Thursday, 7 September 2017

Trade must always be subordinate to democracy

I do not seem to be able to learn the lesson that one can disagree with something and just ignore it. Consequently I have committed myself to blogging a piece by Professor Paul James Cardwell in Prospect Magazine. His contention is that "The free trade case for Brexit is folly and crucially, it is new. Eurosceptics never used to buy into it".
“First of all, leaving the EU gives us back control of our trade policy, and gives us the opportunity to maximise returns from free trade.” These words were spoken by David Davis on 11th July last year. Post-Brexit, getting trade deals with countries the world over has become the new mantra. The prime minister’s visit to Japan last week brought this into sharp focus. But getting new trade deals (and getting them quickly) seems to have become not just a consequence of Brexit but a reason for doing it. What is puzzling is where the desire for an “independent trade policy”—as Brexiteers call it—has come from so suddenly.
To save reproducing the whole text I would recommend a read of the whole article. Cardwell examines UK government sources such as The Balance of Competences Review in 2013, the Conservative Manifestos and Vote Leave tract. Probably the last places I would look to ascertain the pedigree of eurosceptic views. 

In eurosceptic land I can't ever recall a time when Eurosceptics weren't banging on about trade. Euroscepticism has always built itself on the Glorious Revival - ie "restoring links with the Commonwealth" and latterly Anglospheric models such as CANZUK. These mantras about "trading with the rest of the world" are as old as euroscepticism itself. In fact, if I grab any piece of Eurosceptic tract off the shelf I am sure to encounter the phrase "the EU is a protectionist racket". 

But then this was always from the Colonel Blimp quarter of euroscepticism - and much of the material circulated via mail groups and A4 pamphlets long before the mass adoption of internet. All that, though, has since been buried as Ukip popularised itself on the issue of immigration - leaving the trade to be pecked over by the "free market" Tory think tanks. Namely the Institute of Economic Affairs. This is where the crackpot Minford theories come from, which again are as old as euroscepticism. 

That wing of euroscepticism has always been obsessed with tariffs and the costs of regulation - and being that regulation is a facet of trade, repatriating trade policy is a prerequisite to the much vaunted "bonfire" of it. A eurosceptic canard that goes back to the dark ages.  

Though "red tape" is a recurrent piece of right wing scripture, and bread and butter for the tabloid press, it has always been the obsession of the ultra right who have been in the political wilderness for twenty years or more. They who viewed Cameron as a simpering leftist. That is why you won't find it in any recent Tory manifesto. 

Interestingly though, there has never been a unified view on trade issues in that Euroscepticism has always used whatever stick available to beat the EU with, whether it be consistent or not. Consequently there has always been a strong vein of protectionism in Euroscepticism when convenient. 

It is interesting that Cardwell mentions The Referendum Party which was "according to Zac Goldsmith, founded by his father due to his opposition to EU law applying in the UK and the supposed assault on “ancient English civil liberties.” Nothing to do with global trade". As it happens, James Goldsmith used to talk about trade quite a lot and, interestingly, he was fiercely anti-trade liberalisation. Then on the left of Euroscepticism there has always been an economic nationalism.

There has always been a schizophrenia in euroscepticism where "free trade" was good, just not European free trade - because, obviously, anything to do with the EU is bad, even if it's good. The issue of trade, however, has always been an implied issue in the debate, in that the roots of euroscepticism boil down to one concept alone - sovereignty. 

What Cardwell has latched on to is the sudden popularisation of "free trade" but this really isn't anything new. It has always been part of the narrative that we are "shackled to a corpse" and leaving the EU could herald a new era of buccaneering free trade. That was the carrot we always used.

Since the referendum free trade has become a central theme in that it is a necessary device for the ultras to push for hard Brexit. It is a tacit admission that leaving the EU will come at the cost of some European trade and this nebulous concept of "free trade" will miraculously fill the void. 

Cardwell is right to note, however, that eurosceptic interest in trade in the more specific context of EU FTAs is a recent thing. This is more political opportunism in that right wing eurosceptics noted some rumbling on the left about TTIP and something called ISDS. If the left saw it as something inherently evil and something that threatened the NHS, then it was an obvious issue to adopt. It was always understood that a mandate for leaving the EU could not be won without winning the backing of the old left. In the same vein, the right were never especially interested in the fate of Greece, but if the left were raving about it, it was a handy device.

In fact, it would be correct to say that eurosceptics have never really cared about anything in politics except for leaving the EU because we're all monomaniac bores with a sovereignty fetish. When you are convinced that the EU is the root of all the problems, the problems themselves become less interesting - and the sole mission is to attack the root cause with anything that comes to hand. That's why there has never been any real consistency in euroscepticism. This is also why most of the popular leave case collapses post-referendum. 

The reason the hard right have nothing to bring to the table is simply because they've never bothered to update their views or understand the issues. This is why there is such intellectual poverty in Tory think tanks. They are the dog that finally caught the bus it was chasing. 

Ultimately the eurosceptics have been fighting the EEC for thirty years and are not now intellectually equipped to handle the process of leaving. The EU is a beast that crept up on them and it is not one they understand. They don't know exactly what they do want, only what they don't - and if there is an answer it must have something to do with "free trade" - whatever that means. 

But ultimately, in taking such delight in Brexiteer disarray, Cardwell gets ahead of himself because there is actually a very sound rationale for taking back control of trade. 

