Saturday, 16 December 2017

Yes, Brexit is protectionist. So what?

Though people say trade is complex, it isn't that complex when you find your feet with it. Hosuk Lee-Makiyama, a reputable expert on top tier trade issues, recently remarked that it takes about five minutes to learn but a lifetime to master. I couldn't agree more. The concept of non-tariff barriers is far from rocket science but the politics of it is a wholly different matter.

This is why generalists professing trade expertise can very easily wander into a minefield. It is too big for any one person to fully comprehend - and certainly difficult to contextualise without real world experience. This is why one should be highly cautious of experts. It takes a breadth of experience to fully understand how it all fits together.

Over the years I've developed a number of systems for standards and regulatory compliance. Until about three years before the referendum I'd never really given much thought as to how such systems related to trade. Like most Brexiters I had a pretty insubstantial grasp of how trade works and it never occurred to me that the things I've learned over the years would be more relevant than ever.

Working in aerospace engineering alongside fatigue and design tolerance engineers, just about everything we did was standards based from the actual design and materials, right through to the management methods, document controls and authorisation processes.

If an aircraft crashes and it's a repair that has failed then it needs to be traced to the design engineer. The decision making and justifications have to be recorded and the materials used must have an audit trail right down to the quarry where the ores were extracted. Traceability is everything when it comes to quality - and for goods to qualify for use on commercial airlines there have to be stringent processes to ensure we import the real deal rather than counterfeit components.

Having built a number of systems for those purposes, and having learned about the functioning of the single market, I probably have a better idea than most how it all works end to end - same as food safety and chemicals professionals have produced the best Brexit related impact assessment material.

That however, is in just one type of supply chain and says nothing of financial services and intellectual property; areas where it's very easy to get the basics wrong which is why I tend not to comment on those such affairs.

What one notes, though, is a theme not unfamiliar to regular readers of this blog. Whichever sector you look at there are national, regional and international dimensions to it. Aerospace is hugely influenced by ISO, IEC and a number of specialist bodies. There is a entire chain of governance in which the EU is only part of a much wider ecosystem. The same applies to absolutely everything else. There are systems within systems with multiple overlaps and shared jurisdictions. The notion of the EU being the alpha and omega of regulation is overly simplistic and wrong.

Consequently, when it comes to the Brexit debate, mantras in respect of having "no say in the rules" and having no influence is reductio ad absurdum. There are levels of influence even for non-EU members like Norway, who wield considerable influence in everything from telecoms to fisheries.

What one notes is that influence in one domain often comes at the expense of influence in another. EU members cannot independently raise initiatives or WTO complaints. EU membership is also no guarantor of shaping outcomes. It's just a another body where the biggest corporate voices speak the loudest.

One high profile example of this, as mentioned before, is EU inspections for Citrus Black Spot - a fungal disease in fruit. Typically reports cite "EU regulations" as the reason for import restrictions. It isn't that. It's an EFSA risk assessment leading to increased inspections and creating delays causing South Africa to voluntarily terminate trade even though it meets the standards and qualifies for trade preferences.

The South African view is that the risk assessment criteria is the product of internal lobbying and is scientifically questionable. The Spanish government's position will undoubtedly be the product of lobbying by the Valencian Growers Association AVA-ASAJA. They have identified the weak spot in the system that allows them to push for EU level protectionist measures.

What we find is that, notwithstanding cooperation agreements on standards convergence, the risk assessment criteria is still more a political than scientific issue, it rests largely with the Commission, and though the IPPC can investigate, it can only challenge the validity of the risk assessment process rather than the actual verdict. If the process is found to be transparent and the specialists are sufficiently qualified then there is little anyone can do. 

This is where it's possible to overstate importance and usefulness of certain institutions and instruments within the trade ecosystem. Though WTO members can normally raise issues for consideration, panels must be formed, investigations undertaken and hearings scheduled. The process is time consuming and expensive thus, in most cases, an EU decision to exclude produce is usually final.

There are any number of loopholes in the system that make a mockery of the EU's trade liberalisation dogma. As previously noted, the European Commission is currently conducting a review of the Indian SPS inspection process and is considering a total ban on Indian seafood product imports. It recently increased the percentage of seafood imports from India that must go through inspection from 10 percent to 50 percent, after finding repeated violations of its standards for contamination.

On this score you can probably take it on trust that the Commission is being justifiably cautious in that Indian Food Safety standards are woefully underdeveloped and under enforced. A lot of work is going into modernisation but the system, to a point. has to function on trust - and with corruption in India being what it is, we are decades away from trade parity. Not for nothing are India-EU trade relations in their infancy. 

But then when it comes to standards improvement under the aegis of an EU cooperation agreement, we often find the goalpost shift time and again on the whim of EU producers - which is why we still manage to exclude Argentinian beef exports some twenty years after the BSE scare. That issue will run and run and will remain a talking point of trade debate for a decade or more. 

For as long as goods cross borders, foodstuffs especially, consumer confidence will always be a major factor. That in itself is a readily exploitable area for protectionism. So too are environmental concerns which is why big business just loves climate change. Any platform for regulation presents an opportunity to shaft one's competitor

The same goes for standards. The WHO Protocol to Eliminate Illicit Trade in Tobacco Products was the culmination of more than five years of complex negotiations at inter-governmental level. The Protocol contains a range of provisions and obligations for Governments who ratify this instrument, including measures and standards in the areas of Supply Chain Control.

That then started a corporate space race in the standards bodies as to what systems and methodologies will be used. This has been a long running saga in European standards politics and one of the most alarmingly corrupt.

And this is what makes the EU particularly objectionable in that it's really not up to us what we can import and what we can restrict, and unless an eco-lobbyist can popularise a panic over something like "chlorinated chicken" we have absolutely no idea what we are agreeing to. Big bang headline FTAs are of major propaganda importance for the EU so it will make a number of arcane compromises to ensure they succeed. Not always successfully. 

In this, it is hardly a surprise that TTIP failed. It was too big, too ambitious and shrouded in mystique. Something of its nature is impossible to take on trust. What makes the EU even more suspect is that these such deals are never defeated. They simply go into a cycle of review and will be fed in by the backdoor. No doubt TTIP will be installed by breaking it up into smaller, less controversial instruments of trade and national media will completely ignore it.

In the meantime we can be assured that if the EU wants a propaganda win by securing a headline deal with the USA it will devote some of its runtime to dismantling or modifying those aspects of its current acquis which stand in the way. The ongoing saga over endocrine disruptors is part and parcel of that. There is simply no possible way that trade conducted on this scale (and of this complexity) can ever be truly transparent or democratic. Are we to trust the EU when it is a nest of corporate lobbying? 

What we find with trade liberalisation is that it requires a great deal of compromise, considerable sacrifice and those most affected are the last to know and the least likely to have been consulted. Course, you can ask why it is that little old Wallonia can derail something like CETA yet Yorkshire must do as instructed by London. That is a seriously good question I hope we will address after Brexit. 

But then for the EU, what little democracy exists is increasingly going to be an obstacle to further trade increments. It will be interesting to see if the EU-Mercosur deal passes intact. Mercosur members Brazil, Argentina, Paraguay and Uruguay have pushed for an improvement on the EU offer of tariff-free imports for 70,000 tonnes a year of beef. They're not likely to get it and if the EU offered it, no doubt it would be shot down in the ratification process. 

That begs the question as to whether EU trade has peaked. We often hear that WTO multilateral initiatives have stalled, but will future EU deals be meaningful increments, and will they have worthwhile benefits to the UK? Moreover, there is a hypocrisy to address. The remain inclined will panic about possible agricultural liberalisation with the USA, but as yet have seen no moral panic over what a Mercosur deal could do to British agriculture. EU trade good, UK trade bad - it would seem. 

This, though, is not just a question of trade. The ongoing debate on globalisation is one of reconciliation between mutually exclusive concepts. Trade liberalisation is largely incompatible with sovereignty. The more the global rules based system develops the less meaningful sovereignty becomes. In exchange for the benefits of trade we increasingly cede control in what we are told is the common good. 

