Sunday, 11 October 2015

When it comes to trade, the EU isn't that good at it

I was going to launch a fresh broadside against the new Vote Leave campaign, but it looks like it's fallen flat and I'm not alone in thinking that the website is dismal and the campaign material is equally lamentable. That's what you get when a campaign is hijacked by self important Tory bubble dwellers who delegate all the work to their part time hired help.

Instead, I thought it worth pointing out this story from last week, with France threatening to pull the plug once more on TTIP. We've long suspected there was a very real chance TTIP would fail and this really underscores the perils of deep and comprehensive agreements. There's too much to bicker over - and in the end we lose out on forging our own unbundled deals. We're subject to France's protectionism and petulance.

Thus far, the EU has only ever succeeded in one bloc to bloc agreement (EU-Carricom) and for all the fanfare, and years of negotiation, it has largely fallen flat, produced few results and because of the asymmetrical nature has given the EU a prime advantage in primary imports and a place to dump surpluses, but is using the lack of implementation of global sustainable development accords in the Caribbean as an excuse to not deliver what was promised prior to the financial crash. The result being a much watered down agreement that has done little to help the Carribean diversify exports and has had little impact on their respective economies. To a large extent, the agreement exists in name only.

In this regard, the same could happen with TTIP where it may yet pass, to much celebration and fanfare, but in real terms will literally not deliver the goods. Looking at the history of such bloc to bloc negotiations, they are prone to many collapses along the way on the back of comparatively small sticking points - put forward by more influential economies inside the EU - namely France.

It is said that without the EU, Britain would be isolated and that to get the best deals and to execute any fundamental changes to the status quo, there is a need to cluster together, pool resources and form alliances to leverage collective strength in negotiations. That's fine if your agenda is also their agenda, but Spain is having a tough time trying to push forward an EU-Mercoser agreement that would harmonise trade with Spanish speaking nations in South America. The EU has limited diplomatic run time and a full plate, so Spain will have to wait its turn, delaying a deal that could open up a hugely beneficial trade triangle until TTIP is finalised.

That leaves us looking for an alternative model. One which deserves exploration is the type which does not involve formal, geographically-anchored country agreements. Instead of portmanteau deals between nations, we need to look at sector or product deals - in which temporary or industry alliances can be formed for the purposes of tailoring an agreement to the most favourable and most achievable outcomes. The best examples, for the moment, come with the deals brokered through the UNECE-sponsored World Forum on Vehicle Regulation Harmonisation, a process we've labelled "unbundling".

The latest development here is the international agreement on tyre standards for passenger cars, where a new system for certification has recently been adopted for product certification, known as Global Technical Regulations (GTRs).

This, as the name applies, is actually a global agreement, aimed at providing uniform regulation for an industry worth $200 billion a year, employing over 600,000 people globally. Currently, it is producing 3.3 billion units annually and the industry is expected to grow to $220 billion by 2015.

The point here is that, while TTIP could - in theory - produce a boost to the global economy of $500bn annually - over a wide range of products - it is unlikely ever to come to fruition. A deal on tyres - just one product - could, potentially deliver about $40bn, which has a much better chance of being achieved. Do a series of deals, product-by-product, and you will get to your TTIP target, while the negotiators for the "big bang" are still talking about what sort of coffee should be served at the conference tables.

As global trade is expanding at an unprecedented rate, with highly agile corporates being able to rapidly shift bases to take advantage of favourable trade agreements depending on their sector, Europe is well behind the curve. It increasingly looks like we are isolated from the world within the EU as we are prevented from acting in the interests of our own emerging industries, where new innovations must wait in line - often decades to be recognised as priority EU concerns. All the while the EU is engaged in stamping out brushfires in its own back yard.

The bottom line is that the EU is outdated and locked into an obsolete paradigm while the world overtakes. If there were to be any reform of the EU worth having it would be that all nations would have some if not all trading autonomy returned so that nations would be free to pursue their own interests, more in line with their cultural alliances, and then lodging them with the EU so that all EU states may take advantage by way of using the instigating nation as a proxy. After all, that is how Norway accesses EU trade agreements without being an EU member.

That of course is not going to happen. Such a proposal would threaten the very basis of the EU as it contradicts the EUs own statehood ambitions. Moreover, the next EU treaty is likely to want more, not less control over the affairs of Eurozone nations, effectively becoming the economic administrator in the way it has imposed itself upon Greece. Such a treaty would not only marginalise us further in terms of EU priorities, it leaves us locked out of the emerging global single markets.

We could be joining a global automotive trade alliance, which would have all the benefits of a single market in terms of tariffs and and regulations, without the need to cede everything else to a supranational authority. We could then expand it to other sectors to create a multi layered single market where those industries not seeking favourable terms can opt out of the process entirely thus streamlining it.

In the final analysis, the EU says we need it most of all for trade, but it's actually not very good at it. It's large enough to be a massive influence, but by way of its own mentality it is actually holding back global growth and preventing nations with specialist industries benefiting themselves and the wider EU economy.

Indeed we do need a reformed EU, but few can really define what that means. They make pronouncements on the need for greater competitiveness but what's required to do that is anathema to their ethos and an existential threat to Le Grande Project. The dream of a one nation Europe blinds them to opportunities and the realities at play. They cannot possibly conceive that it is they who are the regressive nationalists.

In the end though, I do not believe we will leave the EU just yet. The campaign has been hijacked by know-nothings from the SW1 claque, and nothing you have read here will make itself apparent in any mainstream sources, simply because it is beyond their comprehension. Our media is incompetent and both sides are locked into an old Eurocentric paradigm, fighting old battles and wholly oblivious of just how fast the rest of the world is catching up. It's very much two bald men fighting over a comb. In the end, the well worn fearmongering will win out because our side will fail in framing the question about what the EU is, and it will fail to convey a complex message like the above and instead live in its comfort zone, bleating about regulations and membership fees.

In the end we will leave the EU, not through a considered and negotiated settlement in the wake of a referendum. It will be a seismic global event that slaps us in the the face with the cold hand of reality. We will be torn from the EU, if not ejected under worse terms than ever and we will be in a much poorer position to leverage a deal on the global stage because of the damage such a Brexit process will do. We will have lost our global competitive edge by the time it happens.

This may be another thirty or forty years down the line, but one way or the other, the EU cannot survive under its own weight, it will never reform in any meaningful way and it has an untidy and unfortunate end. Thus I say to all of those campaigning for us to stay in to think carefully about what you're inflicting on us. We can either leave now as we have always been destined to, under amicable terms with an ally, or we can do it the other way, in acrimony and regret.

The EU is never going to be what you envisaged it being. It is overextended in the East, it has gone as far as it will ever go and the new treaty will be the EU's high water mark. The Eurozone will be the closest it will ever get to that completed European Union - with us on the outside of it. Being that the reality, it just makes sense to leave so both the EU and Britain are free to get what they need.

It doesn't mean the end of cooperation nor does it mean we will never act in an alliance to get the best for Europe, but it does mean Sometimes, we can join in alliances to say no to the EU. Brexit isn't the end of the world, it isn't a disaster or economic suicide. It's just a pragmatic recognition of the reality we face and there is no reason why it should be bad for anybody. Since we are leaving the EU anyway, and the EU is certainly leaving us, I would prefer we do it now and that we do it right.

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