Wednesday, 25 April 2018

The power is ours if we choose to use it

I've been a blogger on and off now for about a decade or so. More seriously in the last few years. There was a time when I thought it was a path to journalism. I once dreamed that I would write for one of the big UK titles - but now I wouldn't write for any of them even if they paid me. Which they wouldn't. They're broke.

Ultimately I am driven by a desire to understand things and in the process inform my readers. Nothing is more gratifying than to have some tell you they learn from you and depend on you to keep up to speed. The media, though, no longer serves that function. If a story is breaking the last place I would consider looking for quality information is our so-called newspapers. 

Largely thanks to Twitter I have a vast array of genuine expertise at my fingertips and the ability to cross reference what I am told with background material found on Google. I no longer have to take anything on trust and I do not need unpaid interns and twenty-something hacks to interpret events for me. 

What the media now subjects us to is to is little more than reportage, trivia and reinforcement of existing prejudice. I wonder then what the point of having a newspaper column would be. If one is not seeking to inform or challenge ideas, why even bother?

More to the point, every newspaper has its own agenda - usually that of its owners or sponsors - and why would I wish to serve someone else's agenda when I can advance my own? This does of course mean a smaller audience but there again, what use is a large audience if you are not actually saying anything? If exposure requires narrative conformity then it seems a complete worthless endeavour. 

In fact our legacy media is now so robbed of its vitality and intellectual curiosity that at least half of my role as a blogger is to correct the misinformation put out there by newspapers - and if one were so inclined one could make it a full time occupation. 

Nowhere is this more true than a complex area like Brexit where we are speaking of complex interwoven physical and legal systems each possessing their own rich fabric of nomenclature. To understand it requires a degree of intellectual investment, and cannot be understood without verifying the basic facts - something far beyond the abilities of the modern day press.

We are, therefore, presented with several different versions of reality based on best guesses, where those in power choose to believe the source not with the best track record for accuracy, rather they choose the source with the most institutional prestige. This tends to mean that lazy establishment sources who take no responsibility for their errors who continue to misinform the national debate.

This is ultimately what is responsible for the poor decision making in Westminster. With members of parliament attacked from all sides and lobbied on all manner of issues, they can never hope to acquire any expertise of their own and so they frequently delegate the research function to a media which is no longer in the business of doing research.

Newsrooms all over the world, challenged by the internet, are making major cuts and so they prefer younger, cheaper journalists (if we can call them that) with no real world experience, straight out of a ranking university with no specific subject knowledge. They then spend their careers inside the Westminster bubble, never once rubbing shoulders with anyone working class, mixing only with political functionaries and out of touch academics - themselves living on borrowed institutional prestige, regardless of their own academic track record.

We therefore limp from crisis to crisis on the basis of guesswork from a narrow and insular culture whose actual knowledge is minimal - and decisions are taken on the basis of a Westminster consensus, guided by its own distorted groupthink.

The only real way to break this miserable cycle is for individuals to rob these redundant shells of their power by electing to inform themselves by other means. For as long as we, like our representatives, delegate our research to those incapable of carrying out that duty, we as a people will be incapable of adequately holding our politicians to account.

The internet has allowed us to interact directly with our rulers; to question and cross examine them. With tools such as Twitter we are able to tell which of them are engaged in genuine dialogue and which of them are simply in transmit mode only. The fact of the matter is that we do not need our media as an intermediary. We can do their job for ourselves better than they can.

The old paradigm - that of the twentieth century, was that our rulers spoke to us via the media. In the modern age we can cut out the middleman, consult genuine expertise and challenge the pretenders. The power is ours now. The game is no longer about reaching a mass audience. What matters is reaching the right audience. It is better to to invest a year in changing one person's mind than to tell a million people what they already think.

In respect of those seismic shifts on the balance of power, I no longer have that same ambition to be a legacy media hack. I would consider it a demotion. Traditionally it was always the role of the media to hold the establishment to account. That is no longer the case. The media is the establishment - ever interchangeable with the corporate funded think tanks of London. They are no longer capable of speaking truth to power because their primary purpose is to seek the favour and approval of power.

It is now a duty of citizenship that we the people fill the vacuum vacated by the press and take up that mantle as defenders of democracy, challenging not only our politics but also our press. We no longer have to tolerate being spoonfed with opinion - and the more we choose to ignore the press the further they retreat behind their pay-walls until they are speaking largely to themselves.

During the referendum on the UK's membership of the EU, we set up The Leave Alliance. I was dissatisfied with the official campaign in London and I knew that we needed a presence on the blogosphere. We set out to recruit a small army of bloggers to push a set of pre-agreed messages. I was only partially successful. In the end we numbered no more than thirty activists, but each of us managed a readership of two thousand people at least, which in internet terms is not vast, but through the force multiplier of Twitter it would not be an exaggeration to say we reached nearly a million people.

The one thing we had on our side was persistence. We were online all day, every day, for the better part of a year. We rounded on politicians and journalists, challenging their assertions, questioning their motives, and pushed our alternative ideas. We can't say for sure if we changed anybody's mind but we planted concepts and ideas into the debate and we set the agenda.

The point here is that it only takes a small band of motivated and like-minded people to coordinate their activities to make a real impact on politics. With so many people believing they have no power, the pool of people actually engaged in politics is comparatively small. Consequently, it only takes a few, with a plan, and the right ideas to change the course of an entire continent. You can't necessarily take power, but you can be the kingmaker.

Traditionalists exalt the virtue of a free press, calling upon the noble arguments of yore in respect of The Fourth Estate. This is largely the product of classically educated people who pretty much are the establishment, who view the empowered masses as interlopers on their domain. But the truth of the matter is that we owe these people nothing. They are not entitled to be the voice of the nation and they speak for nobody but themselves - and often only to protect their monopoly over the debate. This is why they often denigrate independent media and blogs.

As it happens, the more they protest, the more they clamp down on "fake news", the more it tells us that they are afraid. The plebs have found their voice and they do not like it. It means they have to up their game to stay relevant - and they very much resent it.

We are at a turning point in media. When the internet unleashed the power of people, the legacy media sought to freeze it out. They do not like competition. With their influence they push for regulation of independent voices and a tightening of libel and defamation laws. They were comfortable with freedom of speech just so long as nobody else was speaking.

It is therefore incumbent upon all of us to defend freedom of speech - with our lives if necessary. We cannot expect our media to defend freedom of speech because our speech is a threat to their business model. The media has found its own comfort zone - a compromise that gives our politicians a free pass. That bargain with the devil is how democracy dies - unless we the people are willing to assert the power we already have. You have a voice. Now is the time to use it. 

Tuesday, 24 April 2018

The case for a customs union is falling apart.

The Westminster groupthink has it that a customs union is a magical device that makes all the problems of post Brexit trade disappear. You cannot persuade remainers otherwise since they are drunk on their own superiority, having convinced themselves that all the expert opinion is on their side.

Admittedly this has been exacerbated by the likes of  BrexitCentral and the Tory Brexiters who have yet to put forth a coherent solution, instead claiming that trusted trader schemes, mutual recognition and "technology" solves the problem. Neither are correct.

The Brexiters are wrong primarily because they think a combination of all of the above not only solves the customs union aspect but also that of the single market if we throw in mutual recognition of standards - which is not at all possible. The EU does not use mutual recognition where there are already harmonised rules.

What both fail to recognise is that the core concern for frictionless trade is regulatory harmonisation. That is what eliminates the non-tariff barriers and that is what facilitates low friction borders. The single market.

We are told that there is no cherry picking from the single market but this is not strictly true if you adopt the rules effectively under ECJ supervision as Switzerland has. But that then begs the question as to why Switzerland still has remaining border infrastructure. It is assumed this is because Switzerland is not in the customs union. This is not the case.

The reasons for Switzerland's dysfunction is largely down to its own under-investment in customs systems. If existing legislation was implemented properly then there would be no need for the large scale border post we see pictured above. The customs formalities themselves are all done by the exporter and pre-filed - but the independent local customs authorities have a habit of asking for unnecessary documentation - much of which could be eliminated.

What should be noted is that none of this has anything to do with tariffs, rather it is primarily a VAT border - and a customs union would not make that problem go away. It requires a different kind of agreement - one which the UK will need to hammer out over the course of Brexit.

One might then ask why Switzerland has never made a move to resolve this. It all comes down to politics. Cross border traffic in Switzerland is politically sensitive. There is a strong isolationist caucus in the country which would ban through traffic and severely restrict cross-border movement. The federal government, therefore, finds itself frozen into immobility, with not enough popular support to introduce reforms or even slight changes. It thus has to make do with the mess it has - it is the best it can achieve.

Meanwhile, if we look to the Norway border with Sweden we gain find the problems are largely of Norway's own making and the result of political choices. Origin inspections are not done at the borders nor is tariff collection. This is handled behind the border and with electronic transactions. Again we find the border infrastructure is for VAT and inspections are primarily for contraband - drugs, weapons and alcohol.

