Saturday, 16 December 2017

Yes, Brexit is protectionist. So what?

Though people say trade is complex, it isn't that complex when you find your feet with it. Hosuk Lee-Makiyama, a reputable expert on top tier trade issues, recently remarked that it takes about five minutes to learn but a lifetime to master. I couldn't agree more. The concept of non-tariff barriers is far from rocket science but the politics of it is a wholly different matter.

This is why generalists professing trade expertise can very easily wander into a minefield. It is too big for any one person to fully comprehend - and certainly difficult to contextualise without real world experience. This is why one should be highly cautious of experts. It takes a breadth of experience to fully understand how it all fits together.

Over the years I've developed a number of systems for standards and regulatory compliance. Until about three years before the referendum I'd never really given much thought as to how such systems related to trade. Like most Brexiters I had a pretty insubstantial grasp of how trade works and it never occurred to me that the things I've learned over the years would be more relevant than ever.

Working in aerospace engineering alongside fatigue and design tolerance engineers, just about everything we did was standards based from the actual design and materials, right through to the management methods, document controls and authorisation processes.

If an aircraft crashes and it's a repair that has failed then it needs to be traced to the design engineer. The decision making and justifications have to be recorded and the materials used must have an audit trail right down to the quarry where the ores were extracted. Traceability is everything when it comes to quality - and for goods to qualify for use on commercial airlines there have to be stringent processes to ensure we import the real deal rather than counterfeit components.

Having built a number of systems for those purposes, and having learned about the functioning of the single market, I probably have a better idea than most how it all works end to end - same as food safety and chemicals professionals have produced the best Brexit related impact assessment material.

That however, is in just one type of supply chain and says nothing of financial services and intellectual property; areas where it's very easy to get the basics wrong which is why I tend not to comment on those such affairs.

What one notes, though, is a theme not unfamiliar to regular readers of this blog. Whichever sector you look at there are national, regional and international dimensions to it. Aerospace is hugely influenced by ISO, IEC and a number of specialist bodies. There is a entire chain of governance in which the EU is only part of a much wider ecosystem. The same applies to absolutely everything else. There are systems within systems with multiple overlaps and shared jurisdictions. The notion of the EU being the alpha and omega of regulation is overly simplistic and wrong.

Consequently, when it comes to the Brexit debate, mantras in respect of having "no say in the rules" and having no influence is reductio ad absurdum. There are levels of influence even for non-EU members like Norway, who wield considerable influence in everything from telecoms to fisheries.

What one notes is that influence in one domain often comes at the expense of influence in another. EU members cannot independently raise initiatives or WTO complaints. EU membership is also no guarantor of shaping outcomes. It's just a another body where the biggest corporate voices speak the loudest.

One high profile example of this, as mentioned before, is EU inspections for Citrus Black Spot - a fungal disease in fruit. Typically reports cite "EU regulations" as the reason for import restrictions. It isn't that. It's an EFSA risk assessment leading to increased inspections and creating delays causing South Africa to voluntarily terminate trade even though it meets the standards and qualifies for trade preferences.

The South African view is that the risk assessment criteria is the product of internal lobbying and is scientifically questionable. The Spanish government's position will undoubtedly be the product of lobbying by the Valencian Growers Association AVA-ASAJA. They have identified the weak spot in the system that allows them to push for EU level protectionist measures.

What we find is that, notwithstanding cooperation agreements on standards convergence, the risk assessment criteria is still more a political than scientific issue, it rests largely with the Commission, and though the IPPC can investigate, it can only challenge the validity of the risk assessment process rather than the actual verdict. If the process is found to be transparent and the specialists are sufficiently qualified then there is little anyone can do. 

This is where it's possible to overstate importance and usefulness of certain institutions and instruments within the trade ecosystem. Though WTO members can normally raise issues for consideration, panels must be formed, investigations undertaken and hearings scheduled. The process is time consuming and expensive thus, in most cases, an EU decision to exclude produce is usually final.

There are any number of loopholes in the system that make a mockery of the EU's trade liberalisation dogma. As previously noted, the European Commission is currently conducting a review of the Indian SPS inspection process and is considering a total ban on Indian seafood product imports. It recently increased the percentage of seafood imports from India that must go through inspection from 10 percent to 50 percent, after finding repeated violations of its standards for contamination.

