Thursday, 9 February 2017

Trade: muddled thinking aplenty

Brexiteers are keen to dream up fantasy trade agendas. CANZUK being one of the dafter ones. As much as they are impractical and serve no real purpose, what is often overlooked is the fact that other countries are busy with other things and so are we.

There are only so many trade negotiators, many of them presently locked into existing efforts or working toward multilateral objectives. Our whole efforts are presently geared toward Brexit and other countries have their own regional agendas. It's cute that Brexiteers think they would be willing to drop everything on our request to talk about an intangible alliance which, so far as I can see, answers no pressing questions.

As previously discussed, any trade policy really needs to be linked to strategic foreign policy objectives. Bilateral deals may offer some marginal improvements in the price of foodstuffs but with tariffs being fairly low, much of the saving are negligible and are nullified by currency fluctuations.

More to the point, bilateral trade deals assume that partner nations can actually supply the demand. Presently China is stockpiling ores from Australia and buying livestock in bulk from New Zealand. UK buyers will find themselves at the back of the queue as suppliers are in no particular hurry to open up new supply chains and certainly not with a country about to send its regulatory regime into chaos.

Further to this, if there were any silver bullets the EU would be at it already. The EU is aggressively seeking deals not least I suspect out of spite in the wake of Brexit. That will naturally comes with obligations that stymie any UK efforts to tinker with regulations and tariffs.

Meanwhile, if you listen to the diplomatic chatter at the WTO, the new religion is trade facilitation - which can mean anything from enhancing customs systems or governance measures to eliminate fraud and corruption.

One major global concern is pharmaceuticals fraud. US pharmaceutical giant Pfizer has found that 69 of its products were falsified in 107 countries in 2014, up from 29 products in 75 countries in 2008 - a doubling of the problem in six years. Over 700,000 deaths per annum from malaria and TB have been attributed to falsified medicines and the Center for Medicine in the Public Interest in the United States estimated that counterfeits cost the global economy around US$75bn in 2010.

As much as this kind of criminal activity seriously hits all Western nations in the wallet it is very much one of the many blights standing in the way of development. If supply chains are known to be corrupt it deters investment.

The World Customs Organization (WCO) and the International Institute for Research Against Counterfeit Medicines (IRACM) announced recently the results of their fourth common initiative in the fight against fake medicines on the African continent. There were record seizures of 113 million illicit and potentially dangerous pharmaceutical products, which took place in the context of Operation ACIM (Action against Counterfeit and Illicit Medicines) in September 2016.

The number of seizures made in joint IRACM-WCO operations has now reached dramatic proportions, with almost 900 million counterfeit and illicit medicines seized at the borders of the continent. “Of the 243 maritime containers inspected, 150 contained illicit or counterfeit products". Staggering. And that's without looking at food fraud.

Cleaning up trade is essential to development, increasing profitability of existing trade and crucially slowing the flow of migration. In this, bilateral agreements between developed nations do little and contribute little to overall trade flows. Only by working with international agencies can we devise an integrated global solution. Such a system would have a number of positive externalities in that effective customs and inspections systems have benefits for other sectors.

As much as this will depend on good science, telecoms and IT, it will also require training and upkeep - which presents many opportunities for UK tech services. This however, can only come about by engaging fully in all of the global bodies and directing our aid spending accordingly. Reverting to mercantilist beggar thy neighbour trade policies will do little more than produce meaningless feel-good headlines. If Britain wants to get serious about trade it will have to move beyond seventeenth century Tory thinking. The world has moved on - and so must our politicians.

It seems there are provisional moves to make this a policy, which is the first glimmer of competence I have come across but whether or not they yet comprehend it must be central to any trade strategy remains to be seen. This is one thing that is largely not dependent on Brexit outcomes so this really is where the effort must go. It will probably be overlooked as Liam Fox's department goes barking after mediocre FTAs. Without a fundamental rethink, with a restructuring of BIS, DfID and the FCO (with the MoD), nothing very much can happen.

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