This seems to suit both sides of the border. There is only one post for both sides, the customs officers from both countries police both sides of the border, and clear each others consignments. There is no great political pressure to upgrade the system so it is not a high political priority. In theory though, it is possible to have an invisible border. Where spot checks are necessary, these can be roadside checks in the 10km border zone, or checks at the point of origin or destination. It all depends on the degree of harmonisation, the system design and the amount of trust and confidence.

The basic gist is that both Norway and Switzerland could have entirely frictionless borders if they upgraded their systems and there was any particular political will. It seems though that there is not. Were there the same political imperative the UK has in Northern Ireland then the problem would already be solved.  

In the remainer Brexitologist camp, however, the argument is a little more sophisticated than the Westminster groupthink. They would have it that though regulatory harmonisation is needed, a customs union is still a precursor to frictionless borders. One can see why but it actually isn't. 

Assuming we had full regulatory harmonisation, either by way of the Swiss "model" or the EEA, electronic filing and post-delivery auditing would still be sufficient. It's really a question of behind the border customs and excise enforcement to remove the incentive for smuggling.

The main problem here is that is it heavily dependent on systems and IT - which is not insurmountable and the general direction of travel anyway, so that makes it a question of what we do in the meantime. The is no possibility of rolling out a system in time for Brexit day. 

But that is another groupthink in play - the insistence that any solution must be finalised for our day of exit, when in fact longer term interim solutions can be found which again do not require a customs union. It is simply a matter of unilaterally aligning tariffs until the systems are ready. This does not even require the EU to consent to it. 

Critics would say that this involves a good deal more "red tape" than a customs union, which initially is a fair assessment in that we will have to equip and train for this regime. The opportunity therein though is to be an early adopter of UNECE Single Window, leading to greater integration of existing commercial accounting and supply chain software. We would be pioneering the methodologies and the system will eventually find its own natural equilibrium. 

What it does not solve in the long term is the issue of rules of origin, but there is no political obligation that says these must be avoided. The obligation is for an invisible border and nothing more. Rules of Origin is a purely economic consideration.

There we must examine whether the penalties of ROO tariffs are worse than losing our ability to deviate from the EU's common external tariff. Remainers tend toward the pessimistic, assuming that this will trigger the departure of the automotive sector and not leaving the single market. More likely it is the other way around, not least since, if we are creative, there avenues we can take to mitigate the impact. We should also note that the EU is being considerably more generous in ROO thresholds now. 

The basic point, however, is that a customs union does not eliminate third country controls, it does not eliminate the VAT issue and has no discernible bearing on what happens at the borders. What little influence it has will likely be eliminated by the end of the next decade - not least thanks to improvements to global rules.

Ultimately the customs union debate is a major distraction from the more important debate yet to be had about our regulatory relationship - especially when the favoured solution of this government, inspired by the Tory right is simply not going to fly. Eventually that we will have to have this out where the choice will come down to either an ECJ or Efta regime. There are no other avenues short of full disengagement resulting in every kind of border friction going on every frontier.

There is then one final and pretty obvious consideration. Supposing we do elect to become a third country with no intention of retaining the single market, the extent of controls would be such that all those companies nominally let off the hook by a customs union would likely leave our shores anyway making a customs union redundant. If we are going to wreck the economy to such an extent and give ourselves multiple avoidable headaches, what's one more? 

From a personal point of view I object to a customs union in principle simply because the purpose of Brexit is to become a distinct customs union and repatriate decision-making, and like my fellow leavers I think that the economy is secondary to that. Trade is an aspect of foreign policy and we must have all the tools at our command to say that we have an independent foreign policy. that it inconveniences a handful of multinationals is not really top of my list of concerns.

The fact is that British industry, multinationals especially can adapt to being out of the customs union, and contrary to the persistent whinges of risk averse remainers, there are opportunities in doing so. They key battle was always going to be the regulatory relationship and those who keep dragging the debate back to the matter of customs unions are only muddying the waters and regressing the debate. The sooner they get their heads round the fact we are leaving the customs union, the sooner we can resolve that far more urgent question.

Monday, 23 April 2018

A customs union doesn't soften Brexit

Blogging has been quiet over the last week as we are now in a state of trench warfare - where all the relevant positions have been explored and churned over time and again, awaiting some kind of decision from the UK government. Instead we are back to square one and fighting over the basics again - made worse by The Times and The Guardian distorting the debate with their ignorance.

The Sunday Times saw fit to tell us that a Swiss solution would work for the Northern Irish border despite a cursory glance at Google Streetview dispelling this notion. Then we've had the amendment on the Customs Union where again we go through all the tiresome bickering over what it actually solves. 

The fact of the matter is that we are leaving the customs union because it is an integral part of the EU treaties. Whether or not we negotiate a new one is an open question but that does not arise until we have formerly left the EU. There is, by law, no remaining in bits of the EU. This is one of those debates that will keep droning on simply because our quarter-wit MPs do not understand the issue. 

Our MPs think a customs union would soften Brexit - but it doesn't. We would still be subject to third country controls. The only way to keep the trucks rolling is to remain in the EEA agreement. Were we to do so we would only need a rudimentary accord on rules of origin.

Further to this I am of the view that a customs union would in due course be redundant anyway. Telling is the new outline of the EU-Mexico modernised agreement released yesterday.
"The EU and Mexico will issue, upon request, binding preliminary information to traders on the tariff classification of goods and origin (advance rulings), which will provide them with legal certainty and stability in the customs treatment of their international trade. In addition, the EU and Mexico will provide for an impartial and transparent system for addressing complaints by operators about customs rulings and decisions. With a view to expediting procedures, they will adopt and maintain risk management systems for high-risk goods and post-clearance audits to ensure compliance with customs and other related laws or regulations".
The devil is in the detail but the mood music here is toward greater behind the border customs cooperation, moving toward electronic transactions - and though it will take time to mature, this is the EU getting down to business with trade facilitation. We can therefore expect that without a customs union agreement, and as a modern technology led economy we would arrive at our own equilibrium with the EU. Then, customs issues aside, what we also see in the agreement is yet more boilerplate references to the WTO TBT agreement. 
"The Parties reiterate their commitment to base their technical regulations on international standards, and furthermore agree on an open list of international standards setting organisations. On conformity assessment, the Chapter recognises the different approaches of the Parties to conformity assessment and their relevant trade facilitation measures: for the EU the use of supplier's declaration of conformity and for Mexico the recognition of product certification carried out in the EU".
This, of course, is yet more of the Geneva Effect, where the centre of the regulatory universe is shifting away from Brussels - even on conformity assessment. This is in keeping with the overall trend where we see the EU agreements with Japan, Singapore, Canada, Korea and Mexico bearing striking similarities. The EU has established a formula so we can expect to see them churning out new evolutions of it all the time, and with MFN clauses throughout the improvements will be replicated system wide. 

Being that we are leaving the EU and regaining our right of initiative, the opportunity lies in a multilateral approach. Though the EU racking up the notches on the bed post, the reality is somewhat different. On the face of it the EU has abolished tariffs with the named countries but that does not necessarily mean the EU is going to admit all goods and will use many of its non-tariff barriers to exclude competition. 

What that means is there will in the near future be growing ranks of smaller nations with ever more gripes against the EU despite having an FTA with it. That is a groundbase of support for UK initiatives and moves inside the standards bodies which will pressure the EU. It will depend on intelligent trade diplomacy but we do have soft power assets like the Commonwealth and means by which we can win favour. 

First on the list of measures to address will be rules of origin where there are already a number of working groups within the WTO and UNCTAD dedicated to untangling the web and simplifying the processes. 

The mistake both sides of the Brexit negotiations are making is seeking a finalised resolution to a complex problem. Whatever happens we still need to make major modifications to customs IT and much is already in urgent need of modernisation. Brexit presents an opportunity for both sides to trial new approaches which can then be replicated elsewhere. Given the direction of travel we are as well opting for an interim customs accord involving unilateral tariff alignment until such a time where the technology and the systems therein can cope with divergence. 

What we see generally though, especially in Westminster, is a total absence of imagination and creativity. They have been told by an inadequate media that customs is the problem therefore a customs union is the solution and that is as much as they can cope with - not least since most are remainers and are not actually interested in new or alternative ideas. We have an administration which sees Brexit as an albatross. That is why this process is cursed. Without ideas driving the process we are coasting toward all of the defaults whether they actually work or not. 

Monday, 16 April 2018

Virtue signalling should be kept out of trade policy

Leaving aside that Cecilia Malmstrom has zero democratic mandate, what we see here is classic EU vanity. This is the EU putting into action The Declaration on Trade and Women’s Economic Empowerment adopted recently at the WTO ministerial meeting in Buenos Aires. It is not without its critics.

How that then manifests in EU trade policy remains to be seen, however it is sure to lead to the EU making invasive demands. This is the creeping cultural imperialism not just of the EU but of the entire global rules based system which is increasingly captured by politically correct groupthink in the guise of UN Sustainable Development Goals. 

This hooks in well with the case The Leave Alliance has made from day one; that the EU is increasingly a middleman - an agent of the globalist agenda. The danger is that global governance becomes global government, creating unaccountable institutions much like the EU but on a global scale. We increasingly see trade used as a vehicle for export of technical governance but we see that role expanding to include labour standards and social policy. 

