The House Article | Trade in a turbulent world: how should the UK respond?

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They will do so amid a turbulent context for trade, the rules that govern it, and international relations more broadly. President Trump’s tariffs, growing protectionism elsewhere, and the fall-out from wars in Ukraine and the Middle East have injected considerable volatility into the global system. It is a challenging time for those of us who support free trade.

This global instability has generated acute challenges for the rules-based system for trade. In response to President Trump’s tariffs, there has been a growing proliferation of so-called ‘mini deals’ as countries scramble to mitigate the impact on their economies. The UK-US Economic Prosperity Deal (EPD) is one such example. The EPD is a strange beast – it is not legally binding, only covers a handful of sectors, mixes specific commitments with more aspirational ones, has only partially been implemented, and does not appear to be compatible with WTO rules on non-discrimination. When the International Agreements Committee, which I have recently joined as Chair, examined the EPD, we warned that the Government “should be wary of implicitly supporting the dismantling of the system in this way.” And whilst the EPD was clearly borne of pragmatism, it is far from clear that it will offer businesses the stability they crave.

Yet the UK is far from alone in pursuing a realpolitik approach with the US; several others, including the EU, have signed similar “deals”. And in parallel, the growing importance of the services sector and digital economy, historically neglected in traditional Free Trade Agreements (FTAs) but vital for the UK’s economic growth, has contributed to a growth in sector-specific agreements. Taken together, these developments throw debates about WTO reform into sharp relief.

The UK’s approach to trade agreements is also evolving. In the immediate aftermath of Brexit, the focus was on FTAs, but since then there has been a move away from FTAs and towards a broader suite of trade instruments – embedded in the current Government’s Trade Strategy. As trade minister in the last Government, I signed dozens of non-binding Memoranda of Understanding (MoUs). Many of these were symbolic, but there is a growing trend to use these for more substantive commitments.

To make sense of these shifting sands, my Committee has recently launched a new inquiry into the future of rules-based trade and the UK’s use of trade instruments. We encourage anyone with knowledge or experience in this area to come forward and share their views, so that we can undertake our duty of scrutiny effectively and make impactful recommendations to the Government in the report we will produce.

While questions about different types of trade agreement may seem academic, they also have important scrutiny implications for Parliament. One of the biggest problems with the current system for scrutiny of international agreements in the UK is that scrutiny is triggered by the form of a treaty and the process the Government chooses to follow, rather than its substance. This has detrimentally affected scrutiny in the past, including with important non-trade treaties, such as with Rwanda on asylum seekers. The Government has signed up to enhanced scrutiny procedures for FTAs, but if it intends to sign up to more and more substantive trade commitments through other vehicles, that will have implications for Parliament’s ability to scrutinise these commitments. As the only Committee in Parliament which scrutinises treaties as routine, the hope for our Committee is that our new inquiry will complement our wider scrutiny work – and underline the case for reforms to the treaty scrutiny process.