Monday, 30 January 2017

If you're not talking about regulation, you're not talking about trade

One reason people assume the EU is in bed with environmental NGOs is because the EU itself is concerned with environmental protection. One visit to a Greek beach anywhere near a shipping terminal and you'll know that isn't true. The real reason is that there's nothing like a public health scare as a basis to block imports that might compete with your own. If you haven't got a rational reason then a good old health panic is your best bet and there's no shortage of paranoid pseudo-science from Friends of the Earth to lend it weight.

One such talking point is chlorinated chicken - or rather chicken carcasses washed with chlorinated water from the USA. Opinion is sharply divided on this subject. There nothing harmful in the use of these treatments as the trace amounts are measured in parts per million (much like the acrylamide scare).

The EU opposition is based on the belief that, with proper hygiene and handling throughout the total food chain, there is no need for these pathogen reduction treatments - which is an entirely reasonable view - but not in my view reason enough to stall a major trade agreement.

This is ultimately the folly of bundled deals and if we could establish a global standard then there would be no legitimate reason to let this be a blocker. It's a problem that really should not be an issue - but because it is an issue that makes any future UK trade agreements with the US and elsewhere problematic.

If we unilaterally agree to accept chlorinated water washed chicken then that puts a red flag on the EU customs systems where any processed food products or ready meals will have to supply a list of ingredients and their origin. This could lead to refusal of entry or a tariff and most likely increase the number of physical customs inspections.

So the UK has a number of choices. If it relaxes its regulatory standards then it most certainly will complicate EU trade. Further to this, until we know what Brexit looks like we don't know what our baseline regulation will be. More than likely it will remain very close to the EU standard in order to maintain existing preferential access to the single market. That limits the options for a deal with the USA. If we are closely linked to the US regulatory system along with its different attitudes to the precautionary principle then we are deviating from global standards which complicates trade even further.

This is why the policy wonks are saying that you can either be in the US sphere or the EU sphere. You can't really be both and a comprehensive deal with the USA most likely does limit options for trading with the rest of the world whose standards still tend to be Brussels-centric. America is not geared for comprehensive agreements because it doesn't want them and doesn't need them. We do.

In effect, if we want liberalised trade with the USA then we need to pressure the US into regulatory harmonisation along with global standards rather than pandering to its peculiarities. To eliminate the disparities we have to work through global bodies to establish an agreed baseline so that differentials in standards can no longer be used as trade barriers. It will take a global effort to bring America to bear.

This is why I don't believe a comprehensive US deal is likely to succeed nor do I believe it is in our immediate commercial interest. And yes, we do need a debate about how far we are willing to lower our standards in order to get trade moving again. The EU very much is protectionist but then so is the USA. The former is our most important market, not least because it is the closest. How much of that are we willing to risk for the flimsy notion of trading with the rest of the world. Moreover you should not that with tariffs being as low as 2%, tariffs are clearly not the issue. As I have said from the outset, the essence of trade is now regulation and if you're not talking about regulation then you're not talking about trade.

This is something the Tory Brexiteer morons do not and never will understand and this is why their approach is wholly wrongheaded. There is no sweeping deregulation and tariffs are the very least of our problems. There are trade offs in trade and it requires a long and careful process. Sweeping unilateralism could very well trash our existing trade agreements. For the time being, all we are likely to get from the USA is an extension of the multiple agreements the USA has with the EU - on the proviso that we do not deviate or that we make concessions which most certainly will reduce trade with Europe.

No comments:

Post a Comment