Thursday, April 20, 2017

Brexit is no miracle cure, but it gives us the tools we need to succeed

To explain the modern trade environment I would describe it as thus. Imagine you were a small business and you found that there were bureaucratic barriers between you and your customer. You bring this up with your trade association and they go to the government. In theory the government then acts as your business lawyer to intercede on your behalf. It looks at any barriers it has which is can remove in exchange for the removal of the barrier that affects you.

Big comprehensive trade pacts like TTIP are when several issues have been highlighted and the government seeks a comprehensive package of reforms. Modern trade agreements though are considerably more than just a series of agreements on non tariff barriers. Very often what is worked out in negotiations does not work in practice. You may be able to sell to a market or import certain goods but if by doing so you radically alter other deals you have with other countries then you cannot trade under those terms. This is why we have a system of waivers built into most modern trade agreements along with dispute resolution systems. Usually a court of some kind.

A recent example of this was when Canadian beef producers found that if they sold beef produced to EU standards then it raised the risk profile for food poisoning with the Americans and subjected them to more expensive border inspections. Naturally there needs to be a system to resolve these disputes otherwise these trade agreements cannot be fully utilised.

One thing that could resolve these such issues in future is a global standard on food safety risk assessments which is why we have global bodies for standards and practices. What you will also find in modern comprehensive trade deals are boilerplate statements to the effect of further cooperation toward regulatory harmonisation. Usually the text is a copy and paste from the WTO agreement on technical barriers to trade. More often than not, these such deals establish working groups or joint committees where our own trade ministry will have an office dedicated to serving that exact trade deal. We have one that deals only in cooperation with China. Very often these offices have certain unilateral powers to make temporary concessions and these are brought up for periodic review. Where you have insoluble disputes we have the WTO courts.

Given that any given country can have multiple comprehensive trade deals, each committed to regulatory harmonisation you find the difficulty is in trying to ride two or more horses. More often than not you are forced to align with your largest and nearest trading partner. In this there are three regulatory superpowers. China, the EU and the USA. TTIP was the most ambitious deal ever in that it sought to iron out the many disparities between the systems. Where harmonisation could not be achieved we would seek out mutual recognition.

Unfortunately due to the secrecy and complexity TTIP failed to pass, and also because certain vested interests really don't want to open up to competition. When it comes to trade deals, the bigger they are the harder they fall.

This is why I voted for Brexit. The EU likes big flagship gestures like TTIP and what that means is we spend seven years or more in complex negotiations to achieve, well, fuck all basically. Moreover it is unlikely that there will ever be a properly comprehensive trade deal with the USA. As much as anything the USA doesn't really want one and is big enough and diverse enough not to need one.

What remains though is a system of automatic adoption of global standards where over time we remove the disparities between the regulatory regimes. This is where the UK needs to be an active player in setting the agenda, to bring the resources to focus on those standards that would most benefit UK trade. As an EU member, what we find is that we lack the ability to launch such initiatives. Any initiatives have to be cleared with Brussels first and if EU member states object then we are prevented from acting. In this regard it would be like hiring a lawyer to work your case who then outsourced it without telling you and nothing is done.

For the EU the priority is not lubricating trade, rather it is focussed on preserving the integrity of its own regulatory system and the uniformity within the single market. All other concerns come secondary to that. We don't call it "fortress Europe" for nothing.

The real game changer is the WTO agreement on technical barriers to trade where the EU of its own volition has surrendered the regulatory agenda to those global bodies and adopts the findings of standards bodies outside of its own control. Outside of the EU we are able to participate fully in all of those bodies without first asking permission from the EU commission and without having our vote or veto overturned. That way we still get to influence the rules of the single market even if we are not in it.

As I outlined over on my last blog the purpose of Brexit is to shorten the chain of accountability and ensure that our trade representative is actually our own government. Britain is increasingly a services economy where we need to focus on niche financial services and internet services where the regulatory systems are still in their infancy. If all our trade activity is tied up in bundled deals where manufacturing is included we can end up losing out on services liberalisation because of German manufacturing concerns.

The view is that we can achieve more incrementally than waiting year after year for the EU's next miracle cure. By going in at the very top end and influencing standards and practices we can edit the DNA of trade deals that already exist and any future ones even if we are not a party to them. The future of trade is mulitlateralism.