Clearly there is a case for international labour standards in that we can't have Filipino slave labour working our fishing boats in our own waters, and we have to eliminate unfair labour competition. Trade policy must have a social conscience, not least to avoid democratic backlashes which lead to protectionist governments.

The problem, though, is that we have come full circle. The technical governance of social issues will creep further into trade governance to the point of constraining popular sovereignty to a similar extent to that of the EU. This defines the political battlefield for the new generation as we head toward a global technocracy dominated by political elites and academic functionaries brainwashed in the latest fads, not least gender equality. This is where leftist thinking creeps in, seeking equality of outcome rather than equality of opportunity.  

As much as that is dangerous, it is also, probably, counter productive. Cultural conditionality in trade helps no one. Where women are empowered in the world it is because they themselves have fought for it, not because of any Western cultural intervention. Wherever we have tried we have made things worse. 

Demands for rights and equality usually comes with increases in wealth, which is why trade policy should contain itself to that aim alone and let politics do the rest. It is not for us to use trade to leverage domestic policy in the developing world. It always has unintended consequences.

What makes it doubly offensive is the EU using its clout to force trade liberalisation on African states in the process of trying to build up their domestic tax base instead of relying on mineral wealth (with all the death that goes with it). When the EU is dumping agricultural surpluses on Africa, it's totally hypocritical. 

Both the US and the EU use brute force in trade to force Africa to open its markets to Western subsidised surpluses, collapsing any domestic production capability - which increases the risk of famine. 

Between that and sending in EU seabed hoovers to destroy inshore fish stocks, the EU's murderous trade policy is driving migration causing thousands to die in the sea, and thousands more perishing on the journey to the Mediterranean. How any of this is striking a blow for Women's equality? How does any of this advance the interests of women - or humanity in general? 

This is why I despise the narcissism of remainers who believe their faith in the EU cult is an indication of virtue. The EU likes to pretend it is a progressive force in the world but the butchery of its trade policy tells a wholly different story. This is why African states are looking to regional trade blocs so that they don't have to sign deals with the EU.

Moreover this is more of the same folly in chasing headlines over progress. The idiocy of the EU is chasing bilateral deals, undermining the multilateral system, complicating matters when the global effort is to simplify trade.

Sadly, the UK government has adopted this same folly. As conceptually mistaken as it is, Britain doesn't have the clout to push cultural agendas through trade like the EU does - and nor should we - but this is evidence that our civil service are still in the Brussels mindset and are playing the game by the old rules. This needs to change. We need to focus on commerce.

This is ultimately what makes Brexit necessary. From the get go it limits the ability of the EU to impose this on us, and secondly it means we can at least influence the UK government and campaign against it. We might then help to restore some sanity to the global system and put an end to the mission creep, lest we have to go through this all over again. 

The challenge before us is to build a global rules based system but one which is accountable and allows democracy to breathe. If we fail in that then we drift toward a global super-EU of privatised regulation - serving a a tyrannical device for globalist elites and a petri dish for their sociopathic social experiments. Far from creating the peace it risks destroying nearly a hundred years of progress. 

Waiting to fall

Time and again I have wrestled with my conscience over military intervention and still I come to no satisfactory conclusion. The more we do the bigger the mess we make, whereas limited strikes tend only to serve the purpose of salving our collective conscience while achieving very little. Meanwhile, with so much misinformation and media noise, it is increasingly difficult to believe anything we are told.

Here though, I tend to be somewhat resigned to the fact that our government will do as it pleases and arrive at a justification after the fact in accordance with the politics of the day and politicians and activists will align themselves accordingly.

What is alarming, however, is how our politics is simply going through the motions. For the left, intervention is more a from of political GPS signalling on the Blair-Corbyn spectrum while the Tories will use a safe opportunity like this to show unity against Corbyn. This is all irrespective of what is actually happening. Our politics couldn't be less interested in the real world.

Normally my criticism would be directed at the Westminster bubble but it seems this condition extends to the wider population where, as well practised as we are, we trot out all the well worn generic protest narratives. It doesn't even matter what was hit in the raid, or how low the collateral damage, it will still be used as a political opportunity.

Worse still, as a political vehicle, it is well within the comfort zone of politician and pundit alike, supplying endless material for churnalism, where everybody will add their tuppence ha'penny. Like Brexit, it pays no attention to the details, has no interest in the facts on the ground and is done without reference to events as they happen. Mrs May is still pegging her hopes on a number of devices already dismissed by the Commission.

In both instances this is dangerous. We are seeing politics on autopilot but with no direction and entirely focused on insular tribal objectives. Where Brexit is concerned, that will eventually manifest as the cliff edge where all of them will be caught off guard with no idea what has happened or why. As terrifying as that is, it becomes doubly concerning as we tinker around the edges of a low grade proxy war with Russia. In both instances we lack the leadership to prevent the inevitable.

What is happening, I suspect, is that our politics overall has entered an all out war. Even on Twitter I find that any nuanced discussion of the issues is utterly futile. One has to pick a clear side and speak to that agenda otherwise you simply do not exist. It would appear that details are not going to get a look in until we have some kind of political resolution and a new national consensus.

It is at this point I start to wonder if there can be a return to sanity or whether this is the new normal. Certainly the presence of Corbyn is an aggravating factor and the absence of meaningful opposition, but Labour is stricken with the same illness as the Tories. Neither can name an obvious successor, and certainly not one who can unite the country. Without leadership, without direction and with a media incapable of bringing any clarity to events, we are destined to hit the rocks. Only then can we take stock.

This, though, is really what makes Brexit necessary. This political dysfunction is nothing especially new. We have been building to a political calamity for many years now. There was never any possibility of correcting it without a seismic political event. Left unchecked it could very well take us to a bloody and unnecessary war as our politicians, trapped in their own alternate universe deal only in narratives.

What this week in politics has shown is that our politicians are as bovine as ever they were, where lessons from the ballot box are quickly forgotten and they fall into their familiar routines, alienating the public as they go. If we let them carry on as normal the we face a glacial, but noticeable decline.

If there is one thing our establishment has proved, it has an unswerving ability to brush issues under the rug. We don't deal with problems, rather we mitigate the symptoms where governance becomes a game of keeping multiple plates spinning. It only takes one to fall for there to be a lapse in concentration and we see them all clattering down at once. We have arrived there.

For a long time I have felt this has gone on longer than the system can bear, with the rug bulging from all of the issues brushed under it. Meanwhile we continue to add to the pile of concerns, digging the hole deeper. Without forcing the issue, without a democratic intervention there is simply no way to arrest the decline. Miserable though the consequences of Brexit may be, it is our one and only opportunity to turn the ship around.

Friday, 13 April 2018

Rethinking aid and trade

Today's Twitter thread...

One of the first tangible benefits of Brexit I've seen is the emerging reform of DFID where it is becoming more of an arm of trade policy than a state owned humanitarian NGO. I would like that to go much further and rethink trade.

I do not think we should be wasting too much effort on free trade deals largely because they are of questionable value and encourage inefficient value chains. Any work on tariffs should really be reserved for multilateral activity.

Instead we need DfID as the spearhead of our trade policy. There is no reason why we cannot pursue humanitarian goals and enhance our trade while we are at it. For a start we can do a lot with medicines and pharmacy products.

Exports of pharmacy products have more than tripled over the past 15 years, with most of these gains obtained from extra-EU transactions. This is also the third largest industry in the UK, contributing 10 per cent of the country's GDP.

This is undermined by a massive global trade in counterfeit medicines and adulterated products. A recent World Customs Organisation raid netted some 113 million illicit and potentially dangerous medicines, with a total estimated value of €52 million.

Of the 243 maritime containers inspected, 150 contained illicit or counterfeit products. So there's a need for greater scrutiny of this type of fraud - which means firstly we need to assist developing countries with their customs controls. We're acquiring some expertise there.

We also need to look at the proliferation of standards and their harmonisation, while investing more in global surveillance networks. If you want an active trade policy then you have to spend some serious money.

The obvious benefit of this is that genuine medicines get to where they need to go instead of the poison currently in circulation. Works toward our development goals while improving the health of developing nations.

But more to the point, it increases the profitability of existing value chains on sectors most important to the UK. Especially if we're daft enough to leave the single market. We could well lose a lot of our pharmaceutical manufacturers unless we give them good reason to stay.

Improving the efficiency and security of supply chains is worth substantially more to the UK than tinkering with tariffs and in terms of improving distribution networks there is a lot to be done.

We could quite easily confine the activities of DfID to just a handful of pursuits and it will still enhance UK trade. As part of the development remit would be well advised to invest in the UNECE road Safety Trust Fund to help reduce traffic fatalities around the world.

Mundane as that sounds it has massive potential because it's a broad area of concern. Everything from child seats to traffic cones, road infrastructure and safety training services. Things the UK excels at.

We've heard a lot about growth in the far east and what we are seeing, in Malaysia especially, is a space race to improve standards of civic governance - driving tests, MOTs, instructor qualification, pedestrian road safety awareness, road maintenance, parking controls.