This is problematic for democracy in that we still find that, even leaving the EU, we are constrained by a number of global conventions and obligations. We are told that this is in the direct national interest and that we live in an age of interdependency and we should basically get used to not having a meaningful say. The trade scriptures say that protectionism is bad. 

As a one time liberal I subscribed to that dogma - but that is exactly what it is. Dogma. Trade policy is there to protect legitimate traders from the predatory practises of nations and corporations who seek to damage competitors by unfair means. By its very nature, therefore, an effective trade policy is "protectionist". We must re-learn this discipline. 

Every liberalisation measure must be done with due consideration to its economic and ecological impacts. But we must also ask whether populations have the sufficient power to call time on or temporarily suspend measures which may unnecessarily harm domestic objectives or interests. 

My deliberations have forced me to conclude that there is insufficient democracy or control as EU members - and even if there were adequate safeguard measures we have an establishment too lazy, venal and indifferent to invoke them - and is not sufficiently engaged with trade and EU governance to realise it's even possible. 

Brexit to my mind answers the call of taking back control simply by repatriating decisions over its external relations. At one time when trade were largely just a matter of tariffs it could be said that "pooling sovereignty" was a tolerable sacrifice but when modern trade methodologies deal with everything right through to labour laws (thus disempowering electorates, individuals and unions), this level of trade integration is a bridge too far. 

I'm not going argue that leaving the EU will bring about a free trade bonanza - and in fact, to experiment with the more radical ideas of the Tory right would be suicidal, but the case for repatriating decisionmaking is undeniable. It doesn't matter especially if we do adopt standards and regulations just so long as the decision rests entirely with parliament and that there is a means to pull the plug on select measures without having to do something quite so drastic as Brexit. Ceding the authority and placing all of our trade relations into a single treaty construct was deeply foolish.

Brexit has already brought the trade debate closer to home and has ignited a conversation about regulation and standards that has long been abandoned. There is, for the first time in a generation, a renewed institutional knowledge of the issues, public engagement and cross platform discussions in just about every field of endeavour. This is healthy.

What it looks like, however, is that the last to be plugged into this national conversation is our increasingly remote establishment - and our government especially. It looks like we are on course to make a number of serious but avoidable mistakes. This was always the danger with Brexit. A risk I accepted when I voted.

Though the consequences of that may well be miserable, we should also note that there are serious economic, cultural and societal problems we would be deferring by remaining, many of which would be exacerbated simply because we are disengaged from the decisions taken in our name. Ever more liberalisation means opening up our markets for speculation by predators and asset strippers - and though that is also an inherent risk of Brexit, we at least retain the power to institute corrective measures without having to beg the Commission.   

In this we should not lose sight of what we actually gain from all this. It is not measured by increments in GDP. What it means is that, as the global rules based system develops (or possibly collapses) the UK will become its own customs entirely with its own distinct third country relationships with the necessary sovereign powers defend our interests and do what it takes to compete. Our new relationships will be less focused on what the Spanish citrus lobby wants. 

If you talk to trade wonks they will often tell you that job losses as a result of free trade deals are just collateral damage - because some numbers on a screen somewhere say that's for the common good. I ask; by whose estimation? We are oft told that Brexiters "voted to self harm" but at least we are actually doing it for the principle of sovereignty and taking back control. The bovine notion that liberalisation for its own sake is a universal good is terrifying. 

For the time being we will be closely aligned with the EU and a lot of our decisions will have to be taken with due consideration to how our new relationship functions, but we cannot expect it to work right away. As a newly independent country we will have to learn the ropes as to how we act like one. Be under no illusions. Tough times are coming. 

What we can say though is that the UK will be rebuilding and remodelling according to the new settlement with every arm of the polity engaged in how that comes about. We are at least applying ourselves to the issues. Not so the EU which has once again looked at its many brush fires and concluded "more Europe" is the answer. These people simply do not learn. 

At some point Mrs Merkel's regime will come to an end and Germany will have its own soul searching to do. It maybe has one halfway competent administration left in its post-war settlement and then they have their own reckoning to come. There's no guarantee Poland is staying in the EU and Hungary has never looked like a committed member. Expansion in the Balkans is faltering, Ukraine is still a nest of corruption and immigration is going to be a major issue of Italy. This notion that the EU is working in harmony has never looked more risible. Brexit isn't Europe's biggest problem.

I have no crystal ball, I don't even know what is going to happen next week. What I do know though is that globally there are shifting tides and globalisation is entering a new phase of uncertainty. The power centres are shifting, technological disruption to trade is re-writing the rule book and the trends in regulation are shifting further away from the EU and into the private domain. The WTO is now openly collaborating with corporates and the game is shifting up a gear. All the accepted norms of legitimacy are going out the window. I'm not ok with this.

It's a long time since I had cause to agree with Spiked Online but Mick Hume has is down on this. "Whatever our internationalist aspirations, the truth is that the nation state is the only effective arena for democratic politics yet discovered. Any progressive-sounding talk of no borders or global democracy can only mean the world being run by the UN Security Council, or Europe being reordered by order of the European Commission". If Brexit is, as they say, protectionist, then it's a protection against that. And a very necessary one. 

Thursday, 14 December 2017

Naysayers be damned. There is life after Brexit.

This week Liam Fox announced £18 million in funding at the World Trade Organisation's largest ever Ministerial Conference in Argentina. The funding from the DfID "will help 51 of the world’s poorest countries produce products fit for export, trade more easily across borders and access untapped new markets which have the potential to create thousands of jobs and lift their citizens out of poverty".

£16 million of the funding will go to the WTO’s Enhanced Integrated Framework (EIF) programme, which helps governments and businesses build the capacity, infrastructure and policies needed to successfully export and trade. UK funding is already helping Zambian farmers harness the country’s huge export potential for honey, building the supply chains and regulatory compliance needed to export abroad.

A further £2 million will go to the WTO’s Standards and Trade Development Facility which helps developing countries meet international agricultural standards, enabling them to export more produce.

The STDF is an excellent example of an Aid-for-Trade partnership on strengthening sanitary and phytosanitary capacity to help developing countries gain and maintain market access. Since its creation in 2004, the STDF has delivered 150 projects to help developing countries improve their SPS capacity and promote safe trade in food and agricultural products.

This is, believe it or not, very seriously good news. This is where aid spending can make a real difference and if integrated into a wider trade strategy then we have the makings of a halfway intelligent trade policy. Though £2m isn't exactly staggering riches, in this domain small sums can do big things.

Mukhisa Kituyi, Secretary-General of UNCTAD remarked at the conference that "Existing waivers for commercial services export from LDCs will have little impact unless backed by lowered regulatory barriers and supply side capacity building". This tells us a lot of what we already know; that tinkering with tariffs is neither here nor there - but deregulation is precisely where we don't want to be not least because of the ramifications for existing UK-EU trade. We cannot enter a race to the bottom, therefore we must enter a trade space race to lift standards throughout.

The European Commission is currently conducting a review of the Indian SPS inspection process and is considering a total ban on Indian seafood product imports. It recently increased the percentage of seafood imports from India that must go through inspection from 10 percent to 50 percent, after finding repeated violations of its standards for contamination. Odisha, one of India's highest-producing seafood regions, is particularly exposed to barriers to trade with the EU. Its seafood exports to the EU have almost doubled to EUR 9.6m.

This is where the UK can and should intervene and no doubt has the business and cultural links necessary to enhance Indian aquaculture - and not a bad idea since fishing generally is likely to come under the microscope for reasons you might be familiar with. There are some bloody interesting things happening in aquaculture too. Proactive trade facilitation puts us first in line to promote UK technologies and business services.

The EU is presently ramping up its trade propaganda. Over the coming months and years they will announce and re-announce FTAs to world to give the impression it has the whole world already sewn up. What I note, though, is that EU partnership agreements are only as good as the investment poured into them and as EU members we do not have sole authority in how such funds are directed. Many such agreements amount to not very much. 

Free of the EU the UK will bring some £5bn in aid spending back in house. That can be turned to our advantage. If we are willing to put the work in (and the investment) then there is no shortage of things for the UK to get busy with that will serve the national interest. Naysayers be damned. There is life after Brexit. 

