The UK isn’t ready to lead the world trading system

Before we can hope to head the WTO we should get our own house in order

July 17, 2020
Liam Fox is UK nominee for the top post at the WTO. Photo: Victoria Jones/PA Archive
Liam Fox is UK nominee for the top post at the WTO. Photo: Victoria Jones/PA Archive

You can’t fault the ambition. On many occasions since 2016, UK ministers have said that after Brexit we will be a global leader in free trade and the fight against protectionism, and in particular a champion of the World Trade Organisation. Now former secretary of state for international trade Liam Fox has been put forward for that organisation’s top job, director general, with the prime minister citing Fox’s “first-hand experience of the political and technical challenges of negotiating trade agreements.” Yes, this is the same Liam Fox who suggested a UK-EU trade deal should be the “easiest in human history” and promised that the UK would have 40 trade deals ready in March 2019—rather more than the 20 existing deals we’ve actually agreed to “roll over” after an extra 15 months. We shouldn’t rule out that Johnson was making a subtle joke about Fox, whose abilities weren’t rated enough to keep his cabinet job.

Fox is in any case considered a distinct outsider in the race to be DG, notwithstanding his frequent visits to the headquarters in Geneva while a minister, which had both UK and WTO officials frustrated about what useful meetings they could possibly arrange given that power resides in the member countries more than the organisation itself.

The aspiration of being free trade leaders is however worth analysing, since this does appear to be a sincerely held view in the government and the Conservative Party. Having a UK DG would not necessarily help, given the incumbent is from Brazil—not normally thought of in that leader category. But against the backdrop of Trump’s trade wars and growing protectionist sentiments in many countries, there certainly seems to be a vacancy.

The first problem is that the UK also has said protectionist sentiment. It isn’t just that we’re leaving the EU, the deepest trading bloc in the world right now, but that we’re doing it with either a light Free Trade Agreement or no deal at all. The government has repeatedly said we’re fine with no deal, even going so far to dress it up incorrectly as “Australia terms,” which hardly shows true free trader commitment. Meanwhile, an apparently growing number of Conservative MPs want to put in place restrictions on trade between the UK and China. So that’s over 30 per cent of the global economy on which we’re likely to soon have greater trade barriers.

Beyond the UK this protectionism is exacerbating existing divisions in the world trade system, particularly between the US and the EU. They can hardly be expected to agree on the world trade rules that should apply to China when they haven’t been able to resolve their own problems for 25 years, notably on agriculture. A genuine champion of free trade would be reticent to take sides, but ready with suggestions that could help both parties come out of the conflict. That isn’t the UK; insofar as there is evidence that the government has thought about the issue, we would seem to be broadly on the side of the US, but with reservations and complications, not least that our farmers and campaign groups prefer the EU approach.

But the biggest problem of all in our desire to be free trade leaders is that we just don’t seem to have thought much about what that would mean in the 21st century. Our major priority in bilateral trade agreements seems to be reduction of tariffs, which were very much the problem of the 1950s. On the regulatory barriers that have been growing in trade for 40 years, the politics of Brexit independence led chief negotiator David Frost to say that “sovereignty is about the ability to get your own rules right in a way that suits our own conditions,” which runs distinctly counter to the underlying philosophy of the WTO, an agreement between countries to pool their sovereignty. On services, where the UK is the second largest exporter in the world, we have seen no creative suggestions for removing barriers. Similarly, we have aspired to be world leaders in digital trade, but have so far said nothing about joining those countries which have already negotiated a trade agreement in this area, namely Chile, New Zealand and Singapore.

Perhaps it is unfair to expect a country still not implementing its own trade agreements to have fully defined policy positions. But then are we a leader, or desperately trying to get our own trade policy in order? Realistically, it’s the second of these. That would also tally with what the rest of the world thinks, even those like the US who hope we might join their side. Which we’d do well to avoid.

We’re already getting a taste of the difficult domestic politics of trade, with a US deal under attack over food standards. Multiply that by 160 (the number of WTO signatory countries) and welcome to the global politics of trade: messy and complex, and without a significant deal since 1995. It isn’t obvious that we’d even want Fox to win the post, as the UK might then have to try to help make deals by offering concessions at potential cost to itself.

In time we can hopefully play a constructive role in resolving all these issues. Right now we’re not ready. On 1st January 2021 we’ll see the biggest change in UK trade relations in history. If we can sort that out successfully perhaps the UK—and Liam Fox—will be ready to help with the bigger picture.