Friday, 28 April 2017

Tory trade fantasies are thin gruel

A number of recent articles from Spiked, City AM, CapX and Civitas have criticised the single market saying that it diverts trade. Since the Anything But Arms agreement nullifying tariffs that is less of an issue. The problem as ever is the inability to meet international standards to the satisfaction of EU authorities.

This is where the EU has a rudimentary trade facilitation policy akin with the kind of activity I have advocated for the UK. It is however underfunded and not nearly as active as it needs to be. In this it turns out that the UK is more of an active player than I thought but still we need to do more.

The pertinent question is whether leaving the single market resolves that. It doesn't. As you very well should know by now, in order for us to retain seamless trade with the EU (our largest single trading partner) we will need to maintain EU rules. Even if that were not the case we would, as per the WTO TBT agreement adopt the baseline level of standards from the global bodies.

In short, the non-tariff barriers remain and were we to in any way relax our import controls on African goods we would, quite rightly, increase our risk factor on EU market surveillance systems. That would make our EU bound goods subject to more frequent customs checks. This is bad for what should be self-evident reasons.

As to the assertion that the EU diverts trade, the EU is not alone in having robust controls against substandard produce not least because of the inherent risks of importing foodstuffs from Africa where corruption leads to food fraud and contraband that eats into the profitability of value chains.

This is why African commodity exports are still stagnating. Whether we like it or not the focus absolutely must be on trade facilitation and international development. There is no magic want to be waved to make all of the structural problems of trade disappear.

In respect of that the critcisms levelled at the single market, while valid, are ultimately meaningless. Leaving the single market only reduces our EU trade for no commercial advantage. What matters is being outside of the Customs Union whereby we can tinker with tariffs - but it is likely we will carry over the Anything But Arms agreement rendering such powers useless.

As per this link we find that Africa is hesitant to enter bloc to bloc deals with the EU in that these such trade deals are asymmetric and usual grant the EU too much power to destroy emerging and developing industries. Put simply, these countries are not ready for "level playing field" competition with the West which is only too keen to dump its surpluses.

The further deterrent is all the strings that come attached to EU deals, not least demands to implement UN sustainable development goals. By doing so you make yourself a playground for Western NGOs who are not presently welcome.

Being out of the EU and seeking deals with Africa on a more equitable basis on the proviso that the UK is allowed to implement trade facilitation measures may very well be more achievable. That though does not require that we leave the single market. The advantage to that is that provided we do not make short-cuts on standards we can use that trade agility to leverage a (convoluted) workaround on EU rules of origin or serve as a re-exporter. We could serve as a backdoor into the EU for African goods.

The main efforts of UNCTAD and the WTO are presently centred on trade inclusiveness, for SMEs especially. This is where we can enhance Africas ability to export while putting us first in the queue to supply Fintech solutions and online banking services/internet connectivity. With the Trump administration drawing down on USAID it, to some extent, vacates the field. Trump does not seem to grasp that aid programmes are as much about filling up the order books as anything else.

Before this can happen though, trading partners will not be willing to enter any agreements with us until there is a degree of long term certainty and they know what Brexit looks like. Further more they do not seek to antagonise the EU. It is therefore in our interests to get things settled as soon as possible and work to a regime that is already understood. That to my mind is the EEA. Negotiating a bespoke deal adds to the delay for no no gain while needlessly harming UK-EU trade.

As it stands, the publications mentioned are repeating decade old political memes devised by the ASI, IEA and all the other predictable, obsolete London "free market" think tanks. It is received wisdom from the bubble. Outside of that dismal clan I have yet to see even one compelling reason to leave the single market.

Many of the criticisms of the single market are entirely valid and it is far from ideal but we must operate in the real world and accept that it is an entity in its own right and consequently something with which we must deal. Our aim should be to evolve it, widen participation and eventually wrest it from overall EU control to make it a genuinely multilateral system. Until then we have to put up with it. We will need to build up our own capabilities in the global arena before we can make any strategic choices.

Thursday, 27 April 2017

Don't expect miracles from free trade agreements

There is a certain degree of naivety among those in the Brexit camp when to comes to trade. The objective of a trade agreement is to remove regulatory barriers and tariffs and in more comprehensive deals find specific areas of cooperation through working groups. As to how useful that is depends on a number of factors. It is a mistake to adopt a "if you build it they will come" mentality.

Utilisation is by no means guaranteed. For starters there are natural patterns in trade and though I am sceptical that it's a universal rule, geography matters and will continue to do so for the foreseeable future. This though is not a determining factor. Certainly cultural commonalities will leader to higher volumes of trade not least because there isn't a language barrier. This is why the Brexiteers tend to favour Anglospheric post-Brexit trade strategies.

Distance and size however, has a good deal of bearing on it. Australia may well be a developed westernised country but it is on the other side of the planet, expensive to reach and with a population being about a third of our own, not a very large market by contrast with the EU.

Then there is the question of whether partner nations are able to supply what we are seeking to buy. For minerals, ores and meats Australia and New Zealand are producing at capacity in order to meet Chinese demand and may find they are unable to accommodate UK orders. A new supply chain has to be established which has up front costs and initial bureaucratic hurdles. Since the volumes of trade could very well be unaffected by a more liberal trade agreement it might well be that they see no advantage in further opening their markets to our products and services.

I am of course speaking broadly just to illustrate the concept but these are the kinds of considerations that trade offices on both sides will be churning over. While their politicians might very well make positive noises and may have genuinely good intentions, when it is tasked to the trade officials they might find there isn't the scope to go further on what is already a fairly liberal arrangement. As much as there are economic considerations there are also political dimensions whereby the voter base (or donors to politicians) will not take kindly to facing fresh competitive.

Some of the more tawdry Brexit inclined publications will often make a big noise over the freak tariffs designed to protect particular product but on average tariffs are historically low. More to the point, they are stable fixed cost factored into pricing. It is the unpredictable variable costs of trade that are of more concern to exporters.