Wednesday, 13 December 2017

Soft Brexit is smart Brexit

Michel Barnier has stated countless times that the UK will not enter substantive trade talks until we have formally left the EU. The latest negotiating guidelines have been published. They detail the framework for the next round of talks where the main concern is the shape of the transition.

The view is that it will take a further two years to come to an agreement. One suspects, for the time being, the EU is politely skirting over the obvious that a trade agreement will take far longer than two years. This is so as not to frighten the horses. The UK can just about agree to two years on the terms outlined above. Beyond that the UK would expect to modify the terms since any longer is a long time to be in the EU without formal representation. We can only speculate. 

In this we have to look at what the UK is seeking to achieve. The UK wants more than Canada, less than Norway, and though it has hinted it does not seek the same obligations, there have been hints from David Davis that we will, on some level, continue participation in a number of EU agencies like the EMA. 

We should not that we will need agreements to cover our participation in the European aviation market through to Euratom. Some areas will be easier than others to achieve. Euratom might very well be a simply copy of the Australian agreement whereas EU members might very well see an opportunity to cannibalise the UK's share of the aviation market and will seek extensive renegotiation. This is where the UK will likely be taken to the cleaners. 

As to the core aspects of trade, again we find the Northern Ireland issue right at the heart of it. If we wish to maintain a frictionless and open border then it will likely require continued harmonisation. The UK government view that we will be able to meaningfully diverge will be one of the first casualties of the talks. 

To have the same level of freedom of movement for goods we will need to maintain membership of regulatory frameworks like REACH. We will also require any number of mutual agreements on recognition of qualifications. There are more than three hundred such areas of cooperation. 

From there is it a matter of deciding what supervisory mechanisms will oversee it. The UK has a choice of associate Efta court membership or direct ECJ application. There are other means available but in all instances there is a heavy bias in favour of the ECJ. Effectively the UK is seeking a deep and comprehensive trade relationship - but it must concede that the level of participation required will necessitates continued budget contributions.    

In this we can expect the EU to cooperate. It has mechanisms for facilitating these kind of relationships. It is though, bound by certain constraints. If we seek only an FTA then it will be governed by the WTO rules on FTAs and therefore any concessions made to the UK could well be transferable to other FTA holders. It may not, therefore, be possible to grant the same level of access for services that EEA members enjoy.

The EU will also abide with its general principle that it will not recreate an EEA style agreement for the sole benefit of the UK so that it can evade obligations on freedom of movement. It will exact a price. The UK will be expected to reckon with the consequences of its choices. We stand to lose considerable market access - and again, where member states see an opportunity to cannibalise UK market share we can expect lengthy asymmetrical negotiations in the EU's favour. 

It is the view of The Leave Alliance that that any FTA negotiated with the EU will result in a far inferior trade relationship with few of the sovereign liberties than many leavers anticipated. Hardline leavers will be disappointed. 

Hardline leavers such as Ruth Lea furiously reject the EEA believing we would be supplicants to the EU. As it happens, were we in a deep and comprehensive FTA outside of the EEA framework it is actually more likely that the UK will be passive recipients of rules without much in the way of consultation or veto. Standard safeguard measures will be available but invoking them comes at the cost of market access. 

We are, therefore, back to our usual conclusion that an EEA Efta arrangement is the more intelligent approach. It has the merit of tried and tested infrastructure, full market access and avoids the risk of UK market share being traded away. The agreement already exists, we are already signatories to it, the terms are already known, and it would massively simplify and expedite our exit. 

What we note about the EEA agreement is that it allows for country specific protocols and is entirely configurable. Over time we can negotiate carve outs. Some suggest the EU would not be willing, but if we can demonstrate that our shift in trade direction in some sectors contributes to the corporate wealth of Europe then we can expect the EU, on occasion, to act in good faith. 

We are then left with the politically difficult issue of freedom of movement. As we continue to point out, this issue is not insurmountable. We would simply have to manage expectations. The choice is stark. The EU, for its own reasons, requires a liberal regime on movement of persons. It will uphold those principles and consequently we are forced to consider our priorities. 

What we would note is that in order to mount an effective post-Brexit trade policy we will have to invest heavily in cooperation programmes beyond the EU, economic partnership agreements and play a full and active role in international organisations. In this domain, multilateral initiatives stand or fall on the level of investment. Money talks. 

With that in mind the greater the hit to our economy by leaving the EU, the less funding will be available to mount the kind of proactive foreign and trade policy we need to deliver the potential gains promised by the leave campaign. Reaching zero tariff agreements is the least difficult part of trade. Maximising utilisation of trade preferences and increasing the profitability of the value chains therein requires a greater degree of engagement and that will require considerable foreign and domestic institutional infrastructure to service such agreements.

Because of the nature of the multiple compromises the UK will inevitably have to make, many of the assumed silver bullets will not be available to us. Though we are most certainly leaving the customs union we will have to stay closely aligned with it - not least to maintain open borders in Ireland. That means our future trade policy will depend more on economic partnerships rather than classic EU model FTAs. A lot will also stand or fall on how successfully we can navigate the many global forums in trade where standards and regulations take centre stage. This is something else that does not come for free. 

The danger of leaving the EEA is that Britain finds itself substantially poorer and unable to mount an effective trade policy and in so doing will gradually creep back into the EU regulatory ecosystem and like Switzerland will trade away sovereignty for market participation with none of the representation or consultation enjoyed by Norway. Exactly where we didn't want to be, and largely making the whole exercise pointless. A voluntary self-immolation for no discernible gain. 

Ultimately we have to safeguard European trade on the best possible terms simply because it is still where our geographical and cultural interests lie. Enhanced trade relations with our neighbour is essential and trade is unlikely to be replaced otherwise. UK-EU trade is on a wholly different level to everyone else in the world. For instance, how many ro-ro ferries are there plying the Atlantic, delivering perishable goods for immediate consumption and JIT components for retail sale and to supply manufacturing plants?

This kind of trade is only made possible by way of having no formalities at the borders. This is how goods arrive at their destination only a few hours after dispatch. This is not just a question of conformity to standards. Even fully compliant products shipped from the United States are subject to lengthy and sometimes intrusive border controls. Fortunately, with the longer shipping time, document checks can be made while the goods are still in transit, but it is still the case that trade with the US and other distant partners is in containerised or bulk cargo.

The nature of our trade with the EU, though, is the vast bulk (well over 70 percent) is in driver-accompanied loads. It's through the Channel tunnel or by short sea shipping, with no customs formalities of any nature. That trade was built up after we joined the EEC, and is basically a child of the Single Market. The trade relies on speed of throughput at the ports. There are not the facilities or infrastructure to deal with border checks. It couldn't survive the uncertainties of a rigorously policed border where lorries are routinely delayed by hours and can be held for days.

The issue at hand here is separating the political from the economic. As a leaver, I simply do not want to be in the EU. I want the UK to be a distinct customs entity where the decisionmaking over areas of economic cooperation stay under the direct control of the UK government and are not bundled into treaties which transfer authority. The EEA, though suboptimal, to me represents an adequate firewall against creeping EU federalism.

Now that we have left the EU we can see all the stops are pulled out to accelerate the EU's federalist agenda. Critics of Brexit argue that were we to remain a member we could continue to block these developments. What we would note, however, is that such measures are never blocked. The UK can only ever really slow it to a glacial pace - which is actually worse because the integration is then done by stealth and so slowly that it meets little direct opposition. 

We are, therefore, tasked with remaining part of the community of European nations in the same regulatory ecosystem, but in a framework which allows the EU to consolidate and form up around its Euro currency members, while Efta and the UK seek out relationships more befitting their cultural and political preferences. It would be curious for the UK to be entirely out on its own.

Internationally we are seeking to be part of a genuinely multilateral trading system. The constraints of the Common Commercial Policy are an obstacle to that. Brexit remedies this, but it need not be an either/or estimation between enhanced European cooperation and acting as a global citizen. Efta is entirely compatible with our ambitions of independence and to my mind a natural destination for the UK. 