This are all things we take for granted but the road fatalities, very often 100% preventable continue to plague India and the far east. That right there is a market in goods and services - and a market for exporting UK governance ideas.

What we are starting to see, with a growing middle class and a wealthier consumer base is demands for better food safety, better road safety, trustworthy medicines and good governance.

These are all development goals shared by most of the global forums where we see UNECE, ISO and others coming together to make that a reality. There is no reason why DfID should not be an active player - especially since DfID is respected globally.

Some would rather we didn't spend on foreign aid, but it is an essential component of any trade policy and if we can meld our trade and development objectives then we kill two birds with one stone.

To do this we need to shift the debate beyond the dismal "free trade" dogma of Tories and the insular technocratic nonsense of trade wonks who prattle on about FTAs. FTAs are better suited to the EU approach but we need to do things differently.

The UK probably won't bother with something as dumb as a customs union agreement but we can be sure there will be a number of obligations and technical restrains that prevent us meddling with tariffs. We therefore need better strategies to make trade more profitable.

Meanwhile we can use our right of initiative in the global system to work on multilateral solutions for medicines. Ideally a global system of approvals, which for now may be pie in the sky but we can chip away at it sector by sector.

Leaving the single market will be a costly mistake and one which will badly dent our trade, but even then the UK is not a down and out. Plenty of mid-ranking powers make valuable contributions. Japan, Israel and Norway worth examining. There is life after Brexit.

Wednesday, 11 April 2018

To be a global Britain we must think beyond the confines of bilateralism

Sorry to be boring but I'm writing about trade again. It is a somewhat futile endeavour since the remainers have got their own little bubble going on, continually reinforcing their miserablist narratives and as for Brexiters, well, they couldn't be less interested. They have their own narratives too.

The remain side is working itself into a lather, continually recycling the TTIP debate in anticipation of an US-UK deal while Brexiters are poised to do little more than wail about Brexit betrayal and how things would have been so wonderful had we adopted the lunatic ideas of Patrick Minford. the remainer wonks are busy telling us what we can't do and Brexiters are not even on this planet which means very little thought is going into what we can do - and what is worth doing.

To give credit where credit is due, the Brexiters are least promoting ideas even if they are batshit crazy but as yet I've not seen anything that addresses the real world problems created by Brexit or anything that even begins to compensate.

One theme this blog continues to push is to question the wisdom of seeking out preferential trade agreements - or FTAs as we insist on calling them. I have always suspected the power of PTA's was overstated but just recently I've come to understand exactly why.

As it happens, much of the criticisms of PTAs can be traced to pioneering works by Jacob Viner, a Canadian economist who studied the diversionary effect of PTAs. This is not a new discovery. The basic theory holds that preferential trade deals divert trade from the cost efficient to the preference holder - where production can shift to higher cost partners. Being that the preference holder has a trade advantage, there is no incentive to bring prices much further down than the non-preference competition and instead they will pocket the tariff difference as profit.

The short of it being that preferential trade agreements not only create an unlevel playing field, they undermine mutlilateral efforts. What we find is that "free trade agreements" go against the spirit of free trade and do not necessarily bring down prices. Over the long term, by entrenching inefficiency PTAs could even have the opposite effect. Consequently we should not be seeking "free trade" for its own sake. Every deal must be meticulously analysed and monitored.

Being that this much probably has sunk in with the libertarian free trade crowd, their answer is unilateral trade liberalisation whereby we remove all of our trade defences irrespective of the fallout. What that leads to is UK business trying to compete with heavily subsidised produce or which makes us a dumping ground for surpluses and destroys those industries we have a cultural or strategic need to preserve. Unilateralism in most instances is never a good idea.

When it comes to nuisance tariffs (under 2%) I have some sympathy with the view that we should unilaterally zero them but given the fabric of interwoven agreements we already make use of, tariffs are increasingly a non-issue except for where complex supply chains are concerned.

What distorts the debate is when Brexiters pluck out tariffs at random from the general system of preferences as examples of where we face "crippling" tariffs but on the whole the impact of negotiating away tariffs of under 2% is scarcely worth measuring and difficult to detect.

Where tariffs remain higher is usually in commodities and agriculture, where tariffs are usually there for intensely political reasons and if at this point we still have them then they won't be negotiated away soon. While the logic of some tariffs may seem absurd, there is nearly always a reason.

This is where we should be looking to multilateral solutions rather than entrenching the folly of PTAs. The WTO Agreement on Trade in Civil Aircraft is one such instrument. It eliminates import duties on all aircraft, other than military aircraft, as well as on all other products covered by the agreement — civil aircraft engines and their parts and components, all components and sub-assemblies of civil aircraft, and flight simulators and their parts and components.

This strategy, however, is lost on Brexiters who seem keen to race off and do "bumper deals" because that is how they think it is done. There are few signs of intelligent life on the Brexit benches and we find that as much as Johnson and Rees-Mogg know nothing of the discipline, they don't want to know either.

We are told they have won us the right to make deals during the transition but any activity in that regard will be the replication of deals we already have via the EU. This is presented as a high drama by the FT and the wonkocracy of Twitter, but in actually it's a good deal more mundane than we might imagine. Some of the EU's PTA's will have no noticeable impact on the UK either way and Whitehall, I suspect, already has an idea of the ten or so key ones we cannot survive without. 

Moving on from there really all depends on what we can offer, which won't be much in the way of tariff reductions or regulatory easing not least because the final EU agreement will rule that out. We are then left with only a few commercial strategies - many of which were always possible even as EU members. What matters is how we choose our alliances and wield our soft power in the many international forums making the best use of our right of initiative. 

On that score, I am reserving judgement as to how well the UK will perform. We may have drongo MPs but I am seeing glimmers of competence in Whitehall that make me think that not all is lost. The FT yesterday informs us that the UK’s £13.9bn aid budget is set for its biggest overhaul in years, with plans to use development spending to push British exporters and pension funds to invest in poorer parts of Africa and Asia. 
Penny Mordaunt, the International Development secretary, said her department would experience a “big shift”. It has faced political pressure to justify its growing budget at a time when other ministries face sizeable cuts. Under the new strategy, aid money will be used to help African companies raise debt in local currencies through the City of London, and to facilitate British companies selling and directly investing in less familiar markets. Dfid’s aim is to facilitate pension funds’ investment in emerging countries, by helping to smooth regulations and to make companies creditworthy.
This is a hugely positive development. This blog has argued from the beginning that DfiD should be refocused on projects which enhance our trade policy. There is a lot of potential in international development to forge new markets for the UK. If they are thinking along these lines then there is hope for us yet. 

My previous thinking was that Britain could do more to enhance the ability of LDCs to export produce but what we find is the private sector is doing the heavy lifting in trade facilitation because there are clear commercial advantages in it which don't actually require governmental intervention. There are also promising signals from UNCTAD that Africa of its own accord is starting to get its act together and doesn't need the West to save them. 

This is one instance where Whitehall thinking is ahead of the curve in focusing on services while the Brexit debate is still bogged down in waffle about chlorinated poultry. I confess to being sucked down that same rabbit hole having lavished far too much attention on trade in goods.

The reason for that being, I suppose, is that leaving the single market attacks the foundation of our main trade in goods, creating new and wholly unnecessary barriers to trade. When the only game in town right now is the question of what our future EU relationship looks like, it stands to reason that we would have to go over the basics time and again. 

What our future trade policy looks like really all depends on how well we can service a foreign policy and that hinges on our participation in the single market and sustaining an active role in financing trade development. Though M. Barnier has said we can still change our minds on the matter of the single market I believe it would take a seismic shift on domestic politics for our present trajectory to change. 

Being that the case we will be in a considerably weaker position and faced with a great deal of domestic regulatory chaos, where we will watch helplessly as key industries hit the rocks and many of our flagships see a bleed of investment. It will take many years to normalise our new arrangement and trade will suffer. We always knew becoming an independent country would hurt us - but the ignorance of the Tory right will make us pay ten times more than we ever had to. Correcting the mistake of EU membership will now take a generation.  

Britain should not waste its time with bilateral trade

One thing the EU is not going to allow is Britain taking back control. As EUreferendum blog notes Commission President Jean-Claude Juncker declared in his 2017 State of the Union Address that: "trade is about exporting our standards, be they social or environmental standards, data protection or food safety requirements", adding that, "open trade must go hand in hand with open policy making".

"With Juncker also insisting that "we are not naive free traders" and committing Europe to defending "its strategic interests", it stands to reason that the Union should carry over this philosophy into the Brexit negotiations. And, with Mrs May taking us out of the Single Market, we have walked "eyes wide shut" into a trap of our own making".

In that respect it marks the EU as a good old fashioned colonial power, protecting its supply lines in commodities, while dictating the terms. As noted by Sarah Rolland, author of Development at the WTO, behind the facade of preferential trade agreements lies the unilateral power of the preference-granting country to amend, deny or expand tariff benefits to suit its domestic political priorities and economic needs. 

