Friday, 16 September 2016

Waiting for the new era of trade negotiations to begin

Deborah Mabbett

MPs are back from their summer holidays and demanding to know the government’s negotiating position on Brexit. Will the UK remain in the European single market? What special deal might be struck for the banking sector? The Prime Minister refuses to say, arguing that a successful negotiator does not reveal her hand. This response at least has the merit of acknowledging that the terms of Brexit have to be negotiated with counterparts who have their own preferences and constraints about a deal. Not acknowledged, however, is that the UK’s bargaining position is weak: the hand contains few cards of value. Once the clock is started, the UK faces the prospect in two years’ time of defaulting to World Trade Organisation (WTO) rules and bilateral agreements. This default position is dreadful for the UK, so a deal must be struck with EU partners.

Any agreement must satisfy conditions at two levels: other states have to sign up to it, and the public at home have to accept it. There is a well-known theory that a government going into negotiations under tight domestic constraints will get a better deal from its fellows than a government with a free domestic hand. This suggests that the UK government can firmly insist on restraints on free movement of people in its negotiations with the rest of the EU, as its hands are tied domestically. Other governments will have to give way if an agreement is to be reached.

Unfortunately, this logic is by no means impermeable. There are several strands to the negotiations. The UK has tied its hands on one: it is open to the counterparts to extract a high price on others. The highest price of all would be to exclude the UK from the European single market. Brexiteers have dismissed this prospect by pointing out that other countries want to trade with the UK, and so surely have reasons to strike deals. An often-repeated argument makes a virtue of the UK’s trade deficit: other countries sell more to the UK than the UK sells to them, and surely they want this situation to continue. For contemporary trade analysts, this mercantilist theory is bizarre, but it is so often repeated that it is worth taking seriously, at least for the purposes of this commentary.

Let’s start with the small kernel of truth in the argument. There are exporters in other countries for whom the UK is an important market, and they will lobby their governments to keep it that way. The UK market is very important to Irish exporters, although Ireland is hardly a powerhouse in the EU. German carmakers have also signalled their concerns, and they have a voice in Berlin. This might be helpful to the UK.

Sectoral interests are important in trade negotiations, but they do not add up like a trade balance. Indeed, the political weakness of domestic manufacturing has a detrimental effect on the UK’s bargaining position. If there was a significant domestic import-substituting industry that would benefit from protection, it would lobby for increased tariffs, and other countries might calculate that concessions needed to be made to fend off the threat. But there is no serious threat of large-scale tariff imposition by the UK. The fate of the steel industry tells us just how weakly domestic producers are placed. The Cameron government was a leading player in blocking a 2013 EU initiative to combat Chinese steel dumping, preferring instead to cultivate its relationship with China. 

In any case, industrial tariffs are so twentieth-century. Consider the case of the car industry. No UK car producer seriously proposes that the domestic industry would thrive behind tariff barriers. This sector, doing better than ever now in the UK, has grown with the advent of international value chains, whereby industries develop through their integration into world markets, not their separation from them. The trade economist Richard Baldwin has documented how, throughout the world, governments have recognised the redundancy of the ‘made here, sold there’ model of industrial trade.[1] Instead of trying to promote import-substituting industries with tariff protection, they have lowered tariffs to make themselves attractive bases in production networks. In the postwar years, the GATT was needed to begin the drive to lower tariffs through reciprocal agreements, but in recent years developing countries have joined the movement with unilateral reductions in tariffs on industrial trade.

Low tariffs on industrial trade are the easy part: the shallow waters of trade negotiations. All the action now is in so-called ‘deep’ agreements, which support integrated production networks by facilitating cross-border capital flows, protecting intellectual property rights, and enabling free trade in services and free movement of people. Deep agreements contain the problematic elements that progressive opponents of the Transatlantic Trade and Investment Partnership (TTIP) have highlighted, such as protection for international investors against ‘expropriation’ by host governments and expansive interpretations of the coverage of intellectual property rights.

Deep agreements are also problematic for Brexiteers. The UK has a large deficit in goods trade but a surplus in services. It follows, on the Brexiteers’ own logic, that the UK’s trading partners will do well enough from a shallow deal; it is the UK that needs deep agreements to promote its services sector and facilitate the inward investment that finances the trade deficit. This introduces elements which are anathema to Brexiteers. Free trade in services and liberalised migration regimes have proved to be closely linked. Service providers are also in global value chains where ideal locations not only have low tariffs but also easy access to specialised workers, transferred in from around the world.

