Wednesday, 6 April 2016

Brexit: modernising our approach to trade


Says Hugo Dixon of InFacts, the europhile propaganda outfit: "It is increasingly clear that many of those campaigning to quit the European Union don’t care about getting their facts right. Myths about the economy, sovereignty and immigration are recycled on our airwaves on a daily basis – often without being challenged."

He needs to read this blog then. Pointing out the flaws in the leave case is something I do more of than actual Brexit blogging. Dixon goes on to say "Those who want to stay in the EU are not entirely innocent. Some suggest that 3 million jobs would be lost if we quit the EU, when it is actually 3 million jobs that are linked to trade with the EU. Even in the worst case scenario, trade wouldn’t totally vanish."

This is how he attempts to establish himself as an honest player by picking the low hanging fruit. The three million jobs myth is one so tirelessly debunked over the last two decades that even the lowlifes at Stronger In wouldn't have the chutzpah top use it. An honest player would pick some of the more egregious porkies from the Remain side, or at least be calculating enough to pick a sacrificial lamb. But Dixon takes you for stupid. 

But the Leave camp, says Dixon, has made an industry out of mythology. Here are seven of their deadliest economic sins.
Sin 1: UK sends EU £55m a day
This figure ignores the budget rebate Margaret Thatcher famously secured by brandishing her handbag. In addition, half of what we send to the EU gets sent back to Britain. The best figure for our net contribution is £17 million a day. If that sounds a lot, consider that it works out as 26 pence per person per day. What’s more, it is misleading to suggest that, if we quit, this sum would be available for building hospitals, or paying off the deficit. If we lost full access to the EU’s single market, which accounts for almost half our trade, the economy would be hit and the UK’s budget deficit would rise, not shrink. We would have less money to spend, not more.
That's if we lose access to the single market - which is by far the worst case scenario. I take it as wholly unlikely. But the notion we will be saving money to spend on the NHS is risible. Should we leave we still have to pay our farmers agricultural subsidies, and because we are still interested in security cooperation we will uphold our commitments to financing Europol.

There is also every likelihood that we will maintain academic cooperation programmes and uphold our involvement in the European Food Safety Authority and other collaborative agencies. Brexit is not the end of European cooperation and there are different layers of cooperation - none of which is going to come for free. Dominic Cummings is a lunatic for trying this one on. It just doesn't fly and nobody except for Leave headbangers take it seriously. 
Sin 2: EU needs us more than we need it
Eurosceptics are fond of pointing out that we have a big trade deficit with the EU – £62 billion in 2014. Other member states would, they say, lose more if our trading relationship broke down. In fact, we’d be the desperate ones. We rely on exports to the EU for 13 per cent of our GDP, but the EU’s exports to Britain are just 3 per cent of its GDP.
Again, difficult to argue. This notion that the EU would come to the table at our command is a little optimistic. If we elect to leave the single market as well as the EU, the EU erects tariff barriers, not out of spite, but because it has a common external tariff. That's just the legal default.

The EU has a common external tariff  that it must apply to all non-EEA members. If we match it in reciprocation, under non-discrimination rules, we have to impose tariffs on all our other trading partners. That creates havoc, so we end up not imposing tariffs on the EU while they impose tariffs on us.

We could negotiate a "free trade deal" but a simple agreement on tariffs doesn't even begin to settle issues surrounding non-tariff barriers and if we wanted a comprehensive deal then the EU would have conditions tilted in its own favour. Moreover, the likelihood of such being concluded inside two years are nil. We may leave the EU but if we want the same favourable access to the single market then we will have to stay in the EEA. 

Sin 3: UK can be in the EU’s single market without free movement
Every country with full single market access has signed up to free movement. That includes not just other EU countries, but also members of the European Economic Area, notably Norway. Even Switzerland, which only has partial access to the single market, has had to open its borders. There’s no reason to think Britain could be different.
This is absolutely true. There is no way we can be in the single market without accepting freedom of movement. Leavers say Switzerland has access and doesn't have freedom of movement but there is no guarantee the EU would offer us such a deal and nothing that suggests the EU even wants another messy trade framework for its nearest partners. 

