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. 

Summary

• Multilateralism may, in theory, put countries on an equal economic footing. But in practice the concept has often relied on an anchor government to create and preserve global norms. Under the presidency of Donald Trump, the US has accelerated its move away from leadership in global economic governance. This shift threatens the monetary and trading systems that have long underpinned globalization. Does the global economy need – and can it find – another leader to take America’s place?
• In the monetary sphere, the US role in providing an internationalized currency has endured relatively well, even though the US’s formal anchoring of the global exchange rate system collapsed nearly half a century ago. Governance of the US dollar and of the dollar-based financial system has largely been left to competent technocrats.
• Recent US political uncertainty has encouraged other governments, particularly in the eurozone and China, in their long-standing quest to supplant the dollar. But these economies’ internal weaknesses have prevented their respective currencies from playing a wider role. Arguments for a multipolar system exist, yet network effects plus the dollar’s superior institutions mean it has retained its dominance.
• In trade, the US role as anchor of the global legal order was already looking unreliable before Trump’s election. Washington has faced growing resistance at home to its global responsibilities. This, together with the idiosyncratic rise of countries such as China, has made the US an increasingly unreliable and narrowly transactional leader.
• More recently, hard-to-regulate issues such as foreign direct investment, technology transfer and data flows, often with national security implications, are increasingly undermining the ideal of multilateral global governance. Institutions such as the World Trade Organization, focused on cross-border trade in goods and services, are becoming less relevant.
• Recent US actions against the Chinese technology firm Huawei show the Trump administration’s willingness to decouple the US market from China and try to drag other economies with it. As far as possible, other governments should resist taking sides. A complete separation of the global economy into rival spheres is probably unfeasible, and certainly highly undesirable.
• Although future US administrations may be less wantonly destructive, it is not realistic to expect them to resume America’s former role. Nor can the US simply be replaced with another power. Instead, coalitions of governments with interests in international rules-based orders will need to form. These coalitions will need to show due deference to issues like investment and national security, especially where attempts to bind governments by multilateral rules are likely to provoke a severe backlash from domestic constituencies.

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. 

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.

Following the US strike on Qassem Solaimani and Abu Mehdi al-Muhandis, populist cleric Muqtada al-Sadr has violently cracked down on youth-led protests in Iraq.

His paramilitaries and ‘blue hats’ –  supposedly created to protect protestors from state and allied parastatal security forces – sought to end the months-long demonstrations by attacking the places where protesters have camped since October. In Baghdad’s Tahrir Square, they successfully captured the famous Turkish restaurant which had become a symbol of Iraq’s ‘October revolution’. 

Once the champion of Iraq’s protest movement, Sadr has seemingly changed course and now leads the counter-protests. This reversal has mystified many, from Iraqis who saw Sadr as an ally in their struggle for reform against an impenetrable elite to foreign diplomats who hoped Sadr could help pushback against Iranian influence in Iraq. 

Yet this is not the first time that Sadr has drastically redefined his position. Since 2003, he has gone from Shia sectarian militia leader to pro-democracy reformist and Iraqi nationalist.

And in the past few months, he has given mixed signals, both supporting and criticising the protesters. The most recent incidents of Sadrist violence targeting demonstrators provoked a societal backlash, prompting Sadr to change tack once more and announce that he would disband the blue hats and investigate their crimes against protesters.

Sadr and the paramilitaries

Sadr’s latest change of course may seem to flow directly from the US assassination of Qassem Soleimani and Abu Mahdi al-Muhandis and the ensuing vacuum in the Shia paramilitary sphere. Prior to this move, the Sadrists were on the defensive, outflanked and outgunned by the growing coercive and political power of a constellation of Shia armed groups coalescing under Muhandis’s de facto leadership. Many of these groups competed for Sadr’s base, including Qais al-Khazali’s Asa’ib ahl al-Haq and Akram al-Kaabi’s Harakat Hezbollah al-Nujaba.  