The EU’s single market is the leading instance in the world of a regional deep agreement. Others, like NAFTA, Mercosur in South America and the South African Customs Union, endeavour to emulate some of its features. The United States has sought to make deep agreements through ‘mega-regional’ agreements in the Atlantic (TTIP) and the Pacific (TPP). So far, China and India are not members, and the hopes of Brexiteers rest heavily on the ability of the UK to conclude bilateral deals with these countries. Compared with an EU-China or EU-India negotiating process, the UK can be fleet-footed, or so the optimists believe.

The Foreign Office has briefed that it is studying the first free trade deal with a developed country to be struck with China, negotiated by New Zealand in 2008. New Zealand has had to maintain high expertise in trade negotiations, as agriculture has remained immune to the global tendency to reduce trade barriers noted by Baldwin. The suggestion that New Zealand, along with Australia and Canada, might lend trade negotiators to the UK had a whiff of urban myth about it, but has been confirmed in an official press release.[2] There are lessons to be learned from the New Zealand experience. Mega-regional agreements are highly formalised and legalised, with judicial institutions for settling disputes and secretariats to coordinate multiple country positions. Bilateral agreements stay in the world of intergovernmental diplomacy. Deals are often delicate and risky. The mood can change on a whim, and there are no promises that transactions will always be above-board. This is the relationship that the UK government will exchange for the tedious regularity of the European single market, where legal processes have often been used to secure British interests. And it seeks to make this exchange at a point when China’s growth has slowed and its industry is burdened by overcapacity, greatly increasing the risk of dumping.       

Returning to the Brexiteers’ misguided optimism about the UK’s current account deficit one last time: a deficit has to be financed with a capital inflow. In a turnaround from the days of Empire when the savings of the middle classes flowed out to investments in the colonies, the UK is now a vassal state in its search for capital. George Osborne knew that money could be found in China, and put a huge effort into negotiating inward investment. The essence of investment negotiations is that the receiving country makes promises to investors about the safety of their funds in the face of future government policy changes: in other words, it concedes sovereignty to encourage investment. We know very little about the promises that have been made to China – the doors are closed more tightly than in any negotiations involving the EU. The delay of Hinkley Point raised hopes that May’s government would be brave enough to step back, but these have been dashed. Yes, our own government is in charge, but it has the sovereignty of a peripheral, not an imperial, power.

    



[1] Richard Baldwin, ‘The World Trade Organization and the future of multilateralism’ Journal of Economic Perspectives Vol 30, No 1, pp.95-116, Winter 2016. (Open access journal)

[2] ‘PM: UK should become the global leader in free trade,’ Prime Minister's Office, 4 Sept 2016. (https://www.gov.uk/government/news/pm-uk-should-become-the-global-leader-in-free-trade)

Wednesday, 7 September 2016

Mr Cameron’s plan to teach English to Muslim women: lessons in policy implementation

Andrea Wigfield and Royce Turner

Introduction

Andrea Wigfield
Greeted by a storm of controversy, the government announced earlier in the year that it would spend £20 million on a programme to teach Muslim women to speak English. The then Prime Minister said this would contribute to ‘building a more integrated, cohesive, one nation country where there's genuine opportunity for people’. Women on five-year spousal visas who failed an English test ‘...can’t guarantee that they’ll be able to stay’. Stoking the political flames even higher, Mr Cameron suggested a possible linkage between an inability to speak English and an enhanced susceptibility to extremist messages.

Royce Turner
Regardless of this political tempest, however, for a policy to have any chance of achieving its objectives, especially complex ones like promoting a cohesive society and ensuring opportunity for all, a policy has to be successfully implemented. The design of policies, and how they are actually implemented on the ground, are fundamental in determining whether or not any policy is successful and there are many lessons to learn both from academic research and from previous initiatives to engage Muslim
women.

Context

One of the key elements in implementing this policy successfully is to recognise the marginalised position of many Muslim women in Britain. A lack of English, alongside other cultural, social, and religious factors, mean that many Muslim women may not be reached by traditional approaches to policy. Of course, accomplishing successful engagement of people from a different culture will pose challenges. But two projects, both conducted by government agencies, provide pointers as to how successful engagement, and policy outcome, can be achieved.

