Monday, 15 January 2018

Trade policy has become the tail wagging the dog


At one time I would have said I was in favour of "free trade". I used to consider protectionism to be a dirty word. Then as I learned more about trade I came to realise that "free trade" is an entirely meaningless term - or at the very least one so widely abused that it no longer carries meaning. And then as I have learned more about non-tariff barriers and the function of regulation, I became a firm advocate of trade liberalisation. A more meaningful description of free trade - the removal of barriers to trade.

But then I came to understand that protectionism also has legitimate uses. We may wish to to place restrictions on trade to either preserve a strategic national asset or to develop domestic capability. More broadly, trade policy is there to protect legitimate traders from the predatory practises of nations and corporations who seek to damage competitors by unfair means. By its very nature, therefore, an effective trade policy is "protectionist".

I then came to understand that globalist trade wonkery is a form of fanatical tunnel vision. It seeks to identify and erase all barriers to trade. In order to do that those who control trade policy and make the decisions must have the ability to modify or remove regulations. They are in the business of making the world more convenient for commerce.

The underlying assumption in the discipline is that growth is good, expansion is the goal and that trade, generally speaking makes nations wealthier. Networks of trade deals improve the efficiency of supply chains thereby bringing more varied goods from all over to domestic markets, increasing choice and driving down prices through competition.

In this there are winners and losers, but the losers are viewed as collateral damage - they who are sacrificed in the name of the greater good. Protectionism must not be allowed to interfere with the dream of total harmonisation on all goods and services bringing about a global free market.

Where the EU is concerned, its vision is one of a pan-European single market encompassing goods and services. But then it also seeks a single regime of rights for workers throughout with equal rights to benefits, eventually bringing about a uniform European welfare system.

The process, however, is far too slow if nation states are allowed to place reservations or make unilateral exceptions. The decision making, therefore, has to be centralised where ever more power over increasingly more areas of governance is transferred to Brussels. This is either done by way of incremental agreement or ECJ rulings. Member states gradually cede control.

The process is called "integration" where really it is better described as homogenisation. We are, therefore, increasingly powerless as a people, where policy is concocted by trade liberalisation fundamentalists and decisions are imposed upon us while lacking the necessary democratic safeguards to overturn policy. This leads to policy stagnation.

Politicians are only too happy with this arrangement because it offloads the responsibility for technical governance and frees them up to indulge themselves in tribal retail politics. The running of the machinery is handed over to the faceless experts largely without supervision and with minimal input or consultation from the demos.

As we gradually liberalise markets the collateral damage mounts up, leading to de-industrialisation and supercharged growth. This is viewed as a universal good in that we now have a cleaner environment, safer, easier jobs and a longer life expectancy. Obviously the march of technology can take much of the credit, but supercharging consumer markets is a driver of that technological advancement.

The question that plagues policymakers is how to adequately deal with the social fallout of this, which is leading us ever closer toward a universal basic income. In effect we are moving toward a soulless utopian model where work is all but obsolete and the bottom decile are simply provided for rather than treated as humans with agency and ambition, where the power is held by the few over the many.

In this the fallout of trade liberalisation is often blamed on an inadequate domestic response to it. Perhaps they are right. Nobody can say that our response to the social problems created by mass immigration have been adequately handled. Health, education and housing is not keeping pace with demand. That problem is exacerbated in that increasing supply of housing, thus maintaining affordability, is its own pull factor. Our last remaining defence against further immigration is presently high costs for shelter.

What we have noted, however, is that immigrants from all over Europe and beyond are willing to make extraordinary sacrifices in order to claim a piece of the dream. We find city squares and parks becoming makeshift transit camps, and we find overcrowding in houses of multiple occupation along with the phenomenon of "beds in sheds" which are part of the exploitation economy. Many of the low priced goods and services we enjoy as wealthy consumers absolutely depends on abridgments of workers rights.

In this we find that migrants from Europe are not necessarily Europe's poor and uneducated. Among Polish migrants doing menial work we find grammar educated middle classes who very obviously present themselves as a better hire than a working class native. Being that the latter is not keyed into the transient worker economy, and being part of the settled community, they have overheads meaning they cannot compete on price. Statisticians may say on average freedom of movement does not depress wages, but the pressure is felt the most acutely in the bottom two deciles.

In this there are moral consequences. As much as London robs UK regions of their youth and vitality, the UK has in recent years pulled in much of the talent from Eastern Europe thus depriving those countries of its best resource. We also find that companies no longer look to train when they have a Europe wide recruitment pool. This means that working class people who cannot obtain credit or access to expensive training are gradually left behind.

