The idea that trade agreements should be subject to human rights impact assessment has been gathering momentum in recent years. This idea springs from concern – particularly on the part of trade unions and civil society organizations – that states are not presently doing enough to anticipate and address the human rights-related issues that arise from their trading arrangements with other countries.

This meeting will coincide with the launch of a research paper on human rights impact assessment by Dr Jennifer Zerk. It will bring together experts from law, trade policy, human rights impact assessment practice and civil society to take stock of progress so far and consider the future prospects for human rights impact assessment as a risk-analysis and policymaking tool in the trade context.  

The meeting will explore the key risks and benefits of the human rights impact assessment of trade agreements. What legal, political and practical challenges have been encountered so far? In what ways could communication, stakeholder consultation and follow-up of findings be improved? And what is needed to build political and stakeholder support for these kinds of processes?  

This meeting will be followed by a reception. 

With international trade discourse taking an increasingly transactional and sometimes belligerent tone, it would be easy to overlook the quiet revolution currently under way to bring new voices into trade policy development and monitoring. The traditional division of responsibilities between the executive and legislature – whereby treaties are negotiated and signed by the executive, and the legislature does what is necessary to implement them – may be undergoing some change.

Growing awareness of the implications of trade and investment treaties for many aspects of day-to-day life – food standards, employment opportunities, environmental quality, availability of medicines and data protection, just to name a few – is fuelling demands by people and businesses for more of a say in the way these rules are formulated and developed.

Various options for enhancing public and parliamentary scrutiny of trading proposals have recently been examined by two UK parliamentary select committees.[1] The reason for this interest is obviously Brexit, which has presented UK civil servants and parliamentarians with the unusual (some would say exciting) opportunity to design an approval and scrutiny process for trade agreements from scratch.

Doubtless, EU authorization, liaison and approval procedures (which include a scrutinizing role for the European Parliament) will be influential,[2] as will the European Commission’s experience with stakeholder engagement on trade issues.[3] The recommendations of both UK select committees to include human rights impact assessment processes as part of pre-negotiation preparations[4] echo calls from UN agencies and NGOs for more rigorous and timely analysis of the human rights risks that may be posed by new trading relationships.[5] Again, EU practice with what it terms ‘sustainability impact assessment’ of future trade agreements provides a potential model to draw from.[6] 

However, process is no substitute for action. Human rights impact assessment is never an end in itself; rather, it is a means to a positive end, in this case a trade agreement which is aligned with the trading partners’ respective human rights obligations and aspirations. It bears remembering, though, that the idea of assessing trade proposals for future human rights risks is a relatively recent one. Do we have the tools and resources to make sure that this is a meaningful compliance and risk management exercise?

Thus far there is little evidence that human rights impact assessment and stakeholder engagement exercises are having any real impact on the content of trade agreements.[7] This is the case even in the EU, where practice in these areas is the most advanced and systematic.[8]

There are several possible reasons for this. First, the methodological challenges are enormous. Aside from the crystal-ball gazing needed to forecast the social, economic and environmental effects of a trade intervention well into the future, demonstrating causal links between a trade agreement and a predicted adverse impact is often highly problematic given the number of other economic and political factors that may be in play.[9]

Secondly, there are many challenges around the need to engage with affected people and listen to their views.[10] The sheer number of possible impacts of a trade agreement on different individuals and communities, as well as the range of rights potentially engaged, makes this a difficult (some would say impossible) task. Some prioritization is always necessary.

This makes for difficult decisions about who to engage with and how. Perceived bias or an apparent lack of even-handedness – favouring business compared to civil society, for instance – can sow mistrust about the true aims of such a process, undermining its future effectiveness as participants begin to question whether it is genuine or worthwhile.[11]

The challenges are even more acute where impact assessment practitioners are tasked with investigating potential human rights impacts in other countries. Even if it is possible to get past the inevitable political sensitivities,[12] the sort of in-depth consultations required will be beyond the budget and time constraints of most assignments.[13]

There are good reasons why trade policy should be subject to greater public and parliamentary scrutiny, and why there should be more opportunities for public participation in the formation of new trading regimes. By building more opportunities for stakeholder consultation at these stages, we can acquire perspectives on trade that are not available from other forms of assessment and analysis.

However, policymakers should be wary of overstating the benefits of existing procedural models. Human rights impact assessment processes are still struggling to provide compelling analyses of the relationships between trade agreements and the enjoyment of human rights, let alone a roadmap for policymakers and trade negotiators as to what should be done.[14]

And financial and practical barriers to participation in stakeholder engagement exercises mean that, at best, these will provide only a partial picture of stakeholder impacts and views.

Experiences with human rights impact assessment of trade agreements so far demonstrate the need for realism about two things: first, the extent to which one can sensibly anticipate and analyse human rights-related risks and opportunities in the preparation stages for a new trading agreement; and, second, the extent to which problems identified in this way can be headed off with the right form of words in the treaty itself.

Both recent UK select committee reports place considerable faith in the ability of pre-project transparency and scrutiny processes to flush out potential problems and prescribe solutions. Of course, there may be cases where frontloading the analysis in this way could be useful, for instance where the human rights implications are so clear that they can readily be addressed through upfront commitments by the parties concerned, whether by bespoke or standardized approaches.

More often, though, for a trade agreement running many years into the future, human rights impacts and implications will take time to emerge, suggesting the need for robust monitoring and mitigation frameworks designed with longevity in mind. Ideally, pre-signing approval and assessment processes would lay the groundwork for future action by both trading partners, either jointly or separately (though preferably both).

To this end, as well as developing ideas for more robust substantive provisions on human rights, policymakers should consider the institutional arrangements required – whether pursuant to the trade agreement or by complementary processes – to ensure that human rights-related risks identified during the planning stages are properly and proactively followed up, that emerging risks are tackled in a timely fashion, and that there are opportunities for meaningful stakeholder contributions to these processes.

Notes

[1] UK Joint Committee on Human Rights (2019), ‘Human Rights Protections in International Agreements, Seventeenth Report of Session 2017–19’, HC 1833 HL paper 310, 12 March 2019, https://publications.parliament.uk/pa/jt201719/jtselect/jtrights/1833/1833.pdf; and House of Commons International Trade Committee (2018), ‘UK Trade Policy Transparency and Scrutiny, Sixth Report of Session 2017-2019’, HC 1043, 29 December 2018.

[2] European Parliament and Directorate General for External Policies (2019), Parliamentary scrutiny of trade policies across the western world, study paper, March 2019, http://www.europarl.europa.eu/RegData/etudes/STUD/2019/603477/EXPO_STU(2019)603477_EN.pdf.

[3] European Commission (2019), ‘Trade policy and you’, http://ec.europa.eu/trade/trade-policy-and-you/index_en.htm.

[4] See UK Joint Committee on Human Rights (2019), ‘Human Rights Protections in International Agreements’, para 12; and House of Commons International Trade Committee (2018), ‘UK Trade Policy Transparency and Scrutiny’, paras 124–34.

[5] OHCHR (2003), Report of the High Commissioner for Human Rights on Human Rights, Trade and Investment, 2 July 2003, E/CN.4/Sub.2/2003/9, Annex, at para 63; UN Economic and Social Council (2017), ‘General Comment No 24 (2017) of the Committee on Economic, Social and Cultural Rights on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities’, UN Doc. E/C.12/GC/24, 10 August 2017, para 13; and UN General Assembly (2011), ‘Guiding principles on human rights impact assessment of trade and investment agreements’, Report of the Special Rapporteur on the Right to Food, Olivier De Schutter, UN Doc. A/HRC/19/59/Add.5, 19 December 2011.

[6] European Commission (2016), Handbook for Sustainability Impact Assessment (2nd ed.), Brussels: European Union, http://trade.ec.europa.eu/doclib/docs/2016/april/tradoc_154464.PDF.

[7] Zerk, J. (2019), Human Rights Impact Assessment of Trade Agreements, Chatham House Research Paper, London: Royal Institute of International Affairs, https://www.chathamhouse.org/publication/human-rights-impact-assessment-trade-agreements.

[8] Ibid., pp. 11–13. For a detailed explanation of the EU’s approach to human rights impact assessment, see European Commission (2016), Handbook for Sustainability Impact Assessment.

[9] Zerk (2019), Human Rights Impact Assessment of Trade Agreements, pp. 14–21.

[10] Ibid., pp. 21–22.

[11] Ergon Associates (2011), Trade and Labour: Making effective use of trade sustainability impact assessments and monitoring mechanisms, Final Report to DG Employment, Social Affairs and Inclusion European Commission, September 2011; and Gammage, C. (2010), ‘A Sustainability Impact Assessment of the Economic Partnership Agreements: Challenging the Participatory Process’, Law and Development Review, 3(1): pp. 107–34. For a civil society view, see Trade Justice Movement (undated), ‘Trade Justice Movement submission to the International Trade Committee inquiry into UK Trade Policy Transparency and Scrutiny’, https://www.tjm.org.uk/resources/briefings/tjm-submission-to-the-international-trade-committee-inquiry-into-uk-trade-policy-transparency-and-scrutiny, esp. paras 23–32.