More to the point, ending freedom of movement also means ending the many academic cooperation agreements, which Vote Leave says we can continue with. Vote Leave can't have it both ways. My own view is that EU academic cooperation is overrated and needlessly exclusive, but there's not a cat in hells chance of winning if we say we want to scrap Erasmus. Our sinecured academic class need to be gently weaned off Euro-subsidy. That will take time.
Sin 4: City will thrive if we quit EU
If we lose full access to the single market, financial institutions based in the City of London will probably lose the passport that lets them operate freely across the whole EU. Banks will have to shift part of their business elsewhere in Europe, meaning we’ll lose high-paid jobs and the taxes that go with them. Even losing a fraction of this money-pot would be damaging – financial services account for nearly 10% of our economy and 11% of taxes.
That's if we lose access to the single market. Neither side wants that. Vote Leave does, but Vote Leave policy is largely decided by the idiotic Dominic Cummings who hasn't the first idea what he's doing.
Sin 5: Canada would be a good model post-Brexit
Boris Johnson toyed with the idea that we should copy Canada, which is not a member of the EU but has just signed a free trade deal with it. Canada doesn’t have to accept to free movement, or pay into the EU’s budget. But it also doesn’t have a passport for its financial services industry, and it pays tariffs on some exports.
As far as I know only Boris Johnson has suggested this as a way forward. It certainly contradicts anything Vote Leave has said. Dixon is actually being way too kind to the Canada option in that it addresses tariffs but not non-tariff barriers. It's nothing even approaching a solution and it should be ignored, along with Johnson's fatuous suggestion that road haulage regulation can be replaced with good old fashioned British common sense. I've heard Farage make better arguments while fighting off a hangover, and he knows dick all about regulation.  
Sin 6: UK could keep the 50-plus trade deals the EU has cut with the rest of the world post Brexit
The EU has made free trade deals with other countries, including many from the Commonwealth. But the UK is not legally a party to them, and we would have no automatic right to piggyback on them if we left. Starting negotiations from scratch could take years. In the meantime, exporters would suffer.
Brexiteers also blithely suggest it would be easy to cut new trade and investment deals with the likes of the United States, China, Japan and India. But the EU is already negotiating agreements with all those countries. If we quit, we’d have to play catch-up and we’d lack the clout to get deals as good.
Actually, the UK will not have to renegotiate its trade deals. Those making these assertions are either unfamiliar with international law or they are being deliberately disingenuous. In this specific context, we are dealing with the problem of continuity of treaties (which is what free trade deals are) following a change of status of the contracting parties.

For example, the “velvet divorce” between the Czech Republic and Slovakia created precisely this problem. It was resolved when on 19 January 1993 the two republics were admitted to the UN as new and separate states. In respect of international treaties, they simply agreed to honour the treaty obligations of Czechoslovakia. The same presumption of continuity is entirely reasonable.

Dixon is right in that we would lack the clout to replace such deals if we struck out on our own, which is why in all likelihood we will rejoin Efta, making Efta the fourth largest trade bloc on the planet. Smaller than the EU but more democratic and more agile. Efta also has agreements of its own we can utilise. More to the point, unlike the EU, Efta allows us to join ad-hoc alliances and we are not forced to side with the EU at the top tables of global governance.
Sin 7: EU red tape costs business £600m per week
This figure presents half the picture, weighing up the costs without the corresponding benefits. The source of the £600 million figure is a study by think tank Open Europe of the 100 most expensive EU rules, according to our government’s assessment of their impact. When the Leave camp uses this figure, it doesn’t mention that the same study cites the government as saying these rules would have a benefit of £1.1 billion a week – giving a net gain of £487 million a week. It also doesn’t say that the UK government, not Brussels, is the biggest source of red tape – particularly British planning regulations. There are, of course, plenty of opportunities to streamline regulations, both EU and home-grown. But giving only one side of the cost-benefit analysis is economically illiterate.
Vote Leave is economically illiterate but neither side has a handle on the regulation issue. Dixon doesn't have the first clue. For starters, it is absolutely impossible to quantify the value or cost of regulation as a whole. It's too extensive and possible to measure. More tot he point there are many different forms of regulations, some binding, some not, some local, some regional and some international. It would take a lifetime of superhuman activity to get an adequate grasp of it.

