Human Rights: Future Trade

Baroness Falkner of Margravine Excerpts

Thursday 3rd October 2019 Lords Chamber

[Baroness Falkner of Margravine (Non-Afl)]

My Lords, I too thank the noble and right reverend Lord, Lord Harries of Pentregarth, for initiating this debate. I also warmly welcome the Minister to the Front Bench. Her role here is much deserved and I look forward to hearing what she says in the period to come. I am going to speak about the broader trends which are more relevant to the future and nature of free trade agreements, although I agree almost entirely with everything said by all the speakers who have gone before.

Our conceptions of free trade agreements are on the whole related to manufactured goods—agri-products or commodities—in other words, physical things or tangibles. Even the creation of the WTO, following the GATT, focused on tangibles. The challenge that has remained unaddressed through the WTO, the UN, the EU and other large trading countries, such as the US and China, is establishing frameworks for the exponential rise of intangibles as a huge segment of trade. We in Parliament are also in danger of focusing on the narrowing proportion of exchange in goods rather than concentrating on the rise of digital globalisation, which is taking place on platforms, in data agglomeration and through innovative technologies. In preparation for this debate, I drew on the McKinsey Global Institute report Digital Globalization, which was published in 2014, so the figures I shall share are already out of date. The current figures are undoubtedly higher.

In the decades since 1990, when political barriers in the developed world came down, the world’s trade in goods, including commodities, finished goods and intermediate inputs, grew roughly twice as fast as global GDP. The large multinationals expanded their supply chains and established new bases of production in countries with low-cost labour—offshoring, as we know it. Global trade in goods went from around 14% of world GDP in 1986 to 27% in 2008, on the eve of the great recession.

In the period since, trade in finished and intermediate manufactured goods has declined, thanks to several structural forces. The makers of many finished goods are beginning to place less importance on labour costs and more on speed to market and non-labour costs. As a result, production is moving closer to end consumers—the practice we now know as reshoring. That is without any help from Mr Trump. In the decade ahead, the global goods trade will continue to decline relative to world GDP, due not least to a reduction in factor costs but also to technology such as 3D printing and other new forms of manufacture, which will transform how and where goods such as electronics, vehicle parts, machinery, electrical equipment, medical instruments and apparel are produced.

On the question of what countries can do in requiring others to up their game in defence of their citizens’ human rights, I argue that this area of nation states’ leverage will become a less potent tool with the advance of the trends that I have spoken about. High- and middle-income countries, where digital globalisation is providing the richest rewards, are the very ones where the defence of human rights is relatively secure. The countries that matter, where human rights are least upheld, are the very ones where digital globalisation might well leapfrog traditional manufacture—the focus of most regulation of trade. If it does not they will be better and more directly assisted through ODA, as their participation in free trade agreements is limited, in any event.

Let me give the concrete example of the WTO’s Trade in Services Agreement, known as TiSA. This is the first plurilateral trade deal in 20 years. It aims to liberalise trade in services by reducing non-tariff barriers such as technical standards, licensing, permits and qualification requirements. Trade in services is already more than 60% of modern domestic economies, with the top three exporters being the US, the EU and the United Kingdom. Fifty countries are taking part in TiSA, of which 42 are high-income and 28 of which are in the EU. Seven are middle-income and only two, Paraguay and Pakistan, are low-income. Future trade agreements—in the areas where regulation is most significantly needed—will be in intangibles, to protect citizens’ rights and to improve environmental protections and standards, privacy laws and non-discrimination in qualifications. But even in these areas progress has stalled because those talks are not going anywhere. At the UN and the OECD, two significant bodies in international agreements, the concentration is on fair taxation. I would argue that is extremely important but not the same thing as human rights.

Looking at human rights, let me turn more directly to what Parliament can do in the here and now on the UK’s position on safeguards in future trade agreements, post Brexit. I welcome the fact that the UK has committed to staying within the EU approach towards human rights standards, including impact assessments and human rights clauses. In so far as the UK rolls over existing EU FTAs: so far, so good.

The question arises as to the future. Here, the most important thing is for Parliament to have access to the Government’s outline approach, and oversight and scrutiny at every stage of the negotiations, even if that is on a restricted-access arrangement for scrutiny committees. My point is that every FTA will be different and merit different areas of scrutiny and suspension or exemption clauses—hence my preference for scrutiny committee oversight. Were the UK ever to conclude an FTA with, say, Saudi Arabia—a country already mentioned—the case for an intense and deep use of human rights clauses would indeed be merited. On the other hand, an FTA with the US would merit a closer regard to non-tariff barriers than to human rights. So Parliament would need to look forensically at each agreement on its own merits. I would also favour a periodic review of agreements, particularly in the light of legal actions taken by private investors in the investor-state dispute settlements area.

I argue that the UK must continue to maintain, at minimum, the UN’s universal human rights standards and should preferably follow the EU’s approach. But it should also be a first, or at least principal, mover in attempting to gain agreement on regulating digital globalisation, which, as I said, is growing exponentially. This is not to suggest that it cannot do valuable and meaningful work to expand human rights in its several networks across the Commonwealth, the UN and other strategic alliances. It should do so with all the levers at its disposal: soft power, development assistance and technical co-operation, within and beyond its trade deals as they come about. That, in my view, would be the balanced and proportionate approach post Brexit.