Tuesday, 7 June 2016

Brexit will be a shot in the arm for global trade

On thing I will be watching very closely after the referendum, win or lose, is the continuing efforts toward trade facilitation. Trade facilitation reforms are broad in nature and entail a number of interventions. These include reforms to improve the quality and quantity of physical infrastructure such as ports, airports, road and rail networks, but also information and communication technology (ICT) infrastructure.

As much as extending internet connectivity into the rural reaches is a massive life quality enhancement for lesser developed nations (Wales), it is also an avenue for growth. Further to this, extending banking and microfinancing can have a transformational effect. There are major opportunities here on several fronts. This is where the development of international standards and regulations is crucial.

But much of what is said about improving trade is trapped in the battles of yesteryear, obsessing over tariffs. If non-tariff barriers are discussed at all the debate is generally centred around customs and borders. Harmonisation of customs and data exchange between partners in a supply chain can make a substantial impact on trade, but customs is only one small aspect of trade facilitation and is often overstated in importance.

Crucial to improvements in the business environment is transparency and domestic regulations. Regulatory mechanisms intended to develop a transparent legal framework have the potential to transform India and Africa. It can help expand trade while also creating major service export opportunities for UK business.

The gains for African exporters from cutting trade costs by streamlining processes often have a greater effect on trade flows than a substantial cut in tariff barriers. The advantage in focussing on this form of trade facilitation is it bypasses arduous negotiations on tariffs. This is what leads casual observers to believe the WTO process has stalled. It is a common theme in the Brexit debate.

In truth, trade facilitation is the in thing and is beginning to go mainstream. We are looking at a new era of trade expansion at a time when many observers are questioning if globalisation is still an ongoing process. To what extent the UK government is involved in such projects is unclear (to me), but I believe we are not served well by the EU.

Our aid policy is seemingly divorced from our trade policy, which or course it would be since the EU negotiates our trade for us. That limits effects based foreign policy. There have been various signals over the last few years that the UK diplomatic efforts are stagnating. Britain is suffering a crisis of confidence in foreign policy.

Authors of a recent damning report include the former head of British intelligence Sir Richard Dearlove, the prime minister’s former adviser on international affairs Jonathan Luff and HSBC’s chief economist Stephen King. The report claims that the crisis of confidence stems from a crisis of identity as “successive prime ministers and foreign secretaries shy away from significant foreign policy engagements”, leaving Britain “self-absorbed and insular”.

The commission says: “There is a great deal of disquiet among the UK’s diplomatic community that British foreign policy lacks a clear purpose, and that as a result there is an approach to the distribution of resources that lacks strategic coherence”.

And who can be surprised by this when we are riding two horses going in different directions? To have an effective foreign policy one must first set out what those foreign policy objectives are. There are areas where we should seek cooperation for the greater good, not least with humanitarian concerns, but government should not forget who it is supposed to serve and the UK acting in its own business interests, by way of trade facilitation is doing everyone a favour, possibly even creating the peace by increasing the wealth.

And this is where we need a strong diplomatic corps at work, firstly in obtaining permission to operate within partner nations. From there we need to install effective procurement systems to encourage bidding from the UK to carry out facilitation objectives. And though critics would argue such unilateralism goes against the spirit of cooperation, that entirely depends on what you're using for building blocks.

Britain in its colonial days was known for imposing the rule of law. India still has laws on its statute book that were drafted in Whitehall during the days of the Raj. There is no reason why we could not resume such activities, although with considerably less brutality, but instead using global regulatory conventions. It makes sense in that this is precisely what the EU does in forming its own regulations.

Sophisticated regulatory systems encompassing customs procedures can not only improve public health, eliminate food fraud and cut out the opportunities for corruption, they also enhance export potential as we have already discussed. In doing so we bring more nations into the global rules based trading system. We would do this in accordance with UN sustainable Development Goals.

The endgame would be a commonwealth of sorts, but more a global single market on a multilateral basis rather than supranational, and one where no one state holds dominion. Crucially one that is also EU compatible.

We then may also wish to look at mutual visa exchanges on a quota basis, possibly using academic cooperation programmes as the facilitator. This is how we can put British science front and centre. And if there's one thing Africa and India need it's British expertise in city planning. Nobody does it like the British. I'm not talking our creaking planning permission system, rather what happens under the streets with cables and utilities. Not forgetting traffic management expertise that the rest of the world needs in bringing down road casualties and reducing delays to shipments by way of easing congestion.

Some would rightly point out that the Department for International Development already does this, but it dabbles without clear objectives, is poor at reporting what it does and is routinely sidetracked with soft issues amounting to bicycle shed syndrome and humanitarian concerns. It lacks coherence, leadership and vision and is often the plaything of vanity politics.

While we are in the EU, foreign aid will continue to be seen as a corrupt slush fund for buying favours and a system Britain does not see much benefit from except for what it notionally buys us in soft power. While aid is often misunderstood, it's not a wholly unfair appraisal of UK aid and it's difficult to discern if we even have a foreign policy geared toward trade facilitation since trade is entirely disconnected.

This is why we need to repatriate trade and aid, and this is what an EEA based Brexit agreement would give us. This is where we have the potential to make aid work for us, while also jump starting trade with Africa. As much as anything, it benefits Europe. A clean slate foreign policy is worth leaving the EU in itself.

It doesn't mean that we would end EU based cooperation programmes to enhance our humanitarian reach but it is a commonly held view that aid exists solely for humanitarian purposes. It doesn't. And it's actually a harmful perception since mutual trade and remittances through population movements is the best form of economic aid there is.

Improving our global reach starts with reintegrating our diplomacy with our trade and aid policy. Independent of the EU working in harmony with the WTO framework on trade facilitation we can be far ahead of the game, free of the EU's dogmatic insistence on protectionist bilateral deals and building something of consequence.

The EU is barking up the wrong tree in seeking deals with the USA which are unlikely to be passed by congress regardless of whoever wins the next presidential elections. The USA will continue to be a closed shop with heavily proscribed trade. We could instead be far more agile acting independently in multilateral forums.

Ultimately what is underpinning the desire among the great and the good to remain in the EU is a total ignorance of how trade is developing and how obsolete EU methods now are. Lacking any real knowledge of regulation and the potential of it, and the trends in regulatory globalisation, they lack the imagination to see anything beyond the walled garden of the EU. Business uses the EU as a comfort blanket, thinking the world will cave in if someone takes it away. We have internalised the dismal notion that we have nothing to offer and are too small to cope outside in the big bad world. 

The big bang trade deals may well be dominated by creaking giants, but ultimately it's the energised and agile playing to their strengths who can make the biggest gains incrementally through building coalitions and working creatively. That is the leadership Britain can show on the world stage and maybe we can show the old EU dog a few new tricks. 

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