Tuesday, 16 July 2019

Brexit may be our only salvation


I am a Brexiter chiefly because I believe in democracy. Political agendas should come from the bottom and be subject to robust debate and voted on. Where the EU is concerned, the agenda comes from elsewhere. It's a technocratic grand design and tends to be enacted without real participation from civil society, and unless it's particularly odious such as the Article 13 business, we don't really have a clear idea of who is doing what to us and why. By the time we get to know about it, it's already too late and once passed into law there is not a lot we can do about it.

It wouldn't be nearly so bad were it just a customs and regulatory union but it's supreme powers go well beyond that and it always wants more power over more things. That is the only direction of travel and the more power it has the less power we have. Little by little we sleepwalk into a prison of invisible governance. Eventually there comes a point where citizens are reduced economic units grazing on the land with no real stake in how they are governed and no real say in who they are governed by.

Generally speaking Brexiters are poor at communicating this rationale. Eurosceptics have the right instincts but have done a poor job explaining it and in the case of the Farage Party, they have such a poor grasp of the arguments that they make us all look like prats. Thanks to them it's embarrassing to be a leaver.

Worse still, being conceptually in favour of Brexit is one thing, but then there's the question of how the UK operates after we leave the EU in a global legal order dominated by trade and regulatory superpowers. On that score, all we get is bloviation, bluster, assumption and fantasy from the Brexiter corner. It is not so much Brexit that's at fault, rather its execution by people who seriously don't have the first idea what they are doing and won't listen to reason. They have some distinctly faulty notions about global trade and it's going to hit us hard when these notions collide with reality.

Much has been said of the gravity model, where most of your trade is always done with your nearest neighbours, necessitating closer customs cooperation and regulatory harmonisation, but Brexiters have never really understood the utility of regulation seeing it as a burden on business rather than a means of facilitating trade and increasing export potential. They instead point to the far east which is seeing a faster rate of growth than the EU. Another misreading of trends.

Complicating it further for the, the previous decade was said to be the decade of hyperglobalisation as we saw container shipping massively expanding, bringing all manner of cheap tat in from China while we offshored labour to India and elsewhere. Arguably it did a great deal of damage, perhaps leading us to where we are today, but those trends are yesterday's news. An article by Finbarr Bermingham sheds some light on it.
"Hing Chao, executive director of another Hong Kong shipping company, Wah Kwong Maritime Transport Holdings, said that “the shift of manufacturing away from China to cheaper, regional markets in Southeast Asia has arguably led to more intraregional trade, which is backed up by the continued growth of intra-Asian container demand”
A few years ago, the major liner companies were predominantly focused on ordering larger and larger container vessels from shipyards, but recently this trend has stopped, and recent activity has been more focused on smaller feeder-container vessels,” he added.
This shift away from globalisation was laid bare by a study of 23 industry value chains across 43 countries released by McKinsey Global Partners in January. It found that in the mid-2000s, globalisation reached a turning point and that between 2007 and 2017, exports declined from 28.1 per cent to 22.5 per cent as a share of global gross domestic product (GDP).
Emerging economies over this time were building stronger domestic supply chains, reducing their reliance on imported goods, while their consumer markets became more important. Over the past decade, emerging markets’ share of global consumption rose by 50 per cent, McKinsey found.
Trade based on labour arbitrage – that is, companies taking advantage of cheap wages in developing countries – became less prevalent, declining to less than 20 per cent over the same period. Leaps in the development of digital platforms, automation, artificial intelligence and the internet of things, meanwhile, meant that the necessity for huge production facilities in low-cost manufacturing hubs has been reduced. “In some scenarios, these technologies could further dampen goods trade while boosting trade in services over the next decade,” read the McKinsey report.
In industries such as automotive, computing and electronics, supply chains “are becoming more regionally concentrated, especially within Asia and Europe”, with companies increasingly looking to make their products close to market to be better able to cater for changing patterns in consumer demand and to reduce disruption from political risks such as the trade war, which is known as near-shoring.
It's actually worth reading the whole thing as I can't reproduce it all here, but near-shoring is becoming increasingly important. As much as anything, it helps is as much of a value chain as possible resides in a singular regulatory ecosystem. And as far as that goes, the EU is the most advanced of all. Any way you look at it, there just isn't a sensible argument for leaving the single market, especially if trade in goods is moving to a more regional model.