Then we have behind the border costs and obstacles. These can be service charges or product registration fees through to the costs incurred from poor infrastructure, delays, corruption, and depending on the type of export, climate is an issue. Perishable goods require expensive refrigeration facilities in warmer climates. Trust is also an issue. We could have a free trade deal with Nigeria but the lack of secure means of payments is very often a concern and also the ability to return goods is a consideration for buyers.

Then of course there are disparities between regulatory cultures which prove to be problematic. This is why even the EU does not have a comprehensive agreement with the USA. It has a number of cooperation agreements and smaller sectoral deals but the holy grail of harmonisation remains elusive. Any deal the UK secures will be superficial and the regulatory barriers will continue to be a deterrent to exporters.

Further to this, not every nation acts in good faith. While on paper a trade agreement might remove certain barriers they can very easily invent new ones and the next major topic in trade circles will be stealth non-tariff barriers. The ones that are there, put there deliberately, but very difficult to prove.

As with most areas of policy we see big ambitions, plenty of promises but when it comes down to it, like the obsession with deregulation, we find that progress is slow and the gains are marginal. When it comes down to it trade agreements are of varying worth, dependent on many variables (not forgetting exchange rates) and the presence of an agreement does not necessarily bring about more trade. This is why we must be cautious of any statistical estimates on how much trade deals are potentially worth. The real world very often does not cooperate with the theoretical models.

As with anything it helps to have a particular strategy rather than darting off round the world looking to sign accords with anyone you fancy the look of. As a business to business and fintech economy we should be looking to create opportunities in those areas. Manufacturing is important but not our dominant concern. This is going to require an integrated foreign, trade and aid policy working in conjunction with each other for specific outcomes.

This is going to be a process of trial and error and, for a time to come, mostly error. Where trade is concerned we have lost our institutional memory and we are beginners at this. We will likely make a number of avoidable errors through inexperience and gullibility. In that respect remainers are already gearing up for their "I told you" so moment. This though suggests to me that FTAs are not the right approach. More than anything they chew up an enormous amount of diplomatic runtime (which we do not presently have) and they take a long time.

What is more likely to yield dividends for trade in goods is to raise initiatives for common global rules (and tariffs) for one sector at a time. It may be that we need to go more micro and just look for more achievable accords on particular product types. Bilateralism is increasingly a massive duplication of effort where every nation has a corps of bureaucrats trying to achieve different objectives with the same partners. The more lucrative partners get preference and their deals will influence our own. I take the view that if you cannot win at a game then play a different game.

We could waste a lot of time talking to every nation individually and it would do very little to enhance our position. We should instead, as a priority, ensure that those agreements with third countries via the EU are replicated with as little fuss as possible and look at means of streamlining the regulatory process and customs systems. The key is to increase the profitability of existing value chains rather than chancing new ones. New supply chains can be volatile and require investment.

For the time being though we should not lose sight of the fact that there is nothing we can accomplish in the short to medium term that would compensate for a major drop in EU trade. That is the absolute priority. It is imperative that we retain as many single market rights and privileges as possible even if we intend to diverge later down the line. The panglossian nonsense of Tory Brexiteers is no basis on which to bet the farm. We would be fools to throw away the most compressive trade arrangement we have based on vague aspirations not grounded in reality.

Brexit for me was always primarily about ending EU political control of UK. Sadly Brexiteers bought the myth that Brexit was also an economic solution. It isn't. Brexit does involve a hit to the economy and the best we can hope to achieve in the medium term is an economically neutral Brexit. Enhancing trade will take patience, knowledge and skill - all of which are presently in short supply in Westminster. We can be optimistic in the long term but for now caution should be the watch word.

Before we can make major inroads into global multilateralism we first need to establish ourselves and learn the ropes as an independent actor. For this we will need to build up our own knowledge base and acquire the right talent. We cannot expect to go haring off into the wild blue yonder and expect the world to fall at our feet. The world is not breathless in anticipation of our impending departure from the EU. Boris Johnson's "bumper deals" exist only in his imagination.

We should also keep in mind that we will remain aligned to the EU regulatory sphere probably for as long as the EU continues to exist. Over and above that there are several global treaties, conventions and rules that place limits on what we can do. Brexit is by no means a free licence to do as we please. There is a system in place we must navigate and there are no short cuts. If there were, everybody would be taking them. Progress on trade liberalisation stalled for good reason.

There is still every reason to believe Britain can make it as an independent state and by playing a different game to the EU we can use our agility to good effect. We can be a trade innovator and an experimenter, perhaps inspiring others to join us in the push for global solutions.

To do that, however, we will need to build up political capital. We will need to demonstrate our commitment to multilateralism at a time when when the world is seemingly retreating from globalisation. That will take investment and we must be mindful to send out the right signals. That starts with ensuring we take no foolhardy and aggressive moves in our approach to the EU. We will be judged by our actions, not our words.

A sane Brexit is still possible

Thanks to the absurd complexity of Brexit, our future relationship with the EU will not be defined for some time to come. That means there is still everything to play for in pushing for a sane Brexit.

There are those who say the Brexit vote requires of us that we leave all EU legal constructs - and that means leaving the single market. Except that the single market is not an EU construct. It is the joint property of Efta and the EU brought into being by the EEA agreement. It is a collaborative construct that operates through a system of co-detertmination. It is, as far as I know, the most comprehensive "free trade deal" known to exist. 

Members do adopt rules devised in the EU but only through a process of negotiation and veto is allowed. ECJ decisions are considered by the Efta court when making a ruling but Efta decisions are not binding. Members are free to veto any rulings if they agree to accept whatever penalty is permitted within WTO law. It isn't ideal, but it's better than having a typical comprehensive agreement with the EU where you accept all of the rules and decisions without veto or reservation.

Insisting on hard Brexit ultimately means losing a lot of trade for no good good reason, to no possible advantage, while rejecting a trade arrangement that would repatriate all the areas of competence that matter. It would also be futile. Any trade agreement will require customs cooperation, regulatory cooperation and sizeable financial commitments. We would fail to achieve the demands of hard Brexiteers while harming our international standing and losing several privileges in the process.

Thankfully there is still time to correct our path, despite the utterances of Mrs May. Nothing as yet is a done deal. The only certainty is that we will seek an exit settlement under Article 50. Once that is agreed, we must then start talks on an FTA, which will conclude in a formal treaty some time in the future.

