Introduction to International Trade Agreements

By Linda Kaucher for Critical Thinking

Linda Kaucher has been researching international trading agreements for over ten years and has put together a comprehensive introduction to the development of these agreements, who benefits and who pays the price in the UK. In Module 4 this year we’ll be examining these issues and the implications for counter-parties to these agreements and their people. Linda has already submitted two pieces to Daily Pickings, Secret EU/India Free Trade Agreement and  US/EU Free Trade Agreement and the NHS.

The most important point in the Chancellor’s 2013 budget speech was: “Our support for European free trade agreements with India, Japan and the US is a priority of our foreign policy” although missed by the UK press, which habitually ignores international trade agreements.

Yet EU trade policy-making rests on the nexus between Brussels and the transnational financial services based here in City of London and the international trade agreement ambitions of these transnational financial corporations shape UK domestic policy-making to fit that wider agenda.  Currently a US/EU Free Trade Agreement, and the EU/India Free Trade Agreement should be major concerns for people in the UK and should be resisted.

Much of the UK media and consequently the UK public still believe that trade agreement action is in the World Trade Organisation and that an absence of action on that front means an absence of action. But while corporations indeed continue to utilise the mechanism of the WTO to advance neoliberalism, the EU opted for an additional program of bilateral and regional trade agreements in 2005. Notably, these are much more secretive.

It is via international trade agreements that neoliberalism is being set in stone. When states make commitments within international trade agreements, those commitments become effectively irreversible, beyond national and EU law and irrespective of the nature of future governments. This is the purpose of international trade agreements and the pressure for them to be undertaken comes from corporations.

In the trade agreement process, transnational corporations gain not just access, but rights, including rights to sue states. States’ rights to control corporations are corresponding curtailed – and democracy undermined.

The main thrust of the US/EU Free Trade Agreement is ‘regulatory harmonisation’ between the EU and the US. That means harmonisation not only of existing regulations but also of new regulations as they are being formulated, to prevent future trade barriers.

Thus the Health and Social Care Act and the associated regulations for its implementation, changing the NH massively and opening it to ‘competition’, have been prepared to ‘harmonise’ with US regulation.  The Act and regulations prepare the NHS for transnational investment in a transformed health system that fits with the corporate-benefit US model. The insurance industry is just one area of financial services set to derive enormous benefit from the changes.

The EU/India trade deal, now seemingly close to completion, will allow Indian firms to supply unlimited numbers of temporary skilled workers into the UK.  This secretive deal undermines the job creation claims that George Osborne made in the budget, especially in relation to infrastructure projects. Jobs may be created but this major channel for cheap temporary skilled overseas labour supply will be opened, effectively permanently.  Actually, similar ‘job creation’ claims made by parties from across the political spectrum, including the Greens with their ‘Green New Deal’, similarly fail to acknowledge these trade agreement labour supply changes and their impact on UK workers, despite their Party access to information(i).

Yet this is not ‘trade’ as we are encouraged to understand it. Vince Cable, the Secretary of State for Business, Innovation and Skills maintains an emphasis on trade as the UK selling widgets overseas. His predecessor, Peter Mandelson, coming from his Trade Commissioner role, habitually turned any ‘trade’ focus towards the developing country aspect in accordance with the lobbying of development non-government organisations, although he claimed development benefits from the trade agenda. The implications of EU trade deals for people in the UK have remained hidden throughout.

With the failure of the media and the particular refusal of the corporate-captured BBC Business Unit to report on trade agreements and their effects on people in the UK, a remarkable silence has been maintained on this overarching framework.

Rather than trade-in-goods, the main part of ‘trade’, especially for the UK and for the EU as a whole, is now trade-in-services(ii).  Trade-in-services includes financial services for example banking and insurance, and investment.

‘Liberalisation’ is the purpose of international trade agreements, that is ‘removing barriers to trade’. ‘Barriers to trade’ can include cash transferred from transnational corporations to governments as e.g. import tariffs. They can also include democratically-decided limits on corporate rights, in the interests of the people of the country.  Yet the spin propagated by those who benefit from ‘liberalisation’ has been so strategic and pervasive that the claims about the benefits of ‘trade liberalisation’ for the most part continue unexamined and unchallenged.

While liberalisation of trade-in-goods is about at-the-border measures i.e. lowering tariffs and supposedly reducing subsidies on production and exports, the ‘liberalisation’ of trade-in-services is very different.

When a country liberalises a service category(iii) it opens it to transnational investment. When the country commits the liberalisation of that service to a trade agreement, it is a commitment under international trade law to keep that service category open to transnational investors.

This then gives corporations rights while states lose rights to regulate.