[12] Zerk (2019), Human Rights Impact Assessment of Trade Agreements, pp. 20–21.

[13] Ibid., pp. 21–22.

[14] Ibid.

This essay was produced for the 2019 edition of Chatham House Expert Perspectives – our annual survey of risks and opportunities in global affairs – in which our researchers identify areas where the current sets of rules, institutions and mechanisms for peaceful international cooperation are falling short, and present ideas for reform and modernization.

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.

Theresa May’s announcement in 2018 on the UK’s ambition to become the G7’s largest investor in Africa by 2022 has been followed by similar stated ambitions at the recent UK-Africa Investment Summit, which saw the attendance of 16 African heads of states. Such ambitions mirror overtures from various international players including a call for a ‘comprehensive strategy for Africa’ by the EU in 2019. While the UK’s recent expansion of its diplomatic networks in Africa and the signing of the Economic Partnership Agreement with the Southern African Customs Union and Mozambique appear promising, there are significant challenges to deepening partnerships including visa restrictions and complex business environments.
 
At this event, the panellists will assess the future of trade and investment relations between the UK and Africa. Amid a proliferation of new trading partners including Asia’s emerging economies, Russia and the Gulf states, what are the points of change and continuity in the long-standing relationship between Africa and the UK? And what are the challenges and opportunities facing governments and businesses in Africa and the UK in efforts to build long-lasting economic ties?
 
This event will be followed by a drinks reception.

This event is open to Chatham House Corporate Members and corporate contacts of Chatham House's Africa Programme only.

Not a member? Find out more. For further information on the different types of Chatham House events, visit Our Events Explained.

 

 

In this article, we examine China's promotion of the renminbi (RMB) in international oil trade and explore its implications for the international currency system in the short and the long term. The article traces the rise of the RMB in international oil trade in recent years and provides an analysis of its impact on the internationalization of the Chinese currency. We argue that despite the increasing use of the yuan in oil trade in recent years, in the short term it is highly unlikely that a petro-RMB system will emerge to rival the petrodollar system. Unlike the petrodollar, which combines the qualities of a master currency, a top currency and a negotiated currency, China lacks the economic leadership and the political and geopolitical leverages to make the RMB a major petrocurrency. Although the emergence of the RMB-denominated Shanghai oil futures is an important development, the absence of highly developed financial markets and a strong legal system in China hinders its potential. In the long run, the RMB may take on a more prominent role in the international oil trade as China's weight as an oil importer rises. More importantly, the overuse of financial sanctions by the US government has begun to undermine the role of the dollar within and beyond the oil trade. In addition, the rise of alternative energy sources will diminish the centrality of oil in the world economy, thus reducing the significance of petrocurrencies—whether the dollar or the RMB—in shaping the international currency system.

In the five months since the last extension of the Brexit deadline, the questions about the UK’s trading relationship with the EU remain as open as before, as do those about what sort of relationship it should seek with other partners.

The world has not stood still, however, and so the UKTPO is convening another panel to consider constructive ways of moving forward. The panel will discuss potential trajectories for UK trade policy, followed by a question and answer session.

The UK Trade Policy Observatory (UKTPO) is a partnership between Chatham House and the University of Sussex which provides independent expert comment on, and analysis of, trade policy proposals for the UK as well as training for British policymakers through tailored training packages.

At this event, which forms the second annual UK Trade Policy Observatory conference, there will be six presentations over the course of the day before concluding with a panel discussion and Q&A. This year’s conference will focus on the following legal areas of trade policy:

• Blockchain: Creating and Eliminating Trade in Services
• China's Role in the International Trading System
• Official Export Support: Compliance and Competition Concerns
• Strategic Litigation and Health Regulation: Implications for International Economic Law
• Development, Labour Standards and Sustainability in Trade Agreements
• Retaining Versus Reforming EU Food Safety Legislation: Selected Issues for a US-UK Trade Negotiation

To register for this event, please click here. 

The upcoming UK general election is arguably a 'Brexit election', and as such, whoever wins the election will have little time to get their strategy for Brexit up and running to meet the new Brexit deadline of 31 January 2020. But what are the political parties’ policies for the UK's future trade? This event will present and discuss what the five main parties’ manifestos imply for future UK trade. Each manifesto will be presented and analysed by a fellow of the UK Trade Policy Observatory (UKTPO) and will be followed by a Q&A session. 

The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.

A necessary innovation

With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world’s biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.

However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.

The AfCFTA is the continent’s tool to address the disparity between Africa’s growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa’s states with the exception of Eritrea.

It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa’s smaller economies.

The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.

Tests to come

However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.

So, the first test for the AfCFTA will be the level to which Africa’s leaders make it a domestic priority, and whether a consensus can be maintained across the AU’s member states as the costs of implementation become clear.

There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people – policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.  

A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU.  The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.

But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.

And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.

A new role for the AU?

The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.

With the AfCFTA, the AU has endeavoured to address Africa’s unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU’s capacity to effectively move from political to economic diplomacy.

Free trade agreements often transcend the transfer of goods and services to include chapters and clauses pertaining to social issues such as gender equality, racial equality, labour rights and climate change.

However, these chapters regularly lack suitable enforcing mechanisms and are seldom legally binding. In a recent report, Women’s Budget Group (WBG) called for gender considerations to be mainstreamed throughout trade agreements so that trade can best facilitate positive social change. Can a similar approach be applied to other issues of social concern?

This panel discusses how policymakers can balance international trade and economic growth with social and human rights responsibilities to reduce gender, racial and income inequality, strengthen labour rights and address the climate crisis. Is international trade inhibiting meaningful progress towards realizing national commitments to socioeconomic equality? What do commitments to progressive trade policies mean in practice?

And, in its present geopolitical position, how well is the UK placed to lead the way in establishing international best practice in the negotiation and formation of progressive trade agreements?

Global trade policy is not going back to the consensus that prevailed over the past few decades. Even if the growing cycle of tariffs and trade threats is tamed in 2020, the economic consensus that underpinned broad support for open trade is breaking down, and escalation in trade tensions is likely.

What next for the US and China?

The US and China are currently at the centre of these tensions. The equity and bond markets started 2020 off euphorically as news of a ‘phase one’ trade deal between the two dominated headlines. Such a deal involves the US reducing some previously imposed tariffs and tabling another round of threatened ones, while China agrees to buy more US goods, including agriculture. This represents a détente of sorts, but don’t expect it to last; trade between the two countries is not actually at the heart of their trade war.

The question instead is which country will have the biggest economy, based on excellence in industries such as artificial intelligence, machine learning and quantum computing. There is a national security component to this issue as well, given how much these high-tech industries feed into military and national security operations. This has increasingly become a concern for the United States as China has adopted a more aggressive regional stance, particularly in the South China Sea.

Tariffs have been used as a tool by both countries to try to prevent the other from dominating the global economy, and while they have dented both economies, they aren’t a particularly effective tool. In particular, tariffs do nothing to address US concerns about intellectual property rights in China, forced technology transfers and state subsidies for high tech industries. The phase one deal, therefore, is a superficial one that fails to get at the heart of the matter.

US–EU tensions

However, with a temporary US-China détente, the US may turn its attention to Europe. The EU and US are in the midst of negotiating a trade deal, but obstacles have been present from the start.

Last July, France adopted a 3% digital tax that applies to firms with global revenues over €750 million per annum generated from digital activities, of which €25 million are made in its territory. A US investigation determined that the digital tax discriminates against US companies such as Google, Amazon, Apple and Facebook, and so the US has threatened France with 100% tariffs on luxury exports, including wine.

The long-standing tensions between the US and EU over their aircraft manufacturing behemoths, Boeing and Airbus, make reaching a US–EU trade deal more complicated. They also risk undermining US–EU collaboration on some joint concerns regarding China’s trade policies and practices.

The United States recently threatened to increase its punitive measures against European goods as retaliation for Airbus subsidies. The World Trade Organization (WTO) gave the US the green light to impose tariffs of up to 100% on $7.5 billion of EU exports last October, but the US had limited them to 10% on aircraft and 25% on industrial and agricultural products. Now, the US is threatening to escalate.

Finally, the US has repeatedly threatened to impose tariffs on imported cars from the EU. This threat looms large for Germany in particular, which is a significant producer of automobiles and whose industry is still recovering from the diesel emissions scandal. Germany has for the past two decades been the powerhouse economy in the EU, but has more recently seen sclerotic growth.

US election implications

It is an election year in the United States, and while it is too early to call the election (or even guess who the Democratic candidate might be), the ballot could bring about change on trade. Protectionism has historically been more of a Democrat policy than a Republican one, so there won’t be a complete reversal of Trump’s trade policy if a Democrat were to win. But there might be some changes.

If a Democrat controlled the White House, the US would still want to pressure China, but it might adopt a more international approach in that effort. The US might also reverse the steel and aluminium tariffs that kicked off these heightened trade tensions.