Looking at the many compromises and difficult choices of Brexit it would be tempting to cave into the nihilism of hard Brexiters. It avoids a great many of the complexities but in so doing would be to embark upon a wholly destructive course with no idea of a destination, likely souring relations internationally and presenting us with some miserable consequences down the line. 

Hard Brexiters believe there are sweeping gestures and silver bullets in the domain of trade, but no such solutions exist. Intelligent trade policy takes patience, skill and determination and requires that we build, not destroy. We can either resort to unilateralism which can only blow up in our faces or we can look to enhance and democratise what we have already built as part of the EU - a regulatory framework extending well beyond the borders of it.

We are told by remainers that being an EEA member means having no say. This has never been an accurate depiction of the EEA option but we would note that Efta with the addition of the UK would be a power in its own right and one able to leverage far better terms under the EEA agreement. In this we can work toward a genuinely collaborative Europe and a single market encompassing the UK's non European allies. The single market is in part our creation so why should the EU be the sole controllers of it and why should it be an exclusively European affair?

Britain stands at a crossroads. Should we cut ourselves off from Europe entirely we will find ourselves adrift and at the mercy of global forces we cannot control or even mitigate. Instead we can maintain much of what is valued about the EU while disentangling ourselves from the political integration. From there we can build and develop our new position in the world. It makes zero sense to make the job harder and more expensive than it has to be. 

Tuesday, 12 December 2017

Yeah, Brexit it bad, but I'm still ok with it.

Last night I almost wrote a long piece on the politics of food safety risk assessment in the EU. There is not a lot of point though. Though I wish it were otherwise, the more effort and research that goes into a blog, the fewer people will read it.

What I did note, however, is unlike the USA where it's more science based, in the EU it's intensely political, almost entirely in the hands of the Commission and in places, as corrupt and protectionist as the EU gets. And it does beg the question as to whether we are better off out or whether we need to be in there to at least be able to defend ourselves in the few ways we can.

There are a lot of technical areas where I really have questioned the wisdom of Brexit. There are undoubtedly places where we will lose our voice in matters that have very serious ramifications for the UK economy and UK law. We do not get to legislate in isolation. EU law will continue to influence UK decisionmaking whatever happens.

By just about every technical and economic consideration we are on the back foot by leaving the EU. What makes it worse is manifest incompetence of our own government who will ultimately open the door for the UK economy to be cannibalised and UK market share in a number of sectors to be decimated. The subsequent expensive adjustments we will have to make will be all the pain of joining the single market with none of the benefits thereafter. And this is if we do actually leave with a deal. I'm not even convinced we will manage that.

One way or another this is going to be a very seriously ugly mess which will take a very long time to climb out of. There is also a very strong chance that we will be strong-armed into doing what we are told by Brussels more than we ever were as members. More so than if we stayed in the single market. 

Moreover, I am even less convinced it's a good idea when I look at my political allies. On the one hand we have the Kipper brigade and on the other, a snobby, aggressively arrogant, backstabbing, corrupt, self-serving Tory establishment impervious to reason, immunised to facts. I wasn't a fan of them before the referendum and I despise them with every fibre of my being now. Politically I have few allies.

But then I am reminded that while I have no love for my Brexiter compatriots, I have a deep seated pathological loathing of the opposition which cannot be remedied. The opposition being vapid, virtue signalling MPs, the entire media, all of the think tanks - and of course the EU which underpins the status quo, allowing these people to thrive.

There is no way you can expect adult decision making from this parliament and our media simply does not function as an informer. Brexit tells you that. Our MPs have zero comprehension of what is happening or why - and their only concern is to dilute Brexit to hold on to the status quo - which is already disintegrating.

Sooner or later, there's a giant shit sandwich on the horizon and we all have to take a bite. It as as I have thought for a very long time now. This political settlement is on borrowed time and I am astonished it has lasted this long. We are due a sort out.

In this my hatred of the anti-democratic EU is almost incidental. Not being in it is a happy event of itself just on principle, and in spirit, if not in fact, I am a hard Brexiter. Brexit in abstract of all technical concerns is a truly wonderful thing and one day soon I will celebrate. But this is as much a part of a culture war which is far from over. 

The societal divisions Brexit has shone a light on need resolving. The Tories most certainly have no answers but the nasty specimens on the left keep me awake at night. Ruthless, self-absorbed narcissistic socialist children with a zeal that puts the brownshirts to shame. 

Then, depressingly we have the second coffin lid to punch through. When we've left the EU it'll be interesting to see how reforms are constrained by those WTO rules Tories are so fond of. This generation's would-be eurosceptics will become the fiercest critics of the WTO and the "unelected bureaucrats" therein. A new crusade for sovereignty begins.

At the very least Brexit makes us a distinct customs entity and puts a stop to "ever closer union". We will have drawn a line in the sand but I have a feeling the Brexit process will make victory taste as hollow as defeat. Economically, socially, politically, we are headed for dark times.

The only comfort I take from this is that remaining would have been worse. I would rather be taking the first steps toward sorting it out than carry on having these moronic specimens carry on unchecked - taking us further down an avenue where politics is something done to us rather than being something in which we, the public, participate.

I am also certain that whatever Britain looks like in ten years, it will be one on its way to a new political settlement. One that is more befitting the UK in terms of its power, its place in the world and one that is better adjusted to the new century in ways that EU members won't be. Call it an instinct or a hunch - or even a reckless gamble, but I am firmly of the view that the Westminster-centric politics of the present will not survive Brexit. And that is the ultimate prize.

We have a loathsome left and the contemptible right and nothing to speak of in between. We learned from the Ukip and SNP experience that party politics as a model is utterly spent and the longer it lingers the more it is despised. If the Tories scrape a win at the next election it will only be to avoid the horrors of a Corbyn government. When he is gone, there will be no loyalty to the Tories. By then politics as we know it will be spent. From there, we start building a very different country.

What is certain is that Brexit will be an economic haircut. One which most certainly will force difficult choices as to what we can expect of the state and whether a take-all-you-can-get NHS and welfare system is sustainable. It will force the many white elephants on the drawing board to go in the bin and as it forces adult choices, the options will be limited for our wastrel politicians. It will be a wake up call for the public as much as the establishment.

For the time being we will linger in uncertainty. We still have a while to go before Article 50 talks are concluded and assuming we get that far we will remain in the EU on more or less the same terms until a new relationship is negotiated. We may yet see sense prevail and and make our way into Efta. That would be a win - but to get there will be a fight to the death. That seems a long shot right now but there is still everything to fight for. 

All I can say is that we have started something. Something big, something daunting, something significant that will consume British politics. Something that cannot be stopped. Something that pisses on just about everyone's bonfire. What's not to like?

Spiked loses the plot again

Says Brendan O'Neill of Spiked Online, "it is time we reckoned with the historic magnitude of what is happening in Britain right now. Democracy is being euthanised. This fact, this terrible fact, is too often obscured by the euphemism and cynicism of the anti-Brexit lobby, which is virtually the entire political class. It doesn’t speak in the language of dictatorship. It speaks in the pseudo-neutral language of ‘softening’ Brexit, of concession and compromise".

Essentially this is true. If you look at tonight's amendments to the Withdrawal Bill, we are not looking at informed attempts to preserve economic cooperation with the EU via single market instruments. Were that the case they would at least be using the correct terminology. Instead what we see is a dash for safety to evade any change at all.

This is essentially what makes it difficult to argue for continued EEA membership in that one's bedfellows are indeed those seeking to effectively erase the vote. Some, however, appreciate that real life gets in the way of the most noble of political ambitions - as we find with the Northern Irish border. Not so Brendan O'Neill.  

O'Neill has it that "The extent of May’s compromise was alarming, if not especially surprising. She erased all of her own ‘red lines’, particularly on the Single Market and the European Court of Justice. She conceded to the EU’s demand that if a suitable agreement is not reached on the Irish border, then the whole of the UK will remain aligned with the Single Market".

The fact of the matter is that it was never going to be any other way. Forty years of technical and economic cooperation are not erased with a single vote and sovereignty is not restored in a single bound. There are decisions to be made where we separate out the technical from the political. 