Cardwell makes note of the common critique that "deals concluded by the EU are substandard because they have to satisfy 28 member states and can be vetoed by any one of them (as we saw with the Walloon Parliament on the Canada deal)". But this misses the point, says Cardwell. "Any form of comprehensive, bilateral deal takes a very long time: there is no evidence of any “quick” deals between major economies. And the more ambitious the deal, the longer it takes. The fact that the EU’s internal ratification process is lengthy is something of a red herring".

I disagree. It is an entirely valid criticism that FTAs are bureaucratic, cumbersome and prone to failure. Years were invested in TTIP for it to fall flat, CETA had whole tracts removed from it in order to pass, and the EU has a habit of counting its chickens before they hatch. Cardwell is right to say that any form of comprehensive, bilateral deal takes a very long time but when you do have to clear them with 28 governments the scope for failure and dilution is magnified many times. 

But actually, everyone is missing the point here; the Brexiters, the remainers and indeed the EU. This actually points to the folly of ambitious and far-reaching FTAs. They make for good headlines and they serve as propaganda set pieces, but the more intelligent way to go about trade is through unbundling, seeking out sectoral agreements and establishing global standards one product at a time. 

To be able to do this, the UK needs to be able to pick and choose its alliances in all of the top regulatory forums and if bound by EU membership it has no independent vote, no right of reservation and no right of initiative. If we are to modernise our approach to trade, moving beyond the dinosauric FTA, then leaving the EU becomes a prerequisite.

It is a depressing facet of the debate that the FTA has become the holy grail of trade. Keeping score between the EU and the UK on how many FTAs they can each pass is not the measure of Brexit success. This is a remainer paradigm and it is one writhing in incomprehension. Big and comprehensive FTAs are largely the domain of regulatory superpowers with large markets and our ability to play that game will be limited. 

The UK will have to look at entirely new approaches and everyone concerned is going to have to come to terms with the fact that FTAs are not the only instrument of trade. One of the most seismic agreements in modern times was not an agreement between any bloc or country, but an accord between standards bodies. MoUs and cooperation agreements involving UK expertise can put us at the forefront of regulatory innovation. Notwithstanding Brexit, BSI is still a major international influence. 

Furthermore, as we repatriate trade, we also take back control of a major part of our aid spending, allowing us to reintegrate trade, aid and foreign policy where we can look at trade facilitation measures, working with a whole spectrum of international organisations to secure and increase the profitability of value chains. If we fall into the trap of assuming FTAs are the only measure of success then we are setting ourselves up to fail. 

As far as FTAs are concerned, the UK should be primarily concerned with carrying over existing relations we enjoy via the EU and negotiating a mechanism for opting into EU FTAs as and when they arise. After which the UK needs to look beyond the myopia of the FTA paradigm and look at navigating the upper tiers of the trade and regulatory ecosystem to its advantage. As an independent player the UK can be more agile and more creative. 

Ultimately though, the modern FTA is far from just a trade deal. Increasingly they require the selective pooling of sovereignty and establishing mechanisms for regulatory harmonisation. Consequently any deal is yet more trust invested in systems that facilitate the automatic adoption of rules and standards. This puts governance on autopilot whereby we find we are adopting standards and regulations by way of statutory instruments without scrutiny or debate. 

The scrutiny that does happen is way off the radar, not in the public eye and very often escapes media attention. Every trade deal has its own chlorinated chicken and it's only the more controversial aspects that receive any real attention. This has always been a negative feature of EU membership in that we have continually adopted rules without forewarning, destroying businesses at the stroke of a pen, with no real safeguards and no means of reform.

Now that the EU is expanding the scope of its trade exclusivity and is increasingly adopting its regulations from the private regulatory sphere, little by little we are witnessing the establishment of a global single market of private legislation where the torch of democracy never shines. As much as the EU has never really been an adequate safeguard against sweeping globalisation, the problem is set only to get worse. 

We are told that trade liberalisation is near universally good, but sovereign peoples must have a means of control and the right to say no. To continue on the path of ceding ever more sovereignty is every bit as bad as Patrick Minford's theorem of unilateral trade liberalisation. It removes the decision making from government leaving us to cope with the fallout without ever having been usefully consulted. 

The case can very easily be made that the repatriation of trade will lead to a slowdown in trade liberalisation, possibly resulting in a drop in living standards, but this is not entirely an economic estimation. It underestimates the value people place on having some degree of control and not being subject to the whims of market forces. Trade liberalisation has externalities and consequences for traditions, heritage, social cohesion and landscapes and, rightly, the public feel that not everything is to be sacrificed on the altar of commerce. 

Sovereignty and control are not dirty words. They are essential to any functioning democracy. Consequently, taking back control of trade is a requirement of Brexit. Moreover, it is not preordained that our exclusion from EU FTAs necessarily harms our future trade - especially if you look at utilisation rates in any real detail. There is nothing to say that UK specific optimisation of existing FTAs cannot be beneficial. 

It is right that we put Brexiteer free trade claims under intense scrutiny, but the fixation with FTAs and the fatalism of remainers is based on a similar level of incomprehension. Ultimately Brexit is about bringing decision making closer to home, shortening the chain of accountability and giving people a real say over things that directly impact their lives. For eurosceptics the watchword has always been democracy - and a nation not in command of its own trade relations is not one in control of anything. 

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