Who will really benefit from Britain’s tilt towards trade with Asia?

The UK has just requested to join the Trans-Pacific Partnership but this trade deal could deepen the influence of multinational companies over Britain’s economy, make it harder to regulate Big Tech, and lower food standards and workers’ rights protections.

16 February 2021

Lord Hannan of Kingsclere is sworn in to the House of Lords on 1 February 2021. (Photo: UK Parliament)

Leading Brexiteer Daniel Hannan got it right for once last week. The now ennobled Baron Hannan – an adviser to the UK government’s Board of Trade – waxed lyrical about Britain joining the Trans-Pacific Partnership (TPP), suggesting it could be a backdoor route to concluding the increasingly beleaguered UK trade deal with the US which Boris Johnson’s government longs for.

Hannan acknowledged that British farmers and environmentalists might oppose a trade deal, but he implied it was a price worth paying for an agreement which forces governments to “refrain from certain actions that would restrict free commerce”.

Such restrictions include EU regulations aimed at controlling the Big Tech giants in favour of Hannan’s preferred free market, “Hayekian” approach to the exploitation of our data.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as it is formally known, is a wide-ranging trade deal between 11 Asia-Pacific countries including Australia, Canada, Chile, and Japan.

The UK government has just announced that it is requesting to join the TPP, calling it a “£9-trillion partnership” that “would deepen the UK’s access to fast-growing markets and major economies, including Mexico, Malaysia and Vietnam, for the benefit of UK business”.

While tweaked slightly after Donald Trump pulled the US out of the TPP four years ago, it remains in most respects the same – an agreement which leading economist Joseph Stiglitz called “the worst trade deal ever”.

Stiglitz argues the TPP is “an agreement to manage its members’ trade and investment relations… on behalf of each country’s most powerful business lobbies”. And this is precisely why Hannan and Johnson are so eager to join.

For them, Brexit was all about deregulation, irreversibly shifting economic policies even further in the direction of international capital. And a key means of cementing these policies in place is through international trade agreements.

Stripping away rules

Trade deals today are less to do with tariffs on the imports of goods than with domestic regulations. Such standards and protections are often the result of hard-fought campaigns by citizens – think food standards, workers’ rights or environmental protections – precisely aimed at constraining the power of the market and big business over our lives.

Free marketeers like Hannan oppose many such rules, claiming they get in the way of the free flow of goods, services and money around the world. Over the last four decades, at the behest of multinational corporations, trade deals have focused more and more on stripping away those rules.

Trade deals deeply affect society. The fact that, in post-Brexit Britain, they are negotiated in secret with no meaningful parliamentary scrutiny, and that they carry the weight of international law, makes them a perfect vehicle for a government that wants to lock in unpopular changes fast.

A US trade deal has been the ultimate goal for Johnson’s government, as it would pull Britain closer to the low regulation, “market knows best” US economic model. But if new US President Joe Biden won’t sign such a deal, the TPP is a good consolation prize.

How does it work in practice? Modern trade deals make it easier to move goods around the world by overlooking differences in quality. Anyone familiar with the US trade talks will have heard about some stomach-churning US food standards. Under a US deal, negotiators would argue there is no meaningful difference between British and US chicken, allowing chlorine-washed chickens into UK markets because they’re “equivalent”.

If two products really are of equivalent quality and safety, that might be fine. But when they’re not, you open up your own producers to unfair competition with producers working to much lower standards. Before long, your supermarkets are flooded with chlorine-washed, battery-produced chickens, and your own producers either go bankrupt, or pressure the government to lower standards here too, setting off a race to the bottom in food quality.

If Britain joins the TPP, food standards could face similar pressure. In fact, it could be worse still.

Currently, Britain restricts palm oil imports because of the serious deforestation the production of such oil often causes, boosting climate change as well as threatening the habitats of animals like orangutans, pygmy elephants and Sumatran rhinos.

Palm oil production can also involve serious exploitation of workers and even children. But Malaysia, a party to the TPP, has already put pressure on Britain to lower its restrictions on palm oil imports and could use the TPP to formally challenge British standards.

Regulations for corporations

Increasingly, this deregulation is not simply the result of a one-off agreement, but is a process through which big business lobbyists gain ongoing access to decision-makers to challenge regulations through so-called regulatory cooperation councils.

Here, governments have to justify the rules they impose as being no more onerous on business than is strictly necessary. This is nearly impossible to prove in reality and means there is an inbuilt bias towards voluntary standards rather than regulation.

The TPP has a regulatory cooperation chapter which will be used by business interests to question and challenge regulation. This regulation might be food standards, but it could also be much wider – think environmental protections, or on the already light touch regulation of the US’s financial sector.

