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Trade and regulation: chlorinated chicken just a taster of problems ahead

The government needs to change its approach to regulatory trade issues

In a new report for the IfG, James Kane argues that the government needs to change its approach to regulatory trade issues

For many people, the prospect of a free trade agreement (FTA) between the UK and the US brings to mind one thing: ‘chlorinated chicken’. Just as it did five years ago when the EU was negotiating the abortive Transatlantic Trade and Investment Partnership with the US, the question of whether the UK should change its food standards to make it easier to get a deal is one of the most sensitive issues in the talks. But in a new report, we find that chlorinated chicken is just a taster of the problems to come for the government when it comes to issues of regulation and trade.

Modern trade agreements are largely about regulation

Tariffs (taxes on the import of goods) are still important issues in trade – as President Trump’s 25% duties on Scotch whisky and other iconic UK products have shown. But modern trade agreements are largely about reducing regulatory barriers to trade. So, for example, while the US might be prepared to get rid of its tariff on Scotch, it will want better access to the UK for its own whiskey. This means changing the EU rules that ban the sale of whisk(e)y unless it has been aged for at least three years.

Trade agreements don’t usually deal with these kinds of rule directly. They tend to focus on making sure countries apply ‘good regulatory practices’ – for instance, publishing impact assessments and conducting public consultations before new regulations are made. But countries often use the leverage a trade negotiation gives to get their partners to make concessions on specific areas of regulation. These might not look as though they have any connection with the agreement: for example, in 2013 the EU decided to allow some meat to be washed with lactic acid. If you read the regulation that did this, you won’t find any reference to a trade deal – but it is widely known that the EU took this decision under pressure from the Canadian and American governments, with which it was negotiating trade deals at the time.

There are trade-offs to make and the government isn’t equipped to make them

Changing your regulations isn’t necessarily a bad thing. The UK has a lot of rules inherited from the EU that it might now want to revisit: the government has already said that it wants to overturn the European Court of Justice’s ruling banning gene editing. But the problem with the dash for trade deals is that the UK might be pressured to make changes that aren’t in its interests. There is an unavoidable tension between the government’s objectives of attaining absolute regulatory sovereignty and doing a large number of ambitious trade deals.

The government is not well set up to handle these tensions. Four years after the Department for International Trade (DIT) came into being, and after three rounds of talks with the US, the government still doesn’t appear certain whether it wants to ban chlorinated chicken or just slap a higher tariff on it. On the wider issues that underlie whole areas of regulation – for example, the precautionary principle or the relevance of factors other than scientific evidence in regulating potentially dangerous products – it has no clear position. It should try to get one as soon as possible.

The UK’s governance structures for trade issues aren’t working – within government or outside

The key body for making decisions on trade policy inside government is the EU Exit Strategy committee of Cabinet (XS). The government seems to think it is working well: it even copied the committee structure for its response to the coronavirus pandemic. But this body is too senior to take all the decisions on trade policy, and it doesn’t include the trade secretary or other departments with strong trade interests (such as BEIS and Defra). This means that trivial issues such as the UK’s tariff on cakes and biscuits are going all the way to the prime minister. With the UK involved in four new trade negotiations and 18 sets of talks to roll over EU FTAs (not to mention the relationship with the EU itself), the lack of clear decision making structures below the top level cannot be sustainable.

The government is also excluding important stakeholders from its deliberations on trade policy: Parliament and the devolved administrations. As the IfG pointed out nearly four years ago, a strong role for Parliament on trade policy actually helps negotiators, allowing them to tell their counterparts, “Personally I’d love to give you that, but you know it’ll never wash back home.” The devolved administrations, moreover, will be responsible for implementing many parts of new trade deals. Side-lining them from negotiations risks the UK being unable to fulfil the commitments it has made – or damaging the Union by imposing new rules from above.

The IfG warned government three years ago that it had not set up the necessary structures to take critical decisions on key trade policy issues. Little has changed. If the government does not address the situation urgently, it will find itself losing control of trade and regulatory policy to better-prepared partners.

 

Keywords
Trade
Publisher
Institute for Government

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