Between the Article 50 agreement and the FTA there is a gap which must be filled. This is the transitional agreement. Some of the treaty provisions will continue to apply to the UK - others will not. That requires a wholly separate "secession treaty" which must be agreed unanimously by all 27 EU Member States, and the UK - and be ratified by Parliament. There has been a total blackout on this and this is potentially going to be the ball-breaker. Such a complex treaty cannot be agreed in the time. We can only really speculate as to how that goes. There are several points of failure and talk of a free trade agreement is, for now, the least of our worries.

That gives us plenty of time to argue about the shape of any future relationship with the EU. Theresa May has spoken of an ambitious free trade deal. It will need to be with more than three hundred policy areas to cover. If it is to come in the form of a single agreement then it will have to borrow heavily from the EEA agreement in terms of content, structure and treaty mechanisms. There is no other way to do it.

The only question is what will serve as the intermediary body, whether it will be Efta or a court in its own right - or some other entity. In that respect it very well could be single market by another name. Just a different mode of it. By then attitudes may have changed significantly and with the inevitable implosion of Ukip the Conservative party will be at liberty to make some unpopular choices where freedom of movement is concerned.

There is still the possibility that, as the EU Commission suggested, Efta/EEA becomes the transitional agreement as there is no time or will to devise anything of a similar magnitude from scratch. If that happens then a concerted campaign could see that becoming the final settlement.All it needs is a decoy gimmick so as to avoid calling it single market membership - and that ought to be sufficient to appease the Brexiteers who will be none the wiser. So long as they call it an "FTA plus" Brexiteers will consider it mission accomplished. As will I.

Assuming we avoid an acrimonious accidental Brexit a deep relationship with the EU is an inevitability. The EU will continue to be a major influence on UK law and as a regulatory superpower that much is unavoidable. It will most likely not satisfy the hard Brexiteers since what they want is a simple free trade agreement. What they want is to simplify the inherently complex. This is neither possible nor desirable. A basic deal would ultimately eliminate a lot of trade possibilities within the EU.

More to the point the UK will be faced with some uncomfortable realities along the way as it discovers that it has no capacity to repatriate certain functions, no budget to do it and will ultimately decide there is little value in disengaging. It is likely that the EU will be amenable to this as UK funding enhances its own capabilities and influence.

With this in mind, so long as the government is repeatedly bludgeoned with the cold realities of a hard Brexit, it should have them running for cover. I have always suspected that we might well end up being boxed in by reality and though on paper we will have left the single market, in actuality we will be yet another peculiar permutation of it.

I see it as especially important to press for this for a number of reasons. Firstly, Brexit is not an economic choice. Primarily the purpose of it is to put a firm firewall between us and the EU executive. Leaving the EU should not mean ending cooperation with the EU and participation in its regulatory systems has certain benefits. What matters is the right to say no. This form of Brexit satisfies that precondition.

Secondly, there is no real point to a seismic separation. There is a certain Hotel California dynamic to this in that we have been an EU member for forty years which inevitably makes it near impossible to escape the gravitational pull of the EU and as our nearest and largest trading partner there is, on balance, no commercial advantage to doing so. We could go all out for total separation but the "freedom" we would gain is akin with the freedom you have when you are evicted and all your belongings are thrown into the street.

The assumption of Brexiteers is that we can dump the EU and rekindle a free trade renaissance. It does not work like that and it hasn't for some time. Trade around the world is influenced by regulatory systems. More than tariffs, regulation is the key issue. The pacific trade circle is heavily influence by US and Chinese regulation and supply chains gravitate toward the rule of the nearest and most relevant regulatory superpower. For Australia and New Zealand, that's China. Where global standards are not used, they tend to bed to the preferences of their largest customer. This is what torpedoes Brexiteer CANZUK fantasies.

And this brings us neatly to the final point. You would only really go to the trouble of severing deep ties with the EU if it were an obstacle to pursuing a different path. Being part of the single market is no real barrier to any of the things we would seek to accomplish. We would regain our autonomy on all of the global bodies just by leaving the EU. We are a free to influence the rules that steer other regulatory regimes and use that to our advantage.

That is about as much as we want from Brexit and about as much as we need. It gives us a bit of a reboot in terms of those policy areas we repatriate without having to wreck our exiting trade. The only reason we would go further than that is to pursue a bigger, better idea - and to be frank, the Brexiteers don't have one. Utterances about the Commonwealth or the Anglosphere sound superficially attractive but when you look at the modern arena these concepts are not realisable. The most we can really do is enhance our cultural ties - and there was never really all that much stopping us doing that to begin with.

I have been a leaver all of my adult life. I was there at the beginnings of Ukip and have been near to the centre of modern euroscepticism for as long as it has been around. In all that time eurosceptics have obsessed about leaving the EU but have utterly failed to produce an alternative or a credible blueprint for getting us there. The EU has been an object of hate to such an extent that it has become the end not the means. They have long since decided that we must leave the EU and that is all that mattered to them.

Consequently the old eurosceptic narratives have never really evolved or updated and Brexiteer thinking is much the same as it was in 1992. The John Redwoods and Peter Lilleys of this world have not in any way developed their understanding or advanced their thinking and have not grown in the slightest. Their ideas are simply not compatible with the modern world - and when you look at the old Ukip party political broadcasts they weren't really up to much then.

Now that we are leaving the EU we find that Euroscepticism 2.0 looks much the same as Euroscepticism 1.0, with the likes of Jacob Rees-Mogg and Steve Baker trotting out pretty much the same garbage about deregulation and sovereignty. This really is Jurassic Park stuff. There is still enormous potential in Brexit but it will take new ways of thinking and those who ushered in this new era are the least equipped to shape it. As is so very often the case.

Brexit will free us of a number of obligations that will allow us to reinvent and replenish politics and policy. To an extent it is already happening. It has swept away the bicycle shed politics of recent years and now we are asking real questions about our direction and our place in the world. This can only be a good thing but we should still be mindful that the EU is, for the time being, our central concern and it would be a folly to lose sight of that. To turn our backs on all of it would be to turn our backs on many of our own accomplishments. As much as that would be foolish, it would be a great pity. 