When trade commitments on service liberalisations are made, certain rules are inherently invoked. The National Treatment rule means that any transnational company must have treatment at least as good as that afforded to any domestic company, including any subsidies. The Market Access rule dictates that if a service category is committed to a trade agreement, the state then loses the right to limit the number of providers who can come in to operate or what services within that category are offered, for instance within financial services.

Any ‘backsliding’ by the state on any aspect of this commitment, for instance by limiting these rights (direct expropriation of a corporation’s future profits) or by the introduction of social, environmental or labour legislation (indirect  expropriation) opens the door to the corporation suing the state. The trade dispute will not be handled within the national jurisdiction but in an international trade dispute jurisdiction of the plaintiffs choosing. In trade dispute settlements, judgements are made only the basis of ‘free trade’ without regard to e.g. social or environmental factors, thus favouring corporations. States have no corresponding right to sue corporations.

This provision is called ‘investor protection’ or ‘Investor/State Dispute Settlement (ISDS) and the EU is now including ISDS in the trade deals it is negotiating. Notably, ISDS will be included in both the US/EU and the EU/India Free Trade Agreements.

Trade negotiations on behalf of people in the UK are carried out by the EU’s Trade Commission. The Lisbon Treaty strengthened the hand of the Trade Commission in this regard, increasing its ‘competency’ to negotiate on behalf of Member States, including on investment.

Some areas remain as ‘mixed competency’. For these parts of trade deals Member State parliaments supposedly have to agree. It is difficult to find out where the blurred lines are drawn and the division of ‘competency’ is indeed contested between the Commission and Member States. However the Commission is now ‘provisionally implementing’ trade deals when it has completed negotiations and after the European Parliament has giving its ‘assent’ but before the agreements have come before Member State parliaments. Therefore this dividing line seems to have lost its relevance. In the process, we have lost our democracy.

While trade deals are formally negotiated by Brussels Trade Commission bureaucrats, the main push for liberalisation in the form of international trade agreements comes from transnational financial services, for which the City of London is both a strong base and a powerful global lobbying mechanism.

In June 2010, the City of London Corporation joined with its lobbying front from the previous decade, International Financial Services London (IFSL), to create TheCityUK(iv). The boards of TheCityUK are chaired by or include the Lord Mayor and key figures in the long term international push for liberalisation e.g. Leon Brittan(v).

When TheCityUK was first set up there was a third partner, the UK government’s Trade and Industry unit (UKTI) which straddles the Departments for business [BIS(vi)] and for international development [DFID(vii)], showing financial services and the UK government joined at the hip. This connection was quickly dropped from the website and instead top level representatives from a range of government departments including BIS, the Treasury and DFID, were then listed as ‘observers’ at board meetings.  More recently the public listing of these Departmental representatives has been dropped.

TheCityUK has maintained IFSL’s Liberalisation of Trade in Services committee (LOTIS). The existence of this committee was secret until its existence was revealed by the World Development Movement non-government organisation in the early 2000s. In this committee a small group of representatives of the biggest banks and insurance companies give their orders to the two faceless bureaucrats who attend the Trade Commission’s fortnightly Trade Policy Committee(viii) meetings in Brussels. Having accessed a meeting of the LOTIS committee, I have witnessed this process and power relationship in action, first hand.

In this way, the UK’s position on EU trade policy is set by the big financial institutions without reference to the parliament and without the knowledge of people in the UK. Because trade agreements are intended to be permanent, these effectively permanent commitments will affect future generations too.

Yet there is no comparable opportunity for input into trade policy for civil society. NHS users and UK taxpayers are not only denied information about the underlying rationale for the NHS changes, and the UK workforce denied information on the cheap labour entry commitments being made on its behalf, but also denied the chance to influence policy.

In Brussels the powerful lobbying mechanism for corporate ambitions on trade-in-services is the European Services Forum (ESF). While ESF boasts a high inclusion, numerically, of small and medium enterprises, one ESF member, BusinessEurope, has, in its own membership, some of the biggest transnational corporations in the world. These are not limited to EU-based companies, for instance US-based corporations are members of BusinessEurope, which is in turn a member of the European Services Forum.

ESF is closely aligned with TheCityUK, including in personnel crossovers.

In these ways, the influence of London-based transnational financial service on EU trade policy is maximised both via UK input into EU trade policy and directly in relation to the EU institutions – the Trade Commission, the European Parliament and the EU Council.

The EU Council is the institution comprised of Member State governments’ representatives. The Council gives the go-ahead for EU trade agreements to be launched.  The proceedings of Council meetings are secret. Only the Council’s final decisions are made public. Thus the arguments that Member State governments advance to the Council and their voting positions are kept hidden from their populations.  In the Council meeting in which the EU/India FTA was given the go-ahead the UK government was represented by Margaret Beckett who was made a Dame in 2013.