On this score you can probably take it on trust that the Commission is being justifiably cautious in that Indian Food Safety standards are woefully underdeveloped and under enforced. A lot of work is going into modernisation but the system, to a point. has to function on trust - and with corruption in India being what it is, we are decades away from trade parity. Not for nothing are India-EU trade relations in their infancy. 

But then when it comes to standards improvement under the aegis of an EU cooperation agreement, we often find the goalpost shift time and again on the whim of EU producers - which is why we still manage to exclude Argentinian beef exports some twenty years after the BSE scare. That issue will run and run and will remain a talking point of trade debate for a decade or more. 

For as long as goods cross borders, foodstuffs especially, consumer confidence will always be a major factor. That in itself is a readily exploitable area for protectionism. So too are environmental concerns which is why big business just loves climate change. Any platform for regulation presents an opportunity to shaft one's competitor

The same goes for standards. The WHO Protocol to Eliminate Illicit Trade in Tobacco Products was the culmination of more than five years of complex negotiations at inter-governmental level. The Protocol contains a range of provisions and obligations for Governments who ratify this instrument, including measures and standards in the areas of Supply Chain Control.

That then started a corporate space race in the standards bodies as to what systems and methodologies will be used. This has been a long running saga in European standards politics and one of the most alarmingly corrupt.

And this is what makes the EU particularly objectionable in that it's really not up to us what we can import and what we can restrict, and unless an eco-lobbyist can popularise a panic over something like "chlorinated chicken" we have absolutely no idea what we are agreeing to. Big bang headline FTAs are of major propaganda importance for the EU so it will make a number of arcane compromises to ensure they succeed. Not always successfully. 

In this, it is hardly a surprise that TTIP failed. It was too big, too ambitious and shrouded in mystique. Something of its nature is impossible to take on trust. What makes the EU even more suspect is that these such deals are never defeated. They simply go into a cycle of review and will be fed in by the backdoor. No doubt TTIP will be installed by breaking it up into smaller, less controversial instruments of trade and national media will completely ignore it.

In the meantime we can be assured that if the EU wants a propaganda win by securing a headline deal with the USA it will devote some of its runtime to dismantling or modifying those aspects of its current acquis which stand in the way. The ongoing saga over endocrine disruptors is part and parcel of that. There is simply no possible way that trade conducted on this scale (and of this complexity) can ever be truly transparent or democratic. Are we to trust the EU when it is a nest of corporate lobbying? 

What we find with trade liberalisation is that it requires a great deal of compromise, considerable sacrifice and those most affected are the last to know and the least likely to have been consulted. Course, you can ask why it is that little old Wallonia can derail something like CETA yet Yorkshire must do as instructed by London. That is a seriously good question I hope we will address after Brexit. 

But then for the EU, what little democracy exists is increasingly going to be an obstacle to further trade increments. It will be interesting to see if the EU-Mercosur deal passes intact. Mercosur members Brazil, Argentina, Paraguay and Uruguay have pushed for an improvement on the EU offer of tariff-free imports for 70,000 tonnes a year of beef. They're not likely to get it and if the EU offered it, no doubt it would be shot down in the ratification process. 

That begs the question as to whether EU trade has peaked. We often hear that WTO multilateral initiatives have stalled, but will future EU deals be meaningful increments, and will they have worthwhile benefits to the UK? Moreover, there is a hypocrisy to address. The remain inclined will panic about possible agricultural liberalisation with the USA, but as yet have seen no moral panic over what a Mercosur deal could do to British agriculture. EU trade good, UK trade bad - it would seem. 

This, though, is not just a question of trade. The ongoing debate on globalisation is one of reconciliation between mutually exclusive concepts. Trade liberalisation is largely incompatible with sovereignty. The more the global rules based system develops the less meaningful sovereignty becomes. In exchange for the benefits of trade we increasingly cede control in what we are told is the common good. 

This is problematic for democracy in that we still find that, even leaving the EU, we are constrained by a number of global conventions and obligations. We are told that this is in the direct national interest and that we live in an age of interdependency and we should basically get used to not having a meaningful say. The trade scriptures say that protectionism is bad. 

As a one time liberal I subscribed to that dogma - but that is exactly what it is. Dogma. Trade policy is there to protect legitimate traders from the predatory practises of nations and corporations 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. 

Every liberalisation measure must be done with due consideration to its economic and ecological impacts. But we must also ask whether populations have the sufficient power to call time on or temporarily suspend measures which may unnecessarily harm domestic objectives or interests. 