Brexit is in the long term interests of democracy

The slogan "taking back control" is one often scoffed at by remainers. In their eyes we never ceded sovereignty and were free to govern any which way we choose. In strict terms the UK was still sovereign in that we could at any time have decided to leave the EU. That though is not the popular understanding of sovereignty and to pretend that the UK has not ceded considerable control is dishonest.

Though the EU is not established as an executive entity comparable with our national government it still has the means of controlling its activity. More specifically, by way of directives, decisions and court rulings it sets the parameters for our government to work inside. In this the EU works toward the establishment of frameworks, systems and conventions that bind us and limit our options.

For trade there are many good reasons why that is necessary. If you want the benefits of free trade the it stands to reason that a degree of systems integration is necessary and there needs to be a shared approach to governance. You then need common rules for the administration of governance systems. In order to effect good policy you need good data and that means having systems in place for the collection and study of it. In all areas of cooperation we cede some sovereignty in exchange for the better functioning of trade.

The complaint in this is that we are drifting more toward a state of dictatorial technocracy. This is not an unreasonable complaint. Very often we find policy is designed by vested interests and the outcome is very often an imperfect compromise which can run counter to its stated objectives and is difficult, sometimes impossible, to reform.

In many areas we have unnecessarily fetishise sovereignty. Certainly Ukip and the tabloids have some curious bouts of histrionics over the most absurd things - often related to standards and what is perceived to be micromanagement. All of this adds to the perception of a creaking bureaucracy that makes ever more petty and meddling rules seemingly for its own sake.

There are, though, increasingly aggressive moves by the EU to control policies far beyond the scope of trade. There are a number of agendas, some benign, some not, driving EU policy where they begin to tread on the territory of what should be entirely a domestic affair. In the pursuit of a social Europe with uniform rights throughout there have been moves to standardise labour laws in conjunction with freedom of movement. This often over looks the many cultural differences and differing attitudes to work - which can vary between sectors.

This is where the EU becomes intrusive. Policy is increasingly decided by courts rather than parliaments and those decisions are permanent and beyond the reach of democracy. It also means policy is slow to adapt. Much of the ideas enshrined in EU law pre-date the internet and the the sweeping changes in the world of work.

This is ultimately down to the ideology of the EU which believes in ever closer union, working toward a uniform government for Europe with the same rights throughout. In spirit that sounds superficially appealing but that mentality ultimately undermines the ability of people to choose for themselves and in so doing makes politics redundant. Ideas and social agendas being life in Geneva, pass through Brussels and then into UK law. This is top down politics.

This also has implications for competitiveness. The most productive economy is the one most able to adapt. This though runs counter to the EU that there should be no inter-EU competition and that there should be a level playing field. As much as anything this is likely to stifle innovation.

Were the EU a simple trade bloc then it would confine itself to only those areas necessary to enhance trade. Instead though the EU increasingly legislates over matters where there are no transboundary concerns where often local decision making and administration would be preferable and superior. The EU targets culture often leads to bad policy overriding local decisions.

In this our own government is often just as much to blame for the maladministration but the driver is still EU policy. This arrangement allows the EU to scapegoat national governments and vice versa. Nobody takes responsibility for policy failings. This is what we leavers mean when we say we want to restore accountability. The removal of the EU removes the go-to excuse for our own politicians.

What so offends the remainers is that sovereignty and democracy are overrated. The notion that people can decide through their own respective governments what the right balance is between the employer and employee is too dangerous and must be enshrined in EU law beyond the reach of liberalising conservatives. It is born of an inherent mistrust of democracy and a lack of faith in people to fight for and conserve their own rights. Little wonder that unions have come obsolete in the EU order.

In this respect the remainer position is typically left wing authoritarianism. Their aspirations are manifested in EU social policy and they view it as largely benign. Brexit overturns that order and makes these such laws once again to democratic challenge. This is absolutely what they do not want. We can see this in the remainer rhetoric when they list the many rights enshrined by the EU? Who but a heartless Tory could object to more paid paternity leave etc. This a typically childish left wing view of the world.

One such example is the minimum wage? Who could object to that? Well they kept pushing it up and now supermarket tills are almost entirely automated and that wipes out a lot of socially useful low skill part time work. The average leftist is pathologically incapable of grasping the concept of unintended consequences. And that is one other unwholesome aspect of EU membership. It means that those areas of government not constrained by EU rule are concerned with mopping up the unintended consequences rather than making preventative policies and devising workable solutions.

In this, we see that the ethos of the EU doesn't work. The notoriously militant French workers don;t think the EU social agenda goes far enough and seek ever more protectionism for their industries where as the Brits tend to be a little more enterprising and open to the the world. I might venture that has something to do with being an island and a maritime nation.

The question we have now though is where we wish to redraw the lines between sovereignty and free trade. The ultra Brexiteers seek their holy grail of absolute sovereignty - which is totally unreasonable and completely unworkable It comes at the expense of European trade. £240bn at last count. The process of Brexit therefore is a reappraisal of what we consider an acceptable trade off.

The assumption among ultra Brexiteers is that free of the EU we are free to legislate as we please without consideration to the EU and that we can be a buccaneering free trade pioneer. This overlooks the fact that the modern global trade arena is just as much rules based and the EU as our largest single trading partner is nearest regulatory superpower. There is no free trade without a degree of cooperation and compromise. In that regard there is no absolute sovereignty either.

What we need, therefore, is a framework for maximum cooperation and free trade with the EU while restoring some of the demarcation lines. In that regard there is one such mechanism. The EEA agreement between Efta and EU. Otherwise known as single market membership. Though it does not give us total sovereignty (a wholly implausible ambition) it does at the very least give us the right to refuse EU laws where we deem the penalty worth the sacrifice.

It is not the day to day regulation of trade we need concern ourselves with. Regulation is a fact of life and it oils the wheels of trade. Brexiteers have fetishised it over the years when really it is EU and the various directives that cage our democracy. Since EU regulation is based on global standards, where there would be little room for divergence it should not be a consideration for Brexit. More to the point there is no appetite in the business world to radically alter the regulatory regime. Imperfect as it is, it is at the very least stable.

