Britain’s Trade and Aid Policies After Brexit – Neo-liberalism Goes Mad

By Mark Curtis

Published in the Huffington Post, 6 December 2016

A picture is emerging of likely British trade and aid policies towards developing countries after Brexit. That picture is just as disturbing as two other likely consequences of Brexit that I detailed in my previous article – a deepening of relations with authoritarian regimes and a new era of military power projection. Together, these policies indicate that Britain will try to lead the world not in promoting human rights or economic diversity but in championing a hardline, neo-liberal economic order benefitting British and Western corporations.

First, the big policy constantly highlighted by the government since the June referendum is its role as the ‘global leader’ for free trade. Prime Minister Theresa May has said:

‘The UK will remain the most passionate, consistent and convincing global advocate of free trade. We will seize the opportunities of our departure from the EU to forge a new role for the UK in the world’.

Trade Minister Mark Garnier says that policy is to ‘ensure that Britain becomes the global leader in free trade once we leave the EU’.

This championing of free trade refers not only to developed countries but also to the poorest and developing countries. Britain will ‘drive even greater openness with international partners’ including the Commonwealth.

While free trade can benefit countries of high, similar levels of development, the idea that free trade is the route to ending poverty in developing countries takes us back three decades. In the 1980s, ideologues in Washington and London began pushing neo-liberal economic policies on the poor, arguing that opening up their markets, privatisation and deregulation would increase their competitiveness. The result has largely been a disaster, with cheap imports undermining local industry and agriculture, putting fledgling companies out of business and undermining local economic development. Robert Pollin, an economist at the University of Massachusetts, estimates that developing countries lost roughly $480 billion in potential GDP as a result of this so-called ‘structural adjustment’.

While free trade for developing countries is now often ridiculed around the world, Britain’s International Trade Secretary, Liam Fox, is a passionate advocate. Fox has recently given two extraordinary speeches extolling the wonders of free trade. In September, Fox told an audience at the World Trade Organisation in Geneva that free trade was a panacea for the poor, saying that Britain would ‘carry the banner’ for it, and that:

‘Just look at the effect on the populations of developing countries that have started down the path of opening up their markets, and ask yourself whether there has been a greater emancipator of the world’s poor than free trade. The glorious thing about free trade is that if the conditions are in place to allow it to flourish, no-one needs to lose out.’

A few days earlier, he told an audience in Manchester that the development success of countries such as China and Vietnam was all down to free trade.

These views are completely at odds with the historical record. There is a large literature showing how East Asian countries have spectacularly reduced poverty in recent decades – and it was not by free trade. The first reason was by pursuing land reform, which in China’s case involved reintroducing household farming alongside government policies to maintain prices and provide guaranteed markets for farmers’ produce – policies that are largely opposed by neoliberals like Fox for interfering in markets.

The second main reason for Asian success has been policies of state intervention to nurture and develop domestic industries. This often involved imposing protectionist trade barriers to keep out foreign competitors, at least until the point when those industries were strong enough to compete in world markets. Again, these policies of state intervention are largely heretical to neoliberals.

The government says it will ensure that developing countries can reduce poverty through trade and that the possible impacts on poverty will be ‘taken into account’ in UK trade policy. But it has provided no detail on this, and the only real way to genuinely take poverty concerns ‘into account’ would be to learn the lessons of history and abandon support for free trade as a model. Yet the government is beginning to embark on negotiating a series of trade deals with developing countries, preparing for the UK’s exit from the EU, which are likely going to press for this simple free trade model.

As for aid policy, the outlook is also that this will increasingly promote corporate interests and Fox’s neo-liberal economic policies, already key features of much of Britain’s ‘aid’. International Development Secretary Priti Patel has called for ‘reform of the global aid system’ and suggested that this should be based on ‘core Conservative principles’ , saying that this entails focusing on wealth creation. The government’s aid review, published last week, fails to mention that multinational corporations might just be a problem in international development and that they should be regulated in any way. The review simply says the UK will ‘forge stronger partnerships with business’ and calls on developing countries to increase foreign investment. Neither does the review even mention the UK-controlled tax havens that are draining developing countries of wealth. The government clearly sees aid as a foreign policy tool. The aid review states:

‘Our aid increases the UK’s influence and soft power around the world and we will use this influence to build mutually beneficial relationships with developing countries. Our work provides us with a seat at the top table in many developing countries. We will not be shy about using our influence to drive reform.’

Britain is already leading the world in using aid to push for the increasing privatisation of health and education in developing countries. The Department for International Development (DFID) is spending £38 million promoting private schools in Nigeria, Kenya and Pakistan. Encouraging private education is controversial and is widely criticised for undermining public education, yet DFID backing appears to be part of a strategy to ‘normalise’ the privatisation of public services in developing countries, opening up new markets for private education providers, in which UK companies are world leaders. One such company, Pearson, actually has a Director – Vivienne Cox – on the board of DFID, which is surely a conflict of interest. DFID has made clear that it will continue providing support to schools ‘regardless of whether the school is public or private’.

Priti Patel is also promoting a major overhaul that would allow billions of pounds of aid to be channelled into the government’s controversial private equity arm, CDC Group. DFID is proposing to increase the limit on support the government can give to CDC from £1.5 billion to £6 billion. CDC invests in corporations overseas and has been widely criticised for its executives’ expense claims on luxury hotels and restaurants and for its use of companies established in tax havens in order to make investments.

DFID is also likely to continue to support the interests of corporations in global and African agriculture through its extensive funding of the New Alliance for Food Security and Nutrition. And it is almost certain to continue its opposition to establishing legally binding commitments on companies to respect human rights globally in favour of inadequate, voluntary mechanisms by companies themselves.

Patel has suggested that aid might be used to promote post-Brexit trade deals with developing countries. Indeed, she sees UK aid as part of the country’s ‘soft power’, implying that aid is a tool in Britain’s wider policy agenda:

‘British soft power is exactly where DFID and our aid and other relationships around the world, come together to deliver in our national interest and deliver for Britain when it comes to free trade agreements but also life post-Brexit’.

Unless there is a serious challenge, Britain is set to increasingly promote a failed model of international trade that will impoverish developing countries still further. It will also likely pursue an aid strategy that supports corporations, neo-liberal economic objectives and wider British foreign policy.

Mark Curtis’ new briefing for Global Justice Now – Dreaming of Empire? – is published here