only 'advantage' to be gained is through the pursuit of the lowest common denominator on standards.

Whether it's the banning of plastic packaging to regulations about what chemicals can be used in the production of food, from the regulation of working conditions to the terms upon which businesses can receive subsidies or support - there is money to be made by opening the doors and lowering regulations.

But the reality of trade on WTO terms means few countries actually negotiate on their own. Most have spent decades building mutually beneficial deals and blocs - like EU - to increase their influence and reinforce their position to protect domestic conditions.

Switzerland and Canada have spent the better part of twenty years trying to negotiate their trading relationships with Europe. And the North American countries - USA, Canada and Mexico - have been back and forth over how to organise their trade for mutual benefit.

Even at present in America, their far-right President upset and forced a renegotiation with the countries neighbours by trying to reestablished protective tariffs to favour domestic production - a move that hurts trade partners and pours money into the pockets of the wealthy domestic business and land owners.

In such a complex web of negotiations, the confrontational approach of Brexiters and their supporting organisations - like the IEA - who have argued for ligitigation at the WTO to force the EU to lower it's standards, is unlikely to win the UK any allies.

In the future

The WTO was established in 1995 as the product of the Uruguay Round as the forum for negotiating global trade and as an arbiter for settling trade disputes. It has been the forum where successive agreements have been negotiated to reduce countries' tariffs and pursue deregulation of domestic standards.

In pursuing those goals the WTO has been accused of undermining the sovereignty of member nations with it's rules - much like Brexiters have loudly and virulently alleged of the EU project.

People who supported Brexit have hoped the UK might use it's historic influence protect some domestic sectors, but any such provisions would immediately irk other WTO members whose export opportunities would be limited.

The reality is that a No Deal Brexit, exiting onto WTO terms, does nothing to improve Britain's sovereignty. It means trading much as we do now, but without our open access to the Single Market - and the investment boost that gives us - and any EU specific deals through which we had previously enjoyed trading access to third party countries.

The main possible benefit would be, as Rees-Mogg himself has claimed, would be in slashing trading tariffs - ostensibly, it would seem, with the US, India and China. But the only way that would have any impact would be if our non-tariff barriers - our food standards, for instance - where lowered substantially as well.

And allowing our domestic policy to be driven, slashed, by the demands of overseas corporations who want to pour lower standard goods into the UK - likely undermining domestic businesses - is unlikely to be seen as an increase to national sovereignty.

If Britain could even manage to unilaterally start slashing it's tariffs and standards to attract America and Chinese suppliers - over likely objections and litigation in the WTO - the cheaper supplies would be of much lower quality, taken on at the cost of major damage done to domestic supply chains.

The post-war world has achieved interdependence on an historic scale. It cannot now be undone. Our predecessors choose to give up total sovereignty for that interdependence and the peace it brought. No one should be under any illusions: an exit from the European Union on WTO terms is another aggressive step into, not away from, globalisation, which does not restore sovereignty.

As we stand our sovereignty is pooled. We take part in building a consensus in Europe that affects our domestic laws. The future under a WTO/Hard Brexit will not restore sovereignty, and may even instead undermine it as domestic laws are driven by what opportunity it sells to our trade partners. These are the extremes of what is on offer when discussing Brexit. Neither will turn back the clock.

May's foreign policy has the contradictions, nuances and cynicism of the twentieth century and it's alienating a generation who want fair, earnest and ethical government

Demonstrators in London turnout in large numbers to show that the Trump brand of exclusion isn't welcome. Photograph: Women's March London, 21 January 2017 by David Holt (License) (Cropped)

Prime Minister Theresa May's past week looks like the scary version of life after Brexit. To Washington, to play chief diplomatic sycophant to Trump. Then off to Turkey to sell Erdogan some British manufactured arms.

Diplomacy has always been about picking friends carefully. That has often meant making unsavoury friends and condemning the more reasonable ones. But now, more than ever, striking that delicate balance must account for the public.

Diplomacy and foreign policy is an art practised as far inside the 'corridors of power', and as far away from the citizens on the street, as any element of government. That cannot continue. It needs to change.

