The Race to the Bottom

How can a trade deal affect our regulations? Well, the argument runs like this: I make lightbulbs and I want to export them into another country. The lightbulbs are safe, but they don’t meet the precise safety standards of the country I want to export to, so that country blocks my imports. As an exporter this strikes me as unfair. It looks, from that perspective, like a trade barrier dressed up as a safety standard.

Modern trade deals try to ‘harmonise’ such standards. They do this by judging different regulations that achieve the same goal as ‘equivalent.’ You can trade such goods because they’re essentially the same. The problem is that goods are often not ‘equivalent’ at all, and by treating them as such, we risk undermining environmental, animal welfare and consumer protections. 

Take food. US food standards are radically different to Britain’s. US agriculture is dominated by massive corporations, farming on an industrial scale, with intensive use of antibiotics, hormones and steroids to promote rapid growth of animals and prevent illness in what are often extremely unpleasant and unhealthy conditions. 

Under a US trade deal, food made to different standards would almost certainly be allowed onto British supermarket shelves. This means more genetically modified foods. It means chlorine-washed chicken (washing poultry in treatments such as chlorine dioxide to remove bacteria which has accumulated over the lifetime of these battery farmed birds). It means serious overuse of antibiotics in food production, and the use of horrific chemicals in pig farming like ractopamine, banned in 160 countries, including Russia and China.

Proponents argue that this is consumer choice. But forcing producers into competition with those practising lower standards makes our standards unsustainable, and farmers would naturally pressure the government to abandon standards here too, effecting a race to the bottom.

The NHS, similarly, is most certainly ‘on the table’ in a US trade deal. But, as former Shadow Secretary of State for Trade Barry Gardiner pointed out during the 2019 election, “the NHS is not a building you can simply sell.” The NHS will be threatened first  because modern trade deals aim to liberalise services, for instance stripping away government attempts to treat foreign investors in those services ‘unfairly’. This mean locking things like the internal market into place in perpetuity.  

It will also be threatened through intellectual property rules which give big pharmaceutical corporations monopoly powers over medicines, allowing them to dictate prices of vital treatments. A particular bone of contention for the US is UK public body NICE, which sets guidelines for cost efficiency in the NHS, in effect allowing the NHS to negotiate down drug prices. Big Pharma hates NICE and wants to force the NHS to pay their monopoly prices for the drugs they control. Such large increases in prices under a US trade deal would pose an existential threat to the NHS – driving costs for new drugs well beyond the health system’s ability to afford them. Soon enough, middle class patients would desert the NHS, leaving a Medicaid-like shell. 

The icing on the cake in many modern trade deals is the Investor‑State Dispute Settlement (ISDS) system, the formal name for ‘corporate courts’, which allows foreign investors to sue governments in special tribunals when they believe their ‘rights’ have been infringed. They were invented back in the 1950s reflecting western countries’ suspicion of how their corporations would be treated in newly independent countries in the Global South. But it’s really the last 20 years that they have become a major problem.

The basis for cases has been expanded to an almost ludicrous degree by City of London law firms. A foreign investor today might claim pretty much any government action that damages their future profits is ‘unfair’ or ‘expropriation’, even though the rest of us might regard the measure as a reasonable response to the harm a corporation is causing. Putting cigarettes in plain packaging, forcing toxic mines to put better environmental standards in place, or the controlling of water prices might well damage corporate profits, but the idea that they have infringed some fundamental right directly threatens a government’s ability to enact regulation. Yet these are all real ISDS cases.

As one example of what this might mean, we only need to look back to 2019, as Britain approached a general election in which Labour had promised to take parts of the country’s energy networks into public ownership. The policy enjoyed widespread support. Alarmed, two energy corporations that would have been affected created overseas holdings companies, hoping that they could sue the government if they didn’t receive the price they demanded for their assets. If Labour had won the election and begun to carry out its manifesto, these energy corporations could have spent years making the policy unworkable. 

How We Can Fight Back

One reason Johnson’s government is so keen on trade deals is that the fall under the royal prerogative. Rather than transferring the scrutiny powers of the European Parliament to Westminster, Johnson refused to give MPs any powers over trade. MPs can’t set guidelines, scrutinise trade negotiations or even get a meaningful vote as to whether a trade deal becomes law.  