I take the view that Brexiteers have been fighting for this outcome for so long they have forgotten what it is that really bothers them about the EU to the point where they have become irrational, fixating on the largely irrelevant minutia. Worse still they have bought into the delusion that Brexit of itself somehow brings about economic revival in spite of there being no compelling evidence that speaks to that.

All we can really aim for is a change in the nature of our relationship with the EU where we remove the EU as the supreme authority. That does not and should not rule out the possibility of economic integration. It just reaffirms the people of the United Kingdom as the supreme authority rather than the Commission and the ECJ.

This is a point lost on the hard Brexiteers. They seem to think rowing back on economic integration is a requirement of the Brexit mandate. It isn't. But then they are also motivated by certain free trade delusions based on a criminally simplistic understanding of how trade and the modern world works.

This is why this general election is such a depressing choice. On the one hand we have those who would force us to stick with the antidemocratic status quo and those who would unwittingly do untold damage to the UK economy. I think I will be sitting this one out. It is ironic that I should have campaigned so hard in the name of democracy to find that on this occasion my vote is totally useless.

Wednesday, 26 April 2017

European Union: a bad idea that doesn't work

The more I delve into the inner workings of the EU the more it becomes apparent that it is a hopelessly utopian vision. Notionally it serves as a barrier to curb the worst excesses of protectionist instincts in Europe but in practice it doesn't really work.

It works among Western European nations who largely abide by the rules (except France) because they are acting in good faith. We don't need the EU for that. The Eastern European states though are the free riders who see the EU as a cash cow to be milked, where compliance is entirely optional. Where you do find large scale conformity it is in those sectors which have been gobbled up by foreign corporates who absolutely love governance. Not for nothing is the EU viewed as a Western oligarchy.

When it comes to the nuts and bolts of it there are plenty of means to evade ECJ rulings as France routinely demonstrates. The UK however tends to roll over. Perhaps it is because we act in good faith or possibly because our political class is too detached from the real business of government to ever really comprehend what is happening. I used to think it more the former, but now I believe it is the latter and the system is on autopilot. Our civil servants will only put up a fight if the politicians instruct them to and since there is no real feedback mechanism between politicians and the real world, there is unlikely to be any instruction.

Then when it comes to standardisation of frontier controls, we find that the ports are increasingly merging or forming alliances and coalescing around their preferred techniques already established in standards at the IMO or elsewhere. There is a profit motive in seeking out regularisation and commonality. In that regard some sectors are light years ahead of the EU machine. As we see increments in technology, increasingly we see logistics and supply chains systems becoming self-governing. The private sector has done more in the last ten years to streamline customs than the EU.

The EU's involvement in all this is largely unnecessary. Its presence is largely to insert itself for the purposes of building a regional space governed by the same rules throughout. The problem with that is that there are distinct circles of trade within its own borders which operate in zones that tend not to deviate from established patterns - often crossing the boundaries of the EU. The North Sea shipping trade is wholly different culture to that of the Mediterranean which lends itself to interacting with North Africa. With regional standards being entirely alien to each other, by way of legacy and evolution it is both difficult and pointless to try to integrate them.

So in effect what we see are dogmatic incursions into business spheres trying to shape a European Union concept in a world that is just not cooperating. As we see in South America where peoples loyalty is divided between drug lords and legitimate authorities, we see the same in business where it has a market of standards regimes to choose from be they local, regional or global. Ideally the EU would like to erase the competition in favour of homogeneity but the real world does not allow for it. Consequently the EU is forced to adapt and to recognise regulatory authorities for the purposes of legitimising activity that falls outside of its own ability to regulate.

In this, it increasingly assimilates third party rules inside its own system but still manages to create a regulatory firewall at the borders. It makes no sense. In the maritime sector the Mediterranean has more in common with North Africa in terms of systems and culture because they are sea ports of a particular climate and ideally should be working to one set of rules with a system. That though does not happen because of the EU - except in those instances where the EU is able to strong arm North African states into conformity. This is patchy as the EU is mistrusted and where it exists conformity is basic at best.

In the rush to claim progress in advancing the free trade agenda we very often find the EU creating agreements without the necessary infrastructure being there to ensure that the system functions according to its purpose - keeping out unsafe products, contraband and potentially poisonous foodstuffs. The result of this is a gradually weakening of the system's integrity to the point where the value exists only on paper. Even member states fail to uphold their own standards. With Greece being as corrupt as it is, it is the back door into the single market for the black market.

Then when we look at more generic rules and standards and when we look outside of the EU we find that the EU is not the only regulatory superpower. There is the USA (whose influence is waning), and then there is China which is starting to make considerable demands of its own. It makes all the sense in the world to avoid duplication. To that end we have the WTO/UNECE/Codex/UNCTAD nexus. The non-state actors with as much influence as nation states. What we find here is that the EU is the obstacle to progress.

In the creation of rules for the smooth functioning of industry and commerce, ideally what we want is only the participation of interested parties. The EU though, voting on behalf of member states, must seek out a consensus meaning that interested parties in the EU can be blackmailed over completely unrelated issues in order to secure cooperation. At the centre of this is the ECJ which is increasingly more an executive than a court. That can often derail progress as it torpedoes initiatives.

The the pursuit of regulatory harmonisation is like herding cats. It is better to establish transboundary rules for specific markets than for authorities to push for their own regime to be supreme as the EU does. This is unhelpful. There is now a turf war going on between the EU and the international organisations. The EU is of equal influence pushing for its own global hegemony. It is unhealthy competition that is mutually self-defeating.

If I had to pick one (and I have by voting to leave the EU) it would be the International Organisations in that there is no central authority, it is based on voluntarism and is a far less proscribed system. Arguably it does not work as well as the EU in that there is no real system of enforcement but the closer we look at the EU the less we find the EU's system integrity is as good as we might think. There are still massive disparities of conformity between member states and enforcement is politically sensitive. The harder the EU pushes the less popular it is with electorates.

