As the dust settles over the UK’s referendum, many are trying to second guess what it all means. Here Cecile Toubeau sizes up the possible repercussions for global trade policy.
Cecile Toubeau is better trade and regulation manager at Transport & Environment, a member of the Commission’s TTIP advisory group.
Can trade policy as we know it survive? In the EU, the UK has been the greatest advocate of new-style free-trade agreements; lots of countries, not just France, have many more reservations about it. In the US, Republican frontrunner Donald Trump is ranting on about increasing tariffs to pre-WTO levels for countries such as China or Mexico. Hillary Clinton, the Democratic candidate, has vowed to renegotiate existing deals.
These developments come in response to the uneven spoils of globalisation, with a disproportionate share of the gains ending up with the global elite, while median wages stagnate or even decline. Also part of the mix are an influx of foreign products and people and the erosion of public services in many countries.
The UK referendum and the rise of Trump demonstrate a backlash against the globalisation of goods and people and can easily be a first step towards a reversal of the economic integration trend of recent decades.
The populists-backlash scenario could see the UK under Boris Johnson, an independent Scotland, a Trump-led US, and several EU member states struggling to contain their internal populist movements. But if one blatantly breaks WTO or FTA promises, it may start a domino effect of protectionism and retaliation, which may well result in an all-out trade war.
A reform scenario could see trade being redesigned to ensure that gains are evenly spread. Those who are successful in trade do so due to comparative advantage, quality, exchange rates and effective supply chains. Redefining our trade agreements is an opportunity to refocus trade policy from an environmental and social perspective. While a reformed trade agenda can never bring back the jobs lost in our post-industrial world, it is a chance to build a vibrant, social, sustainable and competitive future.
Can the Commission transform trade to deliver a form of globalisation that truly works for all? Of course it can and without the aggressive UK model of deregulation and free-market approach, it may seize the opportunity with both hands. It should deliver on promises already made and amend its Trade for All strategy, which currently does not address enough of the negative implications of trade: to make its environment provisions binding; to remove all environmentally harmful subsidies, such as fossil fuel subsidies; to ensure its trade policy, in all aspects, contributes towards a sustainable and decarbonised economy; and to respect the rule of law in member states without privileging foreign investors over the public interest.
With regards to Canada, CETA ratification, like the TTIP negotiations, has been struggling for some time, and may stall indefinitely without the UK urging it on. Like all negotiations, TTIP and CETA are based on tradeoffs and calculations that included UK consumers and businesses. CETA was also negotiated under different political leadership on both sides.
Given the present situation, both TTIP and the EU-Canada deal must be renegotiated to reflect a new Commission approach to trade and the new dynamic of the European Union post-Brexit.