Most importantly, the US might stop hindering the WTO by appointing judges to the appellate body (without which the WTO cannot address rulings that are being appealed) and would likely work with other countries to reform the WTO. The focus would shift from confrontation to negotiation. This, of course, depends on which Democrat is in the White House.

In the meantime, President Trump has a difficult balancing act. Being tough on China and bringing home American jobs were successful slogans in his first presidential bid. He will want to indicate he has delivered on both and will continue to do so. At the same time, tariffs have sparked dips in the markets that have caused the president to de-escalate trade tensions. As the 2020 election approaches, expect the administration to balance these two concerns.

Looking beyond the vote, there may be some changes to the US approach to trade over the next decade, depending on which party is in government. The most pernicious aspect of the trade tensions on the global economy has been the uncertainty they have caused; businesses have deferred and delayed investment as they wait to see what the new rules of the global order are. They know the old consensus on trade won’t come back, but don’t yet know what the new consensus is.

As long as the limbo persists, and it probably will for at least a few more years, trade issues will remain a risk for the global economy.

This article is the first in a series of publications and roundtable discussions, part of the Chatham House Global Trade Policy Forum.

COVID-19 is a sharp reminder of why trade and climate policy matters. How can governments maintain access to critical goods and services, and ensure global supply chains function in times of crisis?

The timing of many trade negotiations is now increasingly uncertain, as are the UK’s plans to host COP26 in November. Policy work continues, however, and the EU has released its draft negotiating text for the new UK-EU trade deal, which includes a sub-chapter specifically devoted to climate. 

This is a timely reminder both of the pressing need for the UK to integrate its trade and climate policymaking and to use the current crisis-induced breathing space in international negotiations - however limited - to catch up on both strategy and priorities on this critical policy intersection.

The UK government has moved fast to reset its external trade relations post-Brexit. In the past month it formally launched bilateral negotiations with the EU and took up a seat at the World Trade Organization (WTO) as an independent member. Until the COVID-19 crisis hit, negotiations were also poised to start with the US.

The UK is also in the climate spotlight as host of COP26, the most important international climate negotiation since Paris in 2015, which presents a vital opportunity for the government to show leadership by aligning its trade agenda with its climate and sustainability commitments in bold new ways.

Not just an empty aspiration

This would send a signal that ‘Global Britain’ is not just an empty aspiration, but a concrete commitment to lead.

Not only is concerted action on the climate crisis a central priority for UK citizens, a growing and increasingly vocal group of UK businesses committed to decarbonization are calling on the government to secure a more transparent and predictable international market place that supports climate action by business.

With COP26, the UK has a unique responsibility to push governments to ratchet up ambition in the national contributions to climate action – and to promote coherence between climate ambition and wider economic policymaking, including on trade. If Britain really wants to lead, here are some concrete actions it should take.

At the national level, the UK can pioneer new ways to put environmental sustainability – and climate action in particular - at the heart of its trade agenda. Achieving the government’s ambitious Clean Growth Strategy - which seeks to make the UK the global leader in a range of industries including electric cars and offshore wind – should be a central objective of UK trade policy.

The UK should re-orient trade policy frameworks to incentivize the shift toward a more circular and net zero global economy. And all elements of UK trade policy could be assessed against environmental objectives - for example, their contribution to phasing out fossil fuels, helping to reverse overexploitation of natural resources, and support for sustainable agriculture and biodiversity.

In its bilateral and regional trade negotiations, the UK can and should advance its environment, climate and trade goals in tandem, and implementation of the Paris Agreement must be a core objective of the UK trade strategy.

A core issue for the UK is how to ensure that efforts to decarbonise the economy are not undercut by imports from high-carbon producers. Here, a ‘border carbon adjustment (BCA)’ - effectively a tax on the climate pollution of imports - would support UK climate goals. The EU draft negotiating text released yesterday put the issue of BCAs front and centre, making crystal clear that the intersection of climate, environment and trade policy goals will be a central issue for UK-EU trade negotiations.

Even with the United States, a trade deal can and should still be seized as a way to incentivize the shift toward a net zero and more circular economy. At the multilateral level, as a new independent WTO member, the UK has an opportunity to help build a forward-looking climate and trade agenda.

The UK could help foster dialogue, research and action on a cluster of ‘climate and trade’ issues that warrant more focused attention at the WTO. These include the design of carbon pricing policies at the border that are transparent, fair and support a just transition; proposals for a climate waiver for WTO rules; and identification of ways multilateral trade cooperation could promote a zero carbon and more circular global economy.  

To help nudge multilateral discussion along, the UK could also ask to join a critical ‘path finder’ effort by six governments, led by New Zealand, to pursue an agreement on climate change, trade and sustainability (ACCTS). This group aims to find ways forward on three central trade and climate issues: removing fossil fuel subsidies, climate-related labelling, and promoting trade in climate-friendly goods and services.

At present, the complex challenges at the intersection of climate, trade and development policy are too often used to defer or side-step issues deemed ‘too hard’ or ‘too sensitive’ to tackle. The UK could help here by working to ensure multilateral climate and trade initiatives share adjustment burdens, recognise the historical responsibility of developed countries, and do not unfairly disadvantage developing countries - especially the least developed.

Many developing countries are keen to promote climate-friendly exports as part of wider export diversification strategies  and want to reap greater returns from greener global value chains. Further, small island states and least-developed countries – many of which are Commonwealth members – that are especially vulnerable to the impacts of climate change and natural disasters, need support to adapt in the face of trade shocks and to build climate-resilient, trade-related infrastructure and export sectors.

As an immediate next step, the UK should actively support the growing number of WTO members in favour of a WTO Ministerial Statement on environmental sustainability and trade. It should work with its key trading partners in the Commonwealth and beyond to ensure the agenda is inclusive, supports achievement of the UN Sustainable Development Goals (SDGs) and helps developing countries benefit from a more environmentally sustainable global economy.

As the UK prepares to host COP26, negotiates deals with the EU and US, and prepares for its first WTO Ministerial meeting as an independent member, it must show it can lead the way nationally, bilaterally, and multilaterally. And to ensure the government acts, greater engagement from the UK’s business, civil society and research sectors is critical – we need all hands on deck to forge and promote concrete proposals for aligning UK trade policy with the climate ambition our world needs.

COVID-19 is a sharp reminder of why trade and climate policy matters. How can governments maintain access to critical goods and services, and ensure global supply chains function in times of crisis?

The timing of many trade negotiations is now increasingly uncertain, as are the UK’s plans to host COP26 in November. Policy work continues, however, and the EU has released its draft negotiating text for the new UK-EU trade deal, which includes a sub-chapter specifically devoted to climate. 

This is a timely reminder both of the pressing need for the UK to integrate its trade and climate policymaking and to use the current crisis-induced breathing space in international negotiations - however limited - to catch up on both strategy and priorities on this critical policy intersection.

The UK government has moved fast to reset its external trade relations post-Brexit. In the past month it formally launched bilateral negotiations with the EU and took up a seat at the World Trade Organization (WTO) as an independent member. Until the COVID-19 crisis hit, negotiations were also poised to start with the US.

The UK is also in the climate spotlight as host of COP26, the most important international climate negotiation since Paris in 2015, which presents a vital opportunity for the government to show leadership by aligning its trade agenda with its climate and sustainability commitments in bold new ways.

Not just an empty aspiration

This would send a signal that ‘Global Britain’ is not just an empty aspiration, but a concrete commitment to lead.

Not only is concerted action on the climate crisis a central priority for UK citizens, a growing and increasingly vocal group of UK businesses committed to decarbonization are calling on the government to secure a more transparent and predictable international market place that supports climate action by business.

With COP26, the UK has a unique responsibility to push governments to ratchet up ambition in the national contributions to climate action – and to promote coherence between climate ambition and wider economic policymaking, including on trade. If Britain really wants to lead, here are some concrete actions it should take.

At the national level, the UK can pioneer new ways to put environmental sustainability – and climate action in particular - at the heart of its trade agenda. Achieving the government’s ambitious Clean Growth Strategy - which seeks to make the UK the global leader in a range of industries including electric cars and offshore wind – should be a central objective of UK trade policy.

The UK should re-orient trade policy frameworks to incentivize the shift toward a more circular and net zero global economy. And all elements of UK trade policy could be assessed against environmental objectives - for example, their contribution to phasing out fossil fuels, helping to reverse overexploitation of natural resources, and support for sustainable agriculture and biodiversity.

In its bilateral and regional trade negotiations, the UK can and should advance its environment, climate and trade goals in tandem, and implementation of the Paris Agreement must be a core objective of the UK trade strategy.

A core issue for the UK is how to ensure that efforts to decarbonise the economy are not undercut by imports from high-carbon producers. Here, a ‘border carbon adjustment (BCA)’ - effectively a tax on the climate pollution of imports - would support UK climate goals. The EU draft negotiating text released yesterday put the issue of BCAs front and centre, making crystal clear that the intersection of climate, environment and trade policy goals will be a central issue for UK-EU trade negotiations.

