Saturday, 25 February 2017

Our trade policy needs a vision or Brexit is a lame duck

I am about as bored of writing about Brexit as you are of reading about it. There are many uncertainties and disputes over the facts but I think by now we can say that this government's approach categorically will not work. The only thing we can really do now is to wait for it to fall apart. This is not pessimism. Theresa May is simply not up to the job and is demanding the impossible while knowing only a fraction of what she needs to.

Whether the advice of Sir Ivan Rogers has been heeded we do not know. If not then we are in serious trouble. It is likely now that British exports, courtesy of the Tories are about to take a serious hit. Even if May achieves the bare minimum on free movement of goods we still stand to lose out.

Amidst the losses I can imagine a number of opportunities this might create. As a business software developer I don't expect to be short of work any time soon. More than anything Brexit is about reconfiguring systems. I think the economy will adapt over time and we will see some surprising side effects. It won't all be bad.

What sticks in the craw though is not that Brexit does all this damage. It is that these will be unforced errors that are entirely avoidable. Brexit will hurt far more than it ever needed to.

In a similar fashion our government is not up to mitigating the consequences. We are told that there are "bumper trade deals" to be had but the immediate task will be replicating all those agreements we have via the EU. Most of them will not be amended so we will not see any real advantage. This is actually less of a concern. Where we lose out will be the cooperation programmes between EU and global bodies. In some respects we won't know what we have lost until it is gone.

This means the government will have to work double time to reassert the UK in the global sphere. This though doesn't seem likely because those who have taken it upon themselves to look at trade have fallen into all the classic traps. Brexiteers have done nothing but talk about tariffs but then the remain inclined trade groupies on Twitter are not much further advanced.

The focus is centred on bilateral deals, following the government rather than leading with new ideas. Still nobody is looking at the bigger picture. We've heard the daft ideas like CANZUK but these are very much aspirational fluff which answer no urgent questions. What is lacking is any kind of original vision - without which, your trade policy can only ever be a meandering mess.

This is in part thanks to a lack of coherence among Brexiteers who have only ever offered up pipedreams as an alternative to EU membership. There has never been a unified vision among eurosceptics beyond the increasingly empty mantra of trading with the rest of the world.

To form a coherent trade policy we first have to ask what it is that we want. First off we want trade to make us better off, to provide jobs and create opportunities for business. We then have to ascertain what we do not want. We do not want free trade for its own sake if it threatens valued interests at home, nor do we want to lower our standards so that we import dangerous or poor quality goods.

In that you need a system and a strategy. Luckily for us there is already a system in the WTO, augmented by the agreement on technical barriers to trade and more recently the Trade Facilitation Agreement.

What should guide our strategy is the reasons for wanting to leave the EU. Clearly our collective efforts to stem immigration have been insufficient. The answer though is not expensive and bureaucratic border controls. It's a zero sum game. We are far more likely to get results by aggressively investing abroad if only to slow the flow of people.

This is where we have to look at the push factors for immigration, which in the case of Africa are failed EU trade policies, famine, corruption and poor governance. Development is absolutely key. In this the WTO Trade Facilitation Agreement (TFA), shamefully underreported by our media, is a game changer.
TFA has been welcomed by the Fair Economy Alliance, a group of organisations representing SMEs across Europe, which has been opposed to the “bilateral trade agenda” taken by the EU. The alliance opposes TTIP and the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. Neither of these represent the voices of SMEs, it claims.
“This has been built up for almost two decades. It has been slow. But at the same time we have something that is substantial, that tackles the things that need to be tackled. Instead of something like CETA, which is very flimsy and not SME-friendly. It doesn’t solve any of the issues and deals with things that are very controversial,” Miguel Galdiz, research and advocacy officer for the Fair Economy Alliance, tells GTR.
He adds: “[For SMEs], the bilateral agenda is not the way forward. They want access to information, they want border procedures to be streamlined. They want all the things the TFA is meant to do. You want to be able to avoid this funnel vision of bilateral agreements, diverting trade towards specific partners. You want to open the multilateral doors.”
And this is what this blog has been saying for some time. CETA and TTIP are bed blocking enterprises designed to frustrate the foundation of a genuinely open trade system, effectively extending the single market walls around North America. In that regard, Trump has done the world a favour by killing TTIP. Though the President is no globalist, he has given the WTO a window of opportunity. 

To get the best from the TFA, though, we will need to invest. We can harmonise customs and reduce tariffs but there are hard facilitation measures we must consider. Take just one point from an entirely fascinating article:
"Africa’s port sector is grossly deficient in both quantity and quality of harbours, quays, cranage, storage systems and hinterland transport. How deficient? Although China and Africa have similar populations (respectively, 1.4 billion and 1.2 billion), in 2015 the five largest Chinese ports moved more than 118 million twenty-foot-equivalent units (teu), whereas Africa’s top five moved less than 10 million. According to Lloyd’s List, the entire continent accounts for just 3% of world container traffic".
This partly reflects the fact that much of the continent’s exports consist of primary commodities such as oil, gas, mineral ores and tropical agricultural produce that are moved on breakbulk cargo ships or tankers, but it also indicates just how little Africa participates in global trade.