In the last couple of decades we have relied on China, Vietnam and others as a source of cheap manufacturing labour, but with technology improving in leaps and bounds, especially in 3D printing and automation, anything from clothes to electronics can be produced closer to home. To an extent this trend has already reached the UK which is partly what makes us a specialist economy in high tech services which again is not in any way helped by leaving the regulatory union. 

Meanwhile China is asserting its own influence in the far east, in a space race with the USA for regulatory dominance where the UK, on the opposite side of the planet, has no real influence on regulatory matters or much else for that matter. No amount of positive thinking changes the facts on the ground.

This is where the Brexiters come seriously unstuck. Their knowledge of trade and trade systems is pitiful, exemplified by one Jacob rees-Mogg. In this game knowledge is power, but we're going into a sword fight armed with a butter knife. We have embarked upon this enterprise with no plan and no clue and no realistic destination. The Tories have put their faith is a US FTA as their plan A, but already the wheels are falling off. Liam fox has in recent weeks poured cold water on the ERG's trade ideas, pointing out that a quickie deal with the USA is highly unlikely. Such a deal would struggle to be ratified on either side of the Atlantic.  

But now that Brexitism has become a cultlike religion, Richard Tice of the Brexit Party accuses Fox of having "gone native". "He’s sipped from Remoaner establishment’s cup of gloom. Believe, lead and we thrive". This attitude is standard in the Brexit Party but it's pretty much what Brexiter Tories think too. There is zero chance of a rational debate. We just have to believe harder.

Due to the politics of the situation, though, we are leaving the single market and will likely leave without a deal. All of these bad ideas now have to be tested in the real world. I strongly suspect it won't take long for Britain to realise its error. Not only will our "global Britain" ambitions hit the rocks, we also lose all of our access to emerging new markets in the EU as it improves the short sea shipping frameworks.

The essential problem here is that the core objectives of Brexiters don't sit well with the world as we find it. Ideally we want to retain the best possible trade relationship with the EU, participating in the single market but with regulatory autonomy and only limited integration. That, though, is not on offer. You have either the EEA, which is full regulatory alignment on matters pertaining to trade (and a good deal more) or you have an FTA which is in no way comprehensive enough for the UK's needs. The only way to achieve that limitless sovereignty as imagined by Brexiters is to have no formal trade relationship with the EU at all - or with anyone else for that matter.

As this blog has outlined, the best way forward was always the EEA Efta option, in that EU rules would not have direct effect and it would end the supremacy of EU law and gives member states a limited right of refusal. That, though, is not brexity enough for Brexiters so now we're going to bodge it and end up having to rebuild our EU trade relations over the next twenty years which will likely culminate in a single treaty framework, almost as comprehensive as the EEA but without the Efta break from the ECJ. Possibly even associate membership of a sort.

There are some of my former allies who campaigned for EEA Efta but have now concluded that with the Tories having lost the plot and with no hope of an intelligent resolution that it is better to remain. They've given it up as a bad job. I have toyed with that idea myself but I happen to think the stakes are higher.

Brexit started life as a desire to "take back control" and fundamentally at the grassroots level it is a democracy movement - one that does not see a future in "ever closer union". That movement, however, was skilfully hijacked by the Tory right as a vehicle for a "free trade" agenda, advanced by Tory leaning ideologue think tanks working in the interests of their US donors. Grassroots Brexiters are really more interested in the ongoing culture war, so when it comes to the detailed trade arguments, they adopt the mantras of the Tory right wholesale since their own cupboard is bare.

This radical economic agenda has been stalking British politics for a long time now. There is no popular mandate for it and were it to appear on any manifesto it would lose elections. But for as long as it is tied to the Brexit movement, it has the smokescreen of being a democratic movement.  

It's my belief that it will take something like a no deal calamity for Britain to have the internal reckoning we've been overdue for some time. In the end, as much as the ERG have been pushing us toward no deal, this is a systemic breakdown of a totally dysfunctional political system.

Here it should be noted that Parliament has had ample opportunity to get its act together. It has been given numerous opportunities to avoid no deal, not least by ratifying the withdrawal agreement. But since they are collectively determined not to carry out the verdict of the people, they have played double or quits. That tells my side of the argument that our so-called representative democracy is not remotely representative. Something is wrong with the way we choose MPs. 

