Linking aid to trade – a Trojan horse?

By institutionally linking trade negotiations to aid, has Boris Johnson jeopardised the cohesion and strength of NATO by wheeling a trojan horse into the central plaza of the Foreign Office?

The trade and defence implications of the Government’s new Foreign Policy strategy include:

·       Regional loss of credibility, because while it is perfectly legitimate for the UK to hope that its security policies will generate goodwill, if they imply that the UK is defending e.g. Eastern Europe, in order to engineer a better trade agreement, rather than because the Government cares about democracy and deterring bullying by Russia, the UK will rapidly lose credibility in that region. The same applies to China and Britain’s standing in Asia.

·       Creating an opportunity for Russia and China to fill the political vacuum left behind in the Middle East and Africa by the United States and now the UK.

·       Rendering the UK’s status within the WTO a hostage to fortune, because at the end of the transition period (which is not being extended), in order to regularise its WTO schedules, the UK will have to negotiate with: the EU itself; the US; China; Russia; India; Brazil, and any trading nation or group of nations that matters, large or small, rich or poor, and it only takes one objection to hold up the talks because the WTO operates by consensus, not voting, which is one reason why WTO negotiations take so long.

The European Union and the United Kingdom have agreed a Withdrawal Agreement pursuant to Article 50 of the Treaty on European Union, which provides for a time-limited transition period during which European Union law, with limited exceptions as provided for in the Withdrawal Agreement, will apply to and in the United Kingdom (the “transition period”).

The communication from the United Kingdom (WT/GC/206), dated 1 February 2020, sets out more detail on the implications in the WTO of the United Kingdom’s departure from the European Union. Further information is also provided in the note verbale from the European Union (WT/LET/1462), dated 27 January 2020. The United Kingdom has communicated that the goods schedule of the European Union will continue to apply to the United Kingdom during the transition period afforded under the Withdrawal Agreement.’ https://www.wto.org/english/thewto_e/countries_e/united_kingdom_e.htm

What happens when the transition period ends?

‘Brexiteers argue that, out of the EU’s clutches, Britain will be the WTO’s star pupil, striking trade deals across the world…However, there is a snag. Britain is already a member of the WTO, but operates through the EU. To become a fully independent member, Britain needs to have its own “schedules”, WTO- speak for the list of tariffs and quotas that it would apply to other countries’ products… The most simple course… [is] for Britain to keep its schedules as they are under the EU, including the “common external tariff” applied uniformly by EU members to imports from third countries. The government has recently hinted as much. This avoids diplomatic wrangling. But simply to readopt EU-approved commitments hardly looks like “taking back control”. It would also lead to other problemsIf Britain kept the common external tariff in place then it might also apply to a company moving components between the EU and Britain. Such a firm could incur tariff charges each time a border is crossed. A WTO member might kick up a fuss if, say, one of its car companies with production facilities in both Britain and the EU suddenly found it more expensive to assemble a model. A related problem concerns the WTO’s “tariff-rate quotas” (TRQ’s). These allow a certain amount of a good to enter at a cheaper tariff rate. The EU has almost 100 of them…this is likely to become the most contentious issue in Britain’s re-establishment of its status as an independent WTO member… Some of these problems are surmountable…countries that stay in others’ good books find things easier. But so far, British politicians are also struggling on that front. Boris Johnson, the foreign secretary, has irritated his counterparts with clownish comments… When the reality of Brexit dawns, Mr Johnson and his fellow Brexiteers will find no trade deal to be especially appetising.’ The “WTO option” for Brexit is far from straightforward (The Economist 07.01.2017). 

‘To be more than an optimistic slogan, Global Britainneeds to rest on a clear, evidence based strategy. And once we have the strategy, we will need a consistent plan to deliver it

[Our] strategy should not be opportunistic or reactive, but based in principles. Brexit makes it even more important for the UK to have an international trade system with rules ensuring non-discrimination, fair competition and enforcement. Alone, we will be less equipped to cope in a trade environment driven by the bilateral and power based instincts of the new US administration and China, or indeed the sheer trading weight of the future EU. That is why we should remain a strong supporter of the WTO, and resist any temptation to short-circuit rules to score quick successes…

The Government has decided to prioritise other goals over our economic relations with the EU. This is fine, provided either people are prepared to pay the price in more expensive goods, less inward investment and lower growth, or we can quite rapidly find compensating alternative markets. There is also a risk, if the Article 50 exit negotiation does not go smoothly, that our future trade relationship will be negotiated not from the starting point of the status quo–integrated membership of a common market and regulatory space – but from outside, almost like any other third country. We should do our utmost to minimise this risk by avoiding gratuitous political friction and prioritising a smooth transition to new arrangements.’ The Tacitus Lecture 2017 – ‘The World is Our Oyster? Britain’s Future Trade Relationships’ delivered by Sir Simon Fraser.

If the Government’s strategy undermines the strength and cohesion of NATO, then linking aid to trade is likely to result in the UK losing influence not only around the world, but critically within Europe, and across the Atlantic if Joe Biden defeats Donald Trump. The decision to merge DfID and the Foreign Office therefore appears to be short-sighted and opportunistic, rather than principled.

See:

·       ‘Political vandalism’: DfID and Foreign Office merger met with anger by UK charities: https://www.theguardian.com/global-development/2020/jun/16/political-vandalism-dfid-and-foreign-office-merger-met-with-anger-by-uk-charities

·       Three ex-PMs attack plan to merge DfID with Foreign Office: https://www.theguardian.com/politics/2020/jun/16/foreign-office-and-department-for-international-development-to-merge

·        Tory Andrew Mitchell says Boris Johnson has made an ‘extraordinary mistake’ by abolishing aid department: https://www.birminghammail.co.uk/news/midlands-news/tory-andrew-mitchell-says-boris-18431116

·       Rory Stewart on Twitter: “Don’t merge @foreignoffice and Dfid:

·        Rory Stewart: DFID may come under greater FCO control (Devex) (27 June 2019):

·https://www.cgdev.org/article/rory-stewart-dfid-may-come-under-greater-fco-control-devex

 ·        What would happen if DfID and the FCO merged? Experts and insiders share their views: https://www.civilserviceworld.com/articles/feature/exclusive-what-would-happen-if-dfid-and-fco-merged-experts-and-insiders-share-their

·        Foreign Office boss Sir Simon McDonald to step down early after department merger plan:https://news.sky.com/story/foreign-office-boss-sir-simon-mcdonald-to-step-down-early-after-department-merger-plan-12010313