Even with the United States, a trade deal can and should still be seized as a way to incentivize the shift toward a net zero and more circular economy. At the multilateral level, as a new independent WTO member, the UK has an opportunity to help build a forward-looking climate and trade agenda.

The UK could help foster dialogue, research and action on a cluster of ‘climate and trade’ issues that warrant more focused attention at the WTO. These include the design of carbon pricing policies at the border that are transparent, fair and support a just transition; proposals for a climate waiver for WTO rules; and identification of ways multilateral trade cooperation could promote a zero carbon and more circular global economy.  

To help nudge multilateral discussion along, the UK could also ask to join a critical ‘path finder’ effort by six governments, led by New Zealand, to pursue an agreement on climate change, trade and sustainability (ACCTS). This group aims to find ways forward on three central trade and climate issues: removing fossil fuel subsidies, climate-related labelling, and promoting trade in climate-friendly goods and services.

At present, the complex challenges at the intersection of climate, trade and development policy are too often used to defer or side-step issues deemed ‘too hard’ or ‘too sensitive’ to tackle. The UK could help here by working to ensure multilateral climate and trade initiatives share adjustment burdens, recognise the historical responsibility of developed countries, and do not unfairly disadvantage developing countries - especially the least developed.

Many developing countries are keen to promote climate-friendly exports as part of wider export diversification strategies  and want to reap greater returns from greener global value chains. Further, small island states and least-developed countries – many of which are Commonwealth members – that are especially vulnerable to the impacts of climate change and natural disasters, need support to adapt in the face of trade shocks and to build climate-resilient, trade-related infrastructure and export sectors.

As an immediate next step, the UK should actively support the growing number of WTO members in favour of a WTO Ministerial Statement on environmental sustainability and trade. It should work with its key trading partners in the Commonwealth and beyond to ensure the agenda is inclusive, supports achievement of the UN Sustainable Development Goals (SDGs) and helps developing countries benefit from a more environmentally sustainable global economy.

As the UK prepares to host COP26, negotiates deals with the EU and US, and prepares for its first WTO Ministerial meeting as an independent member, it must show it can lead the way nationally, bilaterally, and multilaterally. And to ensure the government acts, greater engagement from the UK’s business, civil society and research sectors is critical – we need all hands on deck to forge and promote concrete proposals for aligning UK trade policy with the climate ambition our world needs.

With international trade discourse taking an increasingly transactional and sometimes belligerent tone, it would be easy to overlook the quiet revolution currently under way to bring new voices into trade policy development and monitoring. The traditional division of responsibilities between the executive and legislature – whereby treaties are negotiated and signed by the executive, and the legislature does what is necessary to implement them – may be undergoing some change.

Growing awareness of the implications of trade and investment treaties for many aspects of day-to-day life – food standards, employment opportunities, environmental quality, availability of medicines and data protection, just to name a few – is fuelling demands by people and businesses for more of a say in the way these rules are formulated and developed.

Various options for enhancing public and parliamentary scrutiny of trading proposals have recently been examined by two UK parliamentary select committees.[1] The reason for this interest is obviously Brexit, which has presented UK civil servants and parliamentarians with the unusual (some would say exciting) opportunity to design an approval and scrutiny process for trade agreements from scratch.

Doubtless, EU authorization, liaison and approval procedures (which include a scrutinizing role for the European Parliament) will be influential,[2] as will the European Commission’s experience with stakeholder engagement on trade issues.[3] The recommendations of both UK select committees to include human rights impact assessment processes as part of pre-negotiation preparations[4] echo calls from UN agencies and NGOs for more rigorous and timely analysis of the human rights risks that may be posed by new trading relationships.[5] Again, EU practice with what it terms ‘sustainability impact assessment’ of future trade agreements provides a potential model to draw from.[6] 

However, process is no substitute for action. Human rights impact assessment is never an end in itself; rather, it is a means to a positive end, in this case a trade agreement which is aligned with the trading partners’ respective human rights obligations and aspirations. It bears remembering, though, that the idea of assessing trade proposals for future human rights risks is a relatively recent one. Do we have the tools and resources to make sure that this is a meaningful compliance and risk management exercise?

Thus far there is little evidence that human rights impact assessment and stakeholder engagement exercises are having any real impact on the content of trade agreements.[7] This is the case even in the EU, where practice in these areas is the most advanced and systematic.[8]

There are several possible reasons for this. First, the methodological challenges are enormous. Aside from the crystal-ball gazing needed to forecast the social, economic and environmental effects of a trade intervention well into the future, demonstrating causal links between a trade agreement and a predicted adverse impact is often highly problematic given the number of other economic and political factors that may be in play.[9]

Secondly, there are many challenges around the need to engage with affected people and listen to their views.[10] The sheer number of possible impacts of a trade agreement on different individuals and communities, as well as the range of rights potentially engaged, makes this a difficult (some would say impossible) task. Some prioritization is always necessary.

This makes for difficult decisions about who to engage with and how. Perceived bias or an apparent lack of even-handedness – favouring business compared to civil society, for instance – can sow mistrust about the true aims of such a process, undermining its future effectiveness as participants begin to question whether it is genuine or worthwhile.[11]

The challenges are even more acute where impact assessment practitioners are tasked with investigating potential human rights impacts in other countries. Even if it is possible to get past the inevitable political sensitivities,[12] the sort of in-depth consultations required will be beyond the budget and time constraints of most assignments.[13]

There are good reasons why trade policy should be subject to greater public and parliamentary scrutiny, and why there should be more opportunities for public participation in the formation of new trading regimes. By building more opportunities for stakeholder consultation at these stages, we can acquire perspectives on trade that are not available from other forms of assessment and analysis.

However, policymakers should be wary of overstating the benefits of existing procedural models. Human rights impact assessment processes are still struggling to provide compelling analyses of the relationships between trade agreements and the enjoyment of human rights, let alone a roadmap for policymakers and trade negotiators as to what should be done.[14]

And financial and practical barriers to participation in stakeholder engagement exercises mean that, at best, these will provide only a partial picture of stakeholder impacts and views.

Experiences with human rights impact assessment of trade agreements so far demonstrate the need for realism about two things: first, the extent to which one can sensibly anticipate and analyse human rights-related risks and opportunities in the preparation stages for a new trading agreement; and, second, the extent to which problems identified in this way can be headed off with the right form of words in the treaty itself.

Both recent UK select committee reports place considerable faith in the ability of pre-project transparency and scrutiny processes to flush out potential problems and prescribe solutions. Of course, there may be cases where frontloading the analysis in this way could be useful, for instance where the human rights implications are so clear that they can readily be addressed through upfront commitments by the parties concerned, whether by bespoke or standardized approaches.

More often, though, for a trade agreement running many years into the future, human rights impacts and implications will take time to emerge, suggesting the need for robust monitoring and mitigation frameworks designed with longevity in mind. Ideally, pre-signing approval and assessment processes would lay the groundwork for future action by both trading partners, either jointly or separately (though preferably both).

To this end, as well as developing ideas for more robust substantive provisions on human rights, policymakers should consider the institutional arrangements required – whether pursuant to the trade agreement or by complementary processes – to ensure that human rights-related risks identified during the planning stages are properly and proactively followed up, that emerging risks are tackled in a timely fashion, and that there are opportunities for meaningful stakeholder contributions to these processes.

Notes

[1] UK Joint Committee on Human Rights (2019), ‘Human Rights Protections in International Agreements, Seventeenth Report of Session 2017–19’, HC 1833 HL paper 310, 12 March 2019, https://publications.parliament.uk/pa/jt201719/jtselect/jtrights/1833/1833.pdf; and House of Commons International Trade Committee (2018), ‘UK Trade Policy Transparency and Scrutiny, Sixth Report of Session 2017-2019’, HC 1043, 29 December 2018.

[2] European Parliament and Directorate General for External Policies (2019), Parliamentary scrutiny of trade policies across the western world, study paper, March 2019, http://www.europarl.europa.eu/RegData/etudes/STUD/2019/603477/EXPO_STU(2019)603477_EN.pdf.

[3] European Commission (2019), ‘Trade policy and you’, http://ec.europa.eu/trade/trade-policy-and-you/index_en.htm.

[4] See UK Joint Committee on Human Rights (2019), ‘Human Rights Protections in International Agreements’, para 12; and House of Commons International Trade Committee (2018), ‘UK Trade Policy Transparency and Scrutiny’, paras 124–34.

[5] OHCHR (2003), Report of the High Commissioner for Human Rights on Human Rights, Trade and Investment, 2 July 2003, E/CN.4/Sub.2/2003/9, Annex, at para 63; UN Economic and Social Council (2017), ‘General Comment No 24 (2017) of the Committee on Economic, Social and Cultural Rights on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities’, UN Doc. E/C.12/GC/24, 10 August 2017, para 13; and UN General Assembly (2011), ‘Guiding principles on human rights impact assessment of trade and investment agreements’, Report of the Special Rapporteur on the Right to Food, Olivier De Schutter, UN Doc. A/HRC/19/59/Add.5, 19 December 2011.

