Thursday, 8 September 2016

Don't expect much from an Australian trade deal

So there is to be a UK-Australia "trade deal". We do not as yet know what that looks like. It isn't going to be what Brexiteers think it is. It isn't a case of simply dropping tariffs and letting the good times roll. Tariffs will be the very last thing on the agenda. If we cannot grandfather existing EU agreements on non tariff barriers we will have to have an agreement ready to roll the day after Brexit. These would be mutual recognition agreements on standards and inspections - and also qualifications.

If we have such a thing from the outset then our own regulatory systems have to stay broadly harmonised with theirs. And since Australia has spent the last decade harmonising with the EU it means there is very little room for deregulation or divergence. Nor is there any point. For instance, Australia's food standards are based almost entirely on those of Codex Alimentarius.

There are however conflicting and competing regulatory regimes in other sectors. China is making its own demands and has its own regional codes and conventions and since China is the number one supplier of goods to Australia the focus of much regulatory harmonisation is not with Europe but China. That means China and Pacific harmonisation is the priority.

As the UK will be aligned with the EU there will be distinct differences and any mutual recognition agreement we secure would be limited in scope. There may also be commercial and political pressures meaning that Australia does not have a free hand. In all likelihood any arrangement on non-tariff barriers will be made with a view to continuity of the status quo. That could be straightforward but then again for every pot of ointment there is a swarm of flies.

In that regard the potential to remove non-tariff barriers is no greater outside the EU than in - so even if we could unilaterally drop tariffs (and I have doubts that we can) the costs and inconveniences of trade remain prohibitive. If you have to produce goods to a different standard then even the removal eight percent tariffs does not create much in the way of opportunity. The issues are all interwoven and it's not surprising that trade deals grind to a halt.

But then in come the Brexiteers barging into something they know next to nothing about, without the first idea how the system works, assuming there are miracle cures. Some believe that Brexit is Britain's "Berlin Wall Moment" where we sweep aside the "red tape" and usher in a new dawn of free trade. Except that in a lot of respects the red tape is there for a seriously good reason and Australia and the UK is bound to it by way of international treaties or WTO agreements. If there are simple measures to be taken then chances are they already have been.

Then there is the Trans-pacific partnership. Should this come into force it binds Australia in the same way the UK is bound to the EU. Even free of the EU we still have a number of legacy constraints. It should also be noted that the EU is competing with TPP and is seeking sweeteners to entice Australia not to commit every sector to Pacific integration. And this is before we even begin to think about service where agreements on intellectual property and digital rights are being hammered out at the global level.

The truth is that none of us are free agents anymore. Bilateral deals may sound appealing - and they do foster good relations but each party is not at liberty to be as generous as they may wish to be in spirit. Australian conservatives would like nothing more than to throw it all open to the UK but they have similarly estranged relations with reality.

We can expect some marginal improvements from an Australian agreement but really the gesture is there to help secure continuity of the arrangements we already have. It is unlikely to be the free trade bonanza the likes of John Redwood think it is. I expect the best improvement we can make is to liberalise borders with Australia - which we have been at liberty to do any time we like.

If we are to make any real progress in global trade we need to be reducing the disparities between regional regulatory regimes. This is where we find Memorandums of Understanding between different international organisations to enhance cooperation.

We have seen this kind of thing between various vehicle safety organisations moving us closer to a global standard. Presently we would not dream of opening our roads to Chinese mass produced vehicles but eventually there will be a mutual recognition agreement between regional and global regulatory bodies which creates a global marketplace for vehicles produced anywhere.

This is the real engine of globalisation. These are not agreements between blocs like the EU and ASEAN. It's far bigger and higher up the chain than even TTIP. It doesn't even happen between nation states. We see a gradual merger of largely unheard of but massively significant organisations that govern practically everything. This is why democracy is circling the drain the world over.

And that underscores why Britain needs to leave the EU and become an independent actor. Bilateralism is dead. "Free trade deals" are a chimera. What matters is our ability to initiate regulatory measures according to our own trade objectives. We do not have right of initiative as members of the EU nor do we have a free vote or means of registering opt outs and reservations.

As this blog has noted before the EU is increasingly the recipient of law and regulation and as more countries come on stream into the global rules based trade system it no longer calls the shots. We are told that if we leave the EU we will no longer have "seat at the table" but the EU not the table that matters. It's the global bodies where we need to be committing our resources.

In this, influence is proportionate to the expertise we bring to the table. Our own scientific, academic and diplomatic resources are a valuable asset to the creation of regulation thus can be used as a bartering chip. It is at the consultation stage where we see the most international cooperation, largely to ensure that a piece of legislation is suitably workable so that it will pass a vote.

With this in mind remainers largely overestimate the value of having a formal vote further down the chain. What matters is our approach to the consultation, cooperating in good faith and participating in all the informing bodies that draft regulation. In this it is unimaginable that the UK would not be a leading voice from outside the EU.

In this we see the involvement of British NGO's unions, consumer groups and business associations. They are among the best in the world and their competence is in no way contingent on EU membership. To view it purely in terms of the overpaid button pushers in the European Parliament is to discount 90% of the process. It's a two dimensional and rather childish interpretation.

It's not even as if any real scrutiny is applied by MEPs. Most MEPs know very little and have no real expertise. Most of them don't even know what they're voting for. They work to lists provided by their groups. They won't know whether it's ordinary legislative procedure, or whether it's first reading in response to comitology. To them, it's just a vote that they turn up to, in order to press a button. Trying to have sensible discussions with them about what they voted for is usually a total waste of time. They don't have the knowledge and most times they don't have any real understanding of what they are doing.

As to amendments, most are for show only and get discarded. The ones that stick are the official amendments which will bring the text into synchronisation with the original text but, whatever happens, on technical standards, if they come from international sources, the details can't be changed.

Very often, though, you get MEPs showboating and virtue signalling, putting in amendments for the sake of it. These are stripped out during the voting, and have no effect whatsoever. So when it comes down to it, when remainers say we would have no seat at the table, they just mean one particular table, way down the chain and one not actually all that important to the legislative process.

We have heard much about being outward looking and engaging with the world over the last year. This is what it really looks like. For decades we have has a narrow eurocentric view with our attention focussed on the middleman, failing to engage in decisions made at the very top of global governance where anonymous cooperation agreement have far reaching consequences where even the EU is oblivious.

The truth that all sides of the debate will have to come to terms with is the fact that our whole approach to trade is obsolete. The leavers have some gloriously naive ideas about how trade works but by the same token the remainers massively overestimate the significance of the EU.

Looking at the EUs flagship CETA and TTIP deals we can see then headed to the rocks simply because of the dilemmas conflicting bilateral regimes create. We are locked into regional partitions when the real business of trade and regulation has gone global in a big way and governments are no longer in control of it.

If we want to break the deadlock we have to start thinking about trade in a different way. We have to think and act globally and we have to drop our bizarre fixation with tariffs. It really is bicycle shed syndrome. Non tariff barriers are choking global trade and increasing all the time. Only through acting globally can we smash them down. Bilateral deals may sound appealing but like the EU, that thinking belongs to the previous century.

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