Wednesday, 15 April 2020

Now is not the time for reckless gambles

Much though I loathe Twitter, it at least lets you know what your enemies are up to. Today it would seem there is a concerted propaganda effort in the Brexit blob to push against any extension to the transition.

Naturally the Brexit headbangers are behaving exactly as you would expect. We must be free of the shackles of the transition so we can dash off and sign FTAs with the rest of the world, right about the time when free traders are about as well received as a fart in a space suit and when the entire apparatus of governments the world over is directed at Corona fire-fighting. You have to wonder just how far gone you have to be for something like Corona to have zero impact on your political estimations.

Thanks to Corona the future is a great unknown. Most of the certainties underpinning the narratives of trade wonk land have evaporated. Hitherto now, trade had become uncoupled from geopolitics, with the underlying assumption that treating China as a market economy would lead to future liberalisation and democratisation, with global trade institutions steering us toward a peaceful era of global interdependence. An expansion of the EU mentality.

It's a good theory if you absolutely discount the threat posed by a global pandemic. Which is exactly what we all did. Now that everyone is scrambling for the same basic commodities that global interdependence and national specialisation model doesn't seem all that clever.

Of course this model will still have its defenders and there are still good arguments for maintaining free and fair trade on a level playing field with like-minded allies, but if Brexiteers tell us anything, it is that electorates are not likely to agree with them. The debate is too mired in legacy Brexit era dogma and too many misapprehensions as to what a free trade deal actually is.

As ever there are inherent contradictions to the dogma. On the one hand they tell us that we need to be agriculturally self-sufficient and buy British but at the same time advocate unilaterally dismantling trade protections against subsidised and mass produced meat produce. Richard Tice of the Brexit Party demands that we become self-sufficient - but one struggles to see how he reconciles that with being a "global free trade champion". How does that work exactly?

As with most populism it only works if you don't examine it too closely - but the mood is sure to be one of greater protectionism. The tide was already turning that way but Corona is sure to be an accelerant. All this seems to be in tune with existing deglobalisation trends.

If, then, the geostrategic priority becomes divestment from China (with good reason) then our regional trade becomes all the more important. Being that Western consumers are hypocrites (their buying habits betray their politics) it will likely require similar levels of economic and technical integration with the EU but an extension of the regulatory sphere into North Africa to continue exploiting low wage economies. As we have seen from remainers, progressive ethics are all well and good but only so far as they don't interfere with the supply of off-season fruit and veg. 

Essentially, if the "Global Britain" shtick wasn't flimsy before then it certainly is now. If we were smart we'd play it safe until the dust settles. Britain isn't the only country reassessing its supply chains and trade priorities. UK-US trade talks are on hold - as are most negotiations globally, with some at risk of never seeing the light of day again. It would be foolish then for the UK to slam the door shut on an ongoing process where the EU is is politically obliged to conclude a deal. Once slammed shut, that door may prove difficult to reopen - and the terms on offer won't be anything like as generous.

The one lasting impact of Corona will be to recouple trade with global politics. It will no longer be the sterile and exclusive domain of trade technocrats working behind the scenes. Every deal with have strategic implications and every deal will be looked at through a biosecurity and supply chain resilience prism. That suggests more local, more politically compatible trade partners and a shift away from fast fashion, cheap food and consumer technologies.

With that goes a societal shift, winding the clock back to the 1980's to a more austere, frugal and socially conservative culture. Not necessarily a bad thing if you like bad pop music and shoulder pads. Since we have a Romulan in government, Chancellor Sunak, it is perhaps a sign of things to come. 

Britain's fate, though, will be decided in the next few weeks as we approach the deadline for extending. It is that decision alone that sets the backdrop for the next decade. We can either bide our time to ensure a viable and sustainable outcome to Brexit talks or we can rush it and find ourselves out in the cold and easy prey for various predators, necessitating greater state intervention in markets to fend off the vultures.

The likes of Tice, Redwood and the Brexit blob imagine a no deal Brexit to be the dawn of a buccaneering age of free trade and a renaissance of Thatcherism. Such fanciful thinking is for the birds - especially so now where the UK will necessarily have to revert to a mode of post-war socialism with all the borrowing and inefficiency that goes with it. How rapidly we climb out of it is really contingent on our export capabilities - which are not in any way improved isolating ourselves entirely from whatever remains of the single market.

The UK economy is already going to take a pasting. Brexit or no, the aerospace industry and air travel in general is going to take at least a decade to reassert any sense of normal. With that goes lucrative jobs in Airbus and Rolls Royce, and with inevitable defence cuts, a number of large employers in the regions will be shedding jobs. 

Meanwhile, the auto industry is going to be similarly fragile as we move away from leasing and back into bangernomics. As to the sort of disposable income that facilitates an array of coffee shops, fuhgeddaboudit. We might wonder then what work is available for the steady influx of people. The current economic model is predicated on a ready supply of labour. Soon industry will be spoiled for choice. Demands to curb immigration are only going to get louder. Even the EU may need to rethink freedom of movement as member states count the cost of losing their brightest and best.

Until there is some clear indication of what the new normal looks like, the last thing we need is further disruption. We are looking at a year at least before we have Corona under control, and in the meantime, the norms of trade will keep collapsing. Before we leap we need to know what we are leaping into and what we are dealing with on the EU side of the Channel. It may be that a better deal is possible if we wait. Single market membership of a sort without freedom of movement may even be possible. If not, we can still hit the road if we want to. Now is not the time to be making big gambles though. We have enough on our plate. 

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