57 varieties of inclusive trade policy

The term ‘Inclusive Trade Policy’ is being used more and more – but what does it really mean? In many ways, it is what it says on the tin. That tin typically refers to thinking about what are the distributional consequences of trade policy, or to put it another way, who are the winners and losers.

Once you start thinking about it in this way then there are many dimensions of inclusivity - 57 varieties as the Heinz slogan used to say. Think of geographical location, be this across regions or countries; consider people by education or skill level, by gender, as employers, employees, consumers and the households they are part of; and then also firms and businesses; think too of future generations and the impact of policies now on the environment and the climate.

Less often but equally important is to consider who is engaged in the making of trade policy, how transparent is that trade policy formulation, how much accountability there is, and how much evaluation there is of all these dimensions. Or, to perhaps stretch my analogy, what are the processes involved in making the contents in the tin.

To me, all these dimensions matter, and will matter in the work of the new Centre for Inclusive Trade Policy. That, in and of itself, is a challenge. When doing research, especially empirical research which will be an important element of our programme, there is a strong tendency to look under the (data) lamppost - empirical work requires data, so we tend to focus research on those issues for which we have that data – i.e. where the lamppost is shining.  Often too, it is not just the issues for which we have data, but also the issues of immediate concern to policymakers and funders and to a lesser extent the wider public. So rather than lampposts perhaps it would be more accurate to characterise this as the tendency for research to focus on where these two spotlights are jointly shining. While these challenges are important, we need to be careful we do not let them entirely dominate our choice of topics.

Think of the impact on businesses of changes in trade policy. We have considerable readily available trade and production data on sectors and industries and hence there is a lot of research on the impact of a given policy change on different industries. Equally, policymakers are keen to understand which sectors and industries will be affected. But it is not ‘industries’ or ‘sectors’ that engage in international trade – it is individuals and firms. While there is firm-level research on trade, actually this area of empirics is relatively new and much harder to do because the sort of data we need is not readily available.

For example, our research has shown that the impact of the EU-UK Trade and Cooperation Agreement (TCA) appears to have had a larger and more prolonged impact on UK imports from the EU, as opposed to exports to the EU with differential effects across sectors. In parallel there is also a lot of anecdotal evidence that leaving the EU has had a much bigger impact on very small firms as opposed to larger firms – and this is consistent with what trade theory would suggest. If there are fixed costs to exporting it will be harder for small firms to meet those fixed costs and still make a profit. But joining these two stories up is difficult because of the lack of (access to) data.

I recently visited a small independent gin distillery in Wales (research of course!) for whom the EU had been a growing market, until the introduction of the TCA. They have now entirely stopped exporting to the EU because the administrative hurdles and additional costs are too burdensome, the cost of imported inputs has risen, and the amount they would have to charge for their excellent gin is just too high. This is a real example of how changes in market access have distributional implications – for small producers, and in this case for Wales. The media has many stories of this sort. This narrative is also supported by and consistent with further research we have been doing, and also others, which shows a big decline in the number of varieties of products which are being exported by the UK to the EU.¹

But it is hard to move beyond anecdote and to consider how widespread such stories are, and what are the underlying driving forces, either because of the lack of data or because of a lack of access to the data. This matters for understanding the effects of, and formulating mitigating policies for, and future trade policies. We intend to work on such questions both by obtaining access to the relevant data to enable us to do rigorous and cutting-edge empirical work, and through talking to people and businesses, and policymakers. Hence, high quality and innovative data, matched with policy and stakeholder engagement, and the use of the latest techniques will be our spotlights on the winners and losers, and on inclusivity in the formulation of policy. Nevertheless, we will always aim to be mindful of who and what is left in the shadows.

• ¹ See also Freeman et.al. who also provide evidence on this.