With Muhandis out of the picture, Sadr could reclaim the space by pushing his own right hand, Kadhem al-Issawi (Abu Do’a), to be the new centre of the paramilitary field and forcing competitors, including Khaza’li and Kaabi, to rally around his leadership.

Iran, in the short term, appears to be going along with this solution to bring more coherence to its allied forces in Iraq as it seeks to counter what it regards as US aggression. Iran also hopes that bringing Sadr back in will help neutralize the protest movement which threatens its stake in Iraqi politics. 

The most visible sign of this Iran-brokered rapprochement was the 13 January meeting in Qom attended by Sadr, Issawi and several senior militia commanders including Laith al-Khazali (Qais al-Khazali’s brother). 

Following the Qom meeting, a pattern of tit-for-tat violence and assassinations between the Sadrists’ Saraya al-Salam and Asa’ib Ahl al-Haq – ongoing since the start of the October protests in Iraq – ceased.

A fragmented movement?

However, while the US strikes certainly changed Sadr’s political calculations, there are more persistent fundamentals at work that help explain his change of course. The first of these relates to long-standing fragmentation within the movement. This exists not only within Sadrist paramilitaries, but within the movement’s clerical networks, and also applies to the ties that bind the Sadrist leadership to its popular base. This fragmentation makes it difficult for Sadr to impose a coherent politics on his followers from the top down.

There are signs that Sadr’s recent shift in position has exacerbated this fragmentation. His attempt to reposition the movement’s base within the ‘resistance axis’ that supports the Shia militias in Iraq has only been partially successful. On 24 January, responding to the US assassinations, Sadr called for a million-man march focused on expelling US forces from Iraq. However, turnout was poor, especially given the huge logistical support for the march, and it lasted only a few hours.

Equally revealing, when Sadr called on his supporters to vacate the squares, many refused. One Sadrist protester in Baghdad’s Tahrir Square told the authors: ‘We’ve been camping with our brothers and sisters for four months. Why should we leave them to die?’

Meanwhile, fissures have also opened up within the Sadrists’ clerical elite. One senior Sadrist cleric, for example, is openly defying Sadr’s authority and siding with the revolutionaries in Nasiriyah. 

Sadr’s attempt to dominate the paramilitary sphere is also unlikely to prove any more successful than his many previous failed attempts since 2003. He is neither trusted nor respected by the leaders of other groups. The Iran-brokered rapprochement is already showing signs of weakness. Two recent assassinations of Saraya al-Salam leaders in Basra and Maysan indicate a potential renewal of power struggles between the Sadrist militia and Asa’ib Ahl al-Haq.  

Sadr is not a revolutionary

Sadr has never been a revolutionary, but someone who seeks to leverage a role as both ‘spoiler’ and ‘stabilizer’ to maximise his political leverage. This strategy is ultimately oriented towards sustaining Iraq’s extant political system, not its overthrow. Forced to choose between the roles of revolutionary or maintainer of the status quo, he has opted for the latter. 

The protests that erupted in 2019 were not the same movement that Sadr led from 2015. The 2015 protests were an elite-driven phenomenon, integrated into the political field and carefully calibrated to exert pressure on the elite towards gradual reform. 

By contrast, the 2019 demonstrations spring from a youth-led, bottom-up mobilization that rejects politicization and seeks a more radical form of change. Chatham House surveys in a forthcoming paper reveal that the protesters are younger that those who protested in 2015-16. Fewer have permanent employment. Instead of demanding better services or jobs, they are focusing wholesale transformation of the post-2003 political system.

A Sadrist official told the authors that their movement initially joined the protests in October 2019 expecting a similar reform-orientation to the protests which Sadr had previously led. However, according to him, the protesters failed to come forward with reasonable demands or alternative names for prime minister. He believed the protests would fade, and many would regret the ‘wasted time and blood’. 