This is a game only superpowers get to play and, like it or not, the EU is a trade superpower. This is evidenced by China's rebuke to Canada. China’s ambassador says his country firmly rejects Canada’s attempts to entrench labour standards in a free trade pact. Envoy Lu Shaye says Canada’s so-called progressive trade agenda has no place in a free trade agreement.
Prime Minister Justin Trudeau was unable to persuade China’s leaders to formally entrench labour, gender, environment and governance issues in the negotiating framework of free trade talks. Trudeau spent four days in China in December but left without a formal commitment to moving the free trade talks past the exploratory phase into formal negotiations. Lu says Canada’s insistence on pushing labour standards in the NAFTA talks with Mexico to raise wages would only lead to the shuttering of Mexican auto plants and lost jobs.
With an economy half the size of that of the UK, it speaks to Western narcissism that Trudeau even for a moment thought exporting his liberal progressive values was on the table. One rather suspects India will have also told him politely to "go whistle". 

But then this is why the centre left wing NGOcracy adores the EU. It is a vehicle through which to impose their own dogma. This is most likely the power behind the EU's attempt to kill off trade in palm oil - an industry hugely destructive to rainforests. What we can see, however, is that this cultural imperialism is the very reason complex trade agreements are butchered at birth. 

Being that the EU is an early adopter of every globalist groupthink going, or as they call it "progressivism", climate change dogma and ILO conventions feature heavily in all trade initiatives, which may very well suit the vanity of the EU - just so long as we never examine the often murderous unintended consequences.

We see none of this in Chinese trade policy which is ruthlessly commercial - especially so in its overseas investment in Africa - which goes some way to explaining why China is becoming the global trade hegemon. That, to my mind, is what makes the EU's cultural imperialism a mistake. 

There are several issues to explore here. The imposition of these such agreements on popular sovereignty create internal stresses which ultimately result in Brexit, not least because the values the EU exports are not organic, rather they are the technocratic agenda of the UN ecosystem. It is neither wanted nor needed. They are resisted by mature first world states like Switzerland and the UK. 

Globally, though, we can see that this approach does have some value. That is not in question. Between political pressure from the EU and partly as a result of the WTO agreement on Technical Barriers to Trade, India is making substantial reforms to its food safety regime - and if we look to Malaysia we can see across promising signs across the board to improve standards of civic governance. There is a long road for both to travel but developing countries have a strong incentive to play ball. 

I take the view, though, that pressure to improve standards, labour standards especially, has to be a pincer movement, coming from political pressure externally but also from the bottom of societies. The standards we enjoy in the West are a by-product of consumer wealth. Preferential trade agreements with progressive add-ons cannot substitute organic democratic demand for better conditions. 

For the Far East and India, with a growing middle class and a strong demand for luxury items, there is also demand in for better pay and conditions. Their respective governments will, therefore, favour hard commerce over EU political agendas. It is often said that it is the EU's customs union which diverts trade but when most of its tariffs are nuisance tariffs (too small to matter) it is more likely that EU political demands are the problem. 

The big problem is one of what happens when two regulatory superpowers collide. Even with good relations and the political will TTIP failed to materialise and so superpowers will continue consolidate trade relationships with their economic supplicants. That is where politics happens and this is where the friction with China will eventually come to a head. 

China has learned a few new tricks from the EU and is operating roughly the same strategy in strengthening its barriers to external trade but through "preferential" agreements will gradually snatch third countries out of the Western sphere of influence. Being that it does not entertain the progressive imperialism of the EU it is poised to overtake the West, particularly in African trade affairs. 

China has also learned well from the EU how to game the rules to its own advantage. For as long as we've had mass media, food safety scares have proven a useful instrument of trade protectionism - one which enjoys widespread public backing.

Certainly that has been the case in China where there has been a relatively rapid regulatory response to a number of serious incidents. A food fraud scandal came to light in 2008, when over 20 companies were found to have added melamine, a flame retardant plastic, to baby formula in order to fool tests designed to ensure adequate protein content. Around 300,000 babies became ill in China, with tainted formula being linked to 54,000 hospitalisations and 6 deaths from kidney damage and malnutrition.

This prompted a raft of welcome new measures but have come under fire from global actors for their protectionist nature. A speech from German ambassador Michael Clauss on relations with China explains:
The recent overhaul of licensing structures for milk powder have reduced channels for imports and given a competitive advantage to local producers. A minister has promised the national milk industry in a public meeting full government support and protection in achieving market dominance. Companies in this field are forced by new regulations to hand over their innermost company secrets to the same government authorities closely working with domestic competitors. A recent regulation on baby milk powder requires foreign companies to reveal their entire production know-how down to the last detail to the authorities, not just the exact recipe but for example the set-up of machinery in the production process, even CVs and contact details of every person involved in the companies’ R&D.
In effect, food safety (among other things) is used as a pretext for the wholesale theft of intellectual property. Though Donald Trump's "trade war" has grabbed the headlines, there was never a time when China was not waging its own trade war. China is not interested in "free trade" by any definition of it and though it pays lip service to multilateralism it is a two-faced operator and nobody should take China's emollient rhetoric seriously. The West, therefore, needs to ask whether it can afford the virtue signalling intellectual pygmies of progressivism driving trade policy. 

If the West wants to head China off at the pass it needs better strategies than bilateral preferential trade agreements. We are in a trade space race where we simply cannot afford the waste of intellectual resource devoted to bilateral projects like TTIP - chewing up years of diplomatic and trade run time to produce nothing. Moreover, if ILO labour standards and environmental diktats serve as a barrier to progress (as Canada has found), China will fill that void - and consequently no environmental or progressive cause is served at all.  

Of what little trade debate there is in the UK, it is devoted to reliving past glories, churning over the TTIP talking points and their relevance to any future UK-US accord. There is no attempt to steer the polity on to more realistic goals and more urgent issues. 

What is interesting about the UK debate is that trade has become a strictly technical discipline churned over by nerds who fail to recognise that trade is inseparable from geopolitics - and to a large extent it IS geopolitics. We therefore have to look at the tools available for the amplification of influence and the exercise of soft power. 

Some would likely argue that the UK leaving the EU is the surrender of one of those instruments - but how can that be the case when EU trade policy is driven more by its supranational ideology exporting values which are not even our own? We must, therefore, use the global institutions to exert pressure on China, the EU and the US, making incremental progress on a sectoral basis to head off any protectionist measures from China as its regulatory system matures and begins to dictate terms of trade in the same way the EU does. 

If we maintain our devotion to the principle that trade agreements must cover a multitude of concerns, on the doctrine that nothing is agree until everything is agreed then we will see failure after failure while Western influence is diminished. Juncker may insist that "we are not naive free traders" but lacking from EU trade policy is a sense of realism where as usual it is handling rapidly evolving circumstances with twenty years old doctrines. EU federalists and Tory "free trade" Brexiters have more in common than they would like to admit.  

Britain as a soon-to-be mid-ranking power will find that it can achieve none of its objectives alone. That we might have been able to exert influence over the EU is neither here nor there since whoever is in government inevitably conforms to the Euro-else groupthink and seldom exerts useful influence in a body pushing an agenda which we don't want anyway. That is not to say that we are powerless in a post-Brexit world.

There are dozens of task focused groups in all of the multilateral forums where the UK can pick its own alliances according to its direct national interest and be the leading voice in those alliances, not least because of the expertise and resource it brings to the table. If, as remainers have it that the UK was influential in the EU, it follows that, notwithstanding Brexit, it will have considerable weight in other forums. 

Exerting political pressure through those alliances is a sorely underestimated strategy - not least because we have lost our institutional memory of how those games are played. We are conditioned to believe that nations only work in geographic blocs and must follow the leader. This mindset fails to observe that the EU has on a number of occasions modified its rules because of international pressure and the entire WTO system and the market instruments therein is founded on multilateral accomplishments. 

Increasingly we find that regional regulatory initiatives are useless without a global approach. From tax avoidance through to internet regulation and counterfeit medicines, we find we increasingly find that without international cooperation we are simply playing a game of whack-a-mole. There are all areas where multilateral frameworks cannot only influence policy for the better and encourage better behaviour they are also worth considerably more than all-encompassing bilateral deals which of themselves undermine the aims of the global trade organisations.

With every new bilateral accord comes a further complication to the already labyrinthine origin system, while at the same time creating protected value chains which run counter to the aims of a level playing field. Britain has only limited resources for participating in the global trade arena. We therefore, cannot afford to get sidetracked with bilateral dealing. We must focus on those areas where we can make a real impact. 

Since any Brexit settlement will undoubtedly result in a restrictive relationship with the EU where our regulatory relationship will, for a long time to come, limit what we can do with bilateral deals - certainly in terms of relaxing conditions of market entry, Britain will have to look in all the dark corners of the global system for ways to advance its goals. That is not necessarily a bad thing if we are chasing accomplishments rather than headlines. Global Britain can very much become a reality, but to do that we need to rethink how we do trade and what we want to achieve. 