Learning and Skills Council research

The first, a research project for the Learning and Skills Council (LSC), in which 1,112 Pakistani and Bangladeshi women were consulted, constituted one of the largest in-depth consultations ever undertaken on Muslim women’s attitudes towards paid employment, education, the barriers they face, and their aspirations. The women spoken to shared great similarity to the women the government is seeking to reach with its new language initiative. The majority spoke English, but the level of competence varied greatly, from those who were fluent to those who could speak only a few words. Quite a lot had never worked; many had little or no formal education.

Jobcentre Plus employability initiative

The second project was a Jobcentre Plus employment training initiative targeted at ethnic minority women facing multiple barriers to paid employment : poor English; caring responsibilities; objections from family, friends, community members. Very few had ever worked; confidence and self-esteem was very low. Yet the project surpassed all Jobcentre Plus targets: many participants applied for jobs, or other training, two of them actually entered employment.

Multiple barriers

What did the LSC and the Jobcentre Plus work show us? Firstly, the extent of the barriers that face many Muslim women. Lack of English was a major issue for many. A lack of language curtails engagement, interaction, employment. Another barrier is education, or lack of it. About 11 per cent had been educated to at least degree level. But these were far outnumbered by women who had little or no formal education and had not been to school at all, or who had been to school, and had gained qualifications, but who were not permitted to continue their education beyond a certain level. There are other cultural factors which impinge on any inkling of entering work. Peer pressure, for example, particularly affected older, first generation, migrant women, who came here up to forty years ago, who were sometimes viewed almost as outcasts if they took up a job.

Such cultural differences, and the isolation from the rest of society fostered by them, manifest themselves in a host of ways which make engagement with others outside their own community more difficult. In the Jobcentre Plus project, for example, some women were not sure when it was appropriate to shake hands, or when to look or smile at someone they did not know. This is why so much of that pioneering project focused on life planning, confidence building and, crucially, used mentors, drawn from the communities the women themselves belonged to, alongside delivering the ‘traditional’ job searching advice, on where and how to find a job.

Key Lessons for implementation

What are the lessons for policy implementation? How can this help us in relation to ensuring success for the new initiative to teach women English? The first important lesson is to make sure that there is pro-active recruitment. You can’t expect women who may have spent decades without any engagement to suddenly start volunteering to sign up. You have to go and find them; let them know what is going on, where. The second lesson is about maintaining attendance. Even if you’ve signed people up, you’ve got to keep them coming. Again, the lesson from the Jobcentre Plus project was that a pro-active approach was needed. The location of the training session is important too. The sessions need to be close to home, in ‘non-threatening’ places such as community group venues, to ensure that participants, who often lack confidence, feel comfortable and, through this, to maximise attendance. The Jobcentre Plus project recognised also the importance of a tailored, individualised approach to helping women. When people are at such a distance from employment, or in the case of the government’s new initiative, at such a distance from fluency in English and social engagement, they cannot be herded as one towards a learning destination.

Recognising the social context in which people live their lives, and responding to that in a supportive and appropriate way, is crucial if the opportunity to deliver what is potentially a hugely rewarding educational intervention is to be seized effectively. If it is, the beneficiaries could be manifold and will cross all communities.


The full article, Mr Cameron’s new language initiative for Muslim women: lessons in policy implementation, can be seen in the Political Quarterly, volume 87, number 3.

Friday, 2 September 2016

The forgotten Geordie revolt of 1977 – and its lessons for the UK today

By Iain McLean

Iain McLean
A long time ago I was a Labour councillor who inadvertently brought down the 1974-9 Labour government. The government could only have lasted a few weeks longer in any case, so I have no regrets. The story deserves retelling, because it has important lessons for today.

The Labour government elected in 1974 was the first to realise that it faced an existential threat in Scotland. The Scottish National Party (SNP) won 30% of the vote, but only 15% of the seats, in Scotland in October 1974. The Labour Party’s leaders had forgotten Keir Hardie and Ramsay MacDonald, who both started in politics as campaigners for Scottish home rule. After 1945, Labour became the party of the welfare state, understood to mean equal rights and standards everywhere in Britain, and accordingly hostile to devolution to Scotland or anywhere else. The 1974 election results changed this abruptly. Labour suddenly (re)discovered its enthusiasm for Scottish home rule.