Says the article "China’s demand for oil and minerals, as well as its superabundance of capital for external investment, had led to a surge in economic activity in the east and west of the continent, particularly Nigeria, the Great Lake states and the Ethiopian highlands. To see how pervasive the influence of China has been over the past 10 years, consider the growth in the number of African countries who have China as their primary economic partner". 

This is where we run into the curse of mineral wealth. Deals are struck directly with governments, making governments entirely dependent on foreign contracts, and though the money should go into sovereign wealth funds and infrastructure it very often disappears into Swiss bank accounts or funnelled into private wars. 

Our focus must be on container traffic because that's real goods in the real economy where everyday people can export. We get cheaper and more varied goods while money goes directly into African economies. To do that there are a number of investment strategies we must follow as outlined earlier.

Tackling things like city congestion, access to internet and port modernisation is absolutely essential. This is where we must direct our aid spending and it must be integrated with our longer term trade objectives. Development aid cannot be tacked on in the way DfiD is an accessory to our main trade department. They need to be one and the same. 

Aid has a very bad name in the UK at the moment. We have seen it squandered on do-gooder causes and we have seen some egregious waste. Public trust in aid has collapsed. We have to make the case that aid is an ambassadorial tool that can open doors for UK business. If Brexiteers want to match their own rhetoric about being outward looking proponents of free trade then we must make the case for proactive spending in the national interest. 

Presently Trade Facilitation is not taken seriously. It does not enjoy a high enough profile. Our politicians are locked into obsolete bilateralism and sad fantasies with echoes of empire. If we want to be true modernists and break away from the creaking protectionism of the EU then we must forget about bilateralism and seek out new global multilateral initiatives and put our money where our mouth is. 

Britain is a knowledge economy. We have the technology. We have the education. We have the resource. We must now decide how we are to put it to work. Development brings massive opportunities for British science and engineering and good governance is something we have a track record of exporting. We also know a thing or two about the maritime sector. 

There is no shortage of opportunities in Africa and every strategic advantage in focussing our efforts there. The Commonwealth might be dead but British prestige is still alive and kicking and though we take a hit from Brexit, we still have major assets. In some quarters of the globe Brexit enhances our prestige and many are glad to see us leave the EU. 

As ever my beef is not with the generic rhetoric of the Brexiteers. I do happen to think the EU is a creaking and corrupt mess unable to bring its might to bear in the face of a crisis, and I do think Brexit can be a turning point in trading with the rest of the world. The question of how we get there is where I have very serious differences. We cannot treat regulation as the bogeyman, nor can we turn back the clock looking for solutions. While we have been in our collective slumber the world has changed and trade has changed. 

In a lot of respects the nerds reciting trade technobabble on Twitter are just as obsolete as the die hard Brexiteers. They are following the model of the EU, seeking out exclusive comprehensive deals as a means to fend off free trade and to preserve the integrity of their insular racket. If instead we engage in the multilateral forums, seeking to get the best advantages from global standards and regulations then we enhance the global system while undermining the EU and its policy of sabotaging and controlling international cooperation.

To that end, anyone who wants to see Britain reclaim its voice internationally must speak up for trade facilitation and the removal of barriers. We must continue to make the case for well directed aid spending. We have committed ourselves to a target of 0.7% of GDP. This is an unpopular policy, but there is no reason why it should be. Some of it can be diverted to the Royal Navy to ensure we have the fleet logistics and security vessels to carry our work internationally and there is a stronger case for a hospital ship than a Royal Yacht. And why shouldn't it be built on the Clyde or the Tyne?

As much as anything, this kind of commitment can only enhance our soft power - which will be very necessary after Brexit. We need now more than ever to send firm signals that the UK is not retreating from the world and demonstrate that, in fact, EU membership is a real retreat from global participation. 

The problem with trade is that everyone is looking for big hits and headlines. Headlines though are only fleeting. Bilateral deals are only of limited use. Reductions on tariffs can even be completely useless. The gains to be made only come about through cooperation in small increments - but the Trade Facilitation Agreement gives us the framework to do exactly that. It's bigger than CETA and TTIP combined and when taken into consideration with the WTO agreement on technical barriers to trade we are seeing nothing less than the birth of a global single market. It's a bigger and better idea than the EU. 

More than like the Tories are going to make a pigs ear of Brexit. The eurosceptics never really had a vision and it would seem the Tories don't have one either. We have lost our knack for trade and we have learned the wrong lessons from the EU. If we want to put Britain back on the map then we have to sweep away the dinosaurs and dispense with the crapology of the London think tanks. It's time to put some real substance to "Global Britain". We need a complete rethink on trade and and we need to fly the flag for progressive measures to increase Africa's wealth. The dismal parochialism of bilateralism will not deliver for Britain.

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