Wednesday, 21 June 2017

Britain's Brexit attitude problem

You have to be a bit of an obsessive to keep a blog so it's only natural to fixate on certain issues and individuals. Just recently I have developed something of an intense hatred for Jacob Rees Mogg which far surpasses my usual contempt for Tory Brexiteers. He epitomises the crassness and hubris of his creed. Mendacious to the core.

What piques my ire today is his assertion that we don't get the benefits of Brexit if we stay in the customs union ie "cheaper food, cheaper clothing, cheaper footwear". Again we must note that we are leaving the customs union come what may because we are leaving the EU. That though does not preclude the possibility of having a customs union agreement.

The absence of such an agreement would lead to complex rules of origin procedures where goods shown not to be entirely from the country of origin incur a tariff. In short, unless we can find some other workaround then it most definitely will hurt UK exports to the EU.

I want to park that issue though. What is more relevant is that Rees-Mogg still thinks the gains are to be made by tinkering with tariffs. With average tariffs being around 2%, and in many instance zero, the gains to be had from tinkering with tariffs are barely a rounding error. You have to go through the tariff regime with a fine tooth comb to find scope for improvements. We might be able to make the odd improvement that will benefit some sectors but it is unlikely that there will be any revolutionary developments in this field. Nothing that would justify the disruption of Brexit.

We are told that the customs union is a "protectionist racket" preventing Lesser developed countries from trading with the EU. This ignores the Everything But Arms agreement which exempts LDCs from quotas and tariffs. If anything excludes lesser developed states it is the non-tariff barriers such as regulation.

We have already heard from Rees Mogg that he sees Brexit as an opportunity for deregulation. He is blissfully unaware that doing such a thing would have very serious ramifications for trade with the EU. Lowering standards increases the rate of inspection of goods travelling into the EU. Massive overheads.  

More to the point, deregulation on standards, for the most part, is simply not going to happen. Because the EU uses global standards, it cannot drop them, nor can we, in or out of the single market. We are obliged to adopt the global standard as per the WTO TBT agreement. The way to include LDCs is to use aid and technical assistance to help them conform to global standards. There are very obvious economic benefits to doing so - eliminating customs delays, fraud and counterfeiting. 

We should also note that a race to the bottom on standards is against the grain. The effort is ever more toward global regulatory harmonisation - to remove red tape and customs barriers. This is where the most substantial gains can be made. This is why the flagship drive of the WTO is Trade Facilitation. 

Further to this, deregulation would certainly be viewed as uncooperative, if not hostile. We could very well open ourselves up to retaliatory action - and not just from the EU. Going rogue is the very last thing we want to do. 

If we take Theresa May at her word, that we are seeking a deep and special relationship with the EU, then it follows that we will wish to continue cooperating on standards and widening particpation in the global rules based system. Her backbenchers though, seem to have completely different ideas, adopting a wholly hostile approach to the EU. 

If we are to make a success of Brexit then we need to adopt a pro-EU stance. Whatever happens we will wish to influence EU trade policy and we will seek joint ventures. Our independence and agility though could allows us to work in different ways toward the same goals. 

By expanding the reach of global rules and assisting in their implementation world wide, building a network of mutual recognition of conformity, we can build a global single market to the advantage of all, while weakening EU control over it. Since the EU, of its own volition, is ceding control of the regulatory sphere, we should make that a foreign policy priority. In this we need to be building alliances of third countries who have difficulty exporting to the EU and press the EU for internal reforms. It has been done before. 

If our attitude to the EU is hostile and if our approach to trade is to go into direct competition with it then we will lose every time. We have to work as partners and allies. At the moment Brexit is being driven by arrogant Tories, bereft of any original thinking, bogged down in the mud of obsolete ideology - with a deeply misplaced assessment of the UK's clout. It's the sneering, "superior Brit" attitude - personified by Rees-Mogg. If we don't change our tune then we will be punished for their narcissism. It will take years to rebuild trust and the damage will be lasting. 

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