Thursday, 29 September 2016

Brexit: the right change at the right time

The expression "free movement of goods" does not mean free movement of goods. Conditions apply. You are free to move your goods so long as they comply with certain standards and have a proper audit trail. Only when all your ducks are in a row can you freely move goods. It used to be that we inspected goods at the border for compliance but now we have regulatory mechanisms like Authorised Economic Operators where trusted traders become their own customs nodes and goods travel from point to point without interruption.

With modern IT systems based on international methods and regulatory procedures, so long as a there is a mutual recognition agreement in place covering standards, inspections and qualifications, free movement of goods extends well beyond the confines of the EU single market.

At the heart of this is a common set of standards which can come from any number of international organisations - some with official stranding, others being international private regulators where their codes and guidelines are embedded in contracts and quasi-legislation. What's interesting now is that any technical regulation from the EU is not so much clearly defined prose as it is an invocation of global rules and standards - as the EU is obliged, like a hundred other countries, to adopt global rules.

In the past the Brexit debate has been plagued by a misunderstanding of regulation. Mr Dyson constantly complains about power restrictions on his vacuum cleaners. He is in fact complaining about EU regulations that invoke an eminently sensible set of ISO standards that force manufacturers to make more efficient designs. Though I believe this particular set of standards was an EU initiative, they were agreed at the global level - where any nation has the right of initiative - if they're not in the EU. Increasingly we find that moves toward regulatory harmonisation start at the very top of global governance, and while the EU is a major play, it is not the only game in town.

In the global arena the EU is up against the USA, China, India but also a number of global alliances and conglomerates where nations and blocs are just one class of global participant. The internet giants have their own alliance which has as much or more clout than most governments. Trade deals are increasingly built up around rights of investors and resemble corporate contracts. MoUs are now as much a part of intergovernmental trade as they are part of the corporate nexus.

The EU is a shrinking influence in all this. Not through its own making but because the system is expanding. The fish stays the same size, the pond just gets bigger. Rather than being the core of the single market it is a player in much bigger region where goods and services travel freely. The AEO system is global and the E-TIR system is being adopted worldwide. We are now evolving into a state where anybody who chooses to comply (and meets the standard) can participate. The EU does not control accessions. It is being displaced by UNECE.

Behind the scenes with very little fanfare countries like Kazakhstan are being brought into the fold with UNECE and Codex working to bring them up to standard so that they can participate. This is complimented by the WTO Trade Facilitation Agreement where there is a global fund for exactly this kind of economic assistance. Britain is already a large donor and that is where much of our aid spending should go. Rather than attempting to bring Turkey into the EU we would do just as well to look at bringing any number of developing countries into the UNECE/WTO/Codex sphere. In order to achieve free movement of goods and services worldwide we must focus our efforts at the global level.

But this is why talk of leaving the single market is pointless.We could leave the single market but we still have to regulate and we are still obliged to conform to global standards so there is very little point in replicating all that work. Since there is little the European Parliament can do to tinker with such regulations short of vetoing them entirely there is no real worry. Being outside of the EU gives us the necessary powers of veto - but since we will have an enhanced voice at the global level we won't need to use it often.

The idea that we would leave the single market in order to deregulate is one twenty years out of date. Classic eurosceptic believe we can move out of the EU sphere and into a big wide unregulated space where we can do as we please. It simply doesn't exist. Regulatory globalisation and harmonisation of customs is here to stay. And as much as the eurosceptics have the wrong idea, the EU is equally backward in seeking to cordon itself off as an exclusive club.

The main reason the EU is using brute force to get African trade deals to pass is because it sees this organic system as a threat to its existence. And that is not far off the mark. For Britain it then becomes a question of which we would rather prevail; a rapidly expanding organic global system with no central authority or a staid EU dominated system that creaks and groans and only expands in tranches and only ever at snails pace.

In my estimation it's better if nation states can pursue their own natural cultural relationships in order to enhance trade rather than trade being controlled by the EU. While the world is gravitating more toward regional blocs the EU is the only one which insists on trade exclusivity and that's damaging for all EU members. Central to this is the federalist ideology and though some say the federalist ideology inside the EU has been defeated the institutions still work to that archaic design and show no sign of reform. The only thing that may trigger that reform is Brexit.

Some say we should not leave the EU and seek those reforms but we are dealing with a system that does not want to reform along with politicians who don't understand why it needs reform. This explains Mr Cameron's meagre demands. What was needed was a liberalisation treaty whereby member states could pursue their own avenues and negotiate exemptions, moving the EU more toward the Efta model. That though is counter to the EUs ambitions of harder and faster integration.

The very last thing the EU had in mind was reforming to become a more liberal institution. At best we would have seen that much vaunted two speed Europe but that would not have ended EU trade exclusivity nor would it have given the necessary tools we need to reform UK governance. All it would have done is put the UK into stasis while the Eurozone forged ahead with banking and full political union.

If they had intended on pushing none Euro members out into the EEA where they could seek their own trade agreements that might have been sufficient but that was never on the table because the one thing written into the EUs DNA is that once it has control it  never relinquishes it.

By leaving the EU, the UK will retain a deep and close relationship with the EU but will have afforded itself all of the tools it needs to play a more active role in the global community to bring about a global community of equals. A rethink of how we do things is long overdue and we'll be getting the relationship with the EU that we should have had all along. One where we have the necessary exemptions so that the one size fits all approach does not damage our culture and kill jobs.

For the UK, the EU model was never quite the right fit. Britain enjoys a position as a global business hub simply because our business culture is based on the rule of law and sanctity of contracts. We do things by the book. If we sign up the the rules we follow them. Rules on the continent though are more guidelines and aspirations - and this is most telling whenever you go out of major European cities and into the provinces. Britain can't work that way. We need a more flexible relationship and that is what we are getting form Brexit. One that we would not have got any other way.

Brexit does not exclude the possibility of close integration and as the process of globalisation shows, a central authority is not needed to bring about the free movement of goods and services and as for the digital market, this can only really be brought about through global cooperation. A European digital single market has yet to take form but is already being leapfrogged.

As to the free movement of people, that is a more sensitive area. It's a fine aspiration and we should seek to safeguard it but control of it must rest with nation states for their own security and peace of mind. It is unlikely that we will have a rigid and draconian reversion to full border control. It wouldn't work and it would not be popular in the end - but that is an argument we must win rather than imposing it on people without their consent. I would prefer things stayed more or less as they are but the idea that we are not in control of it is unpalatable. Even the hard liners have a point there.

Ultimately I think Brexit will give us all a new sense of urgency to rethink how we do things. If Britain is in control of the rules it takes from Europe and elsewhere then I can see attitudes improving and better relations with Europe - as a partner rather than a subordinate of the EU. I don't see the EU as community. I see it as a bureaucratic rogue non state actor running around making messes, the consequences of which member states have to deal with alone. At least now it must seek our consent and on the international level and we have a better chance at derailing its ambitions of becoming an actor in its own right.

I do not for a moment think that Brexit will come without a price and contrary to what Brexiteers say we are not out of the woods yet. We do have a huge mess to sort out and will have to work twice as hard to make a success of it but in the end I still think it is timely and necessary.

The relationship we wanted with the EU was never going to happen as a member and there was no reason to expect any radical reforms. Once we are out of the EU though we will find that we are better equipped to function in a world very different from the one the EUs founding fathers anticipated. Once we have reacquainted ourselves with the art of governing, we will wonder why we didn't do it sooner.

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