But we shouldn’t lose hope. We can learn plenty from previous generations of trade campaigners. On New Year’s Eve 1994, as midnight struck, poorly armed peasants launched uprisings across Chiapas, Mexico’s poorest and most southerly state. Town halls were occupied, prisoners were freed, and land seized, much of it still held to this day. A declaration was issued: the impoverished peoples of Chiapas were at war not simply with the Mexican state, but with a global economic system which was wiping out their way of life. The Zapatistas has burst onto the world stage. 

The Zapatista rising was sparked by the North American Free Trade Agreement or NAFTA. The deal threatened to fundamentally change farming in Mexico, turning land into a commodity. The idea of cheaper, imported food didn’t appeal much to the Zapatistas given that the price of this food would in all likelihood be their expulsion from the land and exile to the sweatshops of the cities.

With their focus on radical democracy, some of the most marginalised people in the world challenged the mantra of free trade and free markets at a time when these ideas were nearly beyond criticism in international circles. And they inspired perhaps the most diverse and international movement we’ve ever seen, dubbed the anti (or alter-) globalisation movement. 

This movement secured its first major victory on the streets of Seattle, at a summit of the World Trade Organisation (WTO), the international body set up to develop global trade rules. During a festivalstyle series of teachins, protests and nonviolent direct actions, a broad coalition brought together environmentalists and animal rights campaigners with industrial workers. On the streets of Seattle, and in combination with obstruction from developing world delegates, the summit was brought to a standstill. It wouldn’t hold a successful meeting again for over a decade.

There were many other trade victories which we can also learn, like the defeat of US-EU trade deal TTIP 5 years ago. A wide coalition has already been formed. On the day he was made secretary of state for environment, food and rural affairs, George Eustice was booed by farmers when he mentioned the US trade deal. Even the right wing Mail on Sunday are running regular columns on the problems of a US trade deal. 

There is every reason to hope that the US deal can be defeated if we build a sufficiently large and diverse movement. This defeat would be another setback for a global trade regime which urgently needs to be transformed. But what might that alternative economy look like? 

The Future of Trade

Trade rules do not have to be a problem. After the second world war, many countries came together to secure a more open trading regime, and while they did want to bring tariff levels down, their aim was to achieve full employment and economic development. Trade rules were more flexible, leaving large areas free for countries to design the best policies for their own development. 

In 1964, the United Nations Conference on Trade and Development (UNCTAD) was created to advise developing countries on trade. UNCTAD believed that for developing countries to continue selling cheap fruit and metals to rich countries, with those countries then selling them back expensive manufactured goods, was an economic black hole, and they encouraged countries to use the tools at their disposal to break with this model. The high point of this thinking was the passing of the New International Economic Order at the UN general assembly in 1974, demanding a transformation of the global economy to change unfair terms of trade, and control multinational corporations and finance. Sadly, it was undermined by rich countries, as a manufactured debt crisis devastated the power of the ‘Third World’ and the era of free market economics was ushered in. 

But when neoliberalism was later seriously challenged by the rise of the ‘pink tide’ governments in Latin America in the late 1990s, the reform of trade rules was one of the goals those governments set themselves. They formed ALBA (the Spanish abbreviation for the Bolivarian Alliance for the Peoples of Our America), an alternative trade deal, aimed at breaking the power of the US to dictate trade terms. The deal did not close markets, but did prioritise regional trade and promoted the redistribution of wealth. Though never developed sufficiently to replace the dominant system, the concepts behind ALBA can point us towards what an alternative trade system might look like.

Such a system must regulate trade to ensure a more sustainable economy. Trade rules currently encourage the free movement of capital, playing governments off against one another. We need to reverse this process, and encourage a ‘race to the top’. Trade deals must not protect corporate monopolies, be they in medicines, energy or high‑tech. The transfer of technology is key to countries development. International rules need to help countries diversify their economies and encourage them to develop generics. It also means allowing countries to prioritise regional trade, and agreements which improve commodity pricing.

This is a long way from where we are. But with climate change posing a threat to our whole world, radical reform is the only way forward. Liberalising deals like the US‑UK one must be rejected out of hand. We build the foundations of a very different economy if we are to avoid a retreat into xenophobia, the politics of bullying, and a collapse of any sort of international coordination. A return to 1990s-style globalisation is not an option. Only by constraining the power of capital can we turn things around.