[6] European Commission (2016), Handbook for Sustainability Impact Assessment (2nd ed.), Brussels: European Union, http://trade.ec.europa.eu/doclib/docs/2016/april/tradoc_154464.PDF.

[7] Zerk, J. (2019), Human Rights Impact Assessment of Trade Agreements, Chatham House Research Paper, London: Royal Institute of International Affairs, https://www.chathamhouse.org/publication/human-rights-impact-assessment-trade-agreements.

[8] Ibid., pp. 11–13. For a detailed explanation of the EU’s approach to human rights impact assessment, see European Commission (2016), Handbook for Sustainability Impact Assessment.

[9] Zerk (2019), Human Rights Impact Assessment of Trade Agreements, pp. 14–21.

[10] Ibid., pp. 21–22.

[11] Ergon Associates (2011), Trade and Labour: Making effective use of trade sustainability impact assessments and monitoring mechanisms, Final Report to DG Employment, Social Affairs and Inclusion European Commission, September 2011; and Gammage, C. (2010), ‘A Sustainability Impact Assessment of the Economic Partnership Agreements: Challenging the Participatory Process’, Law and Development Review, 3(1): pp. 107–34. For a civil society view, see Trade Justice Movement (undated), ‘Trade Justice Movement submission to the International Trade Committee inquiry into UK Trade Policy Transparency and Scrutiny’, https://www.tjm.org.uk/resources/briefings/tjm-submission-to-the-international-trade-committee-inquiry-into-uk-trade-policy-transparency-and-scrutiny, esp. paras 23–32.

[12] Zerk (2019), Human Rights Impact Assessment of Trade Agreements, pp. 20–21.

[13] Ibid., pp. 21–22.

[14] Ibid.

This essay was produced for the 2019 edition of Chatham House Expert Perspectives – our annual survey of risks and opportunities in global affairs – in which our researchers identify areas where the current sets of rules, institutions and mechanisms for peaceful international cooperation are falling short, and present ideas for reform and modernization.

The forum aims to develop substantive and actionable policy recommendations for the future direction of global trade in a context of changing geopolitical dynamics and rapid technological transformations.

At the core of the Chatham House Global Trade Policy Forum will be the Chatham House Global Trade Conference, a series of roundtable meetings which address the range of regional and systemic trade matters, and a series of written outputs. The activities will culminate in an annual Global Trade Policy Review Briefing paper.

Our unique position in London, and as a world-leading source of independent analysis and with unparalleled convening capacity, enables Chatham House to engage with a committed network of action-oriented policymakers, business leaders, academics, and representatives from the media and civil society to develop trade policy insights. We are committed to the promotion of sustainable growth and more inclusive governance.

The forum’s work is supported by AIG (founding partner), Clifford Chance LLP, Diageo plc, and EY (supporting partners).

View our current work on International Trade and the World Trade Organization (WTO).

 

Trade has received a lot of attention recently with the US and China still negotiating a trade agreement and the World Trade Organization coming under threat. But the global trade system is also adapting to changing geopolitical dynamics and rapid technological transformations. In light of a backlash against globalization, how can trade be made more sustainable and inclusive? What actions are needed for global trade and the trading system to adjust to changes in technology and environmental considerations? What efforts are key players such as the US, EU and China taking on these fronts?

Against this backdrop, Ms Arancha González will join us for a roundtable discussion on the future of trade and how trade can play a key role in adjusting to the changes that will take place in societies over the next decade. 

The Chatham House US and Americas Programme would like to thank founding partner AIG and supporting partners Clifford Chance LLP and Diageo plc for their generous support of the Chatham House Global Trade Policy Forum.

Global trade policy is not going back to the consensus that prevailed over the past few decades. Even if the growing cycle of tariffs and trade threats is tamed in 2020, the economic consensus that underpinned broad support for open trade is breaking down, and escalation in trade tensions is likely.

What next for the US and China?

The US and China are currently at the centre of these tensions. The equity and bond markets started 2020 off euphorically as news of a ‘phase one’ trade deal between the two dominated headlines. Such a deal involves the US reducing some previously imposed tariffs and tabling another round of threatened ones, while China agrees to buy more US goods, including agriculture. This represents a détente of sorts, but don’t expect it to last; trade between the two countries is not actually at the heart of their trade war.

The question instead is which country will have the biggest economy, based on excellence in industries such as artificial intelligence, machine learning and quantum computing. There is a national security component to this issue as well, given how much these high-tech industries feed into military and national security operations. This has increasingly become a concern for the United States as China has adopted a more aggressive regional stance, particularly in the South China Sea.

Tariffs have been used as a tool by both countries to try to prevent the other from dominating the global economy, and while they have dented both economies, they aren’t a particularly effective tool. In particular, tariffs do nothing to address US concerns about intellectual property rights in China, forced technology transfers and state subsidies for high tech industries. The phase one deal, therefore, is a superficial one that fails to get at the heart of the matter.

US–EU tensions

However, with a temporary US-China détente, the US may turn its attention to Europe. The EU and US are in the midst of negotiating a trade deal, but obstacles have been present from the start.

Last July, France adopted a 3% digital tax that applies to firms with global revenues over €750 million per annum generated from digital activities, of which €25 million are made in its territory. A US investigation determined that the digital tax discriminates against US companies such as Google, Amazon, Apple and Facebook, and so the US has threatened France with 100% tariffs on luxury exports, including wine.

The long-standing tensions between the US and EU over their aircraft manufacturing behemoths, Boeing and Airbus, make reaching a US–EU trade deal more complicated. They also risk undermining US–EU collaboration on some joint concerns regarding China’s trade policies and practices.

The United States recently threatened to increase its punitive measures against European goods as retaliation for Airbus subsidies. The World Trade Organization (WTO) gave the US the green light to impose tariffs of up to 100% on $7.5 billion of EU exports last October, but the US had limited them to 10% on aircraft and 25% on industrial and agricultural products. Now, the US is threatening to escalate.

Finally, the US has repeatedly threatened to impose tariffs on imported cars from the EU. This threat looms large for Germany in particular, which is a significant producer of automobiles and whose industry is still recovering from the diesel emissions scandal. Germany has for the past two decades been the powerhouse economy in the EU, but has more recently seen sclerotic growth.

US election implications

It is an election year in the United States, and while it is too early to call the election (or even guess who the Democratic candidate might be), the ballot could bring about change on trade. Protectionism has historically been more of a Democrat policy than a Republican one, so there won’t be a complete reversal of Trump’s trade policy if a Democrat were to win. But there might be some changes.

If a Democrat controlled the White House, the US would still want to pressure China, but it might adopt a more international approach in that effort. The US might also reverse the steel and aluminium tariffs that kicked off these heightened trade tensions.

Most importantly, the US might stop hindering the WTO by appointing judges to the appellate body (without which the WTO cannot address rulings that are being appealed) and would likely work with other countries to reform the WTO. The focus would shift from confrontation to negotiation. This, of course, depends on which Democrat is in the White House.

In the meantime, President Trump has a difficult balancing act. Being tough on China and bringing home American jobs were successful slogans in his first presidential bid. He will want to indicate he has delivered on both and will continue to do so. At the same time, tariffs have sparked dips in the markets that have caused the president to de-escalate trade tensions. As the 2020 election approaches, expect the administration to balance these two concerns.

Looking beyond the vote, there may be some changes to the US approach to trade over the next decade, depending on which party is in government. The most pernicious aspect of the trade tensions on the global economy has been the uncertainty they have caused; businesses have deferred and delayed investment as they wait to see what the new rules of the global order are. They know the old consensus on trade won’t come back, but don’t yet know what the new consensus is.

As long as the limbo persists, and it probably will for at least a few more years, trade issues will remain a risk for the global economy.

This article is the first in a series of publications and roundtable discussions, part of the Chatham House Global Trade Policy Forum.

The US and China have entered into an increasingly confrontational relationship over trade and technology. This may force Europe to make difficult choices between the two economic superpowers – or perform a balancing act. Although the recent US-China phase-1 trade deal has eased the relationship for now, the trade and technology tensions are a structural issue and are likely to persist.

The debate over Huawei’s participation in 5G networks is an example of how the UK and other countries may face competing priorities in economic, security and foreign policy. Can Europe avoid a binary choice between the US and China? Is it possible for the EU to position itself as a third global power in trade, technology and standard-setting? What strategies should Europeans adopt to keep the US and China engaged in the rules-based international order and what does the future hold for trade multilateralism?

Sir Simon Fraser will join us for a discussion on Europe’s future role between the US and China. Sir Simon is Managing Partner of Flint Global and Deputy Chairman of Chatham House. He previously served as Permanent Secretary at the Foreign and Commonwealth Office (FCO) and Head of the UK Diplomatic Service from 2010 to 2015. Prior to that he was Permanent Secretary at the UK Department for Business, Innovation and Skills. He has also served as Director General for Europe in the FCO and Chief of Staff to European Trade Commissioner Peter Mandelson.