It is no longer sustainable for the Prime Minister to jet jet off around the world to gladhand, and do deals with, leaders who have human rights questions - inadequately answered - hanging over them.

In the US, Trump has the lowest approval ratings in history (Carlsen, 2017), and has faced protests against nearly every policy he has announced in his first two weeks - not just in the US, but around the world. But May is there on business.

May wants to talk trade, wants an exclusive deal. The trouble is that any deal is likely to be disadvantageous to all but American corporations and fraught with many of the same problems as EU-US trade talks: TTIP, food quality standards, private competition in healthcare (Umunna, 2017).

And what about Erdogan? The backlash from the PM's visit to America had not settled down when she arrived in Turkey, almost unnoticed in the furore, to sign a £100m deal for fighter jets (BBC, 2017).

The UK's cynical role in the arms trade has already caused a lot of controversy, waved away with denials, bluster and the promise of jobs. The UK-Saudi relationship has been a frequent embarrassment and horror - from the suppression of women's rights (Withnall, 2016) to, and particularly apt for May's visit to Turkey, British arms being used in the ongoing war in Yemen (Graham-Harrison, 2016).

In Turkey, 140,000 people rounded up, academics fired, and journalists suppressed or arrested, in a consolidation of power following last year's attempted coup (Lowen, 2017).

That these are likely to be the UK's new and enduring friends after leaving the European Union, as the UK scrambles to accumulate trade cash, will not endear Britain's new horizon to progressives.

It will be even harder to comprehend for many of the younger people who are turning out to protest, even many into their thirties, who did not grow up amidst the nuance and cynicism of twentieth century international politics.

Their formative years were under the governments of Bush and Blair. They saw dodgy dossiers lead to invasions, lead to countries collapsing, lead to extended occupations, lead to the selfish, almost gleeful, extraction of fossil fuels while all hell broke loose - and then the subsequent rise of terrorism.

It's not a mystery what these young people, whose views on international relations were formed in the years, want: ethical government. To be represented honestly. That's why Theresa May's visits to Trump, to Erdogan, can set people aflame and launch protest movements.

When Britain preaches its values one moment, threatens to withdraw from international human rights agreements and undermines the independence of the judiciary in another, then jets off for smiles and handshakes with the oppressors of minorities in the next, it is hard to find consistency.

Trump promises America First, and May to make a success of Brexit, but that sense of narrow interest belies the reality that many people now have broader horizons and greater empathy. This national-level cognitive dissonance, between the official voice and the citizens, will be expressed today in more protests.

Across Britain, Theresa May's foreign policy will face protests in solidarity with Muslims everywhere and with refugees who flee from violence and oppression just to be labelled and shunned by official acts of exclusion. And those demonstrations will carry with them the progressive call for the idea of a government, and international relations, based on deals that are fair and ethical.

The Alternative Guide to the EU Referendum: 4 things you should know about TTIP, free trade and the European Union

One of the most controversial elements of the UK's membership of the European Union, at present, is the TTIP - Transatlantic Trade and Investment Partnership - trade deal. Between the United States and the European Union, it is intended to break down trade barriers limiting free trade.

The prospective deal has been controversial from the start - being assembled in negotiations deemed secret, under a cloud of fear that business is being given legal rights to seek recompense from governments for profit-hurting policy, reduce Europe's regulatory standards and open protected domestic institutions to aggressive corporate competition.

I: The EU is only what you make of it

The misconception here is that the EU is a distinct, abstract institution, pursuing its own agenda - thus imagining the deal to be the work of the EU alone, with exit a simple blocking measure. But the EU doesn't work like that. It is driven by a council of the governments of the member states, including the UK.

Right now, Britain's representative are David Cameron's government and the Prime Minister has argued forcefully in favour of TTIP. Leaving the EU is not going to stop the UK's Conservative government seeking the pass TTIP-type trade agreement.

The basic reality is that the opposition to TTIP is to be found in Europe, not out of it. In Germany, 250,000 people have marched against the treaty. In France, the government is opposing the treaty for the way it threatens its protection policy covering certain of its own domestic interests. The movements are right in step with the major concerns over the treaty in Britain.

