Weekly Blog - 27 February 2023 - Trade Deals
UK-EU Trade Deal
British Prime Minister, Rishi Sunak, and the President of the European Commission, Ursula von der Leyen, were buoyant on Monday 27 February when they announced the new Windsor Framework as a solution to Northern Ireland’s post-Brexit trade disruption. If adopted the Framework would replace the Northern Ireland Protocol, which has been massively disruptive for trade in Northern Ireland since it came into force in January 2020. Under the new arrangement, goods from the rest of the UK destined for consumption in Northern Ireland would pass through a green lane where no checks are needed. Goods destined to transit through Northern Ireland and on across the open border into the rest of Ireland, and thus the European Union (EU), would go through a red lane where checks would be required. In theory the Framework therefore massively simplifies trade and minimises disruption in Northern Ireland. Both the UK and the EU now wait to see if the deal will be accepted by the unionist Democratic Union Party in Northern Ireland, whose opposition could derail the whole thing.
Trade Deals
Trade deals that remove and minimise disruption in trade between nations can be crucially important in helping nations, especially poorer developing nations, to develop effectively and lift themselves out of poverty. However, if done badly they can be catastrophic, and lock nations into perpetual poverty. As Christians we know that God abhors poverty and wants to see everyone, everywhere lifted out of the misery of extreme poverty. We read in the Old Testament that when God’s people entered the Holy Land they were instructed, “If anyone is poor among your fellow Israelites in any of the towns of the land the LORD your God is giving you, do not be hardhearted or tightfisted towards them. Rather be openhanded and freely lend them whatever they need … Give generously to them and do so without a grudging heart … be openhanded toward your fellow Israelites who are poor and needy in your land” (Deut 15: 4 – 11). Later in the New Testament, the only injunction the apostles laid on Paul when he went out to preach the gospel was that he “should continue to remember the poor, the very thing I had been eager to do all along” (Gal 2: 10).
A major report from Arise, 4 Shifts, looks at all the lessons from the Bible, and the strongest evidence from history, at what works best to lift communities, regions and whole nations out of poverty, whilst also ensuring the natural environment is protected in the process. It finds that 4 key shifts are needed from our current practices. One of these key shifts is that nations need to build strong and fair domestic economies to develop economic independence and power themselves out of poverty. Trade deals, especially for developing nations, should form a huge part of that process, if done right. Such deals can make a massive difference to the life of ordinary people in developing countries, people like Manu Bahadro, of Nepal, a survivor of abuse and trafficking. Local Christian organisations are supporting her to buy a few goats and training her to look after them, to help with her family’s income. This makes a huge difference in the lives of people like Manu at a local level, but ultimately it is no substitute for the development of national strong and fair economies, partly through the right kind of trade deals, that can create the wealth, jobs and tax base that can lift whole nations out of poverty altogether.
Trade Deals done right for Developing Nations
Trade deals done right for developing nations allow them the maximum flexibility to pursue whatever economic policies are necessary to enable them to develop a diverse national economy that gradually moves up the value chain from agriculture, to manufacturing, to services and the knowledge economy. Such policies might include the use of tariff barriers, tax breaks, subsidies and public procurement in the early stages of national industrial development, to allow developing country businesses to reach the level of maturity where they are able to compete with larger and more established western companies in the open market. Developed nations can therefore massively support developing nations through trade deals by not forcing economic liberalisation or any other ideological model onto developing nations, either overtly through the multinational system or covertly through technical advice and support, but allow them the freedom to choose the economic path that works for them. As part of this, they should reform the rules of the World Trade Organization (WTO) to give developing countries maximum freedom to pursue protectionist and other policies in the early stages of their economic development if needed.
Another crucial part of trade deals for developing nations is securing the transfer of skills and technology, both scientific/technical and best practice in business processes, from more advanced economies to enable their own businesses to develop further up the value chain. They might do this through trade deals that create industrial clusters and export zones, or that attract and allow Transnational Companies to operate, on terms that extract maximum value in technology transfer and tax for the nation. The international community can in turn help such trade deals to come into place by scrapping or significantly weakening patent law and intellectual property rights (except in the creative industries), including reforming the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and relevant WTO rules, to further support the transfer of technology and ideas to developing countries.
Developing countries need to develop national economies that meet the needs of their domestic consumers, but that also boost exports and engage in international trade. Again developed countries (whose economies and businesses are already far more developed and resilient) can significantly help by fully opening up their own economies to developing country exports, and scrapping subsidy regimes that protect their own industries from more competitive developing country exports. Another crucial area for trade deals for developing countries is structuring them in such a way that they attract stable, long-term foreign investment, whilst using various policies to prevent short-term speculative capital which can flow quickly in and out of a country, causing more harm than good.
In all these and many other areas there are many policies that developing nations can pursue as part of trade deals that help them develop strong and fair economies that lift their nations out of poverty (4 Shifts, pg 70 – 86). There are also many policies like these and others that the developed nations of the international community should similarly pursue at their end of trade deals, that can help developing countries secure deals that work for them on their terms (4 Shifts, pg 86 – 90). We have seen this week that trade deals that work can be really crucial for developed nations like the UK and the EU. They can be even more important for developing nations in their struggle to lift themselves out of poverty. But they must be done right if they are to deliver the full development benefits that God would want to see, that can help lift whole nations out of poverty.
Find out more
Find out more about why the world needs 4 Shifts to transition to a fair and green global economy in Arise’s 4 Shifts Report, and how this forms part of God’s bigger vision for our world in the Arise Manifesto.
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