The fact is that the perfect order can only ever work if there is perfect knowledge at the centre, public consent and properly resourced administrative agencies. Perfect knowledge is implausible, consent is unlikely, and while the efforts of Europol etc are impressive, it is still pissing into the wind. Moreover voters are increasingly demanding more accountability. Nation states will wish to retain a higher degree of sovereignty.

Thus, there needs to be a far more informal system that can be voluntarily adopted to govern interactions between the various actors without an ideological federalist agenda pushing it in any one direction. Any system needs to acknowledge that perfection is the enemy of adequate and that the sum of human ingenuity will always defeat rigid and ossified systems. Humanity always progresses faster than bureaucracy. With that in mind we are better looking to more organic systems based on cooperation rather than coercion where ad hoc alliances are free of dogma so that they can achieve more.

It seems to me that the EU is more of a nuisance in bringing about such cooperation. It is neither wanted nor useful. Nation states are perfectly capable of seeking out cooperative ventures and the needlessly restrictive EU framework is a global inhibitor to innovation. I even suspect the EU is well aware of this. It is presently being very careful where and how it brings its authority to bear. Were it any more aggressive in its instructions to member states we would find the UK would not be alone in leaving. And therein lies the problem. The EU is a living, breathing catch 22. It might work if there were consent - but it doesn't have consent because it doesn't work.

The pursuit of a perfect system for trade is one which will always defeat even the finest minds. Electorates can often be superficial, fickle and easily misled. Other times they can be wise in curbing the excesses of untamed authority. It is further complicated by way of technology moving at a lighting pace, with ever more disruptive technologies and ideas confounding the best efforts of the well intentioned. We won't get anywhere close to an adequate system until we recognise that we will always be fighting a losing battle - and that the pursuit of the perfect order is ultimately counter productive.

Monday, 24 April 2017

The era of zombie politcs

It looks like Britain is overwhelmingly going to vote for a conservative government. This by no means is an endorsement of Theresa May. She is neither loved nor despised. She is a caretaker prime minister and as close to an adequate functionary as we are going to get for the purposes of leaving the EU.

As much as anything this is Britain playing it safe. There is no possible way Jeremy Corbyn could be considered an adequate leader but he is only part of the problem. Labour is out of its depth and it is not equipped for the challenges of the day.

For all of my adult life the issue of the European Union has split the Conservative Party and has prevented it from uniting. It cost them the 2005 election and prevented it from winning outright in 2010. In order to exploit this Labour has taken a broadly pro-EU stance. In that regard, Labour’s support for EU membership has never been wholly honest.

For the most part this tacit support for the EU has served them well. It has saved them from having to engage in the subject matter and it has kept the Tories off balance. Now though, the issue is the defining issue of the day and Labour is boxed in on all sides. Many of its core constituencies voted to leave – most of them being their working class base. Consequently the party is unable to offer a coherent position on Brexit. It has of its own volition opted out. It has nothing useful to say on the matter and would alienate half its voters if it did.

Thus far the best Corbyn has been able to muster are a collection of recycled themes from the US election about the system being rigged, stealing the clothes of populists and complaining about media bias. This is loser talk.

What’s disappointing about this is that there is still a mission for a decent left wing party. Labour just doesn’t know how to connect with voters. Corbyn speaks of a rigged system but so far I have heard nothing that really speaks to how it is rigged and what he would do about it. He speaks of a fairer society but as a long standing MP on decent salary I think he’s forgotten what it’s even like to struggle.

One universal truth about life in Britain is that being poor is expensive. If you can’t meet payments you are hit with further costs and bank charges. Rents are more than likely crippling and food costs are spiralling. Even for the middle classes disposable income is shrinking and wages are stagnating. There is clearly scope for a radical government. Sadly though, all Corbyn has to offer are defunct socialist ideas from the 1970’s.

What I find most depressing about this election though is that Labour is not alone in its complete inability to present a worthwhile prospectus for government. You would think that Ukip, the party that campaigned the hardest and the longest for our exit from the EU would have an entire agenda ready to roll for when we do. Instead it has chosen to become a dismal nativist party complaining about Muslims.

As to the Liberal Democrats, they are political opportunists. Since Corbyn has ruled out a second referendum there is nowhere else for remain inclined voters to go. Running on an anti-Brexit platform is an astute move on their part if they wish to revive their fortunes. This though is not an agenda for government. It is a clamber to preserve the status quo, which would not have delivered a Brexit vote were it satisfactory.

To me this is a sign that UK politics has lost its way. Having outsourced government to the EU it has killed the art of politics. We are no longer seeing parties fighting to promote agendas. Instead we get within a few weeks of an election where each of the husk parties pluck feel-good ideas out of the air and run with them. Most are so completely at odds with reality that there is little hope of ever implementing them. Gone are the days where parties would invest in good research and present a coherent and joined up prospectus to the electorate.

If there is one thing I have learned about politics and government it is that everything is connected and if you want certain outcomes then you need joined up policymaking. We need to see credible and detailed plans but what we get instead is differing versions of the same thing. Bogus promises to divide the spoils of power among their respective voter bases according to what is fashionable.

Throughout the 2015 election I blogged almost daily on the rolling train wreck that was the UKIP campaign. What I didn’t realise was that we were seeing a new template for incompetence emerging. Bereft of their own ideas and strategies it seems that the zombie parties are disintegrating in the same way. This is why we are seeing a Conservative landslide. It’s the closest thing to competent we are going to get.

Tories, though, should not be complacent. Once they have solidified their majority they will feel safe in office and rebels within the party will be emboldened. The Tory party at peak has a strong tradition of being its own opposition. It won’t take very long for the infighting to start and eventually it will bring down the May administration in much the same way that Mrs Thatcher was deposed. What we then find is that the talent pool for successors is mighty shallow. We can then expect a disorganised rabble and as is typical for Tory governments we will see fresh corruption allegations week in week out. We’ll have come full circle.

It is true that all politics is cyclic but it seems that each iteration is somehow more debased than the last. Movement building is a lost art and so by the time the Tories fall out of favour there will be nothing left to choose from. The options at the next election will be even bleaker than they are now.

There was a time when I might have taken a closer look at the stock of politicians to see if there is any sign of life. Now they are just names and faces in a creaking and decaying system. If we are looking to Westminster for leadership then we are looking in the wrong place. 