The other issue we have is utilisation rates. Most of the deals we achieve in the next few years will be replicas of the deals we already had via the EU. That though does not improve or enhance our position. Unless partner nations are capable of meeting the standards we set then they cannot participate. This is where we need a concentration of aid efforts to promote good governance and assist in the implementation of standards. This does not immediately boost UK trade. All it means is that other countries can trade more and sell more goods. It does not necessary mean we can export to them. What it does mean though is that globally trade volumes increase and as a supplier of business services, the more trade there is in the world the better we do.

Jetting off round the world securing free trade agreements doesn't really accomplish very much if the infrastructure and capacity is not there. To boost trade we must invest. That is why DfID must be central to our trade policy. Trade utilisation rates have remained pretty static. If we make internet connectivity our focus in lesser developed countries then we are connecting more customers.

We can have all the officials and bureaucrats in the world working on hammering out agreements and they may make marginal improvements but ultimately we need to be out there making trade possible.

There are plenty of Brexit naysayers out there saying Britain can't be a player. I couldn't disagree more. Free to build our own sectoral alliances and without having to clear everything with Brussels we can be a more agile actor. We can act incrementally and we can act globally and we can steer the agenda by way of what we bring to the table in terms of knowledge, finance and governance. Norway is far more influential than is given credit and there is no reason why we cannot play the game the same way.

Brexit of itself does not do anything. It gives us the tools to succeed should we promote new ways of acting on the world stage. International development is absolutely crucial and ensuring British unions, business associations and trade guilds are up front and participating in global bodies is an absolute priority. This is how Germany manages to set the agenda. We must replicate that experience. We must invest in the best possible research to ensure we are leading the field in knowledge driven standards and we must fly the flag for multlateralism. 

All the Brexiteer talk of a free trade bonanza is pure gibberish. There will be no bonfire of regulations. There is a system, we are committed to it and there is a game to be played. Free of the EU we are free to redefine how we approach trade and we can re-write the rule book. Literally. But making a success of Brexit requires that we ditch the Tory free trade dogma and work with the WTO rather than against it. If we play it smart there is no reason why Britain cannot be at the forefront of regulatory innovation and in so doing be the shot in the arm global trade has needed for a very long time.

Wednesday, April 19, 2017

Brexit: the future starts now

Every now and then I see a clip of the TV show "The thick of it". It's one that passed me by when it was first aired. It's a shame as I think I would rather have enjoyed it. In fact I think I would appreciate it more now in light of my referendum experiences. The programme paints a picture of jumped up spads managing every last communication with the outside world, maintaining a firewall between politicians and the public. Everything that so typifies the Blair-Cameron administrations. Everything I have hated about politics in recent years. It's good to have a periodic reminder.

Over and above the normal message management, though, was an integrated array of policies - not actually designed to address a particular problem, rather they were geared toward reinforcing a brand image. A faux-progressive veneer that appealed to the narcissism of the London liberal set. It really stands to reason that further EU integration would be part of that shallow agenda.

Latterly this political culminated in the further Americanisation of politics where we saw televised leader's debates, with everything reduced to soundbites - where the PM's hair stylist was as important to have on staff as a senior political advisor.

As this kind of politics became more entrenched, so did the counter narrative of an aloof, remote class of professional politicians - the ideal bogeyman for any counter-establishment campaign. In many respects the then establishment was the architect of its own demise. Bland and sterile centrism was on borrowed time.

Fast forward to now. Brexitworld. How things have changed already. Personally I am not all that impressed with the PM as a political thinker. She is easily led, badly advised and out of her depth. She is not, though, a presentation politician. Or at least not by the standards set by her predecessors. She does not court the media so frequently and she has already made it clear that she will not participate in any televised debates. She speaks to the public, not the media.

This, of course, prompts a number of howls from the Greens and Plaid Cymru as though these tawdry media circuses were a cornerstone of our democracy - despite them only appearing in 2010. If anyone is out of touch it is they. Left wing populists who haven't worked out that their time has been and gone. Throwbacks to that era. We do not want these televised sideshows, we never wanted them, nor do we want the vapid media blather that goes with it. You can keep your asinine Guru-Murphys too.

