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A Political Economy Perspective of UK Trade Policy

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Written by Dirk Willem te Velde, Massimiliano Cali

There is heated debate about the links between trade, development and poverty reduction. There are several accounts of how trade policies affect poverty in developing countries, but it is also useful to examine the case of how trade policies in developed countries such as in the UK affects poverty in developing countries and what type of actors affect such trade policies.
The debate in the UK is a rich one, with many different actors actively engaged. The UK government has put out several statements on UK trade policy and often this relates to what it thinks the EU should do, e.g. in WTO negotiations or in negotiations between the EU and ACP and other developing country regions, and how this affects development and poverty reduction. Key policy documents include DFID’s white paper on poverty reduction (DFID, 1997), DFID’s white paper on globalisation (DFID, 2000), the DTI’s white paper on globalisation (DTI, 2004), and most recently the trade chapter in the 2005 Commission for Africa’s report (CfA, 2005).

Important ideas behind these policy documents include the notion that trade liberalisation is important for growth and development and hence the potential to reduce poverty, but also that staged liberalisation is necessary, and that regions in the developing world should not be forced into liberalisation. Specific measures, such as Everything but Arms (EBA – duty-free and quota-free access to all of the least developed countries in the EU market), have been announced by the EC’s DG trade to encourage market access in the EU market for the least developed countries. Other measures, such as reducing the EU (export) subsidies on agriculture, which limit market access by developing countries (mostly middle- income countries such as Brazil, Thailand, etc.), have not yet been sufficiently addressed by the EC, despite the UK’s position on this. In addition, some issues have not been addressed satisfactorily (e.g. promoting the temporary movement of workers from developing countries, or promoting offshoring of services to developing countries).

The approach in this paper on the political economy of UK trade policy is to document the evolution of UK trade policy and discuss the views and roles of various interest groups. Trade policy does not evolve in a vacuum and it is therefore useful to survey the perceptions of UK trade policy by different actors such as NGOs, business, unions and researchers. Lobby groups range from sugar-producer groups to trade justice campaigns, unions and business lobbies. Key questions include: How do these groups perceive the UK’s trade policy and its link with development? What arguments have they put forward and how have they affected its formulation? And, how might they affect trade policy in the future?

This paper includes both a background to UK trade policy and a survey of the perceptions of it. It covers how the UK affects developing countries through international economic relations (Section 2) and how trade policies have been adopted and includes a detailed overview of what trade measures the UK government has put forward in its policy documents and what the government thinks about how the linkages between trade, development and poverty reduction are expected to work (Section 3). Section 4 examines the perceptions of UK and EU trade policies by UK-based NGOs and business interest groups. Section 5 discusses details of UK (EU) trade policy and its implications. Section 6 concludes.

Dirk Willem te Velde and Massimiliano Cali