Our starting point is that we need a whole UK solution and one that maintains an open border in Northern Ireland without introducing any new barriers. Being that the EU has its own distinct legal personality, its own customs territory and is a sovereign entity, insofar as trade is concerned, it is already a "United States of Europe". It can and does dictate the terms of market participation and that is the source of its power. We are not, therefore, able to do as we please without due consideration for the sovereignty of our neighbours. 

Like it or not, the regulatory ecosystem of Europe is dominated by the EU and that is a fact of life with which we must contend. Where do we draw the line and how much is absolute sovereignty worth to us? Must everything be a matter for public consideration? How democratic must we be? 

For instance, what is Spiked Online's view on the management of ballast water discharges? Does it have a particular view on maritime surveillance? Or maybe the risk assessment criteria for phytosanitary protection measures? I perhaps missed the thundering Brendan O'Neill article where he skillfully dismantles the case for adopting UNECE standards on reflective strips for articulated trailers.

Perhaps Tom Slater has offered a view on aubergine marketing standards and the power rating for refrigerated ISO containers? These are quite obviously essential matters we must have full democratic control over and extensive public debate. We can't have faceless men in grey suits colluding to decide what radio frequency the Irish Sea coastguard services should use, can we?

Clearly an independent codetermination body like the Efta court insufficient. Down with this undemocratic nonsense! On reflection it's totally worth a hard border in Ireland so we can have referendums on the gradient of wheelchair ramps. I'm sure Spiked is itching to mount a campaign on the minimum fatigue life of fuselage fasteners.

The very idea of having to consult our neighbours and collaborate with them on common standards to avoid technical barriers to trade is an insult to our ancestors - they who fought on the beaches of Normandy to ensure those filthy hun could not impose their weather radar methodology on an unsuspecting public.

I'm glad Spiked is here to engage in these nuances - standing up for the huddled masses who for decades had their faces trampled into the floor by bureaucrats who won't rest until we all have the same non-glare wing mirrors. The man on the Clapham omnibus doesn't need elitist scientists working on disease control measures in plantlife. Who needs a common methodology on control of creutzfeldt jakob disease?

Time we turned it over to ordinary citizenry and spit in the faces of the elites. We take Gotham from the corrupt, the rich, the oppressors of generations - who have kept you down with myths of opportunity - and we give it back to you, the people. Gotham is yours. None shall interfere, do as you please.

Sunday, 10 December 2017

Into the fire...

The latest negotiating guidelines have been published. They will not come as any surprise to anyone except Mrs May and her Brexit brigade. This was always how it was going to be. Things are, finally, about to get interesting. Maybe.

Brexit: the case retaining the EEA

If the UK is set on having only an FTA with the EU then it is seeking a relationship governed by a particular set of WTO rules. Preferences extended to the UK may well have to be granted to others holding an FTA with the EU. That means, even if the UK gets the best FTA of all, it is still going to be only marginally better than the second best. Warning shots have already been fired across the bow of the EU. 

In leaving the EEA (a deep and special partnership) the UK is moving into uncharted waters of negotiating an FTA that can never be as good. One where UK interests could very well be cannibalised. This is what makes retaining EEA membership a no brainer - not least because it is governed by different set of rules where WTO principles do not apply in quite the same way.

From an idealistic perspective, I totally understand leavers who prefer a Canada style FTA. It's the one mode of exit short of no deal that really honours the referendum as is understood by most who campaigned for Brexit. But let's head down real street.

It is conceivable we could cook up an FTA and even one that includes market particpation rights for airlines and services. It would avoid a calamity but would still be a huge hit to trade we would struggle to compensate for. Having left the single market, over the following years we would seek to rebuild a lot of the lost trade we threw away - and in so doing would end up like Switzerland, gradually ceding sovereignty on EU terms under jurisdiction of the ECJ.

One way or another we are going to have to respect EU conditions of market entry and the effects of that will be extensive. So really what we want is a means of adopting rules with a proper means of veto and adequate safeguards. That's Efta+EEA. The only other way to enjoy the same market participation is full adoption of the EU acquis, subject to the jurisdiction of the ECJ without any representation. This is the worst of all possible worlds.

What's important is not the extent of alignment, rather the shape and scope of those institutions and bodies formed for the administration of any future relationship. They must be independent, not the ECJ. This is why EEA-Efta is the obvious choice. Independent tried and tested frameworks.

This prompts Brexiters to argue that our ability to strike "trade deals" will be restricted. That much is true if you think only in terms of FTAs and deregulation as your means of liberalisation. There are problems with this approach. Relaxation of standards would have ramifications for the EUs risk profile of the UK leading to a higher frequency of inspections with all the costs and delays that go with it. Though the EU nominally opens its borders to competition there are any number of means for it to protect domestic producers.

One high profile example of this is EU inspections for Citrus Black Spot. Typically reports cite "EU regulations". It isn't that. It's an EFSA risk assessment leading to increased inspections. Delays causing South Africa to voluntarily terminate trade even though it meets the standards and qualifies for trade preferences.

Again on these such issues we find the EUs risk assessment is a means of creating barriers. The basis of the risk assessment being scientifically questionable and likely the result of internal protectionist lobbying. This is where the UK, retaking its own vote on global bodies can have an impact. The issue was referred to IPPC secretariat to establish an expert committee which will rule on whether the EU risk assessment is justified.

Moreover, our policy within the many global forums is crucial. The bottom feeders at the FT keep dribbling out tired mantras about "The Brussels Effect" but when it comes to the mechanics of trade it's the global standards that matter. Both parties in FTAs work toward aligning on OIE/Codex/IPPC. The EU-Japan economic partnership agreement re-announced yesterday is no different.

As we have discussed previously all modern EU FTAs are largely an affirmation of commitments under the WTO TBT agreement. Out of interest, it would be good to know why they go to the trouble. Having scoured several EU FTAs I notice massive duplication of WTO TBT tract. You could quite easily delete whole chapters of EU agreements without it making the slightest difference. 

The truth is that there are no grand gestures or shortcuts to trade liberalisation. There is no magic bullet to unlock trade. The sweeping unilateral gestures as preferred by the libertarian right are suicidal. Achievements in trade are incremental and the result of thousands of hours of backroom work over increasingly arcane aspects of standards and regulations. Moreover, nothing happens without considerable investment - not least to win backing of new multilateral initiatives.

Even if we do stay in the single market, maintaining the EEA acquis, we still have a lot of new scope in terms of how we interact globally - and the UK is not without allies in a number of standards bodies - who are not best pleased with EU anti-competitive practices. Our strategy should be to seek out and build sectoral alliances through Economic Partnership Agreements.

That requires considerable investment to increase and enhance the participation of LDCs ensuring that they can meet market entry conditions. We then strengthen the global rules based system while seeking to stack the deck in our favour.

The thing is about EPAs, however, is they are only as good as the scientific, technical and material resources your throw at them. That's why we need DfID to grow up and stop playing White Saviour Barbie. It must learn that if it is to exist at all then it is to promote the direct national interest. That means no more spending on UN gender equality window dressing and more spending on trade facilitation. We need to get hardass and lose the virtue signalling.

If we stay in the single market via Efta then we stay in the top ten economies and we stand a better chance of playing the EU at it own game - not least since the EU will be short of a net contributor. From there we can use any number of means to navigate the complexities of the system to grant access to the single market whether the EU likes it or not. It will be a soft trade war. And not before time.

It's actually about time that the EU was exposed for the fortress of bureaucracy it is. It talks about FTAs and reducing tariffs while using every means such as ROO and EFSA to stop competition. We can subvert this quite easily without breaking EU/WTO rules. Though the EU does have clout, the one thing the Northern Ireland issue shows us is that it does not have agility or flexibility. That is its greatest weakness and if we are savvy about it we can run rings around them.

Increments in trade will most likely come from new trade facilitation measures. Small but significant measures to increase profitability of existing value chains - not big headline EU deals. The EU will spend year upon year bogged down in talks to produce FTAs which only notionally add value, but the more they have the less they can afford to usefully service them. The UK does not have that problem. We can use our aid budget to finance them entirely legitimately.