Bear in mind that Daniel Hannan called only a month ago for the binning of safeguards on pay and conditions, GM foods, hedge funds, dangerous chemicals and the disposal of environmentally damaging vehicles, now that the UK is no longer subject to EU rules in these areas. This makes it clear why he is such a fan of other trade deals.

But deals like the TPP are not just about the free flow of goods, but services and capital too. In many ways this is much more important to a service and finance-based economy like the UK. Here too there is plenty to worry about, since liberalising services can potentially apply to anything from legal services to telecommunications, insurance to healthcare.

In older trade deals, governments would offer up only the services they wanted to international competition. In new deals like TPP, everything is automatically subjected to competition unless it is explicitly ruled out.

It is not easy to fully opt out of a massive service like the UK’s National Health Service (NHS) which is, to some extent, already open to competition, least of all when the government’s commitment to that service is in question. And once you’ve started down the path, it’s virtually impossible to backtrack, as “ratchet clauses” lock in deregulation. Re-nationalising the railways or reversing the contracting out of the NHS can become no-go areas.

In essence, trade deals tie the hands of governments – reducing their ability to constrain the power of big business. Another area where this is a particular threat is the internet.

As a society we’re only beginning to grapple with the ways the communications revolution has transformed our world. One thing seems clear though – the vast power which a handful of Big Tech firms now have over our lives is becoming a fundamental threat to democracy.

In the years to come, we will need to take action to tax, regulate and break up these massive, controlling corporations. Trade deals like the TPP will make this harder to accomplish.

The TPP was the first trade deal to include a full digital chapter. Its effect would be to establish the digital landscape as a deregulated, corporate controlled marketplace, making it harder to constrain the power of digital platforms like Facebook, Amazon and Google.

As one example, the TPP prevents regulators from requiring corporations to disclose source code, the “under the bonnet” programming of products often necessary to know if companies are complying with laws.

The deal also prevents governments “localising” data, that’s to say governments are not allowed to stop data being transferred and stored in trade partner countries, even though privacy and consumer protection rules may be weaker there. And it prevents countries from requiring corporations to set up any sort of national presence, making it even harder to pin them down to pay the tax they owe.

At exactly the point when governments are beginning to tackle the power of Big Tech, the TPP cements that power in place in perpetuity.

Corporate courts

This corporate takeover is also held in place by a secretive legal system only open to big business and the super-rich. An investor state dispute settlement (ISDS) hands multinational corporations based in your trade partner’s country the right to sue a government, in a secret corporate court, for treating them unfairly.

Unfairness, in this case, is pretty much any regulation that prevents a corporation doing what it wants, when it wants, in the way it wants. Real-life cases include Australia being sued for putting cigarettes in plain packaging, Canada being sued for trying to remove toxins from petrol, and, most recently, the Dutch government being sued for daring to phase out coal-fired power stations.

The legal power being given to corporations is not an unfortunate side effect of such deals, but is so deeply entrenched in them, even when they seem to offer governments little in terms of jobs or growth, that it would appear to be their main purpose.

Governments might sign them because, like Britain’s, they are true believers in a market-driven system. Or they may simply reason that this is the way the world is and they have no real choice.  

In fact, experts have calculated the TPP could actually destroy tens of thousands of jobs in some countries, and even the impact on GDP is predicted to be tiny at best.

The most prominent international trade union body, the ITUC, said the TPP “aims at institutionalising the economic power of the one percent and fortifying it with legal instruments. This agreement has little to do with actual trade and economic growth, and it intends to reduce policy space, discipline regulation and legislation, and reshape governance.”

Neither is the deal a threat only to Britain. The impact on relatively poorer members of the TPP will doubtless be worse, threatening their ability to protect their farmers and industries from the grasp of big business.

Chile, Peru and Malaysia have still not ratified the TPP, and huge street protests took place in Chile in 2019 since the trade deal is deeply unpopular there. British entry will not be welcomed by these protesters, fearful that UK-based corporations will gain the power to sue governments in a corporate court case, and that the British government will push widespread financial deregulation.

Of course, this agenda is music to the ears of Hannan, Johnson and Trade Secretary Liz Truss. What’s more, they hope the US could be persuaded to rejoin the TPP. This opens up the prospect of reactivating the “Big Pharma” clauses of the deal which are currently in suspended animation.

If reactivated, in response to the demands of the US, these clauses would further extend the Big Pharma patent system, making it easier to renew patents on drugs and delaying the entry of cheaper generic versions of medicines onto the market.

The TPP also brings a US trade deal one step closer, as Britain will already have adopted some of the more controversial aspects of that agreement.

The good news is that this vision for Britain to be recast as a “Singapore-on-Thames” is deeply unpopular with the British public on both sides of the Brexit divide. As the campaign against the US trade deal shows, it is possible to successfully mobilise people against such toxic trade deals.

This can throw a spanner in the government’s plans and can open up space for a much-needed debate about what sort of country Britain should become.