Sunday, 28 August 2016

TTIP is dead - but don't expect much from a UK-US trade deal

News is travelling fast that TTIP has stalled. Many, including this blog predicted it. But it's not dead. It just smells funny. TTIP as we know it was always doomed. It's shrouded in complexity and mystery and it was never going to withstand first contract with any elected assembly. If it ever something called TTIP does pass it will be progressively watered down by protectionist instincts on both sides - but that won't be the end of it.

Our technocrats know full well that something of this nature is mistrusted by electorates both sides of the Atlantic. Why they even attempted something so ambitious and visible to the public beats the hell out of me. That's not how they normally play it. The most seismic developments in international trade have been largely anonymous pacts between non state actors like UNECE.

If anything TTIP is a legacy enterprise, setting out actions for convergence between long established standards and regulations. That's actually quite tricky when the USA and the EU have a wholly different approach to regulating. In the USA the burden of risk is on the producer rather than the regulator. There is a light touch in some areas of regulation but the ever present threat of a class action lawsuit if you get it wrong is why US companies take extra care. The EU though has it that everything is outlawed unless there's regulation for it. The product of this is a wholly different culture in regulation.

In recent years though there seems to be a convergence toward the EU way of doing thing and the USA has more work to do than anyone in bringing its own standards up to the global standard. Some things though, like FDA rules, are so American in nature that there is little or no scope for harmonisation therefore the task is to work toward mutual recognition. Such is highly political and not without difficulty.

The rest though is comparatively easy. The USA has committed to adopting global regulations and standards for all new areas of legislation and the EU has been doing that for as long as there has been an EU. Mutual recognition is no biggie with the rules are essentially the same.

Having invested many man hours and several years in TTIP, the intellectual substance of it will not go to waste. In all likelihood it will be broken up into a number of less controversial partial agreements - which is what they should have done to begin with. The agenda though is still to push through harmonisation with those difficult areas which could deliver massive benefits to both sides. FDA-EMA cooperation on medicines and medical treatments is the holy grail - to create a transatlantic single market in health.

British attitudes to health though are somewhat different with the UKs national religion being the NHS. Nobody likes the idea of US corporates calling the shots - especially when US testing and approval is largely seen as bent with some justification. This is the aspect of TTIP which will be watered down or shelved. The rest will happen through a gradual process of mutual recognition agreements.

In this the UK might as well wait for the EU to complete their own agreements in that we will likely just slam them on the photocopier and Tippex out references to the EU. When everyone is using the same standards and there is no political objection to regulatory harmonisation there is no real galloping hurry.

Some however, believe that the suspension of TTIP put s the UK in a stronger position for securing comprehensive deal. It really doesn't. The NHS is not up for grabs and our market size is not sufficiently interesting to build a time consuming comprehensive agreement. We won't be at the back of the queue as Mr Obama has suggested but we won't be getting anything out of the ordinary.

But that's actually a good thing. The whole approach in global trade is to forge multilateral agreements sector by sector where wider agreements compass any states which adequately conform to international standards. It means that nations can opt in or out according to their own estimations of value.

The conversation about trade in the coming months will centre around bilateral deals simply because this is all the media really understands and it is the old habit that trade diplomats can't seem to kick. I read a remain inclined article on the Norway Option this week making a big deal of the fact Norway has only one bilateral free trade agreement. Iceland I think it was. Except of course free trade agreements on tariffs are really not the engine of trade.

The modern trade agreement appears in many different forms and are registered in many different ways. Were we to look we would find Norway has hundreds of agreements independent of Efta. These would be MOU's and MRAs bilateral cooperation agreements on aid - which are actually very much a product of trade facilitation. Moreover, there are now global frameworks whereby simply ratifying a global convention and conforming unilaterally means that you can trade without a hard coded agreement with another state.

The fact is, bilateral deals are yesterdays news. Even TTIP is a dinosaur. Partial scope agreements and multilateral agreements make the leaps and bounds in trade. In this everything is centred around the trade facilitation agenda where foreign aid is key to stimulating services exports. The entire discipline of trade has changed and because the UK has been out of it so long - and the EU so fatally wedded to protectionism by way of extending market access on licence, there just isn't an up to date conversation on trade.

My own view is that the EU has been barking up the wrong tree all these years. The USA is a tough nut to crack and even installing TTIP by stealth will take many years and we may find it an asymmetrical relationship. In all these years the EU could have modernised and sought to be more of a global player on multilateral forums. Instead it extends bilateral deals to make a series of concentric circles with the EU as the controller in the middle.

Now that we are leaving the EU we can play a wholly new game with an unprecedented degree of agility. In that we need to be looking the world over for trade facilitation opportunities and not worry too much about bilateral deals. Rather than seeking those kinds of relationships we should be looking at mechanisms to exploit that can drag both the EU and the USA out of the dark ages.

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