Sadr’s relations with Iran

A final long-term factor at play is Sadr’s receding autonomy from Iran. Ever since his movement’s electoral victory in May 2018, Sadr came under enormous pressure to reconcile with the political wing of the Iranian-allied parastatal armed groups in the formation of a new government acceptable to Iran.

Over the last year, Sadr has moved even closer to Iran, spending more time in Qom. Iran has offered Sadr security from his paramilitary rivals (such as Asa’ib ahl al-Haq), convincing Sadr that he is safer in Iran than Iraq. Moreover, Sadr is undertaking religious training in Qom, and may see this as a chance to enhance his standing in the Shia religious field as many look towards a future beyond the elderly Najaf-based marja Ali al-Sistani.

By keeping Sadr in Qom, Iran appears to be trying to isolate him from what they regard as negative influences. As tensions between the Sadrists and other protest groups intensified, efforts were made by some protest leaders and allied political groups to reach Sadr in Qom and try to persuade him to change course or restrain the worst abuses of his forces. However, this delegation was unable to make contact with Sadr. Those involved told the authors they have resorted to communicating with local Sadrist leaders in Najaf, Babil, Basra and Baghdad. 

Crossing a line

This is a transformative moment for the Sadrists. Sadr is now defying the popular sentiments driving protests across central and southern Iraq. The sense of betrayal among former allies and friends of the Sadrists is palpable. One senior activist involved in cooperation with the Sadrists wrote that, no matter what moves Sadr makes next, the cleric has ‘terminated all partnership with the protesters,’ and ‘shattered the framework for cooperation’. A line has thus been crossed that Sadr cannot reverse; he will not be able to recover what he has now lost. 

Iran, also, does not see Sadr as a dependable ally, and will look to isolate and side-line the cleric when the opportunity arises. Thus, in seeking to exploit a crisis for short-term gain, Sadr may well have sealed his fate – in the long term – as a declining force in Iraqi politics.

In the face of the COVID-19 pandemic, many global leaders have invoked war analogies – from the Pearl Harbor attack to the collective spirit on display during the Second World War – to highlight past lessons learned or rally their populations.

For Iran’s leadership, more recent war analogies hold resonance and help explain the ideological and political conundrum limiting an effective COVID-19 response. While the Islamic Republic has weathered a multitude of challenges, COVID-19 is putting unprecedented strain on Iran’s already fragile, heavily-sanctioned economy and further exposing domestic political fissures amid ongoing international tensions.

Iran has been identified as the regional epicentre of the pandemic with a steadily rising number of deaths, including several of the country’s political and military elite. Yet the Iranian government has not evoked the collective memory of the war as an opportunity for national resistance and mobilization.

Sluggish and poorly managed

This is unsurprising, because thus far the Iranian government’s response to COVID-19 has been sluggish and poorly managed. After an initial slow response, Iran then attempted to downplay the impact of the virus, covering up the number of cases and deaths and blaming the United States, before implementing a poorly coordinated action plan marred by government infighting.

For the Iranian leadership, the Iran-Iraq war has been the single most influential and defining period – it has impacted its political ideology, domestic and security policies and international relations. More than half a million Iranians died, and a paranoid worldview and sense of isolation was cemented among many elite leaders such as Supreme Leader Ali Khamenei.

The war created a valiant culture of leadership from Qassem Soleimani to presidents Mahmoud Ahmadinejad and Hashemi Rafsanjani and, over time, has resulted in the development of Iran’s asymmetrical defense capabilities.

The war enabled a dark purge of political opponents and the gradual birth of Iran’s reformist faction, all while the ethos of sacrifice and martyrdom was linked to the collective notions of resistance.

These would be carried forward in other resistance campaigns both regional and economic. Most defining was Ayatollah Khomeini’s infamous 1988 decision to ‘drink the poisoned chalice’ and end the long war. Three decades later, Iran continues to contend with those outcomes.