Tuesday, 10 April 2018

The long shadow of Brexit

From the moment Article 50 was invoked there were only two options for Theresa May. Either to make an unpopular choice in the national interest or kick the can down the road until circumstances dictated the path. Having chosen the latter over the EEA, Mrs May has put the Brexit process on autopilot. One gets a sense that this government is no longer even trying to negotiate and will simply roll over at every turn.

The consequence of this now looks like a hybrid of both hard Brexit and Brexit In Name Only whereby we remain ensnared by all of the regulation, no say in its formulation, but with substantially less market participation. We are being steamrollered by the EU into a situation where the EU can cannibalise UK industries but leaving the UK on a tight leash.

This, of course, is a consequence of not having a plan - making no preparations and failing to understand the inherent dilemmas of the Brexit process. This will not be the Brexit that anybody wanted and will deliver nothing that was promised. But then this is also a consequence of Brexit having been managed as an administrative chore - one which easily bores our media, is not wanted by the government and is understood by neither. 

Hitherto now it had been assumed that the Tory right would put up a bit more of a fight, but then we must recall that we are dealing with Tories who, when cornered, will never attack their own. Take that bus for example. It was a decoy. The strategy to win hands down was to attack David Cameron for his outright lie that he had reformed the EU and demonstrate that not only can we not reform the EU, our establishment would never even ask for it. 

To take that line, however, would have meant the Tory Vote Leave operation attacking their own party. Something they would never do. The bus was their plan B - and party unity mattered more than winning. Now that Mrs May has squandered her majority where there is a danger of a Corbyn government by way of an accident of numbers, the Tories cannot afford a civil war which is why neither the hardliners or the Tory moderates (for want of a better word) have been especially vocal except for Anna Soubry and Ken Clarke.

Consequently, the job of the Tory party now is to simply hold the fort and hail every climbdown as progress - just long enough for Labour to implode. Though we have made clucking noises about the EU's proposal on Northern Ireland, we can expect the government to concede to roughly what has already been outlined, shunting the issue into the post-Brexit negotiations.

The sad truth of it is that our political establishment was never capable of making good of Brexit. This blogger assumed that Mrs May would eventually find herself boxed in by reality, and against a backdrop of urgent warnings she would have to cave in to the EEA-Efta option. That, though, seems increasingly remote. 

Partly this is down to a bored media, one which has already squandered its credibility with a constant wail of hyperbole meaning the public are no longer receptive to the warnings and have little appetite for the tiresome minutia that Brexit entails. Throw them a distraction like the sugar tax and Brexit falls off the agenda completely. The chatterati reverts to type - and the media is not so much the dog that didn't bark as the neighbour's yapping pomeranian one tries to tune out.

We are now at a point where the government can do as it pleases largely because the media caravan has moved on, the momentum from the referendum has dissipated and the only fighters still on the field are dies hard remainers and the leavers who can still be bothered to argue with them. That debate occupies a small corner of Twitter while political debate of any kind has vanished from Facebook. 

The danger now is that Brexit day will come and go while subsequent trade talks become a niche interest in a field dominated by self-referential remainers who have no interest in exploiting Brexit opportunities - and wouldn't admit they exist. We then find as Brexit takes effect we must adapt to an unfolding omnishambles lacking the political or intellectual equipment to handle any of it. 

For all that we might well have killed of the WTO option - to the point where even the Tory right have gone quiet about it, the failure has been the overall inability to communicate that as far as export in goods (and regulated markets) go, a non-EEA Brexit is only marginally less devastating and all that changes is the speed of implosion for key industries

While the Pestons and Marrs will churn over Brexit and its respective causes for many years to come, we are unlikely to see any inquiry as to how we sleepwalked into such a dismal cul-de-sac. Brexiters will take no responsibility for their failure to plan, remainers will take no responsibility for misrepresenting the EEA option, and similarly, the media will not recognise its own role by fixating on trivia and failing to understand the issues. 

What happens in the next three years will set the tone for British politics for the next twenty years and battle lines will still be drawn on the matter of our relationship with the EU. Little will have been resolved. Only then does the real battle of Brexit begin. Events of 2016 will cast a long shadow. 

Monday, 9 April 2018

Free trade is not the answer to the Brexit question

When media speaks of Brexiters they either mean people who voted to leave the EU or they mean Tory MPs on the right pf the party. Increasingly it's the latter. People who voted to leave have largely stopped existing as far as the media is concerned. Especially so when it comes to post Brexit trade debate.

The first thing to note about the trade debate is that there isn't one to speak of. For sure the trade functionaries who seek to own the debate still blether about chlorinated chickens and Daniel Hannan, the Owen Jones of trade, is still promoting is factually deficient theories but on the whole the issue has dropped off the agenda.

One might expect that the Institute of Economic Affairs might have something to say on the subject but they seem to be preoccupied with the sugar tax and the gender pay gap. Trivia when one looks at the bigger picture. One suspects this is because there is just enough knowledge in the public domain to take them to pieces any time they put their heads above the parapet, when all they have to go on is the lunacy of Patrick Minford and the snake oil of Shanker Singham.

What seems to be missing is any sort of objective based roadmap. Trade liberalisation has become an end in its own right where we seek to do deals for their own sake without any reference to the lessons of the referendum. Even if we could say that Patrick Minford's unilateral trade liberalisation would be beneficial, it isn't what people actually want.

By Minford's own estimation, such a radical approach would destroy UK manufacturing when those are exactly the sort of jobs that voters, leaver voters especially, actually want. That is what makes leaving the single market, endangering the automotive industry, a bad idea. Any trade policy should be geared toward further enhancing the profitability of existing value chains rather than broad stroke policy.

We might also read into the referendum that there is a dissatisfaction with with disparity of opportunity between London and the regions. That ought to suggest certain domestic policies which should further inform our trade policy. This tells us we need a well thought out trade strategy with objectives in mind - where we need careful decision making rather than policy informed by Tory free trade dogma.

More to the point, Brexit was not strictly an economic proposition. There are cultural factors in play which come with demands to curb immigration, where again that should inform our trade decisions. I cannot imagine Brexiters voted for a more liberal visa regime with India, nor indeed is the case made for liberalising trade in services where India is concerned.

From the Tories we see abstract ideas like CANZUK or an ambitious USA deal, along with Boris Johnson's mutterings about the Commonwealth, but this typifies the entire Tory approach to Brexit; floating ideas with no reference to what is happening in the real world, no consideration of what other countries might have to say about it, and whether it is even desirable.

The debate is also bogged  down in typical Westminster bubble confusion. Like the Brexit debate we cannot expect a coherent conversation when the participants struggle to comprehend even the most basic terms and concepts. Few seem to understand that trade is a governmental discipline separate to that of commerce. We, therefore, have a battle on our hands just to inform the debate before we can begin to influence it.

There are also intractable contradictions to negotiate. When you put it to an average member of the public whether or not they want free trade, most will say they do, but will be less enthusiastic when the possible implications are set out. One thing this blog has been keen to point out is that any future trade policy will require a great deal of international cooperation through the global institutions as well as intelligently directed aid spending - which is not the most popular view in town right now.

I have previously taken the view that at least some of our aid spending should go toward international development to grow emerging economies with a view to curbing migration. I have since seen thinking that suggests development aid may actually have the opposite effect. This shatters some of my assumptions but then for all the super brains inside the EU they have been labouring under the same misapprehension. We therefore need to ask what will work.

This is not to say that development aid of itself is not still a worthwhile endeavour since more trade in goods overall is more opportunity for our ample services sector. The question is one of how we get the UK to the front of the queue. That is where intensified participation in all of the global forums comes in.

On that matter I get the impression that this is a much neglected domain where we have a handful of generalists attending too many diverse forums failing to appreciate their significance and instead giving undue attention to WTO affairs as though the WTO is the alpha and omega of trade politics. We need to be engaged across the spectrum to make the best use of the global rules based system.

The folly is assuming that on Brexit day with our new found freedoms we can race off and achieve instant and revolutionary results. Nothing in the field of trade happens fast and very little is straightforward. Being that the case, the more radical the mode of Brexit the greater the workload we have and the longer it will take to recover. We may find that by maximising sovereignty our real world power is diminished along with our ability to finance new initiatives.

Of course, though, it is presently unrealistic to expect any clarity or coherence with politics in its current state of dysfunction. With regard to recent events concerning Syria and Russia we see our politicians reverting to their old habits based on their residual self-image of being righteous saviours and a power in our own right. As much as that was a dangerous delusion as members of the EU, it could prove catastrophic in a post-Brexit world.

That, I suppose, is what makes domestic politics the main concern for the time being, where necessarily we will be an inward looking country. We cannot possibly hope to project a vision into the world without a degree of political coherence at home. We need a new domestic political settlement because the "centrist" old status quo has gone forever.

I am am often asked how Brexit is supposed to bring about economic revival when there are so few economic arguments in favour of Brexit. I am still of the view that had we elected to remain in the EU we would have persisted with the narcissistic presentation politics we have known since the early days of Blair, masking the decline and failing to address those underlying issues which were gradually undermining the foundations of British society. Resolving our political dysfunction is a prerequisite to any economic revival.