It seems to me that politics will remain broken until such a time as we see a new movement that knows how to do politics. Ukip ultimately failed because it had nothing of substance to offer. Similarly the SNP have jumped the shark for the same reasons. They wanted independence for its own sake had had no programme for government. That much is now abundantly clear. This teaches us that anyone can start a brand and advance it into positions of and influence. The problem is that in a culture where knowledge carries very little currency these upstarts don't know what to do with power when they get it.  

We can see the same even in the Tory party. We have a prime minister who never especially wanted Brexit thus is unable to add substance to it and a Brexit movement so obsessed with its 1990's narratives that it has nothing that speaks to the real world. On the fringes we see Brexiteers concocting manifestos for resurrecting the Commonwealth completely oblivious to the world as it now is. Competence seems too much to ask. 

This is ultimately why we cannot expect any real improvement from the next government. The next crop of MPs will be yet another band of ambitious but clueless party hacks eager to climb the greasy pole. Already my Facebook is a grim spectacle of party devotees suspending their critical faculties to put on a good show for their local party associations. 

For the foreseeable future it looks like politics will remain the same daily grind as exasperated and bored voters peck at the carcass of Westminster politics. Far from seeing a Conservative revival we are electing a stop gap government. This is not a party driven by anything other than self-preservation. The Tories are as dead as Labour. They just don't know it yet. 

Sunday, 23 April 2017

Brexit: the changing nature of authority

The book I'm reading at the moment, The Emergence of Private Authority in Global Governance by Thomas J Biersteker, has it that the state is effectively legitimised organised crime. This to me is civics 101, ie the state has the monopoly on violence and uses the implied threat of it to ensure obedience. Anything not sanctioned by it is crime.

In a well governed state rules exist for the equal distribution of liberty to ensure that the externalities of commerce do not infringe on the rights of the individual. Very often such rules defend freedoms and extend liberties.

There are though, as Biersteker has it, a multiplicity of authorities. There are some within the structures of the state and some external to it. There are private authorities of varying constitutions like sports governing bodies, religions, private regulators and NGOs, and then there can be other types of authority be it terrorist entities like Hezbollah or ISIS, running a state within a state, or even organised crime.

The modern state is increasingly a model of devolved authorities where licence is granted to recognised authorities to perform the function of governance. Regulation is often a devolved or outsourced function, allowing the core body of government to focus on more general concerns.

The purpose of regulation is to regularise and legitimise disruptive practices. This is done according to risk assessment and assessment of harm - or where such practices are at odds with the morality of the primary authority. One example of a disruptive practice is Uber which utilises a number of different trade practices using new technologies which, while considered to be useful innovation, has externalities to consider and decisions to be made over the classification of their activities. For instance is a driver an employee or contractor?

Uber is cause célèbre of libertarians and is held aloft as an example of the free market in action. They very often overlook the necessity for social provision of public transport and when it comes to vehicles adapted for the needs of the disabled, the market does not always provide and the subsequent saturation of the market reduces slim provision to none at all as regulated taxi firms struggle to compete.

Uber is one of the disruptive practices which are initially tolerated and then brought into the fold through the process of gradual regulation and judicial decision making. They eventually become part of the great ossified machine. But then you have those markets that the core state cannot touch with a barge pole like drugs and gun running. This is effectively the prohibition of markets deemed haram. They remain outside of legitimate authority and those participating lose the protections of it.

What's interesting is that they then become authorities in their own right with their own system of rules, underpinned by the threat of violence. Certainly the drugs trade has its own codes, processes and procedures albeit unwritten. Gang culture has its own social hierarchy and a code of ethics.

In Western cultures the drug problem is not so prevalent that it cannot be managed albeit at a huge cost. Narco-states however lack the resources or indeed the means to incentivise public cooperation. Drug lords can exert power in equal measure to governments not least because of the implied threat of violence but very often because the drugs trade is one of the more lucrative sectors.

This leads to the situation we have today where power struggles are between concentric circles of legitimate authority (with prestige and pedigree) in ongoing struggles against criminal authority. As to what constitutes legitimate is largely up to the people by way of their consent. This is why Hezbollah remains a power within Lebanon and it is why the Central American states cannot tackle the drug lords head-on. They can bring equal violence to bear and have popular backing from those whose livelihoods depend on it.

Many of these problems could be resolved by way of regulation and decriminalisation of narcotics. Since the trade is seemingly unstoppable and governments are increasingly unable to offer their populaces more lucrative work it would a great many conflicts of authority and be a source of revenue rather than a net cost. This though is unlikely to ever happen as those in power are at the mercy of their electorates where religious authorities hold influence. The consequence of this stalemate is corruption and war where the only winners are criminals and tyrants.

Then if we look at Africa and across the middle east we find the balance of power is considerably more tribal. Or at least more overtly tribal. The West is equally so but liberal democracy, to a point, removes the worst excesses of it. Promoting good governance has been the holy grail of the West but such efforts are undermined by the aggressive trade policies of China, India, the EU and the USA. Very often African authorities are bought off in order to look the other way when corporations move in to exploit natural resources from fish to rare minerals.

The lack of good governance then has a knock-on effect worldwide. As much as the illicit trade in drugs has its own well documented effects, one of the lesser acknowledged but massively significant issues is food and medicine fraud. This is why the West, the EU in particular has an elaborate system of standards. Fake medicines found in the EU is around ten per cent whereas in Africa it can be anywhere between thirty and seventy per cent.

Standards and inspection practices form the frontiers of the EU, freezing out unwanted goods but at the same time freezing out lesser developed states from participating in trade. This is one of the core concerns of the WTO and UNCTAD. The latter being especially geared toward economic assistance while the WTO is increasingly focussed on the removal of unnecessary barriers, where it seeks the promotion of global standards.

Due to the global nature of trade and consequently counterfeiting, we see an increasing effort to link up and integrate legitimate authorities. Europol and Interpol as just as much part of the trade infrastructure as the WTO. Meanwhile when it comes to standards setting we see increasingly active private and global institutions exerting their authority. Where global governance is concerned we find knowledge authorities where states without the means or the knowledge to regulate will outsource to them.