To acknowledge that the COVID-19 crisis could have equally profound consequences would add further pressure to the Islamic Republic at a time of incomparable vulnerability. Even before this crisis, the Iranian government linked sanctions to economic warfare, making future negotiations conditional on sanctions relief.

Iranian hardliners used the opportunity to promote Iran’s subsistence-based resistance economy designed to insulate Iran’s economy from external shocks such as sanctions. While both groups recognize the economic urgency, their contending strategies help explain the muddled government response and the ongoing ideological competition between the political elites.

Rouhani has argued that a full lockdown of the Iranian economy is impossible because it is already under significant strain from sanctions - the Iranian economy experienced a 9.5% contraction in 2019 and is expected to worsen in the coming year.

That said, through Iran’s New Year holidays the government did take action to slow the spread of the virus, discouraging travel and shutting schools, pilgrimage sites and cancelling Friday prayers. Finally, on 4 April, after receiving permission from Khamenei to do so, Rouhani withdrew $1 billion from Iran’s National Development Fund and is distributing the money through loans and credits to 23 million households.

Aid from a number of Iran’s parastatal agencies was also announced. Conversely, in his annual New Year’s speech the supreme leader securitized the crisis by laying blame on the United States for spreading the virus as a form of biological terrorism. Iran’s army chief of staff Major General Bagheri was tasked with building hospitals and the Islamic Revolution Guard Corps given authority to clear the streets.

The recent expulsion of Médecins Sans Frontières from Iran highlights the mix of paranoia and resistance culture still on display. US sanctions on Iran have significantly weakened Iran’s economy and limited Tehran’s ability to purchase much needed medical supplies and equipment. Unable to access its foreign reserves due to sanctions, the Rouhani government has applied for a $5 billion loan from the IMF.

European countries alongside a number of US members of congress have appealed to the Trump administration to ease sanctions on humanitarian grounds. While Washington continues to pursue its steadfast approach, referring to Iran’s campaign as a ‘sanctions relief scam’, Germany, France, and the UK have offered $5 million in aid and launched INSTEX – a trading mechanism designed to circumvent sanctions to allow non-sanctioned humanitarian trade.

The impact of coronavirus on Iranian society remains to be seen. But the impact of sanctions has placed heavy economic and psychological burden on the people. Feeling abandoned by the Iranian state and the United States could produce a mix of contradictory nationalistic and independent impulses.

The social contract – already fragile amid protests and government repression – reveals declining trust. Without national mobilization and calls for unity reminiscent of the war period, Iranians have stepped in, highlighting the continued resilience of civil society. Support for the medical establishment has been celebrated throughout the country and on social media. Charities, the private sector - through one initiative known as Campaign Nafas (Breathe) - and diaspora groups have initiated fundraising drives and assistance measures.

Iran’s relations with the international community, and specifically the United States, remain an unresolved consequence of the war. The 2015 Iranian nuclear agreement was the closest Tehran and Washington came to resolving decades of tensions, containment and sanctions.

COVID-19 has further heightened the trajectory of tensions between Tehran and Washington suggesting that any new deal, while necessary, is not on the cards. Tit-for-tat military exchanges have been on the rise in Iraq and Yemen while American and Iranian leaders issue threats and warnings of potential escalation.

Abdullah Nasseri, an advisor to Iran’s reformists, recently stated that in order to manage the coronavirus crisis, the Iranian government needed to make a decision akin to the 1988 United Nations resolution 598 that ended war hostilities. Ayatollah Khomeini famously commented on that ceasefire, stating: ‘Happy are those who have departed through martyrdom. Unhappy am I that I still survive.… Taking this decision is more deadly than drinking from a poisoned chalice. I submitted myself to Allah's will and took this drink for His satisfaction’. 

While a similar compromise today might appear deadly to the political establishment, it is clear that a paradigm shift away from the shadows of Iran’s last war is urgently needed to manage the challenges stemming from COVID-19.