Shanker Singham: The Dimbleby food plan would wreck Britain’s trade policy

18 Jul

Shanker Singham is CEO of Competere. He is a former adviser to Liam Fox when he was Secretary of State for International Trade, and to the Office of the United States Trade Representative.

There have been a couple of important independent reports published recently on the subject of trade and agriculture.

In March of this year, the report of the Trade and Agriculture Commission (“TAC”), an independent commission staffed by a secretariat from the Government (primarily the Department of International Trade), was presented formally to the Secretary of State for International Trade.

Yesterday, another independent report (Part Two of the National Food Strategy (“NFS2”) was published. This report was commissioned by the Government, but was an independent review whose lead author is Henry Dimbleby, the co-founder of Leon restaurants.

I was privileged to serve as a Commissioner on the TAC. NFS2 covers many areas, but touches on trade policy aspects of food and agricultural trade, and it is here that its recommendations overlap with those of the TAC, whose primary focus was to study the interaction between trade and agricultural policy issues.

NFS2 correctly draws attention to the unanimous proposal from the TAC regarding the interaction between the UK commitment to trade liberalisation in the form of a zero tariff and zero quota policy, and its recommended approach to deliberate deviations from agreed core standards in areas like labour and the environment.

The TAC report regarded such deliberate deviations from agreed standards in the FTA as potential anti-competitive market distortions, for which a mechanism to impose a tariff could be legitimately crafted.

It is certainly true that gaining such a consensus was a significant achievement from the TAC, and in particular its chair, Tim Smith. However, it does a disservice to that delicately poised consensus to mischaracterise the TAC recommendations in the way NFS2 does.

The TAC report was very clear in its recommendation that, in exchange for a commitment to zero tariffs and zero quotas, the UK would propose a mechanism whereby, whatever core standards were agreed in FTAs, any deliberate deviation from them for trade gain would constitute an anti-competitive market distortion (ACMD). Provided the aggrieved party could show this and its effect on competition, as well as causation and damage, it could request a corrective tariff to offset the artificial cost reduction gained by the deviation from agreed standards.

However, and crucially, those standards have to be agreed. The TAC was careful to ensure that any policy proposed by it would comply with both the letter and spirit of WTO rules on sanitary and phytosanitary issues (SPS rules), as well as the WTO rules on Technical Barriers to Trade (TBT rules). These require a commitment to sound science and non-discrimination and constrain unilateral action.

It was absolutely clear from the TAC report that the UK could not unilaterally assert these standards, but that any tariffication mechanism would come into play only when there was a proven deviation from agreed international standards, or from those expressly agreed in the FTA

It was also axiomatic that this tariffication would be an ex-post event only if all the elements could be proved. I knew that even this proposal would raise eyebrows in capitals around the world. I backed it because I could see the justification for it, and that it was rooted in a normative framework that recognises the interaction between competition and trade policy.

I believed then and do now that many countries could be brought round to this way of thinking, and would not simply assume that this was a protectionist gambit by the National Farmers Union. Proof of this is that we are seeing variants of it emerge in the UK-EU Rebalancing Mechanism, and in US proposals in the WTO.

In addition to completely mischaracterising the actual recommendations of the TAC, NFS2 goes on to publish a table comparing the food standards of the UK’s key trading partners and geo-strategic allies.  It assumes without any analysis that rules that are more restrictive and burdensome automatically mean that standards are higher. It does this even if practices that have been found to violate the WTO.

NFS2 mischaracterises and simplifies the TAC recommendation to the point of absurdity. It will be rightly regarded with deep hostility by capitals around the world. It is to be hoped that the careful consensus obtained in the TAC, and understood by our trading partners, will not be shattered as a result.

It is certain that when our trading partners read NFS2, they will regard it as the type of wild assertion of protectionism that they have come to expect from the EU’s agricultural trade policy. They will also note with horror that NFS2 goes far beyond what even the EU has dared to suggest. Far from being the free trade superman of Boris Johnson’s Greenwich speech, this policy would turn the UK into an international trade pariah state, even worse than the mini-version of the EU that many of our key trade partners such as the US, Australia, New Zealand and Singapore fear, and even more of an outlier.

If these recommendations were to be applied to our imports from the EU, we would immediately be in litigation with them, and they would rightly invoke the rebalancing mechanism to slap tariffs on UK exports. As for the rest of the world, let us not forget that the EU’s sanitary and phytosanitary rules have unified both the developed and developing world against it in the WTO. If implemented, thee proposals would compound the pain inflicted on the global poor in developing countries at a time when the UK has also just announced a cut in its aid budget. This is not trade or development terrain that the UK wants to occupy.

Our trading partners are rightly concerned about which side of the table the UK will eventually land on. Our agricultural trade policy will be a strong indicator of where that will be. If we are even more of an outlier than the EU in these areas, we will be dismissed into irrelevance.

The NFS2 recommendations in trade policy will drive a coach and horses through the UK’s external trade policy, any improvements it could make in terms of domestic reforms in the agricultural sector, and render the seminal Johnson Greenwich speech on free trade into “sound and fury signifying nothing”.

Trade policy matters, and policy recommendations must be carefully calibrated if they are to have any chance of success. NFS2’s trade policy recommendations do a material disservice to the hard won gains and consensus developed in the TAC. They should be comprehensively rejected.