Whose problem is the Irish problem?

Whose problem is the Irish problem?

by Eben Wilson
article from Thursday 17, August, 2017

THE IRISH TAOISEACH’S recent speech in Belfast repeated a standardised pro-EU political position including the mantra that there should be “a plan for a hard Brexit“. This echoed what many of the commentariat demand and, for economic liberals, it is getting a little tiresome.

Mr Varadkar and many others have yet to recognise that the UK’s plan is to be out of the EU single market and out of its customs union; instead they keep inventing a plan of their own. The Scottish Government is stuck in the same rut. 

The UK government says it does not want a hard border, and gives some suggestions for how customs arrangements might be made flexible. Initial responses to such arrangements from the EU have been negative – suggesting the UK is living in fantasy land. We have to ask why.

Any hard borders that might ensue due to Brexit are not of our making, they arise because the EU wants to protect its businesses and inspect the origins of goods that it imports. We can therefore fairly ask; the UK wants free trade, what does the EU want? What’s its plan?

The answer to that last question tells us a lot about the politics of pro-EU factions, including holding up a mirror to the position that Scotland might find itself in economically were it somehow to force itself back into the EU.

Take a step back and leave behind the other politicised aspects of the two Irish jurisdictions and instead imagine two states, one within the EU and one without. The former has a tariff wall surrounding it, the latter is happy to trade freely across the world, with no hindrance on imports.  Which one needs the customs posts?

What happens if the free-trading state decides not to have any customs? Literally none;  a truckload of goods heading into the EU would see no border agents on its way out of the free-trading state with an export load, but would then be stopped at the EU customs post.  A truck coming the other way might be quickly passed through both areas, although the EU would no doubt demand some paperwork from its own exporters.

Who pays? The consumers of the EU; first for their customs service posts and the administration of a comprehensive customs union, but also for higher prices of imported goods as tariff and non-tariff costs are put into the costs of the non-EU traders exporting into the EU. The free-trading businesses might decide to export elsewhere where trade is easier and cheaper and expand trade more rapidly through worldwide sales; or a lower exchange rate might emerge to neutralise the tariff.

EU exporters could end up with difficulties, while the free-trade state, finding EU goods rather more expensive, might discover other places to buy cheaper goods, like Canadian eggs or American chicken. If they do, this could substantially reduce the cost of living in the free trading nation, making its businesses’ ability to build in more easily the costs of any tariff barriers for exports to the EU.

You cannot help but think that some of Mr Varadkar’s and the EU’s warnings are a bit holier than thou, declaring the Irish EU position to be good and favourable, when in fact it gives Ireland a serious problem in respect to its own position vis-à-vis the UK.  Presumably this is why the Taoiseach offered an ill-defined “deep free-trade agreement” and “meaningful talks about solutions that might work for us all”.  Yes, Mr Varadkar, with “all” including you who have the problem, not us; and remember, we’re going to walk away if you can’t get a grip on a logical position.

There is a good chance that, despite the howling of all those who wish to plan trade, that the UK, by sticking to the principle that free trade is a good idea will pin the EU into a difficult corner; making it defend its appalling protectionism and the chummy non-tariff barrier arrangements that protect its big corporates to the detriment of poorer consumers and workers within the EU, and slow both EU and global economic growth.

At the root of the Brexit negotiations is a disagreement over the value of free-trade, especially its ability to make change happen for the better for consumers generally.  EU trade policy is mercantilist; controlled, regulated and politicised through a producer focus.  UK trade policy aims to be open, global and consumer focussed; we do not belong together with views as divergent as this.

The principles of free trade in goods are mirrored in the free trade of labour and talent, but here Ireland’s own internal issues cloud debate. Is the problem about separation with the island of Ireland, the emergence of a back door for immigrants or smuggling? I have no doubt that technical fixes can be found; Ireland is a great deal more comfortable with itself today, it’s not in the Schengen zone and smuggling is an information system about price differences that will never become extensive for as long as international trade is easy and transport expensive.  If we have to have grey areas, so be it; the status of Irish nationals in the UK has always been carefully fudged. 

Again, it is for the EU to defend any reason it wants to put barriers up that affect people as opposed to trucks crossing its own borders. Freed from the European Court of Justice, the UK will have its own rules and they are highly unlikely to mean that Southern Irish residents lose privileges they already have laid down in legislation from 1925 onwards.

Where does Scotland sit here?  Again, leaving aside the “other agenda” of politicised relations between the state of Scotland and rest of the UK, do the same arguments not apply?   Why on Earth would Scotland want to depart from free-trade and join a mercantilist cabal? Would we enjoy being laughed at by England as we struggled with vast quantities of imports stuck in queues at Gretna, Coldstream and North of Berwick? Would Scots enjoy paying their taxes for boat patrols on the Tweed and the Solway?

Historically, geographically and culturally Scots and Scots’ businesses are global entities; our global reach has taught us most of what we know, and generated the productivities we enjoy. It is truly galling to hear our establishment pundits and their subsidy drunk statist hangers-on in Scotland's think tanks and quangos moan about how much Scotland will lose through Brexit. We have one of the strongest world networks in business, and a huge reputation in our productive abilities; what we need to do is change focus and increase sales elsewhere. The EU is a problem for the EU, not for Scotland; apart from the fact that it subsidises statism and central planning and so supports bad policy.

As time passes and the clock ticks on, there is a growing sense of frustration among free traders that the UK position is being reported within the UK as chaotic, unplanned and incompetent. It’s not; it’s principled and forward looking, based on economically liberal ideas that favour consumers and that have worked historically. Crucially, it does not involve a central plan. Has anyone reported that the 27 nations of the EU are offering their own positive progressive plan? Have they done anything other than dig their heels in about the powers of the European Court of Justice, power to control trade, power to demand regulated services and capital markets?

This negotiation is a power struggle, except that only one side is demanding power – the UK side only wants trade freedom. We Scots are inheritors of the moral sentiment put forward by Adam Smith that mercantilism is destructive not only for others, but for our own nation; curtailing the divisions of labour and development of knowledge that allows everyone in a society to develop as human beings, especially the less well-off.

And that should be the real goal of the UK negotiating position; to explain to Europe that we reject mercantilism. We need to explain that we plan to learn from trade, because that will improve the lives of our young people by learning what others are doing and what we can do with them to best advantage. We do not want our choices made for us by the EU’s trade controllers. We want to innovate for the benefit for all, not trade in yesterday’s controlled goods.

The alternative is gradual decline through EU protectionism; with other consequences. If there is one reason why we should be out of the EU and acting globally it is the reality that EU trade policy is starving people in Africa, forcing thousands of them into small boats to cross the very borders that are used to do them ill. Britain, and Scotland, has a huge opportunity to stand up to this protectionism and re-establish proper free-trade with these emerging nations.  We can do a lot more for peace, prosperity and global development by allowing poor people to export cheap produce to us; in return we can export what they need to improve their lives. Then, together, we can thrive.

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