Friday, 28 April 2017

Tory trade fantasies are thin gruel

A number of recent articles from Spiked, City AM, CapX and Civitas have criticised the single market saying that it diverts trade. Since the Anything But Arms agreement nullifying tariffs that is less of an issue. The problem as ever is the inability to meet international standards to the satisfaction of EU authorities.

This is where the EU has a rudimentary trade facilitation policy akin with the kind of activity I have advocated for the UK. It is however underfunded and not nearly as active as it needs to be. In this it turns out that the UK is more of an active player than I thought but still we need to do more.

The pertinent question is whether leaving the single market resolves that. It doesn't. As you very well should know by now, in order for us to retain seamless trade with the EU (our largest single trading partner) we will need to maintain EU rules. Even if that were not the case we would, as per the WTO TBT agreement adopt the baseline level of standards from the global bodies.

In short, the non-tariff barriers remain and were we to in any way relax our import controls on African goods we would, quite rightly, increase our risk factor on EU market surveillance systems. That would make our EU bound goods subject to more frequent customs checks. This is bad for what should be self-evident reasons.

As to the assertion that the EU diverts trade, the EU is not alone in having robust controls against substandard produce not least because of the inherent risks of importing foodstuffs from Africa where corruption leads to food fraud and contraband that eats into the profitability of value chains.

This is why African commodity exports are still stagnating. Whether we like it or not the focus absolutely must be on trade facilitation and international development. There is no magic wand to be waved to make all of the structural problems of trade disappear.

In respect of that the criticisms levelled at the single market, while valid, are ultimately meaningless. Leaving the single market only reduces our EU trade for no commercial advantage. What matters is being outside of the Customs Union whereby we can tinker with tariffs - but it is likely we will carry over the Anything But Arms agreement rendering such powers useless.

As per this link we find that Africa is hesitant to enter bloc to bloc deals with the EU in that these such trade deals are asymmetric and usually grant the EU too much power to destroy emerging and developing industries. Put simply, these countries are not ready for "level playing field" competition with the West which is only too keen to dump its surpluses.

The further deterrent is all the strings that come attached to EU deals, not least demands to implement UN sustainable development goals. By doing so you make yourself a playground for Western NGOs who are not presently welcome.

Being out of the EU and seeking deals with Africa on a more equitable basis on the proviso that the UK is allowed to implement trade facilitation measures may very well be more achievable. That though does not require that we leave the single market. The advantage to that is that provided we do not make short-cuts on standards we can use that trade agility to leverage a (convoluted) workaround on EU rules of origin or serve as a re-exporter. We could serve as a backdoor into the EU for African goods.

The main efforts of UNCTAD and the WTO are presently centred on trade inclusiveness, for SMEs especially. This is where we can enhance Africas ability to export while putting us first in the queue to supply Fintech solutions and online banking services/internet connectivity. With the Trump administration drawing down on USAID it, to some extent, vacates the field. Trump does not seem to grasp that aid programmes are as much about filling up the order books as anything else.

Before this can happen though, trading partners will not be willing to enter any agreements with us until there is a degree of long term certainty and they know what Brexit looks like. Further more they do not seek to antagonise the EU. It is therefore in our interests to get things settled as soon as possible and work to a regime that is already understood. That to my mind is the EEA. Negotiating a bespoke deal adds to the delay for no no gain while needlessly harming UK-EU trade.

As it stands, the publications mentioned are repeating decade old political memes devised by the ASI, IEA and all the other predictable, obsolete London "free market" think tanks. It is received wisdom from the bubble. Outside of that dismal clan I have yet to see even one compelling reason to leave the single market.

Many of the criticisms of the single market are entirely valid and it is far from ideal but we must operate in the real world and accept that it is an entity in its own right and consequently something with which we must deal. Our aim should be to evolve it, widen participation and eventually wrest it from overall EU control to make it a genuinely multilateral system. Until then we have to put up with it. We will need to build up our own capabilities in the global arena before we can make any strategic choices.

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