In this respect, thanks to Mrs May, we are already seeing a restoration of some of the gravitas our politics has lacked over the last twenty years. That is to her credit. I wouldn't go as far as saying Mrs May was anything close to Mrs Thatcher, but her dignity is what I have missed most in politics. I appreciate this could still be the product of sophisticated message management and it's just that my bullshit radar is getting weaker as I get older, but I do think this sets the right tone for the new era. This is a time of serious politics the like we have not seen for many years.

Arguably this is a consequence of the vote to leave the EU back in June. I don't see that it was going to change any other way. Cameron and Osborne would still be in charge, striking their ridiculous poses and staging visits to northern factories. Instead I now get a sense that, in her own cack handed way, Mrs May is seeking to connect with voters, fashioning her approach according to their values rather than the Twitterati and the Westminster bubble. It's a touch illiberal for my tastes but if the polls are anything to go by it's popular enough.

If there was one thing most voters agreed on in recent years it was the need for a new politics. Many politicians have claimed to be the manifestation of that, be it Farage or Corbyn, but actually the real manifestation happens to be Theresa May. This is not to say that Mrs May is a radical. She is about as ideas free as her predecessors - but then Mrs May does not need to be a radical. Voters have been radical for her. Brexit is about as radical as we need for now and all she has to do is deliver it.

One is then puzzled why anyone would want to wind back the clock on Brexit. Whatever happens now we will get our new politics. Already business as usual is disrupted, non-essential lawmaking is on the back burner, and public debate is focussed on matters of existential substance. The next ten years or more will be devoted to revisiting our statute book; redefining the structures and institutions of government. It will be the first comprehensive review of the UK constitution since the war. What's not to like?

We do not as yet know what Brexit will look like but we can safely assume British fishing will be up for review along with agriculture and labour law, and for the first time in a very long time we will have our own trade policy. We'll be having debates about issues buried for decades. Why would you want to go back to the stagnant universe of pre-Brexit politics?

It's early days yet and I am still not convinced for a fact that we will leave the single market. Certain realities are starting to dawn on opinion formers and politicians alike. Nobody is expecting sunlit uplands and rainbows. Outside of the government and the readership of the Daily Express, the strawman Brexiteer does not exist. Of the fifty two per cent who voted for change there were no homogenous traits. Most recognise that there will be trade offs between trade and control, democracy and liberty. British voters are treating this with the gravity it deserves.

The reason I can tell is because they're not voting for Labour. They know that Jeremy Corbyn has nothing to offer, nor indeed does his party. It would also appear that those seeking to wind back the clock are putting their faith in Tim Farron, a pinch-faced worm bent on taking us back to that era of narcissistic presentation politics and centrist political deadlock. Back to those days of asinine and trivial politics. Back to those days where mainstream politics wallowed in its own inward looking insular bubble, completely oblivious to what they have signed us up to.

For the first time in my adult life politics is finally getting real. When I do vote Conservative in June it will be reluctantly, in the absence of any new movement with good ideas, but in the subsequent disarray space will be created for new ideas and new innovations out of necessity. This is the democratic renewal I voted for. Something interesting may arise from the husk of the left - and maybe the Tories will implode as Labour just have. By 2025 we could be looking at an entirely new edifice of politics and entirely new debates, long departed from the vexed question of EU membership. A genuine new era of politics.

It is said that we leavers are the inward looking ones seeking to wind the clock back. I couldn't disagree more. For me I can imagine little more stultifying than carrying on the same tedious debates from our parents generation. Nor could I stomach any more of the same cloying sycophancy of media driven politics. Brexit is about change, it's about moving forward and dealing with the world as it really is rather than reinforcing the failures of the last century. We have really started something here and I don't want to put the genie back in the bottle. Luddites and naysayers be damned. The future starts now.

Monday, April 17, 2017

On the circumstances of Brexit. Again.

Over on Facebook, John Band linked approvingly [FB link] to a lengthy article by Fugitive Ink (FI): this post started as a comment in response but, it becoming somewhat lengthy, I have decided to post it here.

The FI article, written by someone who was involved with Ian Duncan Smith's leadership bid, is interesting and thoughtful; however, it also betrays much of the thinking that has led to an increasing disconnect between the political parties and their voters—and, thus, some of the reasons for the vote for Brexit.