II: Remember ACTA?

As ever, the problem persists of national governments hiding behind the EU - using it as an excuse or a way to pass policies where the public aren't watching, when it is simply a system whose strings they are pulling.

Consider the controversial ACTA treaty. ACTA, which was intended to ensure an international 'harmonisation' of copyright enforcement, was criticised as potentially allowing private companies to violate basic personal liberties like privacy and even threatening generic medicines to protect the financial interests big pharmaceutical companies.

While many national governments around the world and across Europe signed, including the UK, the treaty was ultimately blocked in a vote by the directly and proportionally elected EU Parliament, following massive public protests across the EU.

III: What is the point of free trade?

On TTIP, Prime Minister Cameron has tried to make out that there are stark lines over the deal. From his perspective, on his side - supporting TTIP - are all those who want free trade and the benefits it brings, and on the other are people who are 'against free trade and wanting to see an expansion of trade and investment and jobs' (Mason, 2016).

It is not unfair to suggest free trade is a worthy principle, but why can't we have it on ethical terms?

In its more idealistic form, the EU is all about constructing an ethical free trade area. In its origins, it was conceived of as a way to end war in Europe by stopping national governments getting into strife with each other over control of the natural resources with which to construct to materiel of war.

Going further back, into the 19th century, the campaign for free trade was about breaking open cartels. Under the system of trade formed by the competing systems of national protection, the basic necessities were made prohibitively expensive by the stranglehold over them of powerful and unaccountable landlords and bosses whose interests where served by national government protection.

The Anti-Corn Law League, the early radical liberal campaign in the UK for free trade, sought to break up these cartels to reduce the cost of basic food and goods, so that the poorest could afford a decent and healthy life. The campaign for free trade was in service to the public against the protected interests of the rich landowners.

IV: What does EU trade look like?

What the EU has attempted, but not completed, is to ensure that the free trade it promotes takes place on a fair and ethical playing field. Basic standards, enforced by regulation (the mythical beast the Right love to talk of slaying), protect workers' rights, prevent animal testing and in a host of other important areas ensure a basic minimum expected of business practice in Europe.

Internally, this comes hand-in-hand with policies like the Regional Development Fund. The fund is intended to invest in the poorest, sub-national, regions of the EU to raise the standard of living up, so no country can look to undercut another on basic standards or be cut out left unfairly behind.

Externally the protections, of standards and rights, require trading partners to meet certain conditions for access to Europe's common market - like those of Norway and Switzerland that have been much publicised as alternatives in for the UK during this EU referendum campaign.

All of these ideals depend, however, on who is in charge of policy and negotiation at the EU. Right now, it is the conservatives of many EU member states who are in the ascendency and control policy and decision making at the European level. As a result, the EU's actions have been tinged with conservatism.

Within that system, it has been the Right, and the far right, who have been the ones pushing most aggressively for the UK to do away with the EU's standards - though it has faced resistance. The solution for the Right has become doing away with the EU, but keeping the market intact, as they still want to trade with Europe, but want to be undercut everyone else and help big business pad its profits by doing away with concern for the environment or workers' rights.

What do progressives want from trade?

Exiting the EU will require new trade deals to be negotiated. The conservative Right is unlikely to make those standards and regulations any kind of priority in its negotiations. Maybe, of course, those who want a 'left exit', unrestricted by the European system, will get a government of the Left before too long, to set about forming a new progressive trade policy.

But what are progressives in Britain going to negotiate for, if not an ethical trade area? An ethical trade area underscored by democratic accountability and cooperation?

Even a progressive exit would mean the dismantling of systems of cooperation, decades in the making, that have supported advances in rights, in a move that could only make the Far Right happy - only to have to then try to rebuild it all over again.

Right now for progressives, fighting corporate power and ensuring trade is conducted ethically and with appropriate standards and rights protections, remaining in the EU - not idly, but campaigning for progressive, democratic reforms - is still the best option.

This is Part 2 of  a multi-part series, "The Alternative Guide to the EU Referendum" - click here to go to the introductory hub