This is where I part ways with the majority of Brexiters. I do not see Brexit as an end in itself, nor do I think we have a buccaneering free trade future just around the corner. I fully expect Brexit to take a major economic toll and I don't even think that our politics has hit rock bottom yet. Not until the symptoms of our political choices over the decades manifest themselves in intolerable ways will we see signs of a political renewal.

Brexit is not a technocratic two year negotiation. It is the beginnings of a ten to twenty year journey to rediscover who and what we are and where we fit in the new global order. It is an adjustment to our actual status as a mid-ranking post-colonial power where we must reforge our institutions to reflect that reality and purge from our politics the belief that the world is our plaything. Only then will we have an idea of what we want to achieve in the world and a realistic perception of our position in it. Then, maybe, we can have an intelligent debate about trade. 

Saturday, 7 April 2018

Brexit trade: Britain should not be aiming for notches on the bed post

If you thought the Brexit debate was under-informed then the wider debate on trade, the little that there is, will turn you a pale shade of green.

It's not helped by the fact that those politicians most keen to talk about trade are the least likely to know anything about it. There seems to be an assumption the abstract of any geopolitical considerations we can knock on the door of any country and "offer them a free trade deal" as though we simply hand over a contract to sign. Then there are the likes of Daniel Hannan who, for whatever progress they might have made in recent months, have simply reverted to type to talk about deregulation.

What is also forgotten is that while politicians from Australia and America may make pleasing noises about future trade relations, when it comes to the nitty gritty, countries will act in their own interests, regardless of how close the cultural and language ties are. They will in the end have their own voters and lobbying interests in mind.

We also have to consider what we can get past our own parliament where MPs will have their own re-election prospects stalking them. A report from Open Britain draws attention to the usual talking points.

"In the case of India, to get trade talks started the UK would need to agree to grant more visas for Indian workers, something the UK government blocked in the EU-India FTA talks. China, meanwhile, is deeply protective of its services sector. In return for any kind of trade deal, Beijing would likely want Britain to advocate for it to be granted 'market economy status' at the World Trade Organisation".

Beyond that there are several other considerations that make enhanced trade agreements a total non-starter. With Efsa having banned Indian seafood imports we could find that if we take a softer line then there will be ramifications for our trade with the EU. The EU will not want to risk letting seafood from the UK contaminate its own system.

All the while China has been waging a tech/IP trade war which has been going on in the shadows, the importance of which cannot be overstated. Japan is seeking to join a US complaint against China at the WTO and the UK has a vested interest in this initiative succeeding. That though means a deal with China is dead in the water.

On a subject as complex and consequential as this the only real expert advice I trust is that of Homer Simpson whose fatherly advice is "if you can't win, don't try".

The truth of the matter is that this flurry of bilateral preferential trade agreements is symptomatic of the WTO process having stalled and with every one that is signed the multilateral system is weakened. That is in no-one's interests, especially smaller economies. The result of this growth of PTAs is a spaghetti bowl of complex agreements with intractable overlaps where every deal has ramifications for others still in negotiation. We are regressing.

Meanwhile, as a new trade war starts to heat up we might need to ask if PTAs have hit their high water mark. The EU has had to scale back its ambitions to get CETA in the bag and a revival of TTIP looks remote. If reaching breakthrough was difficult during a relatively stable period in trade affairs, the chances of these such initiatives succeeding now are somewhere around nil. With the UK needing whatever scraps it can get it will have to act fast - concentrating on only the most crucial pillars of our existing trade.

From there the UK needs to take stock and examine its own foreign policy and political objectives - many of which will not be in line with our trade ambitions. We will still need a lot of goodwill from the EU to manage the legacy Brexit problems and any moves which undermine the EU could have costly repercussions. If the EU is intent on ending the demolition of rainforests by banning Malaysian palm oil in biofuels, the UK could very well anger the EU by going against the grain.

While the UK is still finding its feet, it would be well advised to steer clear of ambitious big headline deals. They chew up enormous diplomatic and intellectual resource very often to fall over at the last minute. The problem with comprehensive deals and the rounds system at the WTO is the principle that nothing is agreed until everything is agreed. This is why we have failed to make progress in recent years.

We also have to consider that there is an upper limit to how much we can handle at any one time. Even with a well resourced trade ministry there is no possibility of negotiating dozens of agreements simultaneously, not least least when there will need to be coordination to ensure that what we offer remains attractive to third parties. A country may well be up for a preferential trade deal with the UK if it does not face any competition for that market. However, if we are also offering PTAs to other states who are in competition, such agreements look less lucrative.

In fact, the whole reason the multilateral system exists is to avoid this inefficient process and to stop the proliferation of protected channels of trade, instead promoting fair competition. PTAs undermine that by entrenching favoured partners. The Brexiter criticism of the EU is that it has multiple strands of protectionism which is absolutely correct and when it talks about free trade it is simply extending its protectionist walls around partner countries for select industries.

We should, therefore, question why it is that Brexiter are so keen to replicate this model, especially when we will lack the clout of a major bloc like the EU. Moreover, there is an inherent contradiction in their approach in that they favour deregulation and unilateral removal of tariffs meaning there are no defensive measures to trade away in negotiations with third countries.

This is where we have to hold the global system up to the light and examine it from every angle. Nobody could argue that the WTO system is not dysfunctional with many high profile failures, multiple existential threats and internal stresses. Working in rounds it is prone to failures for the same reason high profile PTAs fall over. If everything depends on complete agreement then we cannot be surprised if initiatives are routinely kicked into the long grass.

If Britain wants to make the best use of its resources it will ditch the trade wonks and focus on sector specialists who work in the specialist global bodies. Instead of multi-spectrum deals we need to look at less politically contentious angles of attack, looking at only a single sector, system or product at any one time, making incremental progress, building on multilateral initiatives ensuring that everybody wins.

We can still be ambitious in this. A single global vehicle type approvals system would be revolutionary and there is most certainly an appetite to simplify rules of origin where any initiative would attract widespread support and very possibly be able to corner the EU into reforming its own labyrinthine system. But then at the same time we can work on even less contentious agreements on tyres, electronics and fishing. The more granular we go, the higher the probability of success and the more likely it is that we will make incremental progress rather than devoting armies of trade wonks to a single country to produce nothing.

Theresa May and Liam Fox have repeatedly spoken of strengthening the global rules based system, reiterating our commitment to working on a multilateral basis, but their actions do not match their rhetoric because there is no real understanding of how the system works, why it exists and how we can make good on our well meaning pronouncements.

When the UK leaves the EU we will reclaim the right of initiative all the major global forums and despite the miserablism of the remainers we are not without allies and where we seek genuine improvements to the system we will find others willing to act in good faith irrespective of the wider geopolitical situation. To achieve anything the UK needs to re-learn the art of making alliances, and working through ad-hoc groups.

What we need, however, is for the thinking to catch up to the rhetoric. For as long as as the trade debate is bogged down in talk of replicating bilateral deals we will know that neither the remain nor the leave side of the Brexit debate has understood the system or realised the potential opportunities of Brexit. The measure of Brexit success is not the number of notches on the bed post as we conclude PTAs. What we need is to focus on those things that increase the profitability of existing value chains, using the global institutions to remove the barriers.

There are now mountains of academic tracts on the value of PTAs and still we have no reliable means of establishing their actual value whereas there are objectives in trade facilitation where we can put exact numbers on the savings we can make which will have entirely beneficial secondary effects.

For as long as work visas and political favours are tied up with bilateral trade treaties we can expect them to fail. They will also force us to make unwelcome concessions and make political enemies as we go. Moreover there is a certain naivety at work in believing that China, India and others are playing an honest game. These are not countries interested in doing us any favours and will use whatever means they have to undermine us. Trade is not divorced from politics. That is something we have long forgotten having outsourced the discipline to Brussels.

Presently the trade debate has become a niche fixation of the sell-your-own-granny libertarians on the right - who think that unilateral deregulation leads to sunlit uplands whereas in reality it will lead to UK markets being flooded with substandard and knock-off produce while lacking the leverage to retaliate against predatory practises.

As it happens I agree with the objectives of the Tory right in that we do want to keep trade red tape to a minimum and drive tariffs down even further (who doesn't?), but uniltaeralism is not the means. It only works if everyone is working to that objective - which they clearly aren't. To get to our destination we will have to do it not by deregulation but by means of regulatory improvement and harmonisation and we will have to skilfully make the argument in all of the global forums. It is a slow and meticulous process where there are no shortcuts but there are ways in which we can improve the process to ensure we all win.

Britain urgently needs to expand the trade debate beyond the old paradigm and recognise that we need to play a very different game to that of the EU. The EU establishment thinks only in terms of big ticket FTAs because the EU is interested only in regulatory imperialism - not trade. Consequently, out of habit, when UK academia talks about trade they think in the same terms. This we cannot afford. We are not a regulatory superpower.

Because wonkland cannot progress beyond what they're indoctrinated in, and if we cannot adapt to our new status as an independent actor, we will end up with a zombie trade policy, spending years and vast resources trying to conclude bundled FTAs with individual countries when we could have made progress by other means.