The London School of Economics is deeply implicated in providing high status brand ‘academic support’ for the trade liberalising agenda of the City of London Corporation and the ESF in Brussels, thus in both the UK and EU contexts.

In 2006, London School of Economics staff set up a think tank in Brussels called the European Centre for Political Economy (ECIPE). It provides ‘unbiased’ academic support for the corporate trade agenda. ECIPE is allowed disproportionate opportunity to influence Commission and European Parliamentary decision-making.

The European Parliament, with its huge work program, relies on a committee system.  The International Trade Committee (INTA) is what counts for trade.  ECIPE along with the ESF is invited to the front table, informing INTA MEPs on the benefits of trade deals so that the committee then votes positively on trade deals, thus recommending them to the full parliament. No opposing voices are given such weight or access to the committee to provide alternative information.

In London the LSE has a similar role. Media-favourite academics such as Professor Tony Travers use media opportunities to promote the interests of the Corporation from behind the veil of ‘academia’, and LSE ‘research’, supporting the City’s political agenda, is readily produced.

Howard Davies had an extended stint (2003-11) as Director of LSE until he was hounded out by students following the affair involving Gadhafi’s’ son, very dubious PhD processes and big donations to the School. But prior to this, as the first head of the Financial Services Authority, he ensured the minimal, light-touch financial services regulation which destroyed the UK economy but not the big banks largely thanks to public money bailouts. In fact even greater corporate-demand international trade agreements have emerged since then. Now Howard Davis is being reinstated from exile in Paris: the Cameron coalition government has put him in charge of the airports enquiry, a position from which he can again prioritise financial service interests.

Further to LSE’s trade agenda connection, Peter Sutherland who chairs Goldman Sach’s International chairs the School’s Council. He was the Director General of the General Agreement on Tariffs and Trade (GATT) when the WTO was set up from the 1990’s GATT Uruguay round(ix). He is now also the UN’s Special Representative on Migration.

Thus the financial services forces promoting the international trade agenda are extremely powerful, well positioned and well-resourced to achieve neoliberal aims and to embed them permanently in international law, to the extent that we are now on an unerring trajectory towards a corporate-run world.

The WTO continues to be a key background mechanism for this though attention to it has been effectively eradicated while the content and implications of bilateral and regional trade agreements are kept secret.

The main means of achieving these aims are: secrecy, with the complicity and/or ignorance of the media; spin about the benefits of ‘trade’ devised by well-resourced public relations, again then propagated by the media; and the wrapping of international trade in technical language to deter media, and thus public, interest.

Together these means have been very effective. The Prime Minister(x) and the Chancellor have named the US/EU FTA as a priority, albeit without any explanation of what it will mean. Meanwhile the NHS changes continue to be treated purely as a ‘national’ issue without reference to the upcoming US trade deal. Similarly the aspect of trade that is about moving workers across borders, allowing corporations to capitalise on the wage differential between low and high wage countries, and its centrality to the EU/India FTA, remain effectively hidden.

Here I have tried to give some information on meanings and mechanisms to expose the importance of George Osborne’s ignored statement: Our support for European free trade agreements with India, Japan and the US is a priority of our foreign policy”.


(i) The UK Conservatives, Labour Party, Greens and UKIP have all had MEPs on the European Parliament’s International Trade committee (INTA) long-term. See later references to INTA.

(ii) The protection of Intellectual Property is always a significant factor in corporate-interest trade agreements. In the WTO this is the TRIPS agreement. However Intellectual Property is not a focus of this paper.

(iii) Trade-in-service categories as defined by the WTO (but used generally for other trade agreements): Business, Communications, Construction and Engineering, Distribution (includes food) Educational, Environmental (includes water, energy, toxic and nuclear waste), Financial, Health and Social Services, Tourism and Travel Related, Recreational, Cultural and Sporting, Transport, Other.

(iv) See TheCityUK website

(v) Leon Brittan, former Conservative Home Secretary, Vice President of EU Commission, responsible for trade policy in the EU, when Nick Clegg was his intern. Currently Vice Chair of UBS investment bank. From Sep 2010- Feb 2011 Advisor on trade to David Cameron, for the production of the UK White Paper on trade, which recommended an increase in skilled migrant labour entry. Although he temporarily stepped aside from the UBS Vice Chair role for this, he remained on the Advisory Board of TheCityUK financial services lobbying group.

(vi) Department of Business, Innovation and Skills

(vii) Department for International Development

(viii) Formerly called the 133 Committee.

(ix) Peter Sutherland also oversaw the Sutherland Report on the completion of the EEC internal market, and was Vice Chair of the European Round Table of Industrialists when it was set up.

(x) David Cameron’s new year statement reported in The Guardian 1.1.13