We would like to take this opportunity to thank founding partner AIG and supporting partners Clifford Chance LLP, Diageo plc, and EY for their generous support of the Chatham House Global Trade Policy Forum.

The WTO Ministerial Conference in June 2020 presents a critical opportunity to move ahead on better alignment of trade and environmental sustainability objectives, policymaking and governance. In light of the challenges facing the WTO, meaningful efforts to address environmental sustainability would also help to reinvigorate the organization and strengthen its relevance. 

In this context, the meeting aims to advance discussion on two questions: How can the multilateral trade system better contribute to meeting the UN Sustainable Development Goals and the Paris climate goals? What priorities and tangible outcomes on trade and environmental sustainability should be advanced at the WTO Ministerial Conference in Nur Sultan in June and beyond?

The event will be hosted by the US and the Americas Programme and the Hoffmann Centre for Sustainable Resource Economy at Chatham House in partnership with both the Global Governance Centre and the Centre for Trade and Economic Integration at the Graduate Institute, Geneva.

We gratefully acknowledge the financial support for this event from the Chatham House Global Trade Policy Forum’s founding partner AIG and supporting partners Clifford Chance LLP, Diageo plc and EY, and on the Graduate Institute side, from the government of Switzerland.

Trade and investment between the UK and Latin America is woefully underdeveloped. Latin America’s agricultural powerhouses Brazil and Argentina only accounted for a total of 1.6% of the UK’s agricultural market across eight sectors in 2018, all of those areas in which Argentina and Brazil have substantial comparative advantages. 

Conversely, UK exports to the large Latin American economies remain far below their potential.  To cite a few examples, in 2018 in the electrical equipment sector, the UK only exported $95.7 million of those products to Brazil, making the ninth largest economy in the world only the 42nd export market for those goods from the UK; Mexico only imported $91.4 million of UK-made electrical goods, placing it directly behind Brazil as UK’s market for those goods.

As we look to the future, any improvement to the relationship will depend on two factors: 1) how the UK leaves the EU and 2) whether Latin American agricultural producers can improve their environmental practices and can meet the production standards established by the EU and likely maintained by a potential post-Brexit Britain.

In the first meeting of the working group,  Chatham House convened a range of policymakers, practitioners and academics to explore this topic in depth, identify the key issues driving this trend, and begin to consider how improvements might best be made. Subsequent meetings will focus on specific sectors in commerce and investment.

We would like to thank BTG Pactual, Cairn Energy plc, Diageo, Equinor, Fresnillo Management Services, HSBC Holdings plc and Wintershall Dea for their generous support of the Latin America Initiative.

This event is  part of the Chatham House Global Trade Policy Forum and will take place virtually only.

We would like to take this opportunity to thank founding partner AIG and supporting partners Clifford Chance LLP, Diageo plc, and EY for their generous support of the Chatham House Global Trade Policy Forum.

Please note this event is taking place between 2pm to 3pm BST. 

This event is part of the Chatham House Global Trade Policy Forum and will take place virtually only.

International trade has a crucial role to play in tackling climate change. The production and transport of goods is a major contributor to green-house gas emissions, as is the delivery of certain cross-border services. At the same time, it looks inevitable that the COVID-19 pandemic will lead to a radical re-think of global supply chains as companies and governments seek to build in greater resilience while at the same time preserving as far as possible the efficiency gains and lower costs that global supply chains generate when operating normally.

Future international trade rules will have a crucial role to play in addressing both challenges; they represent both an opportunity and a risk. If designed well, they could play a very important role in re-enforcing moves towards a more sustainable use of resources, greater overall alignment of economies with the Paris Agreement, and greater economic resilience. But they could also, if poorly designed and implemented, or overly influenced by strategic political considerations, have significant unintended and negative implications. These include: reduced economic efficiency, increased poverty, unnecessary economic decoupling and reduced consensus on the broader mitigation and adaptation measures required to meet the challenge of climate change.

Against this background, a number of key questions arise: In what areas, if any, do we need to modify or adapt key principles underlying the system of global trade rules in order to respond to the twin challenges of responding to climate change and building greater economic resilience?  Which are the most promising/practical areas on which trade policy experts should focus now to re-launch/re-energize discussions on WTO reform, including, for example, dispute settlement? What national economic policies will be needed to complement the development of new/reformed trade disciplines in these areas? How might future political changes, such as a change in the US administration, affect the prospects for and political momentum behind such deliberations? What in any eventuality is the best way to build the required political momentum?
 
This roundtable is convened by the Global Economy and Finance Programme and the US and the Americas Programme and it is part of the Chatham House Global Trade Policy Forum. The event will take place virtually only.

We would like to take this opportunity to thank founding partner AIG and supporting partners Clifford Chance LLP, Diageo plc, and EY for their generous support of the Chatham House Global Trade Policy Forum.

Please note this event is taking place between 2pm to 3pm BST.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade.

The Indonesian government has taken a number of important steps to tackle illegal logging and the associated trade, most notably with the ratification of the Indonesia–EU FLEGT voluntary partnership agreement in 2014. The process of negotiating this agreement has contributed to the introduction of a national timber legality verification system (SVLK), clarification of the relevant legal framework and significantly improved engagement with stakeholders in the forest sector. There have also been important developments in recognizing indigenous peoples’ tenure rights to forest land and resources.

However, implementation and enforcement challenges remain. In particular, progress is hampered by a poorly functioning decentralized governance system, persistent corruption and insufficient transparency of information.

The private sector has responded positively, with growing awareness of the issue of illegal logging. While uptake of voluntary legality verification has recently declined, with the need for this now circumvented by the introduction of the SVLK, the area of forest certified as being managed sustainably increased in 2012.

An analysis of data on timber production and consumption suggests that illegal logging has decreased since 2000, and the findings of the expert perceptions survey tend to confirm this for the period 2010 to 2013. In part, these findings reflect a shift towards plantations and away from natural forest harvesting. However, legal ambiguity over the permitting process for forest conversion may mean that levels of illegality are higher than these data suggest.

Building on the government’s response to illegal logging will require effective implementation of the SVLK including addressing identified shortcomings. Improved land-use planning to support effective control and monitoring of forest conversion is also needed. Increased resources and training for enforcement officials are required, while efforts to tackle corruption in the sector should be stepped up. The government should clarify the rights of indigenous peoples through concrete actions such as developing clear processes for mapping and registering their land claims.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade.

The Brazilian government has made slow progress in tackling illegal logging and associated trade since the previous Chatham House assessment, in 2010. Illegality, corruption and fraud remain widespread in the forest sector, despite a relatively strong legal framework. Considerable efforts have been made to improve law enforcement in the sector but these have been hampered by poor coordination between the relevant government agencies, limited resources and inadequate penalties. At the same time, attempts to involve a range of stakeholders in policy discussions and decision-making have stalled.

The private sector’s response to illegal logging is perceived to be weak, despite the reasonably high uptake of sustainability certification schemes. Initiatives are under way aimed at promoting a legal and sustainable market for timber within Brazil, with the engagement of the private sector. However, such undertakings are modest given that the majority of the country’s timber production is consumed domestically.

Considerable investment in systems to monitor timber and revenue flows is required to tackle fraud, while the regulation of sawmills needs to be tightened to reduce the scope for the laundering of illegal timber. The imposition of appropriate sanctions and ensuring the collection of financial penalties could help to fill the gap in resources that is impeding effective enforcement.

Clarification of the regulatory framework is needed – in particular, those regulations related to the fiscal regime for the forest sector – as is the simplification of the processes for approving forest management plans. The latter is a priority if smallholders are to be able to engage in legal and sustainable forest management. An extensive programme of outreach and training is a prerequisite for ensuring such engagement. Finally, efforts to promote legal timber on the domestic market should be intensified and expanded.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

The Ghanaian government has taken a number of important steps to reduce illegal logging and related trade, most notably with the signing of the Ghana–EU voluntary partnership agreement in 2009. This agreement has prompted improved multi-stakeholder dialogue within the sector as well as a process of legal reform. Considerable effort has also been put into the development of a timber legality assurance system, which has been successfully piloted. However, a number of enforcement and administrative challenges remain, particularly in relation to tenure and land and resource rights, as well as broader governance challenges including corruption.

Awareness of the issue of illegal logging has improved among the private sector, and the area of natural forest that is verified as legally compliant has increased considerably in recent years. However illegal practices remain widespread in the country. Illegal chainsaw milling is prevalent, predominantly supplying the domestic market. Illegality is also an issue in supply chains for export, albeit at a lower level. Trade data discrepancies indicate that illegal trade is a problem, in particular for tropical logs, and there is a lack of clarity over the legality of many logging permits.

A key challenge for the country is its declining resource base. The forest sector has shrunk considerably over the last 15 years as a result of this, and the situation looks set to worsen. Wood-balance estimates indicate that timber consumption considerably exceeds sustainable harvesting levels. 

