Tuesday, 6 October 2015

Remaining in the EU is a gamble we cannot afford

Heavily paraphrasing an Economist article here, but this is key to a lot of what we've been saying on this blog. After more than five years of negotiations, representatives from 12 countries in Asia and the Americas finally struck a deal on the Trans-Pacific Partnership, an ambitious and contentious free-trade pact. It is the biggest and deepest multilateral trade deal in years, encompassing countries that account for 40% of the world’s economy. But it might prove even more important than that if it succeeds in its ambition to “define the rules of the road” for trade in Asia, as Michael Froman, America’s lead negotiator, put it.

Mr Froman’s office estimates that TPP will see more than 18,000 tariffs on American products reduced to zero. But tariffs, which have already been greatly reduced among TPP’s members, are not the most touted bit of the treaty. More important are the minimum standards for the protection of intellectual property (WIPO), workers and the environment. All parties will be compelled to follow the International Labour Organisation’s basic principles on workers’ rights, for example.

The full implications of the deal are not yet known, however, since TPP has been negotiated under a thick blanket of secrecy. This was intended to make it easier for the signatories to offer concessions without being pilloried at home.

Lawmakers in the 12 participating countries must now approve the agreement. This should be straightforward in places like Japan, where the ruling party has a commanding majority. But Canada faces a knife-edge election on 19th October. One of the three main parties is campaigning against TPP, arguing that it will kill farm jobs.

The biggest row will be in America, where Congress has 90 days to review the deal before putting it to an up-or-down vote, with no amendments. Although Republicans, traditionally the party of free trade, have a majority in both houses of Congress, they are divided on TPP’s merits. Donald Trump, a candidate for the Republican presidential nomination next year, has described it as “an attack on America’s business”. Hillary Clinton, the leading Democratic presidential contender, has also refused to endorse the deal, albeit not quite so flamboyantly.

What we see here is a "trade deal" which is less about dropping tariffs as it is about forming a single regulatory environment for key sectors. Note that the building blocks are WIPO and the ILO - those bodies that define international standards and form the basis of much of the EU's own regulation. In essence the rest of the world is creating its own single market, but TTP differs from TTIP in that it is must be ratified by signatory states and put before national parliaments. Y'know, that democracy thing.

Where TTIP is concerned, there is no such cumbersome democracy in that national parliaments are excluded from deliberations and the process is entrusted to the European Parliament - where we have no independent right of veto and in negotiations we must always adopt the common EU position. The benefit of multilateral agreements in a community of equals is that the whole thing does not fold if two blocs do not agree. Nations may opt out of TTP, but EU states have no such autonomy.

The disadvantage is that ratification can be stalled for petty political reasons and thus nations could be held back from enjoying the benefits. That though, is that democracy thing. What it spells out is the necessity to be approach the creation of common trade areas one industry at a time so that there can be proper scrutiny with a higher chance of succeeding. The ILO conditions alone could be considered offensive to America, depending on who is in charge. Without American approval the deal is a dead duck.

The clear lesson for Britain is that we can independently adopt international standards, and probably already have, which gives the UK all the scope it needs for mutual recognition to join in this global single market - but only if we are free of the EU. We can try and possibly succeed in going all in or one industry at a time which may actually be accomplished faster than horse trading in order to pass a comprehensive agreement. But more than anything, a parliamentary veto is enough of a reason to leave the EU more than any other concern.

We might even ask if we can afford the risk of staying in the EU, exposing ourselves to whatever the EU concocts while missing out on the global opportunities. We have already observed how we are presented with rules on banking, through to plastic bags and sugar taxes without a national debate or a veto, and we cannot say for certain what else is in the pipeline. The question must be asked as to how much more law are we going to allow to be adopted on our behalf without the means of influencing them at the top tables?

In no way does the EU represent democracy, and as it continues to raise the bar for market entry we risk losing our global competitiveness while being on a tight leash to the new model EU, subjugated to the primary mission of preserving the euro. By staying in the EU we expose ourselves to whatever the EU signs up to as a matter of expediency while cutting ourselves off from a revolution in global trade. It is a gamble we cannot afford to take.

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