UK Conservatives ponder global trade reboot

LONDON — Post-Brexit Britain must soon decide how active to be in shaping global trade — and it won’t be short of advice about how to embrace its new role outside the European Union.

Beyond rhetoric about support for a “rules-based” trade system and the virtues of being a “free-trading nation,” the U.K. government is yet to show its hand in a meaningful way.

Most agree something should be done to reset the floundering ship of global trade. U.S. President Donald Trump’s combative approach and imposition of tariffs, both on allies and adversaries, has reduced confidence in the former beacon nation for free trade. The World Trade Organization is in the doldrums with its dispute body strangled by the Trump regime and amid accusations it has failed to crack down on unfair trading practices from China. 

Critics complain about China’s alleged intellectual property theft, abusive infrastructure contracts with developing nations and state subsidized dumping. Human rights concerns in Hong Kong and Xinjiang, growing tensions with neighboring states and increasing concerns about cyber security are adding to the gnashing of teeth. China denies all claims against it, and insists it has “stood by the multilateral trading system through thick and thin.”

Many in Boris Johnson’s Conservative party argue the current malaise in world trade creates an opportunity for the U.K. to play a leadership role, though others doubt Britain has the clout — or the international reputation — to pull it off.

Its bid for the top job at the World Trade Organization showed ambition — even if few thought former International Trade Secretary Liam Fox stood a chance. Despite being knocked out of the race, the U.K. continues to insist it will be an active participant on the trade stage.

“This is a critical moment for Britain and her trading relationships with the world,” International Trade Minister Ranil Jayawardena said in a statement to POLITICO. “We are committed to free and fair trade through free enterprise, the rule of law, and high standards.”

Onlookers hope to harness that critical moment. Senior Conservative MP Tom Tugendhat wants Britain to coordinate a new international grouping of democratic nations to pile pressure on rogue states, which might even spark some soul searching at the WTO. And there are calls in the U.S. for Britain to convene allies and create something much stronger: a NATO for trade that can punish those who flout the rules. 

The T(x)

Trade wonks worry the west is being outrun by China on the trading front. But there are proposals for containing the economic behemoth.

Tugendhat, chair of the House of Commons foreign affairs select committee and co-founder of the China Research Group of Conservative MPs, argues a new grouping of democratic nations is needed to tackle China and other states that break the rules — something like the G20 but for trade.

It would in effect be a talking shop about how rules-based nations can support each other through supranational bodies like the WTO, as well as a statement about the direction nations want to go in and a platform to put pressure on rogue states. As an added bonus, it might prompt the WTO to rethink its approach.

“The World Trade Organization is supposed to be a global platform for world trade, but, for various reasons that we all know, it has been somewhat devalued by the fact that some people are playing fast and loose with the rules,” Tugendhat said. “A flexible grouping alongside the WTO would bring together those nations most dependent on international cooperation and offer an alternative way to reinforce global trade. There’s no point in pulling down the WTO or replacing it but it’s about time those of us who need it give it a bit more heft.”

Tugendhat said Britain could coordinate such a network, rather than lead it outright, and that it could sit alongside other groups looking at vaccine development or environmental solutions. “As we leave the EU, we leave a major block, allowing us to work more flexibly,” he said. “We should use the opportunity to build new, variable relationships with others.” 

Few doubt that Trump, if he wins a second term, would take little interest in such an idea. “Small and medium states should not sit around and wait for their hegemon to step up. We should roll up our sleeves and get back to work,” Tugendhat argued in a private speech to RUSI think tank members last month. 

But Peter Holmes, an academic for the U.K. Trade Policy Observatory at the University of Sussex, questioned whether such a group would have sufficient weight without U.S. involvement. 

He also pondered whether the U.K. has the authority to set up a group about following rules, after it moved to breach international law by unilaterally overriding the Brexit Withdrawal Agreement it signed with Brussels. “Britain’s credibility in doing anything like this is minimal,” he said. 

The Labour Party took a similar line. Shadow Trade Minister Bill Esterson said “the decision by the Tory government to violate international law via the Internal Market Bill and their continued sale of arms to Saudi Arabia for use in Yemen is dangerously counterproductive and undermines our international standing and influence.”

Others fear a clearer movement towards global factions could worsen tensions and trade flows. Carolyn Fairbairn, director general of the Confederation of British Industry, argued that although WTO reform is needed, a multilateral approach with all “growth nations” is best, especially when the coronavirus pandemic continues to wreak economic havok. “What businesses fear is a fragmentation of the world economy into different spheres,” she said. “That is fundamentally anti-prosperity, and creates barriers to trade that will ultimately make it harder to grow and thrive.”

Trade NATO

But there are calls for Britain to go even further than the Tugendhat approach.

Anthony Vinci, an adjunct senior fellow at the U.S. Center for New American Security, said a trade talking shop would be a start, but a trade alliance along the lines of NATO would be better. The idea is that nations could impose punishments like collective tariffs on China or other alleged rule-bending states if a set line is crossed. 

NATO was the threat that created the peace, and the model could be transposed to the trading realm, Vinci argues. He said without a real deterrent, rogue states will never be reined in. “By creating that threat, China would see the futility of its geo-economic actions, and so just not take them,” he said over the phone from the U.S. 

With the current political turmoil in the U.S., Vinci argued Britain could be the nation best positioned to take up the mantle of creating such an alliance, with its connections to the Five Eyes security group and the Commonwealth, and with its newfound freedom on trade. 

“In some ways, due to the political complexities in the U.S. right now, [the U.K.] is maybe the best-positioned country in the world to set this up, at least in the near future,” he said, “There is a huge opportunity for the Johnson government to do that.”

Some in the China Research Group are said to be interested in the idea of a NATO for trade, and according to an aide to an MP were discussing how the NATO concept of burden sharing would work in the trade realm on a recent conference call.

Others are not so sure. Conservative MP Bob Seely, who is a China hawk but not a member of the CRG, said building trade relationships that do not include China was a good thing “but you don’t necessarily want to cut China out, and you don’t want to build up a division between the authoritarian states of the world and the democracies.”

He added: “The consequences of that is China then has less and less incentive to behave within a rules-governed system if the rules-governed system is locking it out.”

China insisted it upholds the multilateral trading system, including the WTO, and does not take advantage in its dealings with developing nations. “China has faithfully fulfilled its WTO accession commitments, including commitments on [intellectual property] protection,” said Zeng Rong, a spokesperson for the Chinese embassy in the U.K.

“The talk about China not following world trade rules is a fallacy,” Rong said. “China has stood by the multilateral trading system through thick and thin. China will continue to fulfill its commitments, comply with international rules, actively participate in the improvement of the multilateral trading system, and firmly support the WTO in playing a greater role in global economic governance.”

For its part, Britain is mulling what role it wants to take in the trade world. Its revamped board of trade, which met for the first time this week, will discuss the principles dictating the U.K. approach, and intends to produce reports about reforming the WTO and the global trading system.

After shaking up its own trade by quitting the European Union, Britain could attempt to lead on issues facing the globe. And there is no shortage of ideas if it wants to. 

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