Sunday, 21 August 2016

Britain can be the midwife to a global single market

In global trade your influence is not directly proportionate to your market size. It's what you bring to the table. In that regard Britain has plenty to offer in terms of what it can do and what it can facilitate. That much is not going to change after Brexit. The question is how we enhance that influence after we leave the EU.

Many say that we have influence over the EU therefore we have influence globally. This is a misconception. Many underestimate the powers of the commission which acts almost as a rogue entity where the opinions of leading member states are often advisory. Worse still is that we don't seek to influence the EU when we really should. That's half the problem.

There have been times when we have attempted marginal reforms to CAP and CFP but have failed because of a lack of momentum and political will from the British government. It is deferred to ministers with no real political weight put behind it.

The dynamic behind that is the fact that our government prefers not to be distracted with grubby things like policy and prefers to indulge in politics. That is why key areas of policy have been neglected for so long. It is also why we must leave. We don't use our influence to our advantage and we never will. Only by leaving do we come up against the various obstacles to reform and only then will we make any serious moves to remove them.

One of the biggest frustrations of EU membership is not so much the EU as domestic attitudes to it. Successive governments have been happy with the arrangement of off-shoring key areas of policy ans once they have done so take very little interest in the development of these policies and domestic policy is geared around coping with the fallout rather than steering policy objectives. That may be sufficient for the political class, not so much for industry. Fishing and agriculture especially. Both feel neglected and undervalued - with some justification. We have become passive victims of policy-making rather than drivers of it.

By voting to leave the EU the message we are sending is not a message to Brussels. It is a message to our own government that we want them to govern rather than shirking their responsibilities. We want policy made in our name in the direct national interest.

We are told that pooling sovereignty is in the greater good and there are winners and losers but it does seem to be mostly losers as small industries are wiped out at the stroke of a pen. It is difficult to see why the UK should be religiously compliant when nobody else seems to take their EU commitments as seriously as the UK. Brexit is really about putting UK concerns ahead of EU defensive interests like manufacturing.

While Britain is a serious high tech manufacturing economy we are also a major services exporter and we lose out on trade advantages because of EU protectionism. Trade has stalled globally and we need to kick start it.

As Britain begins to reassert itself in trade terms our political machine will be seeking any advantage it can to offset Brexit. In this they will be searching for bilateral agreements but will find that most of the easy hits have already been ticked off the list. Our approach must change from the big bang deals in search of incremental opportunities. That is the way global trade has shifted.

In order to put Britain in the limelight we need to harness new approaches in ways that are alien to the EU. This starts with trade facilitation. Rather than bilateral agreements we need to be enhancing and expanding the global frameworks for trade. That starts with the WTO Trade Facilitation Agreement. Hundreds of billions of dollars can be added to world wide trade by removing regulatory barriers - which are now far more pressing than mere tariffs. What we are seeing now is domestic commitments to adhere to global rules and standards.

The immediate problem is that for lesser developed nations compliance is problematic. Their supply chains are old fashioned, infrastructure is outdated and they are prone to corruption. This is where Britain can enhance its own interests and influence by being an ambassador of the global rules based trading system. This is something we are good at. We have all the sciences at our disposal to help bring African nations up to the global standard, and we are experts in good governance. As we bring on stream sources of cheaper food produce, allowing African nations to export we create opportunities for UK agribusiness and banking. The UK is a leader in microfinancing and agricultural engineering. These are all services we can provide.

In this we need to be less concerned with the European single market in services and look to build one globally focussing on those opportunities where UK services and expertise will be in demand. The problem for Europe is that most of the big gains have already been made in the region and further progress will prove glacial - right about the time where geographic proximity has never mattered less.

Many have expressed doubts about the power of trade facilitation, but there are advances in agricultural techniques that mean we can turn scrubland into prime agriculture. Add a port, a road and an airport and you have a whole new supply chain to bring on stream. This is why India is investing heavily in port modernisation and liberalising port services. The key is investment. You get out what you put in. And if Britain is the champion of trade facilitation then the rest will follow.

Some are fixated on the possibility of a deal with the US but as the global rules based trading system evolves it will become less important. The USA has an executive order to adopt global rules, regulations and standards and so all that is required is a general mutual recognition agreement  rather than intricate trade deals. We could try and get the US to open its borders to more people but we all know that isn't going to happen so we should focus on what we can achieve with the tools we have and one seriously potent tool is the WTO's Trade Facilitation Agreement. We have already seen the TIR convention take on new ratifications and even Russia is using it. This is the future of trade.

What it requires of us is that through active diplomacy we seek our new friends and new opportunities to use our aid policy to implement regulatory harmonsiation and compliance measures, paving the way for UK companies to exploit the opportunities. We can pioneer it. In the modern era regulatory systems are the means by which we kickstart trade and we are masters of it. Nobody does rules and regulations quite like the British.

As we have noted though, the system does not work if it is inflexible. Regulatory systems in their infancy need waivers and exemptions. We may need to secure our own and we may which to grant them. This cannot happen while trade is an exclusive competence of the EU. Moreover, since horse trading with standards and regulations is the real business of trade now, the exclusivity the EU enjoys on matters of trade means it can extend its reach into virtually any area of regulation it chooses with no means of appeal or veto. We cannot operate this way nor can we tolerate such arbitrary lawmaking without proper scrutiny.

We were told that the reason we should join the EEC originally was so that we had a say in the rules and regulations. If that logic was sound in 1975 then it is sound now. The fact is that regulation is decided at the global level and we need our own voice in it. Having the EU commission act on our behalf without supervision or unilateral blocking powers is neither influence nor democracy.

Now that Britain is leaving the EU we not only become a WTO member in our own right, we have a free voice as well as the right of initiative in trade and regulatory concerns. We do not have to seek a common position nor do we have to ask permission from Brussels. Those powers we take almost immediately. Suddenly we find ourselves with tools of real influence.

Whether it turns out to be the silver bullet is entirely contingent on how soon we drop our fixation with dinosaur deals and turn our attention to the new games in play. Trade deals are dead. Unilateral declarations of conformity are now the way it gets done and all of this is happening under the radar. What we need to do is bring it out into the open and start exploiting the open invitations that are already there. Britain can be the midwife to a global single market in goods and services. First though, we have to look beyond trade deals and realise there is something of greater significance than the EU and there's a party going on without us. When the penny drops, the pounds will roll in.

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