Apart from the author's slightly tongue in cheek opinion on referenda—"… they’re mob rule! indirect democracy is the only non-disastrous form of democracy! etc, etc.…"—my original comment was sparked by two passages, the first of which is this:
Let’s be clear about this. No one, during the course of that 2001 campaign, was arguing that we should leave the EU. No one was arguing that we should give up the Common Market.
The second is this:
We had, self-evidently, settled the issue of Europe within the Conservative party for a generation—perhaps even forever. By demonstrating beyond argument that a charisma-free, intellectually limited, personally disorganised and badly-staffed unknown could defeat all sorts of proper candidates, purely because he did not want further European integration, we had paved the way for healing our painfully divided party.
FI's aversion to referenda is justified by his statement that "[n]o one, during the course of that 2001 campaign, was arguing that we should leave the EU"—but, of course, many Conservative voters absolutely were (and continued to do so): whilst the issue may have been put to bed as far as the party was concerned, it wasn't for a great many voters (and my parents, for instance, were not knuckle-dragging neanderthals desperate to kick out the dirty foreigners).

This complacency within the political bubble, and unwillingness to engage with decades-held concerns of nominally Conservative voters, simply encouraged those same people to believe that no party shared their concerns. Which, of course, explained the increasing rise of UKIP (organisationally shambolic though they were (and are)): increasingly, people reluctantly gave their votes to the Conservative Party at the General Election (largely because they feared a return to a 70s-style Labour government and union tyranny), whilst increasingly voting UKIP at European Elections.

There is an argument, of course, that this state of affairs could have carried on indefinitely—and it might well have done. But then came Cameron and his personal speciality of making un-forced political errors. Rightly or wrongly, a number of unfulfilled promises—around hunting, inheritance tax, and others—and, of course, the gay marriage issue, meant that the Conservatives were losing voters and activists at the margins. And, given the number of safe seats in the UK, the margins are where elections are won.

And so the promise of a referendum was given—to try to win back those voters, and to neutralise UKIP (the latter being effective in terms of Parliamentary seats—but less so on the pure number of votes). Cameron held the referendum, genuinely assuming that he would win: this was partly because he ignored the fact of those 4m UKIP votes—many of which came from Labour's heartlands.

Whilst IDS's campaign, and Fabricated Ink himself, seemed to believe that the issue of further integration had been put to bed—i.e. we don't want it, thanks very much—no one bothered to tell the European Union. As such, the EU has continued to press ahead (sometimes subtly, sometimes not) with the integration agenda: it continued to arrogate to itself new competencies, e.g. over energy supply and bin disposals through its environmental remit; over tax arrangements through state aid regulations, e.g. Ireland and Apple; .

And the EU did these things with, it sometimes seems, an almost wilful lack of regard, or care, for basic public relations nouse—seeming not to care about gross violations of traditional UK rights such as habeas corpus via the European Arrest warrant, as highlighted by the Andrew Symeou case; and, at the other end of the scale, ludicrous micro-management—such as deciding that the sale of powdered milk formula means that UK supermarkets cannot offer their customers free parking.

At the same time, the British government engaged in what many perceived as chicanery, and complicity with the EU, over such things as the European Constitution—sorry, the "Lisbon Treaty" (after the breaking of what voters perceived as a promise, both by Brown and Cameron, it almost didn't matter what the treaty actually said anymore).

Of the IDS campaign team's opinion of the EU in general, FI also says…
True, a lot of us wanted a looser, less standardised, less integrated Europe. We wanted a Europe that was more about free trade, liberal rather than corporatist, not over-burdened with fiddly regulations and tolerant of historic differences.

Some of us very much liked the idea of EU enlargement, if only as a way to mandate that looseness, the lack of standarisation and ‘let a thousand flowers bloom’ variety.
Had the EU been able to say, in 2001, "alright chaps—you in the UK can stay as you are, and you're automatically exempted from any new Directives or Regulations", then we might still be in that organisation. But, of course, that would have been impossible—without continued compliance with EU laws, remaining within the Single Market and the Customs Union would have become increasingly difficult. A compromise might have been made by allowing firms who wished to trade with the EU to sign up to all of the regulations would, of course, have been satisfactory to the British—as it still would be, I believe—but it was not, and is not, to the European Union.