This is why the remainer think tank monopoly over academia and the technical Brexit debate is unhealthy. They have Brussels blinkers on and lack the imagination to navigate the trade system in more creative ways. When it comes to trade they are luddites same as the ultra Brexiters. Like the Brexit process we are too easily distracted by talking points to see the bigger picture.

More disturbingly we have a political apparatus that simply does not want to know. Brexit talks are presently on an uneventful hiatus where we see our bored polity has reverted to type, fixating on the debate around the gender pay gap and the sugar tax. Anything but address the urgent and consequential. One is starting to think that if they can't follow this debate and make the attempt to find out what is happening, they deserve everything they get. And they will get more than they ever bargained for.

Thursday, 29 March 2018

Brexit realists must reclaim the argument

As a thought exercise I sat down to come up with fifty distinct reasons to leave the EU. It wasn't that difficult and that was without climbing heavily into the details - and nowhere on that list was immigration. What those reasons are, for the purposes of this post, is neither here nor there. The question is more one of which of those issues is resolved by Brexit?

That's where Brexit becomes problematic because some of its worst facets remain the same long after Brexit and are in fact amplified for the UK by way of having left. For instance, EU trade policy becomes no less murderous and its protectionist tendencies will likely be worst after Brexit and we will feel the consequences of them more acutely.

 A common theme running throughout was how the EU limits our abilities to decide things unilaterally, but that is without examining the consequences of what happens when we do act unilaterally without the necessary clout to handle the repercussions. Regulatory divergence, for instance, is one of those things where we can nominally repatriate the power but there are few advantages in actually diverging.

The therefore find that the gains from Brexit are very often only in principle or only theoretical. We will, for instance, have the power of veto in a number of forums, but in all likelihood will seldom every deploy such measures. This is the Norwegian experience with the EEA where it finds it must build up political capital by choosing its battles carefully. Win some, lose some.

Meanwhile there are obvious trade-offs like fishing where we could fetishise sovereignty and control to the max but find our market for fish substantially diminished. The same goes for agriculture and aviation.

The essential problem with the EU is that it takes all of these considerations and places then under a single treaty framework which leads to a gradual transfer of authority where we eventually find that the levers of power in Westminster aren't attached to anything.

Nowhere is this more observable than in the domain of trade, and especially WTO affairs. Ronald Stewart-Brown commenting in 2008 on the failed Doha round had this to say about it:
… it needs to be emphasised, the UK no longer has any meaningful existence in the world of international trade negotiations as it has ceded Brussels controls of most aspects of its trade relations with third countries apart from currency and trade promotion. While she retains nominal WTO membership, it is now in reality little more than a region of the EU in trade policy terms, with the periodic right to nominate one of its nationals as EU trade commissioner.
In the early days of UK membership, when EEC decision-making on trade policy was primarily inter-governmental, the Department of Trade and Industry was a leading and respected player in EEC trade policy matters. But as EU trade policy decision-making became more supranational so DTI trade policy expertise gravitated to the commission in Brussels. The dropping of the word trade from the department’s title when it was renamed last year as BERR (the department of business, enterprise and regulatory reform) says it all.
Gradually we find we are being erased as a nation state in all the ways that matter in international arenas, and at a pace so glacial we barely notice that the machinery of the EU is taking over, making our own politicians puppets to be paraded to give the illusion of influence. This is why the argument that British influence would decline if we left the EU was unconvincing. The damage is already done. 

We are told that the EU amplifies our influence, but only in so far as our agenda chimes with that of the Commission and to an extent the Council, but that is where we see a globalist groupthink take over where our respective establishments are unlikely to oppose any initiatives, especially if it be an act of global virtue signalling. If the UK found itself wanting to go in a different direction to the herd (and the fact that it never does is part of the problem) it would find it has no more influence than being a lowly pipsqueak member state.

But then by the same token the UK cannot expect to wield massive influence as an independent member of the WTO either. Multilateralism hinges on building consensus and choosing alliances. Brexit goes some way toward making that possible but again the potential is only theoretical simply because Brexit does not change the Westminster groupthink or break its habitual conformity. 

To get the benefits of being an independent state we have to start acting like it - and there is no outward sign that much as sunk in. In fact, it is telling that British trade wonks fancy their chances of a career by jumping ship to Brussels think tanks because their dogmatic mindset matches that of the EU.

One of the biggest problems arising from Brexit is that the UK has forgotten how to act as an independent nation and no longer has any concept of what is in the direct national interest. Trade wonkery in Europe has gone native and unlike the USA its denizens posses not a shred of patriotism. that's what makes UK academia, trained in the doctrines of Brussels, next to useless, bordering on dangerous.

The worst of the damage from Brexit will come as a result of playing the game by the old rules with UK politicians still failing to come to terms with the fact that the UK is not the power it believes itself to be - an illusion that the EU has sustained for the last four decades. 

Worse still we have yet to realise that the EU has acquired its own distinct trade personality and a patriotism of its own among its own officials where we will find that the EU is no ally in trade affairs. When it comes to something like expelling Russian diplomats in response to the Salisbury poisoning, we can expect some token solidarity but that does not happen in the realm of trade. We are going to have to get used to the idea that the EU is not interested in cooperating with third countries, nor will it be looking to do us any favours.

Moreover the UK will find that it is not nearly as popular among its former colonies as it belies itself to be, with former Commonwealth nations having trade concerns of their own, not least new regional trade initiatives in Africa where we could very well see Africa become a fourth standards superpower in the years to come. 

The point here is that in order to maximise the utility of our new found sovereignty and independence we will need entirely new strategies where we shall have to look at how mid ranking nations operate, rendering much of our EU experience obsolete. 

In this we find we can no longer afford the pretence of an ethical trade policy. It already looks like the UK will break from the EU intention to curb palm oil imports from Malaysia and Indonesia. Our ecological pretensions outside of any global framework will have to take a back seat. 

That is perhaps one of the more bruising consequences of Brexit in that it will shatter our self-image as a moral actor under the EU umbrella - however bogus that may have been. That, I suppose is no bad thing. A trade first trade policy might be a welcome novelty instead of the finger-wagging and preening we see from the "international community". 

What is clear is that of itself, Brexit achieves very little and puts our establishment way out of its depth, having to confront a world of labyrinthine complexity when it can barely master the basic definitions of the EU apparatus. How well we do will be entirely contingent on how well we can re-focus our civil service and change the institutional mindsets within it. 

The mood in international trade has, since Trump and Brexit taken a more aggressive turn, which has the potential to turn into a global trade war. Though nobody wants this, trade is very much back on the agenda and very much en vogue and will be the driver of international conversations in the next decade. It could very well serve as a cleansing forest fire as the global economy adapts to a new phase of globalisation.

Again this will require a new mindset. Being that we are but a small ship in rough seas, our safety net is not the EU, rather it is strengthening the global institutions and multilateral frameworks in whatever way we can. As much as the WTO serves as a stabilising factor, we must be cautious not to row back on the progress in global regulatory harmonisation. Noises from the Tories about slash and burn deregulation are entirely the wrong signal to send.   

It is these considerations that should steer our approach to Brexit. The mantras from the Tory right about taking back control of our laws, money and borders may well be what the public assumed they were voting for but there are real world practical limitations where more control in theory means substantially less in practice. Options are restricted, choices narrow and consequences more severe. 

The USA can afford to fetishise sovereignty in that it is a superpower that to a large extent does not need trade outside of a foreign policy - but if the UK turns down that path it will find that sovereignty without the power to wield it is meaningless. 

As a leaver I accept that Brexit comes with limitations and will likely slide to become only a mid ranking power, but I see that more as a political and cultural realignment that is long overdue and one which confronts a number of our long held delusions. I see that as healthy. The question is whether our political class can also be disabused of its pretensions. As a Scotsman said to me just recently, England is a country in need of liberation from the British. He's not wrong. These delusions have long fed a residual self-image that has caused us to meddle where we shouldn't.

As much as Brexit has robbed our political class of its veneer of competence and alerted us to the state of our political atrophy, in will in turn we a wake up call to a country that has been asleep at the week, disengaged from international affairs and all to happy to delegate governance to Brussels. Lifting the veil of Brussels exposes a whole universe of global governance that we must navigate as an independent actor. We may not be in any shape to do that presently, but at least acknowledging it exists will be a start. 

There are those who will regard any Brexit as a failure - and if the mantras of the Brexiteers are the benchmark by which we consider Brexit a success then Brexit will fail. The challenge for Brexit realists, therefore, is to reclaim the argument and make it clear that Brexit is less about restoring a perfect indivisible sovereignty, rather it is a matter of repatriating the decision making. 

Brexit has never been an economic proposition and it was a politically motivated folly by Vote Leave Ltd to ever pretend it was. This was primarily about democracy, warts and all, and the legacy of Vote Leave will have been to sour the appetite for that worthy goal. 

The only way Brexit could ever deliver on what was promised, or provide remedy to any of our complaints about it is for the EU to stop existing. Though I certainly wish that were the case, such wishful thinking has no place in the Brexit process. We shall have to contend with the EU whether we like it or not - and that reality is not going away any time soon.