It's time to back off and demand free trade

It's time to back off and demand free trade

by Eben Wilson
article from Monday 11, December, 2017

MRS MAY’S last minute efforts to get away from the EU imposed deadline on Stage One negotiations for Brexit may have been clever politics, but it was also unprincipled political expediency.  Everyone can see that the fudge and ambiguity of the first phase “agreement” is extremely brittle.

The text confirms that politics drives these negotiations, not a concern for the people who voted for sovereignty over their economic and political future. Now, the searchlights of scepticism from both remain and leave factions, the former bolstered by devolved governments, and hounded by a media demanding simple quick fixes, threaten a further fudged and ambiguous outcome from the next negotiation phases that could be severely damaging economically.

By agreeing to negotiate and not being much more forceful about walking way, we have allowed the EU to think that they cannot lose by digging their heels in. The great risk is that we get forced into some form of bilateral closed trading arrangement based on our eagerness to get access to the EU single market.

We should not be in any way keen to go this way.   It would close many other doors that we desperately need to see opened up, and especially in Scotland.

In coming to this conclusion I have been looking at the realities of customs barriers and globalisation of trade.  Not many people have heard about the WCO, SAFE , “Single Windows” and AEOs in this debate[1]. Maybe we will now as negotiations continue. If we don’t, the media will have shown again that is much more interested in the mud-slinging than the arguments.

The WCO, ironically headquartered in Brussels, is the World Customs Organisation. SAFE is the Security and Facilitation Framework through which global logistics are carried out, a single window is an integrated documentation system shared between customs organisations and traders, and an AEO is an authorised economic operator – a pre-cleared international trader.

These are the core institutional arrangements that allow cross-border trade to take place.  We are talking here about more than 24 million containers annually.  More than five million of them through Felixstowe and Dover alone. 

What’s crucial is that these arrangements exist now, and they are rapidly advancing and becoming further honed across the world.  They are not creations of the EU, but of world traders and customs organisations. As so often in political economy, the real world of business is far ahead of the political classes in getting things done, looking at a far longer time horizon, across a much wider canvas, and co-operating for mutual gain rather than being uncooperative to protect factional interests.

In this context, the EU is a dinosaur; a protective cabal of special interests, especially in relation to trade in food, while also being adept at non-tariff barriers in the form of standards and sector specific regulatory approval regimes which control trade both from without and within the so called single market.  And this is the cabal that the Scottish Government, among other remainers, wants to continue with; while the rest of the world goes the other way, seeking mutual benefit from freeing up relations.

Together, these institutions provide a toolset for a productive future in cross border trade for an independent UK separated from the EU, including Scotland.  They allow a future for us to access and trade with the part of the world that is growing and innovating, rather than the obsolete and obstructive EU which tries to protect its place in the world through a single regulatory regime for 500 million people that curtails growth and innovation.

It is this framework and its potential that we will lose if a trading arrangement is agreed between the UK and the EU in the next phases of negotiation that requires us to close our borders to non-EU trade.  That must not happen; it would be worst of all worlds, we would be restricted in our power to influence Brussels, and restricted in our ability to trade with others.

Let’s look at the practicalities here; because they are what matters for UK households rather than the politics.  I run a business in advanced electronics and data systems; we buy components and sub-assemblies, and develop products and services by combining a mix of manufacturing, assembly, digital programming and presentation plus maintenance services.

As such, we buy goods from all over the world from where our components are shipped, our firmware needs are serviced from Osaka, Italy, China, the US, Canada, and even, I discover, from Dominica. What we do in the UK is put the value added service together – in the jargon, the end to end solution.

In this, the mix of EU and international regulations; the CE ratings, the IEEE standards, the WEEE recycling requirements are all adhered to as a matter of course.  They cost us money, hidden in our supply chain costs, rather than internally within our own companies.  There’s a lesson here, the “regulations” that are mentioned in the EU negotiations are not just affecting large companies; every company buying from other companies will be affected by any inefficiencies in tariffs and other barriers that lower competition, or favour larger corporates who can deal with EU bureaucracy.  Ordinary consumers pay in higher product and service prices, and slower innovation.  That makes their lives poorer, and it hits the poorest hardest. 

For all Scots, free trade matters far more than cosy arrangements between St Andrews House and the Berlaymont in Brussels.  The latter are what politicians love, the former are what the people need.  All consumers need to view calls to retain access to the “single market”; there is no single market, there is only a highly controlled EU internal market, based on detailed and prescriptive rules and regulations for goods and services.   These rules are not well adhered to however much the EU claims to be achieving “harmonisation” across its 27 members.  It’s vital that our negotiators do not fall into the trap of allowing “regulatory equivalence” to kill off the growth of our worldwide trade.  [2]

In that context, the contrary approach of the present Scottish Government, and indeed the Scottish Conservatives and other statist left-wing parties, is deeply damaging to Scotland.  Our politicians have committed themselves to a backward facing disruptive approach, the opposite of leadership.  The SNP play politics whenever events, like the Irish border, allow them to make capital for their singular one-dimensional secessionist agenda. The Scottish Tories provide support that could help UK negotiators fall into the worst-case scenario of a half-in half-out restrictive trade deal; as so often soft-left statism flops into corporatist claptrap and surprises itself with voter flight. When those voters are expanding businesses, we all lose.

True leadership would look outwards, think globally and catalyse the enterprising. I am minded yet again to hire a large aeroplane, stuff it full of young graduates with rucksacks and three month’s pocket money, and jet them out of Prestwick to Asia, Africa and the Americas.  We could be holding a Scottish International Trade Convention in the half-used departure building by the end of February, inviting hundreds of sales managers from Scottish companies to find out what our kids have found that we could sell to the world.  This would be ten times more productive than raising our taxes to spend on yet another technology institute which it is hinted that Derek Mackay is about to do; no doubt this new quanguette will be hiring in the same way as those wonderful people who charged students in Bath £450,000 a year to hire a vice-chancellor of doubtful usefulness.

We need to get on the make; the tools for easy international trade are there for us to use – why on Earth are we continuing to cosy up to yesterday and re-adopt European corporatism and  mercantilism? To recoin a phrase; it’s the politics, stupid.



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