Around the edges of this, in times of "austerity" certain resentments fester, while coping with the quality of life issues caused by rapidly expanding populations, where leftwing social democratic parties assume the remedy is to simply pay out more in welfare, adding to an already huge welfare bill. Whatever training exists is that which is mandated and supplied by the state which generally means it is of low value and poor quality.

In this a largely insulated middle class who enjoy cheap goods and services will seldom complain, and will enjoy the freedom to travel and work elsewhere in Europe. Little wonder this demographic would have voted to remain. All the while the political class congratulates itself for perpetual growth and what it considers a healthy economy.

What we have, though, is a political class in widespread denial, often discounting the corrosive effects of atomisation and lack of societal cohesion. The erosion of the familiar. With the inbuilt inequalities, and having to lower life expectations, it is not surprising that at least half of the country feels like a change of regime is necessary. There is a justifiable feeling that the political class is out of touch, is not listening and is largely unable to act even if it was willing. Which it isn't.

The main reason for inaction is that politicians know that many of our entitlements and state provisions cannot be sustained without continental immigration, and that immigration allows them to continue to evade many of the hard questions about future sustainability of entitlements - which no politician seeking re-election will ever touch with a barge pole. What is not discussed, however, is that even with present turnover, we are still sitting on a demographic timebomb, with poor savings rates and underperforming pensions.

It is my view that one way or another the UK is staring down the barrel of a huge crisis that will necessitate major economic structural reforms. Unpopular ones too. That makes a period of political turbulence inevitable and most likely another "lost generation" as the economy reorders itself. This is why I think a remain vote would simply be delaying the inevitable - and it's why I am unmoved by economic arguments from the remain camp. Remaining provides only temporary certainty.

Where Brexit brings about some remedy, as mentioned above, trade liberalisation is all about the convenience of commerce to the exclusion of all other concerns. This changes. Already the drop in in the value of Sterling has made the UK a less attractive destination for casual labour, thus the restriction in labour supply means that business will have to pay properly and train workers to plug skills gaps. It also brings about a slowdown which allows space and time for integration.

We have also seen a surge in factory orders due to the exchange rate. Whether or not this can be sustained will depend largely on what kind of trade relationship we secure with the EU. We should be cautious of such economic news in that Brexit will undoubtedly result in a number of trade barriers with the EU leading to job losses. Unless our place in the European air travel market is secured, to name one sector, a lot of high quality jobs will vanish.

What matters, though, is that the decision making over trade defences (of which control of immigration arguably is one) rests with parliament, and more importantly the British public. We can have a trade policy geared to the wellbeing of UK society rather than working toward the goals of the Euro-federalists. What technocrats may call protectionism I call acting in the national interest (which may or may not be economic in nature).

The propaganda of the EU has it that there is something inherently sinful about acting in the national interest. That's really a matter of perspective and is entirely relative to the individual. There is nothing preordained about Brexit being protectionist, rather it means that the policy resides in Westminster rather than Brussels so that proper national debates on trade will take place with scrutiny repatriated.

In this you can very well pick fault with my reasoning, and you may tell me that we cannot possibly predict how the economy will re-order itself, but we have undeniably kickstarted a process which puts British voters closer to the driving seat and in many respects arrests a number of unwelcome trends our political class were unable to even acknowledge let alone resolve.

For all that "free trade" brexiteers are (rightly) denounced as ideologues, trade policy wonks are equally so, working to an entirely sterile depoliticised trade agenda with only one goal in mind irrespective of the social consequences. Trade has become a technical discipline rather than a tool of political economics and foreign policy. It is no longer integrated with politics yet it increasingly has more power over us while we have fewer democratic means to forge our response to it.

Trade liberalisation for its own sake globally, or for the ends of a European superstate, is to completely ignore the preferences of the public, their economic, social and spiritual needs and is therefore profoundly anti-democratic. One might even say anti-human. The fundamental question here is whether we serve the economy or whether the economy serves us.

The laws and rules we make for ourselves locally are there for the governance of our own distinct cultures derived from our unique heritage and geography. In some areas there is every advantage and all good sense in seeking harmonisation and modernisation, but the political dimension is where that line is drawn. For this there is no scientific answer, or even a correct answer. It is only a question that democracy can resolve. It is fluid and it is cyclic but if that choice is removed, where trade is locked into a single agenda beyond our control then we can no longer say that we are a democracy.

For all that there are votes and vetoes within the EU and global apparatus, those voting rituals are far out of reach and off the public radar. Without that public involvement then by definition it is not democratic. That we call the empty and sterile voting rituals within the EU "democracy" is an indication of how debased that word has become. We no longer know what it means. Brexit, I hope, will reunite us with a truer definition of it. Taking back control is not an empty slogan.

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