In order to make further progress in tackling illegal logging, the process of legal reform and efforts to improve enforcement need to continue. Priorities include: a review of fiscal policies for the sector; improvements to land administration; completion of the conversion process of logging rights; and implementation of the legality assurance system across the country. Efforts must also continue to address the challenge of illegal chainsaw milling, which will require a range of approaches from legal reform to developing alternative livelihood strategies. 

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

The government of Lao PDR has taken a number of steps to reduce illegal logging and associated trade. Most notably, it has made progress towards negotiations with the EU on a voluntary partnership agreement (VPA). This has prompted the establishment of a multi-stakeholder steering committee and a technical working group and the revision of several land and forestry laws to include provisions related to the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.

However, significant implementation and enforcement challenges remain. The legal framework is unclear and, at times, contradictory. Implementation by central and local governments is inconsistent, and internal mechanisms to oversee government decisions are limited. Moreover, enforcement capacity is weak and there is a lack of transparency. The available evidence suggests that illegal practices are widespread in the forest sector.

Awareness of the issue of illegal logging has improved, including in the private sector. The area of natural forest certified under the Forest Stewardship Council (FSC) scheme has been gradually increasing in recent years. However, a key challenge for the Lao forest sector is pressure on forest resources from agricultural plantations, mineral extraction and infrastructure development.

In order to make further progress in tackling illegal logging, the government should push ahead with preparations for the VPA negotiations, ensuring that the lead agencies are appropriately engaged and resourced to implement a credible dialogue process. Data on the allocation and management of forest resources should be systematically collected and made available to the public in order to enable effective forest monitoring. In addition, accountability mechanisms, including anti-corruption strategies, should be clearly defined and implemented by all relevant ministries to ensure that forest resources are exploited legally and for the benefit of the country. 

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Japanese government has continued to engage on the issue of illegal logging and related trade, but its approach remains focused on ‘soft’, voluntary measures rather than establishing legally binding requirements. It has been actively promoting the country’s legality verification system, known as the goho-wood system, and this is helping to raise awareness of the issue of illegal logging in Japan. However, the system is not only voluntary but has serious design weaknesses which limit its ability to eliminate illegal products from Japan’s market.

While the number of companies registered as goho-wood suppliers has increased, this may be occurring at the expense of sustainability certification, which is more demanding and expensive. The number of companies in Japan with FSC chain-of-custody certification remains low.

Japan’s imports of timber-sector products at high risk of illegality are estimated to have declined significantly since the start of the century, though levelling off since 2010, while imports of high-risk paper-sector products are estimated to have gradually increased over this period. Levels of high-risk imports remain significantly above those of the other consumer countries reviewed. These are currently estimated to comprise 12 per cent and seven per cent of total timber- and paper-sector products respectively.

It is recommended that the government develop further legislation to control imports of illegal products, including a requirement for risk assessment and mitigation as well as third-party monitoring. Such legislation would also help support the government’s policy to promote the domestic timber industry. Until such legislation is passed, Japanese industry should implement more robust risk assessment and mitigation procedures.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The French government has been engaged on the issue of illegal logging and the related trade: the government played an active part in the development of the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan and has been supporting the negotiation and implementation of voluntary partnership agreements (VPAs) in producer countries.

The government has also been actively promoting the production and consumption of sustainable timber, providing funding for forest-management related projects in producer countries and establishing the National Group on Tropical Forests to facilitate a multi-stakeholder dialogue on forest policy. Media coverage of illegal logging has increased considerably since 2007, indicating greater awareness of the issue among the general public.

This response, as well as increased sourcing of sustainably certified products by the private sector, is thought to have been a factor in the decline in imports into France of timber-sector products likely to be illegal. The proportion of timber-sector imports at high risk of illegality is currently estimated to be two per cent. The proportion of highly processed products such as furniture has grown significantly, as has the share coming from China, with a parallel decline in imports of logs and sawnwood from central and West Africa.

However, there remain a number of areas for improvement by the government. In particular, with legislation now in place to implement the EUTR, this should be rigorously enforced and sufficient resources put in place to enable this. Furthermore, the effectiveness of the sanctions regime should be monitored. The planned review of the public procurement policy should be undertaken, and monitoring of its implementation should also be introduced.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade.

The United Kingdom has shown a strong response to the problem of illegal logging and related trade; of the five consumer countries studied, it scored highest in the assessment of laws, regulations and policies related to this issue.

The government played an active part in the development of the EU’s FLEGT Action Plan and has subsequently been supporting the negotiation and implementation of voluntary partnership agreements with producer countries. The government has also been providing a significant amount of funding, through the Forest Governance, Markets and Trade Programme, to initiatives aimed at tackling the trade in illegal timber and improving forest governance.

The private sector in the UK has also been proactive, as reflected in the increase in the number of companies with chain-of-custody certification and in the amount of certified wood-based products on the UK market. A high level of media coverage of illegal logging also indicates that there is widespread awareness of this issue.

This response is thought to be partly responsible for the decline in imports into the UK of timber-sector products likely to be illegal, currently estimated to comprise three per cent of the total. However, there has been a significant shift in the types and sources of high-risk products coming into the UK, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

While the UK has been one of the most proactive European countries in addressing illegal logging and the related trade, further action could be taken. Cooperation with the Chinese government and its private sector would be beneficial. Systematic monitoring of the UK’s timber procurement policy is also required, and the efforts made to date to enforce the EUTR will need to be maintained.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

Efforts to tackle the problem of illegal logging and related trade have continued in the United States; the Lacey Act amendments in 2008 have influenced behaviour within the industry and high-profile enforcement cases have increased awareness of the issue. 

The impact of the Lacey Act on levels of illegal imports into the US is uncertain. The proportion of imports of high-risk timber-sector products is estimated to have declined since 2010, while that of paper-sector products has stayed at about the same level: in 2013, high-risk imports were estimated to comprise five per cent and two per cent of the totals respectively. However, there has been a significant shift in the types and sources of high-risk products coming into the country, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

Though the Lacey Act is an important piece of legislation for tackling the trade in illegal timber, several implementation and enforcement challenges have arisen since the amendments were enacted, in particular the interpretation of ‘due care’. Improvements to the procedure for processing import declaration forms are also required to ensure effective enforcement of the act. In order to effectively tackle illegal logging and the related trade, the US government should also continue to encourage its trading partners to strengthen their forest governance.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Netherlands has shown a strong response to the problem of illegal logging and related trade: the government played an active part in the development of the EU’s FLEGT Action Plan, and has been supporting the negotiation and implementation of Voluntary Partnership Agreements with producer countries.

The government has also been promoting the production and consumption of sustainable timber. It has a comprehensive procurement policy, established the Sustainable Trade Initiative and helped to launch the European Sustainable Tropical Timber Coalition.

As a result both of these government actions and of promotion by the private sector, there is a high proportion of certified wood-based products on the Dutch market as well as a large number of companies with chain-of-custody certification. A high level of media coverage on the issue of illegal logging also indicates that there is widespread awareness of this issue.

This response is thought to be partly responsible for the decline in imports into the Netherlands of timber-sector products likely to be illegal, currently estimated to comprise two per cent of the total. However, there has been a significant shift in the types and sources of high-risk products coming into the country, reflecting changes in the global timber industry: a growing proportion is coming from China and comprises more highly processed products such as furniture.

While the Netherlands has been one of the most proactive European countries in addressing illegal logging and the related trade, further action could be taken. A key challenge will be effective enforcement of the EU Timber Regulation given the Netherlands’ role as a major conduit for timber to the rest of Europe. Systematic monitoring of its timber procurement policy is also required.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. The Chinese government has made notable progress in its efforts to tackle illegal logging and the associated trade. This has included the development of a draft national timber legality verification system (TLVS) and its active engagement with a number of consumer countries. The government’s plans to establish bilateral trade agreements with producer countries are also encouraging, although no formalized commitments have yet been made. Reflecting the growing awareness of the impact of Chinese companies overseas, the government has also been developing further guidance to promote sustainable forest products trade and investment.

The private sector is also taking action, with continued growth in the uptake of chain-of-custody (CoC) certification. Industry associations have been promoting legal and sustainable sourcing, and they will have an important role to play in testing the draft TLVS.

These steps are likely to have had an impact on the volume of illegal wood-based products being imported into China. However, trade data discrepancies and analysis of trade flows both indicate that illegal trade remains a significant problem. While imports of high-risk products are estimated to have declined since 2000, these are reckoned to comprise 17 per cent of the total by volume in 2013. This proportion is high compared with other timber-importing countries examined in this assessment.

In order to build on its response to illegal logging and related trade, the Chinese government should establish binding regulations and stringent controls on the import and export of illegal wood-based products. The draft TLVS should be further developed, including through pilot projects with timber-exporting countries and effective consultation with industry, civil society and other consumer-country governments. The government’s procurement policy should be strengthened through the clarification of its legality and sustainability requirements, the inclusion of a wider range of products within its scope, and the development of a robust mechanism to monitor compliance. 