But its plans were radically flawed. They offered an elected assembly for Scotland, and, as usual, for Wales as an afterthought. The assemblies were to be elected under first-past-the-post, which might have helped to ensure Labour’s hegemony. More important, they proposed no change at Westminster, nor in the arrangements for taxing and spending in Scotland and Wales. So, Scotland and Wales would retain their full-strength complement of MPs, slightly more than their population shares, and two assemblies with no obvious jobs except to protect their tax-and-spend arrangements, which were highly favourable to Scotland although not to Wales. Scotland received more public spending per head than its relative need warranted, for reasons that go back to 1888. Then it was (almost all) about Ireland. The Unionist government of Lord Salisbury wanted to ‘kill [Irish] Home rule with kindness’ and it guaranteed Ireland and Scotland a share of some tax revenue. This ‘Goschen proportion’ was 80:11:9 to England (with Wales: E&W), Scotland, and Ireland respectively. The Goschen proportion survived Irish independence in 1921. Every Secretary for Scotland could demand 11/80th of E&W spending of every social programme, as a floor not a ceiling. When an argument of remoteness or deprivation could be added, then Scotland would claim more than its Goschen proportion, even as its relative population declined to below 11 80ths of that of E&W.

Reliable public spending numbers were published in 1973 and 1977. They showed that public spending in Scotland was higher than in the poorer English regions, including the North of England, although income per head was lower in those regions. The newly formed Tyne & Wear county council took an interest. I was an elected member, and served as vice-chair, then chair, of its economic development committee. Together with the leader and chief executive of the council, I helped to organise a conference to draw attention to this disparity. We were denounced as the ‘No-men of England’ in a Scotsman splash by Neal Ascherson, the well-known Scots public intellectual. Tyne & Wear linked with the other newly-created metropolitan councils in the English conurbations and found an ally in Merseyside County Council, where the relativities were the same – poorer than Scotland but getting less per head in public expenditure. The two councils lobbied their Labour MPs to vote down the government’s flagship Scotland and Wales Bill. This they did, in February 1977. The bill limped on as separate bills for Scotland and Wales. Later backbench revolts, not due to Tyne & Wear or Merseyside, added the requirements, first for a referendum on the Assemblies, then for a threshold for a ‘Yes’ vote to become effective. In the ensuing referenda, the proposal for a Welsh Assembly was defeated. That for a Scottish Assembly was carried, but failed to reach the threshold.

The Conservatives and SNP called a vote of no-confidence in the Callaghan government, which lost by one vote, forcing (a few weeks early) the 1979 General Election that brought Margaret Thatcher to power, and killed Scottish devolution for 18 years.

When we called the conference, we did not anticipate that train of events. But I do not apologise for it. A party that cares about post-tax incomes, as the Labour Party does, should ensure that similarly-situated citizens anywhere in the country get similar life chances. That was the original premise of the Welfare State, going back to 1909. As between Scotland and the north of England, it was not honoured in 1977. Unbeknownst to us, the Treasury was then introducing the ‘Barnett formula’ that was designed to reduce this disparity. It has, but only by a little.

The Scotland Act 1998 created the present Scottish Parliament. It has many admirable features, but it did not touch the issues that led to the Geordie revolt. The Scotland Acts 2012 and 2016, however, could provide the solution, and Scottish independence certainly would. The two Acts take steps to match, for the first time, the pleasure of spending with the pain of taxing, and put them both in the hands of the Scottish Parliament. Independence would of course mean full fiscal autonomy. Short of independence, any fiscal settlement must be fair to all four territories of the UK. At that level, Scotland and Northern Ireland do well; England and Wales do badly. Within England, the formulae for distribution are opaque and their relationship to need and tax capacity is obscure.

England is the hole in the UK devolution settlement. As it contains 85% of the UK’s population, the hole is bigger than the fabric. Whether or not Scotland becomes independent, the UK government will need to bring in a more robust regime for the governance of the regions of England, and to ensure that the tax-and-spend regime is both transparent and fair. The lessons of the Geordie revolt are with us yet.

You can read the full article here.