Wednesday, 26 April 2017

European Union: a bad idea that doesn't work

The more I delve into the inner workings of the EU the more it becomes apparent that it is a hopelessly utopian vision. Notionally it serves as a barrier to curb the worst excesses of protectionist instincts in Europe but in practice it doesn't really work.

It works among Western European nations who largely abide by the rules (except France) because they are acting in good faith. We don't need the EU for that. The Eastern European states though are the free riders who see the EU as a cash cow to be milked, where compliance is entirely optional. Where you do find large scale conformity it is in those sectors which have been gobbled up by foreign corporates who absolutely love governance. Not for nothing is the EU viewed as a Western oligarchy.

When it comes to the nuts and bolts of it there are plenty of means to evade ECJ rulings as France routinely demonstrates. The UK however tends to roll over. Perhaps it is because we act in good faith or possibly because our political class is too detached from the real business of government to ever really comprehend what is happening. I used to think it more the former, but now I believe it is the latter and the system is on autopilot. Our civil servants will only put up a fight if the politicians instruct them to and since there is no real feedback mechanism between politicians and the real world, there is unlikely to be any instruction.

Then when it comes to standardisation of frontier controls, we find that the ports are increasingly merging or forming alliances and coalescing around their preferred techniques already established in standards at the IMO or elsewhere. There is a profit motive in seeking out regularisation and commonality. In that regard some sectors are light years ahead of the EU machine. As we see increments in technology, increasingly we see logistics and supply chains systems becoming self-governing. The private sector has done more in the last ten years to streamline customs than the EU.

The EU's involvement in all this is largely unnecessary. Its presence is largely to insert itself for the purposes of building a regional space governed by the same rules throughout. The problem with that is that there are distinct circles of trade within its own borders which operate in zones that tend not to deviate from established patterns - often crossing the boundaries of the EU. The North Sea shipping trade is wholly different culture to that of the Mediterranean which lends itself to interacting with North Africa. With regional standards being entirely alien to each other, by way of legacy and evolution it is both difficult and pointless to try to integrate them.

So in effect what we see are dogmatic incursions into business spheres trying to shape a European Union concept in a world that is just not cooperating. As we see in South America where peoples loyalty is divided between drug lords and legitimate authorities, we see the same in business where it has a market of standards regimes to choose from be they local, regional or global. Ideally the EU would like to erase the competition in favour of homogeneity but the real world does not allow for it. Consequently the EU is forced to adapt and to recognise regulatory authorities for the purposes of legitimising activity that falls outside of its own ability to regulate.

In this, it increasingly assimilates third party rules inside its own system but still manages to create a regulatory firewall at the borders. It makes no sense. In the maritime sector the Mediterranean has more in common with North Africa in terms of systems and culture because they are sea ports of a particular climate and ideally should be working to one set of rules with a system. That though does not happen because of the EU - except in those instances where the EU is able to strong arm North African states into conformity. This is patchy as the EU is mistrusted and where it exists conformity is basic at best.

In the rush to claim progress in advancing the free trade agenda we very often find the EU creating agreements without the necessary infrastructure being there to ensure that the system functions according to its purpose - keeping out unsafe products, contraband and potentially poisonous foodstuffs. The result of this is a gradually weakening of the system's integrity to the point where the value exists only on paper. Even member states fail to uphold their own standards. With Greece being as corrupt as it is, it is the back door into the single market for the black market.

Then when we look at more generic rules and standards and when we look outside of the EU we find that the EU is not the only regulatory superpower. There is the USA (whose influence is waning), and then there is China which is starting to make considerable demands of its own. It makes all the sense in the world to avoid duplication. To that end we have the WTO/UNECE/Codex/UNCTAD nexus. The non-state actors with as much influence as nation states. What we find here is that the EU is the obstacle to progress.

In the creation of rules for the smooth functioning of industry and commerce, ideally what we want is only the participation of interested parties. The EU though, voting on behalf of member states, must seek out a consensus meaning that interested parties in the EU can be blackmailed over completely unrelated issues in order to secure cooperation. At the centre of this is the ECJ which is increasingly more an executive than a court. That can often derail progress as it torpedoes initiatives.

The the pursuit of regulatory harmonisation is like herding cats. It is better to establish transboundary rules for specific markets than for authorities to push for their own regime to be supreme as the EU does. This is unhelpful. There is now a turf war going on between the EU and the international organisations. The EU is of equal influence pushing for its own global hegemony. It is unhealthy competition that is mutually self-defeating.

If I had to pick one (and I have by voting to leave the EU) it would be the International Organisations in that there is no central authority, it is based on voluntarism and is a far less proscribed system. Arguably it does not work as well as the EU in that there is no real system of enforcement but the closer we look at the EU the less we find the EU's system integrity is as good as we might think. There are still massive disparities of conformity between member states and enforcement is politically sensitive. The harder the EU pushes the less popular it is with electorates.

The fact is that the perfect order can only ever work if there is perfect knowledge at the centre, public consent and properly resourced administrative agencies. Perfect knowledge is implausible, consent is unlikely, and while the efforts of Europol etc are impressive, it is still pissing into the wind. Moreover voters are increasingly demanding more accountability. Nation states will wish to retain a higher degree of sovereignty.

Thus, there needs to be a far more informal system that can be voluntarily adopted to govern interactions between the various actors without an ideological federalist agenda pushing it in any one direction. Any system needs to acknowledge that perfection is the enemy of adequate and that the sum of human ingenuity will always defeat rigid and ossified systems. Humanity always progresses faster than bureaucracy. With that in mind we are better looking to more organic systems based on cooperation rather than coercion where ad hoc alliances are free of dogma so that they can achieve more.

It seems to me that the EU is more of a nuisance in bringing about such cooperation. It is neither wanted nor useful. Nation states are perfectly capable of seeking out cooperative ventures and the needlessly restrictive EU framework is a global inhibitor to innovation. I even suspect the EU is well aware of this. It is presently being very careful where and how it brings its authority to bear. Were it any more aggressive in its instructions to member states we would find the UK would not be alone in leaving. And therein lies the problem. The EU is a living, breathing catch 22. It might work if there were consent - but it doesn't have consent because it doesn't work.

The pursuit of a perfect system for trade is one which will always defeat even the finest minds. Electorates can often be superficial, fickle and easily misled. Other times they can be wise in curbing the excesses of untamed authority. It is further complicated by way of technology moving at a lighting pace, with ever more disruptive technologies and ideas confounding the best efforts of the well intentioned. We won't get anywhere close to an adequate system until we recognise that we will always be fighting a losing battle - and that the pursuit of the perfect order is ultimately counter productive.

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