The lazy mantra that the UK becomes a passive rule taker is largely gaslighting from remainers whose horizons extend no further than Brussels - most commonly people who have never bothered to read an EU FTA. With every FTA the EU signs it further reinforces the dominance of global standards and international forums. 

We also note that the buzzword in trade right now is Blockchain. The blockchain aspect is really just the technological platform but the methodology of Single Window is what should concern us. It is revolutionary. There is only so much we can do by tinkering with tariffs and standards. The big gains are to be made in customs cooperation, where again we find UNECE and ISO spearheading advancements. The frameworks are also crucial. Again we find in the EU-Japan agreement the WCO takes primacy. 

I was also completely unsurprised to find this tract:

Being that the UK is a first world economy and a scientific technological leader at the forefront of a number of industries, we are very often the first movers on a number of standards and BSI is a global standards powerhouse. Even if it were the case that that EEA members were "sitting by the fax machine" for EU regulations (which they aren't), the standards therein are not the exclusive domain of the EU. We are not helpless. 

Nobody should underestimate the scale of the challenge Brexit presents nor should we expect an easy ride of it. The EU will fiercely defend its own interests and it will seek to frustrate an independent UK trade policy. But we should also note that as the global rules based system matures the EU won't always get its own way and the leverage the UK can wield, along with Efta and those other states who may follow Britain's lead, means that there will be give and take between the UK and EU. It will vary according to the sector and the platform. With guile and patience we can still shape the rules of the game - possibly even to greater effect. 

For me the case for staying in the EEA has never been stronger. There are plenty of good reasons to leave the EU but deregulation is not one of them. There is, however, every advantage in being an independent actor in trade forums as a distinct customs entity - and from a sovereignty perspective, in the modern context, having the ability to say no matters more now than it ever did. The EU offers us no such protection and can railroad us into adopting job killing standards for entirely political reasons. 

Brexit will require that we think differently about trade, and it requires that we take off the Brussels blinkers and learn to think globally. There are a number of approaches and dozens of mechanisms other than FTAs to enhance and improve our trade. There is far more to trade than tinkering with tariffs and and there is still much to do. Measures to tackle counterfeiting and fraud between key trading partners can have substantially more impact than an agreement on tariffs. This all depends on a network of interagency cooperation where we would be foolish to turn our backs on the EU.

Whichever way it goes, the UK will be committed to spending considerable sums on cooperation. Brexit means we repatriate a lot of the spending decisions but the one thing we cannot afford to do is is neglect our participation on the world stage. The opportunities are there but we must be active players and we must be prepared to invest. 

If the UK leaves the single market, thereby voluntarily relinquishing substantial sources of income, we cannot expect to play high stakes games in the same league. Likely it will take decades to  recover lost influence and trade - if we recover it at all. Leaving the EEA most likely means becoming the supplicant of the EU that many,incorrectly, say Norway is. 

Taking our place in Efta means that we remain part of the European trade ecosystem but it formalises the natural drift between the UK and Eurozone EU and empowers both tiers to configure their interests accordingly. The EU is then free to further integrate while the UK can cast a wider net. It is a more harmonious configuration for Europe and beneficial for both. Neither is served by permanently weakening the UK. Leaving the EEA would be an unforced error - and a sledgehammer to miss the nut.

Thursday, 7 December 2017

A Brexit nontroversy

It is difficult for me to climb on the outage bandwagon with regard to the Brexit impact assessments. Supposing David Davis had released them in full they would have been one of two things. Either they would have been issue illiterate garbage dreamed up by the Legatum Institute or they would have been the sober works of a large consultancy firm working in close cooperation with the civil service.

Had they been the former, they wouldn't have lasted until lunchtime. It would have provided two or three days fodder for the chatterati and a bone for the remain-o-sphere to gnaw on for a few weeks until they worked out that it's something else that doesn't make a dent in public opinion. They would make such a meal of it, missing all the important points, adding to it their own conspiratorial histrionics to the point of absolute uselessness - embarrassing themselves in the process.

Had the assessments been something more substantial, all it would have told us is that the government is going against the best available advice in leaving the single market. We already know this. We know that if there is a substantial deviation from the EEA acquis then there will need to be firmer customs controls in Ireland or at the seaports to Ireland. We know that we would lose market participation rights in pharmaceuticals, chemicals and aviation. We know that we would be subject to standard third country controls to the detriment of UK trade.

Come to think of it, after a more than a year of intense public debate, it would struggle to tell us something we do not know. We have covered just about all of the bases. More to the point, the MPs presently expressing outrage would be no more likely to read the government's assessments any more than they are the wealth of material already in the public domain - much less understand it.

Consequently, one is not inclined to get excited. It would have achieved nothing. That David Davis has admitted detailed assessments do not even exist is not really any surprise either. I suppose one could be moved to to express disapproval that Davis has misled parliament, except that is now par for the course. It just doesn't rate that a politician is lying. There has been total transparency from the beginning. The whole thing looked like bollocks, we were expecting it to be bollocks and nobody is in the least bit surprised that it is bollocks.

The modern mode of politics has become a circus whereby the machine sets about wrong-footing the government - where if incompetence is exposed a minister is expected to fall on his sword. It's a time honoured approach, instrumental in bringing down the Major government as it found itself mired in sleaze.

The problem now is that ever since Blair, governments have learned that if they hang tight nothing actually happens. There is no consequence for failure and more often than not, failure is rewarded. The only time failure ever really concerns a government is if there is an election on the horizon and the opposition is in good form. The rest of the time they can do as they please. This is not a democracy.

Because we are hopelessly wedded to the current party system, where it is virtually unheard of for mid term shifts in party allegiances to collapse a government, we are pretty much stuck with what we've got - and the government knows it. MPs have it within their power to collapse the government and form a new unity government to make the decisions this government can't, but they just won't. They will allow the UK to drift over the cliff before they break ranks.

We are, therefore, in a bizarre position where the majority in parliament don't even want to leave the EU but will allow us to coast out on the worst possible terms simply because there wasn't the coherence to do anything else. That is a system that doesn't work. One that fails in its most basic obligations. Now we face the consequences.

Wednesday, 6 December 2017

Brexit roundup

Just about every other blogger and Brexit watcher will be reporting on the performance by David Davis today. I have to confess I didn't watch it. I cannot imagine anything less important than the Brexit impact assessments. MPs should by now have their own working outline of what could happen given the wealth of information now in the public domain. Nothing that would be in an impact assessment is a state secret. MPs are not being kept in the dark.

And though Davis coming clean and admitting that impact assessments done at the level demanded by MPs do not exist is seen as the main story, I am more concerned by the clip I saw with Davis talking about contingency plans in the event of no deal. He spoke in his usual cavalier way of the need for a number of bilateral deals to ensure the basics continue to function. He does not yet grasp that no deal means no deal(s). This is why Tories still believe that not reaching an agreement is not a big deal.

What I did make time go for, however, was the International Trade committee. I zoned out for much of it and at some point I will discuss some of the issues therein, but for the most part they were going over what is old ground to readers of this blog and I did a quick Twitter thread on one of the issues. Retweets always appreciated.

What one notes is that the room was empty of journalists, and largely devoid of MPs by the looks. Notably no high profile Brexiteers, but then of course they, being Tories, already know it all. What MPs did find time for, however, was a packed meeting on Israel in Westminster Hall. As ever the Labour Party is completely unable to focus on anything other than its own myopic fixations and is easily distracted by trivia.

Meanwhile, it turns out on the Northern Ireland front, what we initially thought was progress is no progress at all. Instead of bringing clarity to the debate all it has done is reignite an entirely futile, wrong and pointless debate about the customs unions. It does not seem to have registered with them that we are leaving it regardless. The process of separating quotas and tariffs at the WTO is the mechanics of the UK becoming a distinct customs entity with its own customs code - ie leaving the customs union.

Meanwhile we still have grave warnings from MPs about the dangers of a hard border, when in fact, even when it was a hard border, it wasn't a hard border as such. The debate has lost any sense of reality. What we are looking to avoid is manned checkpoints controlling the movement of people - which is suggested by nobody, and insofar as movement of goods is concerned roadside equipment and preclearance is so noninvasive it would scarcely be noticed. It just means maintaining the EEA acquis. 