Furthermore, Cameron's inability to bring anything meaningful back from his key negotiations—despite repeatedly watering down his stated aims and declared red lines—gave the impression that the EU simply was not going to make any concessions. As such, by the end of 2015, it became abundantly clear that an EU "that was more about free trade, liberal rather than corporatist, not over-burdened with fiddly regulations and tolerant of historic differences" was not on the table—and it never has been.

From a UK point-of-view, the European Union has never really helped the pro-EU cause. Perhaps its functionaries thought that the "Little Englanders" would not notice the Irish, and the Dutch, and the French (the French, for god's sake—supposedly one of the pillars of the EU!) being forced to re-run referenda until "the voters gave the right answer"? But how would they not, given that some of those were in the context of a UK referendum promised—and then reneged on by British politicians?

This kind of bombastic and arrogant refusal to countenance that the peoples of Europe might not be quite as keen on a "United States of Europe" as its architects, led to a perception that the EU simply didn't care what the citizens' actual opinion might be. As such, the EU continued—and continues, even now—to announce further integration measures, often in direct contravention of UK politicians' frenzied denials, or attempted evasions, e.g. plans for a European Army.

Similarly, had those inept British politicians not given the impression that they were lying, dissembling, breaking promises and generally covering up the true scale of the EU's ambitions, then we might have voted to Remain. Or, of course, the vote might not have occurred at all.

But, once Cameron had promised the referendum, it is unlikely that his personal pride, if nothing else, would have allowed him to cancel it—after all, was he to be the Prime Minister who had twice broken his "cast iron guarantee" of an EU-related referendum?

Further, as FI asserts, EU membership has made the British people more internationalist in their outlook—or, at least more Europe-centric. This proved particularly unfortunate after 2008, especially given the timing of the referendum, as both Left and Right deplored the on-going train-wreck of the southern European economies—Italy, Spain, Portugal and, particularly, Greece.

The Progressive media decried the cuts in Greek benefits and pensions demanded by the demons of the "Troika", and the horrendous unemployment rates (particularly amongst the young) in Greece and the other countries. The excitable media of the Right were able to conjure more immigration horror stories about people from the southern economies flooding into the UK, looking for work.

And, for slightly different reasons, both sides became incensed at the possibility that the British taxpayer would have to stump up for the Greek bail-out; this forced George Osborne to deny, categorically, that this would happen: his subsequent humiliating climb-down (originally denied by the Chancellor, and counteracted by the EU), simply provided more ammunition for those who maintained that membership of the EU meant that we were no longer in control of our own destiny.

In many ways, these crises shot down one of the Remainers' key arguments: that membership of the EU meant political stability and economic prosperity. How were people to believe this argument, when the newspapers were full of stories about EU member states where this was obviously not the case? The newspapers did not have to explain "complex" ideas such as "internal devaluation" or "fiscal transfers"—they just had to publish pictures of Greeks rioting against real austerity, and stories about 50% youth unemployment in Spain.

Our politicians and other campaigners rushed to explain that, of course, this economic nightmare couldn't happen here—because, our "Anglo-Saxon" economy and legal system were uniquely conducive to business. This, of course, tapped into the British psyche about our unique brilliance and fitness (a jingoistic reflex that is, in fact, present in most peoples) and thus reinforcing the mindset of "well, why can't we be bigger players on the world stage, rather than a province of the EU"?

In this climate, what might be seen as surprising is that Leave won so narrowly (and I've barely even touched on the migration issue). Rightly or wrongly, the British people is not one that likes to see itself as subordinate—and, yes, one can blame the British for being pig-headed, nostalgia-driven, xenophobes if you wish—but, in the circumstances, a rift was more likely than not. Indeed, given the many exemptions that the UK already has, one could argue that it was inevitable because it was already happening.

Probably the only way to ensure that the UK voted for Remain was simply to wait another thirty-odd years for all those people who viewed themselves as British (as opposed to European) to die. One might argue that holding the referendum in 2016 might be the only way in which Cameron was ahead of his time.

Whatever happens next—and I don't necessarily disagree with FI's assessment of Theresa May—it is likely to be a bumpy ride. I remain optimistic but—in my more cynical moments—largely because May's vast ego won't let her be the Prime Minister who fucked up Brexit.