Consequently we can dispense with such fag packet maths and get down to brass tacks. Regulation is good and bad. Generally speaking we get more done when countries are working to the same set of rules and harmonisation is a seldom ever a bad thing. Compliance costs but divergence costs more. It's a cost of doing business and there's no use moaning about it. There is however a number of issues surrounding regulatory change, time-scales and implementation costs. We take the rough with the smooth.

What matters is that we have direct access to the bodies that make the rules, a real voice in making them and a right to say no to damaging regulation that we don't want. And that is a the most compelling reason of all to leave the EU. It's childish to suggest that we can slash and burn red tape, and very often the best deregulation is regulatory reform - improving the rules. But as we continue to point out, most of the technical regulation is not made by the EU. The EU adopts it from the ICU, UNECE, IMO, Codex and OECD. Not forgetting ISO and CEN, the standards bodies. Some of it is binding, some of it largely instruments of influence.

In matter of trade or when the EU abuses its own powers to assume exclusive competence, the EU tells us how to vote and does not allow opt outs. It also has ever intention of eventually replacing member states at the top tables so we get no say at all. This is an entity that seeks to be the supreme government for Europe and seeks to downgrade member states at the international level.

In this regard, little old Norway has more direct influence over the rules it adopts than we do. Hugo Dixon never makes mention of this because the entire Remain campaign knows that if the public ever get wind of the fact that the EU is a redundant middleman that doesn't make the rules then the whole case for staying in the EU is utterly sunk.

If we want a global single market of harmonised regulations then we need to be at all the top tables making our voices heard. Presently companies with trade difficulties have to approach the UK government, which is no easy feat, who then join the queue at the EU to get those concerns heard and only if 27 other member states agree can it progress to the top table. Then if we reach an agreement at the top tables we must then wait for it top go through the EU mill. It's slow, unresponsive, the chain of accountability is far too long and often we don't get what we want so we don't even bother to try.

More ot the point, by the time the EU has added bells and whistles to those global agreements, they have created another barrier to the outside world. Far from being the embodiment of internationalism, the EU is the exact opposite. We're just reinforcing Fortress Europe and excluding our non-EU trading partners.

So just because the Leave campaign is putting out weak and risible arguments thanks to the brain dead Dominic Cummings, there are seriously good reasons to leave the EU, it most certainly will streamline and enhance our trade and we will be adopting new and revised rules far in advance of the EU having had a real say in their creation. This is the truth the Remain camp is desperate for you not to know. If we had a halfway competent leave campaign we would be winning this.

What it does mean is that we will for the foreseeable future remain as part of the single market even if we leave the EU and we will have freedom of movement. That may upset the Ukip lynch-mob but who the hell cares what Ukip thinks? Nobody wants their depressing vision of Britain. But if you dislike Ukip for being introspective, closing us off from the world, shutting out foreigners and harking back to old ways, entirely oblivious to the rapid changes in global trade, then you should dislike the EU for the exact same reason.

We want a global community acting in the spirit of real cooperation and multilateralism. We cannot achieve that under the dead hand of supranationalism and nobody is served having Brussels tell us what to do and how to do it. We're at the top of the league of soft power because we play by the rules. London thrives because it's London, not because we're in the EU.

We have the fifth largest economy in the world and we have universities with global reach in or out of the EU because they have heritage and prestige. We're not talking about going it alone, we're not talking about turning inward.

We are talking about modernising our approach to global trade and breaking out of the EU model that just doesn't work for Britain. Even the Remain camp knows it doesn't work. See above. They never sell the benefits of the EU. All they do is point out that leaving isn't straight forward. Well, tell us something we don't know! But unlike Remain weiners, we don't shy away from doing what is necessary just because things get a bit tricky. Only losers think like that.

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