Thursday, 8 September 2016

Brexit is a refreshing change of political scenery


The stated aim of the World Trade Organization (WTO) is to "ensure that trade flows as smoothly, predictably and freely as possible". However, the WTO does not claim to be a "free market" organisation. It is sometimes described as a 'free trade' institution, but that is not accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.

Trade economists routinely rattle off the mantra that "the WTO has stalled" by way of few increments in tariff reduction for many years. But as an active institution is is constantly involved in dispute resolution and in recent years has turned its attention on trade facilitation where it is an active forum for identifying barriers to trade and opportunities to overcome them.

The WTO Technical Barriers to Trade (TBT) Committee gives WTO members an opportunity to discuss each other’s product regulations and standards and the impact these have on companies and consumers. These discussions are called “specific trade concerns” - STCs for short.

According to WTO rules, members can regulate their products to protect consumer safety and health, but they need to do it in a way that does not make trade in these products unnecessarily burdensome. The WTO TBT Agreement ensures that in future all members adopt a common global standard according to the sector or trade concern. In food and agriculture this is Codex Alimentarius. In matters as diverse as air pollution to vehicle safety it's UNECE.

There are about ten major multilateral regulatory bodies all attached to the UN family of organisations but there are other private regulators and consumer bodies and when it comes to contributory organisations there are hundreds of them. Even after considerable study of this field I am still discovering ever more weird and wonderful bodies - some with no official standing and some with quasi-official status as sock puppets of the EU or global trade alliances.

Unlike the EU, one things these organisations are not is banning machines. The average person sees regulation as an inconvenience and really just a bad on things rather than an instrument to facilitate trade. In recent years every last regulation is hotly debated and in its own way is a trade agreement in its own right. This is why the tariffs debate kicked around by trade economists is increasingly irrelevant to the trade debate.

The EU goes one beyond trade facilitation and has its own social and public health agenda and it uses regulation as a tool to further that agenda. That's where controls on e-cig products come from. This is where most people come into contact with EU regulations and this is generally where people believe the EU oversteps its mark. Which is entirely a justified point of view and to my mind one of the more prominent reasons for leaving the EU.

By leaving the EU but staying in the single market we retain much of the regulation but the ratchet effect is ended and certain areas of policy are beyond the reach of the EU. And that's a good thing. The rest of it, however, is the substance of the single market. Over the last two decades there has been a gradual convergence between EU standards and regulations with the global bodies to the point where the EU adopts all global standards now and where there is no global standard, the EU standard is considered the benchmark.

As an aside those EU benchmarks will be rules from UNECE and European standards bodies commissioned by the EU - some with a British Standards heritage.

This stuff is not about controlling people's lives and it's not about freezing out democracy. It's about increasing efficiency and profitability of supply chains and removing delays, losses and safety threats. The intent is to create a global rules based system whereby anyone can opt in without the ultimatum of a social agenda (as the EU is known for).

In this there are bound to be winners and losers, especially since corporates have a major say in the formation of the rules. Small businesses argue that the system is sewn up for their advantage and that these rules and regulations mean the little guy can't compete. In some respects that is true. But it's also to prevent substandard and dangerous goods crossing borders.

The challenge for the WTO has been to improve consultation and enhance participation by SMEs. This is the present day agenda of the WTO and they work closely with the United Nations Conference on Trade and Development (UNCTAD) to bring e-commerce and micro-finance to the developing world.

Some believe there is a more sinister agenda and much of the criticism, usually from the far left is paranoid and unhinged. Most of the the regulatory outputs are measured against UN sustainable development goals which on balance are not as dreadful as they sound. In that regard, resistance to UN measures is more likely to come from those of us on the climate sceptic right.

That actually presents us with a problem in that the upper echelons of global governance tend to crossover into the EU and it's a super-bubble where reality does not often intrude. To make it into that world you have to believe what they believe and follow the rules of the gang. One might go as far as calling it a progressive's mafia. This leads it into mission creep where the EU's social agenda ethos starts creeping in. 

We are also seeing a worrying merger of the Food and Agriculture Organisation, the WHO and Codex. Public health agendas are then fed through to practical regulation for commerce. If we are not careful we could end up with an EU like global government - which is to be avoided at all costs.

The appeal of these multilateral organisations is that they are not supranational, they have no real power to dictate and they are not designed to erode the sovereignty of members. Whether it stays that way is another matter and may for the basis of the battle for the next generation.

What does appeal to me about the WTO and the UN family of regulatory bodies is the "can do" approach. The vibe of the WTO is very much a proactive one whereby they are genuinely seeking ways to improve things and break down barriers. By contrast the EU is a "big, bad I said no". A paranoid authoritarian body which sees national sovereignty as an existential threat.

This is why, with some caution, I feel more enthused by engaging at the global level in that you get from it what you put in rather than it being an obscure black hole into which we pour endless sums of money. 

By the same token I am also prepared to accept that I've bought the PR and I'm being somewhat naive - but with Brexit starts a new journey and many new opportunities. A refreshing change of record in a debate that stagnated decades ago. We now have a clean slate and a chance to build on what was good about the EU while ditching that paranoid authoritarianism that spawned it in the first place.

That said, there is a great deal wrong with the process of globalisation. There is a huge democratic deficit, much corruption and on that score it makes the EU look almost transparent. We need to engage with global institutions to make them more accessible and more accountable. They are never more dangerous when access is controlled by the likes of the EU, which use the globalisation agenda to further regional integration. We must take care not to repeat the mistakes of the past. 

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