My deliberations have forced me to conclude that there is insufficient democracy or control as EU members - and even if there were adequate safeguard measures we have an establishment too lazy, venal and indifferent to invoke them - and is not sufficiently engaged with trade and EU governance to realise it's even possible. 

Brexit to my mind answers the call of taking back control simply by repatriating decisions over its external relations. At one time when trade were largely just a matter of tariffs it could be said that "pooling sovereignty" was a tolerable sacrifice but when modern trade methodologies deal with everything right through to labour laws (thus disempowering electorates, individuals and unions), this level of trade integration is a bridge too far. 

I'm not going argue that leaving the EU will bring about a free trade bonanza - and in fact, to experiment with the more radical ideas of the Tory right would be suicidal, but the case for repatriating decisionmaking is undeniable. It doesn't matter especially if we do adopt standards and regulations just so long as the decision rests entirely with parliament and that there is a means to pull the plug on select measures without having to do something quite so drastic as Brexit. Ceding the authority and placing all of our trade relations into a single treaty construct was deeply foolish.

Brexit has already brought the trade debate closer to home and has ignited a conversation about regulation and standards that has long been abandoned. There is, for the first time in a generation, a renewed institutional knowledge of the issues, public engagement and cross platform discussions in just about every field of endeavour. This is healthy.

What it looks like, however, is that the last to be plugged into this national conversation is our increasingly remote establishment - and our government especially. It looks like we are on course to make a number of serious but avoidable mistakes. This was always the danger with Brexit. A risk I accepted when I voted.

Though the consequences of that may well be miserable, we should also note that there are serious economic, cultural and societal problems we would be deferring by remaining, many of which would be exacerbated simply because we are disengaged from the decisions taken in our name. Ever more liberalisation means opening up our markets for speculation by predators and asset strippers - and though that is also an inherent risk of Brexit, we at least retain the power to institute corrective measures without having to beg the Commission.   

In this we should not lose sight of what we actually gain from all this. It is not measured by increments in GDP. What it means is that, as the global rules based system develops (or possibly collapses) the UK will become its own customs entirely with its own distinct third country relationships with the necessary sovereign powers defend our interests and do what it takes to compete. Our new relationships will be less focused on what the Spanish citrus lobby wants. 

If you talk to trade wonks they will often tell you that job losses as a result of free trade deals are just collateral damage - because some numbers on a screen somewhere say that's for the common good. I ask; by whose estimation? We are oft told that Brexiters "voted to self harm" but at least we are actually doing it for the principle of sovereignty and taking back control. The bovine notion that liberalisation for its own sake is a universal good is terrifying. 

For the time being we will be closely aligned with the EU and a lot of our decisions will have to be taken with due consideration to how our new relationship functions, but we cannot expect it to work right away. As a newly independent country we will have to learn the ropes as to how we act like one. Be under no illusions. Tough times are coming. 

What we can say though is that the UK will be rebuilding and remodelling according to the new settlement with every arm of the polity engaged in how that comes about. We are at least applying ourselves to the issues. Not so the EU which has once again looked at its many brush fires and concluded "more Europe" is the answer. These people simply do not learn. 

At some point Mrs Merkel's regime will come to an end and Germany will have its own soul searching to do. It maybe has one halfway competent administration left in its post-war settlement and then they have their own reckoning to come. There's no guarantee Poland is staying in the EU and Hungary has never looked like a committed member. Expansion in the Balkans is faltering, Ukraine is still a nest of corruption and immigration is going to be a major issue of Italy. This notion that the EU is working in harmony has never looked more risible. Brexit isn't Europe's biggest problem.

I have no crystal ball, I don't even know what is going to happen next week. What I do know though is that globally there are shifting tides and globalisation is entering a new phase of uncertainty. The power centres are shifting, technological disruption to trade is re-writing the rule book and the trends in regulation are shifting further away from the EU and into the private domain. The WTO is now openly collaborating with corporates and the game is shifting up a gear. All the accepted norms of legitimacy are going out the window. I'm not ok with this.

It's a long time since I had cause to agree with Spiked Online but Mick Hume has is down on this. "Whatever our internationalist aspirations, the truth is that the nation state is the only effective arena for democratic politics yet discovered. Any progressive-sounding talk of no borders or global democracy can only mean the world being run by the UN Security Council, or Europe being reordered by order of the European Commission". If Brexit is, as they say, protectionist, then it's a protection against that. And a very necessary one. 

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