Increased training for the private sector on due diligence, market regulations and legality requirements in consumer countries is required to stimulate further action by industry, and the work to elaborate further guidelines for companies operating overseas in the forest products trade should be continued. Awareness-raising initiatives for Chinese consumers should also be extended, in order to increase demand for verified legal wood-based products.

This paper is part of a broader Chatham House study which assesses illegal logging and the associated trade. 

The Vietnamese government has made some progress towards tackling illegal logging and the associated trade. It has negotiated a voluntary partnership agreement (VPA) with the EU, a process that has prompted a review of relevant legislation and improved the government’s engagement with civil society. In addition, it has signed agreements with Lao PDR and Cambodia in which it has committed to coordination on forest management and trade. However, there has been little progress in policy reform, and there is still no legislation regulating illegal timber imports.

There is a high level of awareness of illegal logging and associated trade within the private sector: Forest Stewardship Council (FSC) chain-of-custody (CoC) certification has increased rapidly, particularly in the furniture sector. But efforts are hampered by poor access to third-party verified raw material.

Both trade data discrepancies and analysis of trade flows indicate that illegal trade remains a serious problem. The volume of imports of wood-based products at a high risk of illegality is estimated to have increased since 2000, while its share in the volume of total imports of wood-based products gradually declined until 2009 and then increased slightly: they are estimated to have comprised 18 per cent of the total by volume in 2013.

In order to build on its response to illegal logging and related trade, the government should establish a legal responsibility for Vietnamese importers to ensure that their timber sources are legal. Furthermore, to increase domestic demand for legal products, it should establish a public procurement policy requiring the use of verified legal products. Within the framework of the VPA, broad and effective multi-stakeholder engagement will be vital to ensure that a robust timber legality assurance system is developed. In addition, proactive partnerships should be forged with high-risk supply countries to establish legality criteria and indicators that reflect the full scope of the relevant legislation in those countries.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

This assessment of the extent of illegal logging in Cameroon and the response to this issue suggests that progress has stalled since 2010. The reform of the legislative framework for the forest sector has yet to be completed; and while there have been improvements in the availability of forestry information, there remain many gaps. Furthermore, the principle of transparency has yet to be broadly accepted within the government. Enforcement is weak and information management systems are deemed inadequate. Most important, corruption remains widespread and the political will needed to drive change is felt to be lacking.

While there is evidence of progress in the private sector – the area of forests with legality verification and certification has increased – illegal activities are rife throughout the forest sector. Half of all timber production is estimated to come from the informal artisanal sector – mainly supplying the domestic market. However, illegal activities are also common in supply chains for export: timber originating from ‘small permits’ and sales of standing volume permits is thought to be particularly problematic. This is of particular concern, as the supply of timber from such permits is expected to increase owing to the growing pressure on forests from other sectors.

Since 2000 trade has shifted away from sensitive markets: the EU market’s significance as a destination for Cameroon’s exports of timber-sector products has decreased, while China’s significance has increased enormously. This has important implications for strategies on how best to tackle illegal logging in Cameroon.

In order to make further progress, markets for legal timber need to continue to be developed in key consumer countries – which, in the case of Cameroon, are now both the EU and China. Within Cameroon, further analysis of the political economy of the forest sector is required. Attempts to tackle corruption should be reinforced, and this would be facilitated by examining the experience of anti-corruption efforts elsewhere in the world. Further improvements to transparency are needed; the establishment of a new independent observer will be important in achieving this goal.

The next stages of legal reform will require broad consultation among stakeholders, in particular small-scale producers as well as local communities and indigenous peoples. Efforts to promote a legal domestic market should be intensified, including more extensive training and outreach for small-scale producers and processors. Finally, to improve enforcement efforts, continued investment in the training of enforcement agents and the provision of adequate resources are required.

This paper is part of a broader Chatham House study which assesses the global response to illegal logging and the related trade. 

There has been limited progress in tackling illegal logging and related trade in Malaysia since 2010. Widespread problems remain, particularly in the state of Sarawak. There are high levels of deforestation throughout the country: expansion of timber, pulp and agricultural plantations (including oil palm and rubber) is the main driver of forest loss.

Forest policy-making in Malaysia involves both the federal and state governments, but the states have prerogative rights to develop their own policies on land and forests. This poses challenges, not least since governance of the forest sector varies quite significantly from one region of the country to another.

The government has been negotiating a Voluntary Partnership Agreement (VPA) with the EU since 2007. Negotiations stalled for a number of years but resumed in 2012 without the participation of Sarawak. Concerns remain among stakeholders about the limited recognition of indigenous peoples’ rights by the government, as well as about corruption and the lack of transparency.

Awareness of illegal logging and related trade is increasing in the private sector, although the area of natural forest concessions certified as being under sustainable production remained virtually unchanged during the period 2008–12.

Asia is the major export market destination for Malaysia’s timber products. However, both the US and the EU import significant volumes of wood-based products from Malaysia too.

The Malaysian Anti-Corruption Commission (MACC) has recently stepped up investigating corruption in the forest sector. In Sarawak, an intensified focus on combatting illegal logging could signal a turning point for the state’s forest sector.

In order to build on its response to illegal logging and related trade to date, the Malaysian government should fully engage with the voluntary partnership agreement process and improve multi-stakeholder participation. Transparency in decisions about forest allocation needs to be significantly improved and greater recognition accorded to the rights of indigenous peoples.

More concerted efforts are required to tackle high-level corruption – for example, through strengthening the MACC. At the same time, the government should consider options for an independent monitor for the forest sector as a means of improving forest governance.

The aim of the meeting is to identify ways to improve monitoring of illegal logging and the trade in illegal timber. Building on the experiences of Chatham House’s project Indicators of Illegal Logging, the discussions will focus on the data needs of particular end users and methodological challenges for estimating levels of illegality. The potential for improved coordination and collaboration between global efforts to monitor trade flows will also be considered.

Attendance at this event is by invitation only.

• Clearance of forests for agriculture is a major cause of deforestation worldwide; the three most significant commodities in this regard are palm oil, soy and beef, which between them accounted for an estimated 76 per cent of the deforestation associated with agriculture in 1990–2008. International markets are an important driver of demand, particularly for palm oil and soy.
• Global production of palm oil has grown strongly for several decades, more than doubling over the period 2000–13. Indonesia and Malaysia between them account for more than 80 per cent of palm oil production, and are likely to continue to dominate world exports. The European Union (EU), India and China are the main consumers, importing almost 60 per cent of the market; EU demand is driven significantly by biofuel policy, while India and China use palm oil mainly as a cooking oil and in processed foods.
• Global production of soybeans has roughly doubled since 2000, and the expansion of output has been particularly rapid in South America; Brazil and Argentina accounted for almost 50 per cent of global production in 2013. Overwhelmingly the main importer is China (which took 43 per cent of all soy imports in 2014), mainly for animal feed for its growing meat industry. The EU is the second largest importer, using soy for animal feed and biofuel.
• In contrast, consumption and production of beef has grown only slowly. Major producers are the US, Brazil, the EU and China; principal exporters are Brazil, India, Australia and the US. The US and the EU are still major consumers, although – as in most developed countries – consumption is falling slightly; other significant consumers include Brazil, India, Pakistan and China. Russia and Japan are also significant importers.
• Three main factors underlie the growth in both consumption and production of palm oil and soy: population growth; changing dietary preferences; and policy support for biofuels. The first two are just as relevant to beef. Continued growth in world population and the expansion of the global middle class, with accompanying higher consumption levels of processed food and meat, will continue to drive demand upwards – strongly for palm oil and soy, more weakly for beef. Given the difficulty of increasing yields, particularly in developing countries, the further expansion of agricultural land into forest areas is inevitable. None the less, three other factors may restrict this growth: the private-sector commitments and government policies that are being developed with the aim of decoupling agricultural production from deforestation; a loss of support for biofuels, most notably in the EU; and health concerns, particularly over the consumption of palm oil and beef.

 

Recommendations

• Integrate chokepoint analysis into mainstream risk management and security planning - for example, government agencies should assess exposure and vulnerability to chokepoint risk at the national and subnational levels.
• Invest in infrastructure to ensure future food security – for example by agreeing on guidelines for climate-compatible infrastructure through an international taskforce established under the G20.
• Enhance confidence and predictability in global trade - for example, through a process under the World Trade Organization (WTO) to continually reduce the scope for export restrictions
• Develop emergency supply-sharing arrangements and smarter strategic storage, e.g. an emerging response mechanism among major players in the global food trade, modelled in part on that of the International Energy Agency in oil markets and led by the UN Food and Agriculture Organization (FAO), the UN World Food Programme (WFP) or the Agricultural Market Information System (AMIS).
• Build the evidence base around chokepoint risk - including through the collection of data on real-time food trade and infrastructural capacity to aid in assessing risks to food supply chains.

Further Reading

• Read more about chokepoints in global food trade at resourcetrade.earth
• Take a closer look at chokepoints and food security threats in an interview with a report author and experts in related fields
• Discover the 5 things you need to know about chokepoints
• Explore what the Qatar crisis tells us about food supply risk (in The New Arab)