As one of the major international commercial nations UK trade policy has immense implications for lives and prosperity both domestically and abroad. International trading rules can affect issues as diverse as human rights, development and the environment.

Trade policy is broadly speaking conducted under the Royal Prerogative (though export controls are governed by an act of Parliament, see below), which enables ministers, amongst other activities, to conduct diplomacy and reach and implement international agreements – or join international organisations – without a formal requirement to seek parliamentary approval, unless alterations to domestic legislation are required. Click here to view a description of the Royal Prerogative provided by the government to the Commons Public Administration Select Committee (PASC) in 2003.

The departments with a primary interest in international trade policy are the Department of Trade and Industry; the Department for International Development; the Foreign Office. The Prime Minister’s Office also plays a part.

As a member of the European Union the UK is a participant in a customs union – meaning generally a single market between it and other EU states, with which it has common external tariff arrangements. Put simply the EU, one of the major world blocs, negotiates with other bodies on behalf of all its members, who are unable to enter into their own separate agreements. The ability of Parliament and other elected representatives to ensure some kind of oversight of EU trade policy is therefore critical to the democratic content of trade policy.

The 732 directly elected members of the European Parliament provide scrutiny at European level. Ministers are in theory accountable to the UK Parliament for their participation in intergovernmental EU talks. But there are difficulties with this concept because responsibility for unpopular decisions may be passed to other participants in the negotiations.

Oversight of the European institutions itself can appropriately be conducted at arm’s length since the EU has its own scrutiny mechanisms, including the European Parliament. National level scrutiny is conducted by a variety of parliamentary committees including the House of Commons the European Scrutiny Committee and Foreign Affairs Committee; and in the Lords the seven EU subcommittees. There are a number of general weaknesses to this system. The volume of business is overwhelming; there is no coordination mechanism between committees for the scrutiny of ministers attending negotiations; and there is a broader lack of cooperation between committees.  For  more detail, go to Europe page

The UK participates in a variety of international organisations with implications for trade policy. Most significant of these is the World Trade Organisation (WTO), which developed out of the 1948 General Agreement on Tariffs and Trade (GATT). The WTO is the organisation with responsibility for negotiating, establishing and enforcing the rules that govern trade between nations. These occur in phases or “rounds”, the most recent being the “Doha round” with an emphasis on development, which began in 2001 and recently collapsed.

Britain is a member of the WTO bur it is the EU trade commissioner who takes part in WTO negotiations on behalf of all EU member states. However UK representatives attend WTO talks in force. The WTO has been criticised as an aggressively liberal organisation, levelling down workers’ rights and environmental standards. Its impact in the UK – though not perhaps as great as in other countries – can be detected in the decline of certain traditional industries, such as textiles, which depended on the protection they previously enjoyed.

Parliamentary scrutiny of the WTO is problematic, partly because it is carried out at two stages removed – through ministers participating in EU bargaining leading in turn to the WTO negotiations. Ministers regularly provide written statements to the House regarding the WTO. In the past decade there have been more than 500 parliamentary questions on issues relating to the WTO, indicating a high level of parliamentary interest.

In the Commons the Trade and Industry Select Committee has responsibility for the WTO but has not recently carried out an inquiry into it; though it took evidence from the then Trade and Industry Secretary, Patricia Hewitt, in 2003 following an international ministerial meeting.

The Commons Foreign Affairs Committee (FAC) pays no attention to the WTO.

The International Development Committee has produced reports on the WTO in 1999 and 2003, due to the focus on international development in the Doha round of trade negotiations. Such an initiative is a good example of mainstreaming of international policy. The International Development Committee was able to place the discussions at the Doha negotiations into the broader international development context. 

The House of Lords European Union Sub-Committee A has also investigated the Doha round within the context of the European Union leading the negotiations.

As a member of the EU the UK cannot conclude bilateral trading agreements. But it can decide not to permit the sale of certain goods to particular countries; and promote trade on a bilateral basis. The Export Control Act 2002 sets out the criteria upon which decisions are made to allow or prohibit sales.  The main purpose of the Act was firstly to place this regulation of trade on a statutory footing, following the Scott report on arms sales to Iraq and Iran, but primarily to regulate the arms trade, to prevent the development of weapons of mass destruction, to uphold human rights and to pursue policies of sustainable development.

Controls under the Act are placed in accordance with European-level decisions and other international obligations, such as adherence to UN Security Council resolutions; but other restrictions may be imposed as well. The stakes are high – if the wrong items find their way into the wrong hands, they can be used for brutal repression, or in armed attacks on citizens of the UK or its allies.

Any secondary legislation – that is changes or additions to the Act itself – must be approved by both Houses of Parliament in 40 days. The Trade Secretary is required to report annually on the workings of the Act – but these reports are already taking longer than a year to appear and have been criticised as lacking in detail.

Parliament has had some success in holding the government to account over bilateral trade policy. The FAC forced the Foreign Office to alter statements it made over the arms to Africa scandal in 1998. Since 1999 a Quadripartite Committee/Strategic Export Controls Committee has functioned in the Commons, drawn from the Defence, Foreign Affairs, International Development and Trade and Industry committees, producing annual reports. It has a strong record of raising human rights concerns about the possible end use of items. On some occasions it has met with obstructions when seeking information as part of its inquiries, including non-cooperation from official witnesses and denials of access to official information. The committee has recommended it be granted the right to express views on particular export licence applications in advance of their being granted – but the government has refused such requests.

The ECGD was set up in 1919 to help UK firms win back markets after the First World War. A government department responsible to the Trade Secretary, it is regulated by the Export and Investment Guarantees Act 1991. It provides insurance, finance facilities and guarantees, and project financing. Guarantees regularly exceed £3 billion annually; often they are directed at markets in countries with poor human rights records, including Saudi Arabia, Indonesia and Nigeria. Defence products frequently take up a large share of the budget (in 2002-3, 50 per cent). There was controversy over the alteration of ECGD rules on bribery in 2004.

Despite the ethical and human rights concerns raised by the role of the ECGD, its annual reports are not subject to thorough parliamentary scrutiny. Since 1999 the International Development Committee has investigated it once (in 1999); and the Trade and Industry Committee three times (in 2000, 2004 and 2006).

1.  The initiative of the International Development Committee in conducting an inquiry on the Doha round is a good example of “mainstreaming” and it should be replicated as best practice, with other select committees considering trade and foreign policy issues as they apply to their specific area. For example the Environment, Food and Rural Affairs committee may wish to consider the environmental implications of such agreements.

2.  Similarly, the appearance of Patricia Hewitt before the Trade and Industry Committee created a good precedent for parliamentary oversight.  The one-off evidence sessions on the EU negotiating position at the Doha talks were an innovative example of parliamentary oversight.  However, for there to be adequate parliamentary oversight of these areas in the long term it is essential that such mainstreaming is entrenched within the parliamentary process.

3.  Many issues connected with trade are highly technical and legalistic. Therefore it is essential that parliamentarians are able to access the most accurate information and legal advice.  This is a clear example of a case where select committees should be able to draw on their own source of legal advice – possibly provided by a newly-formed parliamentary Legal Counsel Office.

4.  The parliamentary Strategic Export Controls Committee should be given the specific power to report on important export licences before they are granted, enabling Parliament to move beyond a rigid retrospective form of scrutiny.

5. More broadly, placing the Royal Prerogative power to conduct diplomacy and enter into international agreements on a statutory footing would give Parliament a definite formal role in trade negotiations and treaties. Click here for the report of the Public Administration Select Committee report on the Royal Prerogative