first published 3 December 2010
UK government’s consultation on new trade policy
Evidence from The Corner House
by The Corner House
In early 2011, the UK government plans to announce a new trade and investment policy for the next five years. To inform this policy, it gathered perspectives at the end of 2010, on “UK trade and investment performance and potential, the role of government on trade issues, the impact of global developments, both economic and otherwise, and the course of UK trade policy.”
The Corner House submitted evidence about government support given to UK industry by the UK Export Credits Guarantee Department (ECGD). It stressed that taxpayer supported funds should be used to assist exporters, particularly at a time of economic recession, but that such support should:
– Not be provided to companies that are can obtain insurance and export finance through the commercial market;
– Be conditional on projects, for which export support is provided, meeting international environmental, social and human rights standards;
– Dovetail with domestic efforts to build a low carbon economy;
– Be directed towards supporting “sunrise” industries with long-term prospects within a low carbon global economy rather than “sunset” industries whose prospects are in long-term decline;
– Be available only to companies that pay taxes in the UK and that are committed to remaining in the UK rather than exporting production abroad.
The Corner House’s evidence contends that:
1. Successive UK governments have failed to provide the vast majority exporters with support, favouring instead a small group of politically well-connected businesses and banks and catering to their wishes at the expense of the needs of the majority. The Corner House urged the Government to target ECGD support towards small- and medium-sized enterprises (SMEs) and require ECGD to justify the extent to which its support for individual exporters contributes to long-term, sustainable job creation in the UK and to tax revenues.
2. The UK has failed to support a domestic low carbon economy and is missing out on export opportunities provided by the $3 trillion global market in low carbon goods and services. Instead of providing taxpayer subsidies for exports to fossil fuel projects abroad, such as oil pipelines and gas fields, ECGD should support exporters developing low-carbon technologies.
3. Efforts to boost exports by scrapping and weakening ECGD’s environmental and social safeguard standards will work against the long-term interests of the UK’s exporters, particularly SMEs and those involved in “green” goods and services, and could lead to companies breaking the law, with potentially adverse consequences for jobs. In May 2010, ECGD weakened its environmental and social due diligence procedures on the grounds that they had placed UK exporters at an international competitive disadvantage. The new rules mean that ECGD’s absolute ban on supporting child and forced labour is now ineffective. The Corner House believes that this policy is misplaced and that its previous screening and assessment procedures should be reinstated immediately for all projects.