Thursday, 5 March 2020

EU trade: theory versus reality

I spend a lot of time looking at new generation trade deals. It's real onion layer stuff. It's not until you start drilling down into the annexes do you really get to the substance of them, and even then, if you don't know what you're looking at then you won't see the game in play. There's a deep philosphy at work and broader strategy - best described as "globalisation by treaty" or backdoor multilateralism.

Much has been missed and misunderstood by the UK government which explains its deeply flawed negotiating strategy. The UK believes a "Canada style deal" allows trade to continue without the obligations that go with single market membership. The EU has seen them coming. 

Though new generation EU FTAs do not make explicit demands for regulatory alignment, they set up the conditions where third countries have little choice but to adopt EU rules and global standards (as defined to a large extent by the EU). Then when you look at how standards are evolving, moving away from basic technical specifications towards hard coded rules much like traditional EU regulation, and the way in which the EU dominates those international organisations, we see that the EU is effectively appropriating multilateral institutions as its own private plaything.

CETA is one such example which promotes the development of international standards under the aegis of the WTO TBT agreement, which are then adopted by the parties. Once an international standard/rule is agreed, it will apply across the board. The EU is gathering together allies who are committed to the mulitlateral process, and is using new generation FTAs to extend the grip of international standards.

So in effect, while CETA proclaims the "right to regulate" for both parties, Canada still has to regulate in accordance with its obligations under the WTO TBT agreement - making global standards (mostly of EU origin) central to its regulation. If you're a sovereignty fetishist then this is seriously bad news in that Canada and the EU want to cooperate and have a common aim of building the global agenda. CETA then enables the globalists within the Canadian government to by-pass internal resistance - in much the same way our own politicians used the EU.

CETA also requires international standards are used as the basis for equivalence. The way the EU operates, it can make a WP.29 standard, shunt it upstairs, call it a UN Regulation and then expect everybody else to conform. It's subtle, and not particularly transparent, but it creates the systems needed for the two governments (EU and Canada) to create common laws and standards. It doesn't force the issue, but it enables the parties to say they are acting in accordance with their international commitments.

But if you add "pacta sunt servanda" (agreements must be kept), it would be very difficult for the parties not to "cooperate", and to do so in good faith. Thus, there is a strong mandatory element to cooperation and you have to have a very good reason for rejecting a proposal. It thus changes the relationship in a very significant way. This enables the Canadian government to by-pass its own parliament. It can "conspire" with the EU to formulate an international standard, to which it must then comply.

When you look at this system as a whole, you effectively have the EU27 and all who cooperate via EU FTAs all converging on the same set of standards and the same regulatory philosophy. This includes Canada, Korea, Mexico, Japan, Vietnam and others. The standard is set for future cooperation. A divergent UK has nowhere to go. It is surrounded on all sides by a system it is also hooked into by way of its own multilateral commitments through the WTO system. If they really understood the implications of a "Canada style deal" they wouldn't be asking for one.

There are caveats though. On paper this is a formidable system, and if it was taken as seriously as the EU takes it then it would work quite well. But once you start dealing with the likes of Thailand, Vietnam and India, any commitments made are merely ink on a page. There is no sincere effort to implement nor is there meaningful enforcement. The EU can monitor and raise issues, and take defensive action where necessary but with China exerting its own influence on the global system, there is plenty of scope for subversion.

Here the UK can rightly raise the question why it is expected to commit to extensive level playing field provisions when it is happy to import from Thailand, China and elsewhere with virtually no regard to labour rights, the environment or fair play, and when the EU can't even enforce basic standards in its own territory. Meanwhile, migrants processing Thai chicken for its biggest export market, Europe, face widespread abuse by their employers, partly because foreign auditors have focused on food safety rather than workers’ conditions.

Without more enforcement and transparency, this system is a giant hypocritical bureaucracy much like everything else in international politics where, for all the difference it makes, it might as well not exist. In those areas where it does work, all it succeeds in doing is diverting the pollution and the exploitation to the third world. There are at least two locations in the UK where clean sustainable ship-breaking could be done, but EU habitat rules make it impossible so this dirty, bloody trade is done on the cheap in the slums of the world, where nobody asks questions when it kills.

This is a peculiar facet of the trade wonk debate, particularly among remainer think tankery, (and myself on occasion) to talk up the requirement for alignment to secure access to the EU market, yet the far east seemingly has no problem exporting container loads of dangerous and counterfeit tat and foodstuffs that come nowhere close to EU standards. The Brexitcentric debate appears to have consumed our collective attentions to the point where we ignore these rather large elephants in the room. Looked at in the round, Barnier's demands for a level playing field beyond that which applies to Canada looks slightly ridiculous. 

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