Tuesday, 27 November 2018

Jacob Rees-Mogg - the man who wrecked Brexit

It's no secret that I despise Jacob Rees-Mogg with every fibre of my being. He falls into that particular category of Brexiter where you can never be quite sure if he's stone stupid, lying or both. But he is a svavy operator. He is not above pushing a dishonest narrative to garner support for his agenda. This is quite common to all of the Tory brexiters but JRM is the very worst of them.

This is once again relevant because the UK is poised to end up in a customs union if May's deal limps through parliament. I'm not going to argue that this is undesirable but yet again it has sparked off a debate about the nature of our future trade policy - where a customs union will have serious implications for the nature of any independent trade policy.

A customs union by its most basic definition is an agreement to harmonise external tariffs but the EU goes much further in demanding the adoption of the Union Customs Code and alignment with the Common Commercial Policy and it is that latter component which is more obnoxious. It really does cede a lot of power to the EU. Precisely how that works outside of the treaties really remains to be seen. I don't have the necessary understanding to appreciate all of the implications but it will dramatically reduce the scope of any future FTAs and put the UK at a distinct disadvantage.

It can be argued, however, that it will make it far simpler to roll over existing deals and preserve much of the trade status quo insofar as we can while being outside of the EU regulatory union. With the EU now including UNECE automotive type approvals in FTAs you do at least have a shot at protecting the automotive industry. Here May's advisors have probably calculated that losing car factories will be more unpopular than upsetting a pack of Tory backbenchers with a tariff fetish.

The short of it is, the public don't care about trade. They probably should, but it's boring so they don't. That's a fact of life and it only ever becomes political when the public get wind of a half understood food standards scare. Chlorinated wombats etc.

In principle, though, this is not Brexit. If the aim is to restore political authority over who and what comes into the country and on what terms then this really isn't it. This is primarily about protecting the corporates because no government wants to see headline departures of Nissan and Airbus. Furthermore, if that is the aim then the general approach here is to preserve the existing centrally planned economic order. It can be preserved but at an enormous cost in sovereignty as is commonly understood. It is no exaggeration to call it vassal state stuff.

Essentially the government is playing it as safe as possible and that is entirely the fault of Rees-Mogg and his ERG clan. If May's advisers are worth their salt they have probably told her that giving control of trade policy to the likes of Rees-Mogg would be akin with handing a loaded revolver to a toddler.

The narrative goes that the beastly EU is a protectionist cartel that impoverishes the third world and diverts trade. That case can be argued but for none of the reasons Rees-Mogg and co think. They are tariff fetishists. They have it in their heads that tariff reductions are the be all and end all of trade and that liberalisation is the silver bullet. It really isn't.

The dishonest ploy used by Rees-Mogg is to cherrypick EU tariffs to weave a narrative that the EU charges eyes-watering percentages which makes imported produce more expensive for consumers. But the baseline tariffs only apply in a very select set of circumstances given the EU has hundreds of bilateral and multilateral agreements on tariffs.

The argument that these tariffs keep Africa poor is entirely bogus. If anything it is the system of interwoven agreements that preserve a trade preferences for Africa and were we to unilaterally liberalise then Africa would be facing the full force of global competition when they are not societally equipped to cope with it. They are called developing countries for a reason.

Very often the likes of Rees-Mogg will plug out a particularly high tariff - very often an obscure number. They are usually the outliers and generally if a curiously high tariff exists it's there for a reason which can often be counter-intuitive. The point being that the global system of tariffs is a delicate balance of interests and tinkering with it is not as simple as many believe it is. If there were sweeping policies we could employ to improve things, there's a good chance we'd already be doing it.

Worse still, the ERG are fixated with the idea that trade deals should be simplified and that the bulk of EU agreements are little more than administrative fluff for the benefit of bureaucrats, failing to note that measures in FTAs are there for the purposes of trade facilitation. They believe the Department for International Trade can be a rapid fire FTA factory, churning out simpler and more effective agreements. They are not on this planet. They don't understand the system and they don't want to either. This is pure ideological zeal at work.

More to the point, though a customs union does curtail our ability to forge FTAs, the actual value of FTAs is massively overstated and provide only marginal increments in trade that consumers would struggle to notice. It's only when you have massive shifts in trade such as joining a single market do you see any tangible evidence of change. The fixation with FTAs is all but irrelevant.

For a time now global trade growth has reached a plateau. There haven't been many game changers such as containerisation and even that trade has its normal ceiling. This is essentially trade normalisation. It's about as good as it gets until the next game changer. Changes in the shipping markets, largely to do with multifunctional sulphur limits could very well shift a lot of sea traffic into the air. Smaller consignments travelling directly to regional airports. The challenge for trade policy, though, is to maximise the profitability of value chains.