We are told that Norway does not have frictionless borders, but in fact it only has border posts on main routes. Norway has many unmanned crossings. They are treated as customs green lanes. It's just illegal to use them when carrying goods that need to be declared. For several years pole-mounted ANPR cameras at unstaffed crossings have been used and have proven effective in seizure cases of typical contraband - drugs/booze etc.

Over the years inspection frequency has declined by ever closer customs cooperation - and gradual alignment on agricultural products. The frequency of inspections entirely dependent on the level of divergence which dictates the customs risk profile. This is why trusted trader schemes and Authorised Economic Operator systems can substantially reduce the level of border friction. With investment both the UK and Norway could all but eliminate border checks under the EEA framework. 

This of course raises the question of how far we can diverge once we have left the EU. The short answer is, if we want to keep delays at the border to a minimum, then not a lot. That then leaves all the trade wonks at a loss as to what our future trade strategy looks like since they've got it got into their heads that they can full their boots with deregulation and tariff slashing. For as long as they keep the Brussels blinkers on they will find themselves short on options. 

As you can probably tell from my tone I am bored rigid with the whole affair. We have a while to go yet before it gets interesting. For the moment we are going round in circles. Yesterday proved that if you think we're making progress, just wait an hour or two.  

Monday, 4 December 2017

Drop the free trade mantra - it's dangerous.

One thing about Twitter is that it is very easy to get sucked into a bubble. It is natural to seek out like minded people. This is precisely why I have dumped just about everybody who comments on trade. Following other people means they set the agenda and you respond to it. What this has led to in Brexit terms is a self-congratulatory bubble of "Brexperts" who churn over the same issues ad nauseam, adding precisely nothing to our understanding, entrenching dogmas and repeating falsehoods. 

In deciding who to get rid off I ask myself if that person is in any way going to help me progress my case or is likely to inform it. In most instances the answer is no. The trade bubble is still uniquely obsessed with the WTO and for as long as the subject serves their agenda, it will be the only topic of conversation. 

The problem, however, is that the WTO is but one (largely stagnant) forum in a myriad of other influential bodies - all of which have major implications for trade. The WTO centres mainly on tariffs with a nod to standards and a framework for their application but the dirty business is done elsewhere. Non tariff barriers have been weaponised.

For instance, a standard on the maximum amount of a certain grain fungus per tonne is less to do with food safety as it is preventing Egyptian competition. Nobody comes into the world of food standards without a hidden trade agenda. Similarly Co2 and Sulphur limits on shipping has precisely zilch to do with looking after the environment. It's about the big boys with the new ships with newer engines shafting the midsize competition. So Codex and the International Maritime Organisation (to name just two) are places where corporates lobby to ensure standards protect their position in the marketplace. In many instances this is massively more significant than tariffs.

If the UK is not sending its own industry delegations and making good use of our own vote (and veto) then we are passively accepting the common EU position - set by people who actually believe Co2 limits have an environmental motive. The point here being that if your understanding of trade revolves solely around the WTO and the EU then you're ignoring the larger part of trade - and in so doing neglecting trade policy. The WTO is not the centre of the universe. It is an important and highly visible aspect of trade but it is far from the whole picture.

We are often told that the EU is a protectionist entity. Remainers deny this when in fact they should make very clear that it is protectionist and for good reason. Trade policy to protect legitimate traders from the predatory practices of nations who seek to damage competitors by unfair means. By its very nature, therefore, an effective trade policy is "protectionist". We must re-learn this discipline.

The conventional thinking among trade wonks and the bottom feeders at the FT is that the EU has its own gravitational pull in respect to standards and non-EU members are passive recipients. What is not spoken of is the EU's continued outsourcing to global standards bodies - or as I call it, The Geneva Effect. Though we will remain configured for enhanced EU trade come what may, we are not without a voice when it comes to setting those standards.

After we leave the EU we need to ensure that trade associations are taking a full and active role in standards setting with the support of UKgov. UK shipping and nuclear is well represented. I can't really say the same for other sectors.

How successful we are in shaping those standards depends not on the size of our economy, rather it is is the size of our market participation. Being in the top ten shipping services providers the UK has considerable influence and will not have any difficulty finding allies to frustrate the EU's invasive agenda. We can also say the same of our influence on the nuclear sector.

This, of course, does not apply to every forum and we will need to formulate approaches for each sector. We must have an adequate national strategy and we need to stop relying on generalists to do very specialised work. If we are going to be an independent country - we need to start acting like it.

Whether we are or we aren't more influential out of the EU is really besides the point. The UK needs an aggressively defensive posture in all of these forums if only to keep our head above water. We need good intelligence on all the standards bodies. From what I can see through my limited periscope the UK is only playing at it, flying the flag but not really understanding the highly consequential games in play.

Though it's fashionable to prate at length about the WTO, we are often reminded that the various WTO agendas are going nowhere. The framework is set, the appellate body is in a state of limbo and multilateral initiatives are glacial. There is plenty to gossip about but the real business is done elsewhere. 

Outside of the WTO the world of standards is not especially sexy and there is nothing earth shatteringly exciting about arcane subjects like digital standards, but then I am reminded of when the big players were competing for the standard width of the humble Compact Disc. If I recall it was Phillips or one of the big players who got there first and already had the production equipment ready to roll. They had intellectual property protections in place to prevent others capitalising on the technology and for a while their market position was unchallenged. This early participation matters more to a services and innovation economy far more than budging the price of coffee granules half a percent downard.  

We should, therefore, give a lot less attention to the timewasters who would distract us with their narrow perceptions. Moreover, we need to lose our phobia of protectionism. Nobody who speaks of free trade in international commerce is remotely interested in free and fair trade. They mouth the platitudes of free trade at all of the globalist jamborees like the World Economic Forum, but it's always best to watch what they do, rather than listen to their words. 

As the UK are newcomers to the modern world of trade I rather expect many corporate interests are salivating with glee to hear our trade ministers prattling on about free trade - without the first idea how the game is played and how devious it really is. It is worrying that when Liam Fox and other Tory ideologues talk about free trade they are entirely sincere. It's about the only time when Tories are sincere - and the last place where sincerity actually gets you anywhere. Unless we wise up, UK interests will very rapidly be cannibalised. 

Presently we are seeing something of a turf war evolving over the loyalties of LDCs. Brexit has triggered a vindictive streak in EU trade circles where the EU is seeking to head the UK off at the pass in any of its more creative trade endeavours. The UK can buy the loyalties of LDCs with development funding but it will have to outspend the EU and be prepared to make concessions the EU will not. That will be the decider as to whether the UK is able to wield influence in its own favour. If we unilaterally drop our defensive measures then not only will we harm our trade with the EU, we will have little to barter with.  

As with everything else, politicians are looking for big hitter headline accomplishments. The EU is no different in its never ending pursuit of the biggest deals ever. As much as this approach is inadequate for the EU, it is wholly redundant for the UK. Third countries will be gearing for trade with one of the trade superpowers, so any FTAs the UK has with them will have to slot in where the cracks appear. Our only hope is to have a savvy agenda, utilising the agility a cumbersome squabbling bloc like the EU could never hope to have. There lies our salvation. 

It is for this reason I have to tune out of the mainstream trade debate. The prattle therein is entirely self-serving for those whose very livelihood depends on the perpetuation of the FTA and WTO mythology. Our success depends on bypassing them rather than engaging with them.  

Thursday, 30 November 2017

The system did not have democracy in mind

Very occasionally I look at my Brexit compatriots and wonder why on earth I aligned with these muppets. I mean, they really do talk some crap don't they? By then who, honestly, has a working command of trade mechanics and how the EU works? In the grander scheme of things, hardly anybody. I could maybe scratch up about a hundred people from my bubble with a rounded command of the issues - and for all the remainers like to sneer, I don't think they have a particularly sophisticated idea either.

Consequently there are two Brexit worlds and never the twain shall meet. There is the philosophical Brexit, which in my view the leavers win hands down every time, and then there is the technocratic Brexit where it seems that leavers are genetically incapable of comprehending the issues. 