But for the other side of the argument, there are questions as to why parliament has been so utterly sidelined and how powerless it has proven to be in holding the executive to account. Though it has much to do with the low calibre of our politicians there are also serious constitutional problems we need to address. If there is one thing leavers and remainers can now agree on, it is the need for far reaching constitutional reform.

Before we can get to that debate though, we need to clear the air. Crashing out of the EU will certainly accomplish that much. The free market Tory right will then be a spent force in politics, leaving the rest of us to pick up the pieces. With the Tory right then discredited and universally hated, the parameters are then set for a new national conversation.

Some might conclude that the price of this reckoning is simply too high, in that it costs us anywhere up to half of our exports and at the very least decimates the economy. The question on my mind, though, is whether we can afford not to. If we don't go through this then the chances are that nothing at all will change and if there is any political or constitutional reform, it will comprise of tinkering around the edges leaving the same dysfunctional institutions more or less as they are.

The question then becomes one of what happens when you have an establishment and ruling class running the country as normal with only general elections as our means of influencing government? 

Being that the culture of Westminster (including the media) produces certain groupthinks and behaviours, along with an institutional consensus that is alien to the values of the country, there is nothing to stop the narcissists and control freaks in Westminster handing yet more power to Brussels while imposing their authoritarian decarbonisation agenda upon us while continuing to ignore all of the acute trends that brought us to this point to begin with. A serious country cannot be governed by virtue signalling egotists.

Fundamentally I am opposed to a no deal Brexit, but no deal itself is the the ultimate product of our decrepit political system and is therefore evidence that a sensible and managed departure was always too much to hope for in that it is beyond their abilities. Should we remain in the EU then as much as the central dispute over our membership is not resolved, the window for meaningful change also closes.

There is no doubt in my mind that no deal will be the ground zero for a new era in our politics. It won't be pretty, and will come at enormous cost to our economy and our international standing. It will takes years to recover from, and perhaps our exports may never fully recover. It will be a long process and a bitter political feud seemingly without end. We will have reignited politics in a way not see in my lifetime. I offer no guarantee of a positive outcome, but at least we will have started a meaningful democratic process to decide who and what we are; to resolve the gaping identity crisis that Brexit has exposed.

An EEA Efta Brexit would have sufficed were it not that our politics is corrupted beyond repair. But I never anticipated they would screw it up this badly or that the media would drop the ball as much as they have. The inadequacy of our media is as much a facet of our democratic atrophy. It lacks seriousness, gravitas and any sense of societal responsibility. Brexit is the storm that brings down the tree that was rotting from the inside out. Superficially it looked in good health, but collapsed when abnormal pressure was exerted upon it.

It may be that politics can still salvage the situation and we may yet pass a withdrawal agreement but hopes of that are fading when we have two talentless imbeciles in the running for the Tory leadership. It says a lot about that state of the parties that Corbyn, Johnson and Hunt are really the best they can dredge up for leadership. Of itself that is sufficient evidence to suggest we need a far more radical rethink of British governance and even question whether the UK as a single entity is even still a viable concept.

Whether the middle classes like it or not, Britain is going to have to undergo a prolonged political and economic overhaul. There are too many trends that indicate our current way of doing things is utterly unsustainable - from the emerging pensions crisis to home ownership, legal aid and the collapse of criminal justice system and the societal fragmentation caused by massive immigration. And that;s before we get on to discussions about the future of the NHS and the welfare state. There is no way our politics is intellectually equipped or mature enough to address these issues even if they cared to admit them.

Sooner or later, all the problems our establishment have been in deep denial about will bubble to the surface, and then it becomes apparent that we can no longer afford to live as we are. Whatever the cost of Brexit may be, it at least marks a (relatively) peaceful transition to whatever we are to become. It may well prune GDP to see us become a mid ranking power permanently but if the alternative is decades more of managed decline while we cede more of our democracy to managerial technocrats in hock to any passing globalist fad then I'll take it.

Part of me wishes we didn't have to do this. I could certainly do without it. Who doesn't like a quiet life? But then in recent years it has become apparent that Brits will defer to just about any authority and submit to all manner of nannying and authoritarian measures for the sake of peace - to the point where we don't even realise we live in a bureaucratic cage. We are apathetic, cowardly and decadent and our politics is a reflection of that. I think it high time that quiet life Britain has enjoyed was disturbed for a while. It may be our only salvation.  

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