Monday, 4 December 2017

Drop the free trade mantra - it's dangerous.

One thing about Twitter is that it is very easy to get sucked into a bubble. It is natural to seek out like minded people. This is precisely why I have dumped just about everybody who comments on trade. Following other people means they set the agenda and you respond to it. What this has led to in Brexit terms is a self-congratulatory bubble of "Brexperts" who churn over the same issues ad nauseam, adding precisely nothing to our understanding, entrenching dogmas and repeating falsehoods. 

In deciding who to get rid off I ask myself if that person is in any way going to help me progress my case or is likely to inform it. In most instances the answer is no. The trade bubble is still uniquely obsessed with the WTO and for as long as the subject serves their agenda, it will be the only topic of conversation. 

The problem, however, is that the WTO is but one (largely stagnant) forum in a myriad of other influential bodies - all of which have major implications for trade. The WTO centres mainly on tariffs with a nod to standards and a framework for their application but the dirty business is done elsewhere. Non tariff barriers have been weaponised.

For instance, a standard on the maximum amount of a certain grain fungus per tonne is less to do with food safety as it is preventing Egyptian competition. Nobody comes into the world of food standards without a hidden trade agenda. Similarly Co2 and Sulphur limits on shipping has precisely zilch to do with looking after the environment. It's about the big boys with the new ships with newer engines shafting the midsize competition. So Codex and the International Maritime Organisation (to name just two) are places where corporates lobby to ensure standards protect their position in the marketplace. In many instances this is massively more significant than tariffs.

If the UK is not sending its own industry delegations and making good use of our own vote (and veto) then we are passively accepting the common EU position - set by people who actually believe Co2 limits have an environmental motive. The point here being that if your understanding of trade revolves solely around the WTO and the EU then you're ignoring the larger part of trade - and in so doing neglecting trade policy. The WTO is not the centre of the universe. It is an important and highly visible aspect of trade but it is far from the whole picture.

We are often told that the EU is a protectionist entity. Remainers deny this when in fact they should make very clear that it is protectionist and for good reason. Trade policy to protect legitimate traders from the predatory practices of nations who seek to damage competitors by unfair means. By its very nature, therefore, an effective trade policy is "protectionist". We must re-learn this discipline.

The conventional thinking among trade wonks and the bottom feeders at the FT is that the EU has its own gravitational pull in respect to standards and non-EU members are passive recipients. What is not spoken of is the EU's continued outsourcing to global standards bodies - or as I call it, The Geneva Effect. Though we will remain configured for enhanced EU trade come what may, we are not without a voice when it comes to setting those standards.

After we leave the EU we need to ensure that trade associations are taking a full and active role in standards setting with the support of UKgov. UK shipping and nuclear is well represented. I can't really say the same for other sectors.

How successful we are in shaping those standards depends not on the size of our economy, rather it is is the size of our market participation. Being in the top ten shipping services providers the UK has considerable influence and will not have any difficulty finding allies to frustrate the EU's invasive agenda. We can also say the same of our influence on the nuclear sector.

This, of course, does not apply to every forum and we will need to formulate approaches for each sector. We must have an adequate national strategy and we need to stop relying on generalists to do very specialised work. If we are going to be an independent country - we need to start acting like it.

Whether we are or we aren't more influential out of the EU is really besides the point. The UK needs an aggressively defensive posture in all of these forums if only to keep our head above water. We need good intelligence on all the standards bodies. From what I can see through my limited periscope the UK is only playing at it, flying the flag but not really understanding the highly consequential games in play.

Though it's fashionable to prate at length about the WTO, we are often reminded that the various WTO agendas are going nowhere. The framework is set, the appellate body is in a state of limbo and multilateral initiatives are glacial. There is plenty to gossip about but the real business is done elsewhere. 

Outside of the WTO the world of standards is not especially sexy and there is nothing earth shatteringly exciting about arcane subjects like digital standards, but then I am reminded of when the big players were competing for the standard width of the humble Compact Disc. If I recall it was Phillips or one of the big players who got there first and already had the production equipment ready to roll. They had intellectual property protections in place to prevent others capitalising on the technology and for a while their market position was unchallenged. This early participation matters more to a services and innovation economy far more than budging the price of coffee granules half a percent downard.  

We should, therefore, give a lot less attention to the timewasters who would distract us with their narrow perceptions. Moreover, we need to lose our phobia of protectionism. Nobody who speaks of free trade in international commerce is remotely interested in free and fair trade. They mouth the platitudes of free trade at all of the globalist jamborees like the World Economic Forum, but it's always best to watch what they do, rather than listen to their words. 

As the UK are newcomers to the modern world of trade I rather expect many corporate interests are salivating with glee to hear our trade ministers prattling on about free trade - without the first idea how the game is played and how devious it really is. It is worrying that when Liam Fox and other Tory ideologues talk about free trade they are entirely sincere. It's about the only time when Tories are sincere - and the last place where sincerity actually gets you anywhere. Unless we wise up, UK interests will very rapidly be cannibalised. 

Presently we are seeing something of a turf war evolving over the loyalties of LDCs. Brexit has triggered a vindictive streak in EU trade circles where the EU is seeking to head the UK off at the pass in any of its more creative trade endeavours. The UK can buy the loyalties of LDCs with development funding but it will have to outspend the EU and be prepared to make concessions the EU will not. That will be the decider as to whether the UK is able to wield influence in its own favour. If we unilaterally drop our defensive measures then not only will we harm our trade with the EU, we will have little to barter with.  

As with everything else, politicians are looking for big hitter headline accomplishments. The EU is no different in its never ending pursuit of the biggest deals ever. As much as this approach is inadequate for the EU, it is wholly redundant for the UK. Third countries will be gearing for trade with one of the trade superpowers, so any FTAs the UK has with them will have to slot in where the cracks appear. Our only hope is to have a savvy agenda, utilising the agility a cumbersome squabbling bloc like the EU could never hope to have. There lies our salvation. 

It is for this reason I have to tune out of the mainstream trade debate. The prattle therein is entirely self-serving for those whose very livelihood depends on the perpetuation of the FTA and WTO mythology. Our success depends on bypassing them rather than engaging with them.  

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