A glistening example this week comes from Brendan O'Neill, who, of late, seems to set the benchmark for Brexit stupidity. But then from a layman's perspective, he is absolutely right. The people of the UK have voted to leave the EU and to control their own laws accordingly. That in itself shouldn't be all that controversial but the mechanics of trade muddy the water. Northern Ireland, furthermore, just makes it impossible. 

In this it comes down to a choice. If the UK wants to diverge from the EU regulatory model then there must be a hard border. This is because the EU cannot compromise. It is bound by its own legal construct and then there is the WTO. The rules must be obeyed. This global order of rules is such an article of faith that it cannot bend to exceptions even in such a case where enforcement could very well lead to a political destabilisation and violence. That leaves only one thing left on the table. The Brits will have to lump it and carry on conforming. The system has thwarted democracy. 

It matters not that there is no particular value in regulatory divergence in this instance. What is said here is that when it comes down to it democracy has to take a back seat. The other message coming over loud and clear is if the UK does diverge then the EU will place the integrity of the single market over an above peace. So much for EU dogma. 

Of course, this is all highly subjective but the system we have built is so rigid that even having left the EU we find expressions of the democratic will come with such miserable consequences that we are bound forever to do as instructed. This is precisely where we didn't want to be, which is why we needed to leave far sooner than we actually will. The problem with carelessly allowing the drift into technocracy is that, as Brexit demonstrates, powers are much more difficult to repatriate than they are to give away.

Howsoever, we are where we are so it is is the job of politics and politicians to find a compromise. We have to somehow marry the technocratic Brexit with the philosophical Brexit in a game where neither side can begin to comprehend the other and we've put an impossibly short timescale on it. Why? Simply because some words written in haste on a page somewhere in the Treaty of Lisbon say it's two years. The system was never built with democracy in mind.  

This is why Brexit is only really the beginning of a far more involved process. We have spoken previously of the double coffin lid scenario where we punch through the layer of EU rules only to find we are tangle in a different web of rules and constrained in similar ways. We will also find that the WTO (combined with the rest of the UN regulatory system) means that sovereingty as imagined by Brexiters barely exists at all. 

As this global order ossifies we will find it takes on the same character as the EU, adopting much of the same dogma and operating according to the same set of globalist values, influenced and dominated by the globalist intelligentsia, all of whom subscribe to all of the same convictions from command and control quasi-liberal economics up to and including climate change. 

In this it's easy for the blowhards to denounce regulations as petty infringements on liberty but we are about to discover as we diverge the precise utility of it - not least as food prices start to climb. Many leavers will come to question whether that marginal increment in sovereingty was worth having to live without heating. 

That said, the UK is not the only one to run in the the limitations of democracy inside the framework of the current legal order. Certainly the Greeks have learned that expressions of democracy are next to useless as a member of the Euro - and sooner or later a refugee quota will test Easten European tolerance to the limit. 

In effect, we have spent the last half century building an elaborate cage of rules and systems for the better functioning of commerce while utterly neglecting the human propensity to break systems. Sooner or later, it will all come crashing in for no other reason than the fact that no system can ever withstand the human need to evolve and challenge the constraints placed upon us. It is the cycle of history. 

In this instance we are at the very end of the post war settlement. Though the WTO is a relatively young institution, it is the manifestation of a seventy year old system devised long before internet, containerisation and automation. Humanity is evolving to a point where the systems of yore and the economic models of the present increasingly have less relevance. Rather than asking where we go from here, our terrified establishments are doing all they can to preserve the old world.

As much as this is down to the fact that any new order will undoubtedly threaten their power, they simply have no idea what the new mode for humanity will be. Is it to be a technological anarchy they cannot control?  Can governments any longer hold dominion over us? They don't know and they are in no rush to find out. That is what they are afraid of. If governments are no longer at the centre of power then tyrants no longer have a means to control us. That is not in their grand design, and freedom is the very last thing they have in mind. 

A dose of the Brexit blues

Some readers will be wondering why I am not obsessively blogging every twist and turn of the Brexit process. I am watching it like a hawk and spend more hours on Twitter than any human should - thus have seen every possible opinion and every stupid misconception, but other than the provisional agreement on the Brexit bill and the unsurprising shape of the Northern Ireland "deal" there nothing much to get excited about.

The dregs of the ultras, notably the odious Liam Halligan, are still playing their mendacious games, piping out their poison to anyone who will listen, but there does now seem to be a broad understanding in the Twittersphere that the WTO option is not an option and anyone who suggests otherwise very rapidly provokes the ire of the ever growing crowd of brexitologists.

Today, though, there is some room for optimism. If reports are correct and there is indeed the basis for an agreement on the exit settlement and Northern Ireland then it is a signal that time pressures are focussing minds, and in the absence of better ideas the government is having to concede to the obvious. 

We are told that these such concessions "outrage" Brexiters, but it would appear that, as usual, it is only the unappeasable expending any energy over it. Tories can squeal all they like for the One True Brexit™, but the UK does not exist in isolation and its actions have consequences. If we turn our backs on regulatory cooperation we open a hole in the EUs customs firewall. It then has no choice but to police its frontier.

The EU will not make substantive concessions on the NI border because, when we leave, the border becomes the outer frontier of the most mature and complex customs and regulatory union on the planet. It cannot redesign it the for the sole benefit of a departing member. We have a choice of remaining in the single market or erecting a hard border with Ireland. It is that simple.

To make any kind of substantial concession for the UK so as to avoid a hard border the EU would have to revise its treaties, and any concession would then apply to all third countries. That is simply not going to happen. The UK will have to maintain regulatory harmonisation. This we have been over time and again, and as EUReferendum notes, the mechanics of WTO rules means we have obligations either way.

There will come a point in the very near future when there is something original and interesting to say, not least as discussions regarding our future relationship heat up, but for the moment I am living a in a day to day zombie state of lethargy, exhaustion, nihilism, serotonin depletion and relentless boredom - as is traditional for this time of year. Don't be surprised if I am not at my most prolific.

Wednesday, 29 November 2017

Best be leaving now

The European Commission has launched a public consultation to gather views of the broader public on setting up a European Labour Authority and the introduction of a European Social Security Number.
The European Labour Authority should ensure that EU rules on labour mobility are enforced in a fair, simple and effective way. Concretely, building on existing structures, the Authority would support national administrations, businesses, and mobile workers by strengthening cooperation at EU level on matters such as cross-border mobility and social security coordination. It would also improve access to information for public authorities and mobile workers and enhance transparency regarding their rights and obligations.
The European Social Security Number (ESSN) aims at simplifying and modernising citizens' interaction with administrations in a range of policy areas. An EU Social Security Number would facilitate the identification of persons across borders for the purposes of social security coordination and allow the quick and accurate verification of their social security insurance status. It would facilitate administrative procedures for citizens by optimising the use of digital tools.
Both initiatives were announced by President Juncker in his 2017 State of the Union address. Legislative proposals for both initiatives are announced in the European Commission's Work Programme for 2018 and planned to be tabled by spring 2018.
There are two ways to look at this. This could be viewed as the EU steaming ahead to do all that which it could not do with the UK as a member, much like PESCO. The other way to look at it is that this was always the direction of travel. UK membership only really governs the pace of integration and a "public consultation" means they are going to do it regardless of what anyone thinks. 

Either way, this is not the domain of a mere trade bloc. This is an instrument of an emerging supreme government, to which the UK would otherwise be subordinate. It is the foundation of Juncker's "Social Europe" meaning that social and welfare policy will gradually drift toward Brussels and far out of the reach of democracy. Of course, this would follow that much vaunted Brussels subsidiarity principle. You are free to have any have any policy you like, just so long as it stays within the parameters defined by the Commission and the ECJ.

And this is the thing with the EU. Once consent is established for the basic foundation, the ossification process begins to the point where you no longer have the power, reform is impossible and like trade and agriculture, it simply drops out of public discourse. Why debate that which cannot be influenced? This is how we drift from democracy to technocracy - and subsequently stagnation and disaffection. That is why I would vote to leave every single time.