This is where things get interesting. Here we are looking to remove corruption, fraud, counterfeiting, food adulteration and spoilage/waste. This then becomes a matter of trade infrastructure and harmonised customs systems. Trade facilitation. And though trade facilitation refers to improvements in customs formalities it can be expanded to include a development policy to improve access to markets. This can mean anything from traffic signalling to reduce port congestion, port dredging to increase port throughput, and basic road maintenance.

The thing about this though is it requires intergovernmental coordination and lots of investment. International development should be and is a core tenet of the trade discipline, often overlooked because FTA chatter is more politically entertaining. It's slow and it's difficult to measure the cumulative effects and it is not necessarily value for money. This is a nut we have yet to crack.

And how is this reported? You guessed it. "Britain spends £4 billion on fixing POTHOLES in India" says the Daily Wail. Being that this feeds into the populist narrative, the likes of Rees-Mogg make all the pleasing dog-whistles to cut back on foreign aid and therefore discounting a major facet of trade policy. It;s an important part of streamlining value chains and increasing their profitability and the ERG would happily trash it. And the sick irony of this? This should have been our trade focus all along - and there was nothing much stopping us doing any of this in the EU.

Ultimately it is economic partnership agreements where the UK stands to make the most gain but we cannot seem to move the debate beyond FTAs. This is where the EU really does freeze out third world produce - sometimes for protectionist reasons but then mainly for food safety reasons. Not for nothing does it keep a close eye on Indian seafood imports.

This is where the UK should be pitching in to ensure developing world producers can meet the standards. Instead Rees-Mogg wants regulatory independence precisely so we can barter on standards. Tory trade thinking is totally obsolete. He's the Jeremy Corbyn of commerce.

So while the ERG prattle about not having the power to strike FTAs, they are fixating on only one component of trade among several different avenues spanned across a number of international forums where the UK could and should be flexing its regulatory diplomacy muscles. If you put any of this to an ERG MP you'd be met with a blank stare.

Frankly, nothing is served by putting these wreckers in charge of anything more complex than a TV remote. The fashionable "free trade" dogma circulating within the bubble is both dangerous and destructive and though it does rather go against my sovereignty principles part of me is relieved to think their crackpot theories will not be implemented. They don't actually mind if we are a vassal state just so long as we are a vassal of the USA and flogging off British assets to their American sponsors.

From a trade perspective there is nothing to be said for the kind of deregulation they seek, there si no value at all in leaving the single market and they're not going to get anything out of FTAs that we don't already have. Tory Brexitism is intellectually and morally bankrupt. There are plenty of good reasons to leave the EU but "free trade" is not one of them.

This then begs the question as to what do we actually achieve with Brexit if we are staying in the customs union. The answer is not very much save for the loss of trade that depends on the regulatory union of the single market - which is not likely to be replaced by any combination of substitutes even if we did leave the customs union. It should also be noted that trade is substantially more than shipping tins of beans from point to point. The EEA facilitates a vast array of trade in services.

Ultimately the only intellectually coherent Brexit is Efta EEA in that it would maintain most of the trade we enjoy with the EU with sufficient protections so as to ensure our own market share is not cannibalised by the EU and we are then free to look at trade avenues elsewhere complementing the efforts of the EU. We should still be looking to closely collaborate with the EU on trade even with an independent trade policy. It is in our mutual self-interest.

The chances of this happening, though are vanishing. The Tories have done a supreme wrecking job with their anti-EEA propaganda and Rees-Mogg's lies about trade have proven highly effective among the Tory grassroots. Having closed down the one sensible viable option, with Ukippers making it doubly impossible by conflating EEA freedoms with open borders, I don't suppose it's politically possible. Theresa May certainly thinks so.

So now when faced with the intellectual bankruptcy of Tory trade theories, no get out of jail free card and a gun to her head, there was little else she could do but to sign this monstrous deal which, impressively, is even worse than EU membership.

The only alternative to this dismal fate is no deal at all, where Britain loses all of its formal trade links and ultimately ends up grovelling to Brussels for any kind of restoration to normality the moment the Tories are ejected. The price of that will be roughly the same as the deal now on the table - only by then we really will have lost the likes of Nissan etc. There are societal arguments for doing so, but there is no economic argument in the world that credibly supports the WTO option.

Regular readers will note a tone of conflict here in that none of the likely options are especially attractive and if it isn't Efta then none of the Brexit avenues on offer are in the national interest. The whole Brexit enterprise has hit the rocks and its architects are the ones chiefly responsible for that. If at this point the ERG find their prize snatched away from them, they have only themselves to blame.

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