In this, the West is fighting an uphill battle against vast criminal enterprises who are always one step ahead of the game, often utilising disruptive technologies to thwart regulatory systems. This is why we are seeing ever more moves to control the internet and promote standards in e-commerce. Good markets function on trust and trust is essential to trade. This is why we also see global standards in consumer rights emerging. All of this is key to the digital economy and this is set to be where the most lucrative tech opportunities lie.

As this blog has outlined, trade normalisation has caused global trade to peak and growth has been stubborn. The challenge therefore is to enhance the profitability of existing supply chains. This blog is a big advocate of trade facilitation and aid investment to that end however, tackling illegitimate trade still remains a priority. As much as fraud hits the margins of legitimate trade it also damages brand reputations and reduces trust in the system.

Tackling this is going to require ever more regulation, standardisation, integration, more globalisation of governance and huge investments. And that is going to be a problem. Certainly we saw from Brexit that there is little appetite for ceding more control and spending more as a electorates do not trust global institutions nor do they see the benefit to spending internationally. The right wing press in the UK has given aid a bad name and it is widely believed that contributions to the EU are a market entry fee rather than the running cost of an elaborate governance system.

Quite rightly, the public suspect that there is an agenda they are not in control of, have very little say in and no real means of holding it to account. The EU as a supranantional authority is one which wields a great deal of power but offers the people of Europe very little control. The irony being that any moves to full democratise the EU to establish it as a legitimate authority would be fiercely resisted. People tend to prefer the nation state as the more visible and accountable vehicle of government. It is tied up in their identity and traditions. It means something to them spiritually - a human need often neglected and disparaged.

Part of the reason the EU despised is because those proponents of this new EU utopia view national allegiances and regional identities as somehow backward. Globalists tend to be metropolitan types who will celebrate any culture other than their own, often treating backward practices abroad as diversity that must be respected. A recent misty-eyed BBC Radio 4 romanticisation of Spanish bull torture is one such example. The finger wagging liberals are the ones most responsible for Brexit. As vile as populists like Nigel Farage are, the condescending (and whiny) metropolitans are worse.

Ultimately at the heart of Brexit is a question of consent. We all recognise the need for authority but if democracy means anything the it is the right to choose. In that regard, some Central American drug lords have more democratic legitimacy than the EU. The creation of the EU is very much a project of the political elites who have concealed their agenda over many years, repeatedly distorting the truth about the nature of EU ambitions.

Essentially the problem with our EU relationship is that it is a wholesale dumping of legitimate authority onto a body that has little legitimacy. The consent it enjoys is by way of its potemkin village in Strasbourg where people foolishly believe the present of a toy parliament and voting rituals in some way constitutes democracy. Most of the major decisions regarding governance of key industries are outsourced wholesale by our own government and are subsequently beyond the reach of democratic reform. A bad compromise remains in place because too many vested interests have a stake in the status quo.

But this is the ultimate challenge of our age. How do we go about the process of globalisation while maintaining democratic process and informed consent? The European Union is clearly not the answer. A regional solution may well have been adequate for the last century but what of the internet world?

On the European Union, Tony Benn said "I can think of no body of men outside the Kremlin who have so much power without a shred of accountability for what they do". Except of course, that is no longer true. There are several entities globally with unprecedented decision making powers, most of which never see the light of day. I would venture than most have never heard of the ITU, Codex or UNECE. As we move ever more toward seamless borders and globalised internet trade, the producers of quasi-legislation are set to become some of the most powerful forums on earth.

In this regard Brexit solves very little. The holy grail of the Brexiteers is absolute sovereignty but this is no longer within our grasp if ever it was. We will find as we leave the EU that we are still compelled align with the EU, if not in law then voluntarily. Authorities can exert power beyond their own borders as we are about to find out. The EU can make rulings on products and services within its own borders and if we wish to trade with the EU then that decision must be observed. This is why we should have given more consideration to Efta.

This is where the remainers strongest argument lies in that our exit from the European Union in some respects reduces our power to influence decisions. What we find though is that the EU is increasingly making decisions not on the content of rules, rather their implementation. As regular readers will know, the trend is toward more decision making at the global level.

This is where the traditional model of governance begins to fall apart. The global trade ecosystem is a nexus of authorities. In setting the standards and rules there are a number of influential forums, but also treaty constructs between private authorities which governments and blocs have agreed to recognise. The removal of the EU as an authority in the UK does not remove its influence and even if it did there are several global accords which have significant influence over our energy, agriculture and banking rules. To name a few.

The players in this are NGOs, corporate alliances, super unions, regulators and nation states. In this we find anonymous subcommittees both in and out of the UN system have considerable power. It is of mind-boggling complexity and is awesome in its scale. This is why people prefer the simplistic narrative of Brussels bureaucrats because it's a more easily digestible world view and presents people with an easily understood bogeyman.

What we find instead of this simplistic, but widely believed, narrative is that sovereignty is massively diluted and authority is distributed to the most competent entity. It is assumed by many that the buck stops with the EU in terms of the transfer of powers but in actuality the EU is just as likely to surrender powers to private authority. Its influence in European law is not fully understood but if you read technical regulations it is there for all to see. It is for this reason I view the EU as an anachronistic middleman.

Increasingly we see that coalitions of the interested are the best way to establish common rules for the whole world, and compulsory allegiance to geographic blocs prevents nations from playing to their strengths in accordance with their lead industries. In this, it is likely that we will never reach the desirable state where technocracy is subordinate to democracy and so we must be active and independent participants, cutting out the many barriers to participation - the EU being one of them.

Out of concern for its own territorial integrity the EU would like nothing more than to remove the participation of member states form global forums and the longer we stayed in the EU the more likely that was to happen. It has made a number of attempts at the International Maritime Organisation to take control. Our interests lie in keeping these such organisations as multilateral forums.

At the very least, while we do not restore absolute sovereignty, we do regain the right to say no and the right to propose initiatives. Even smaller states like Norway can have a dramatic influence on major sectors by way of launching initiatives. They may not have the market size but they have soft power and expertise which is increasingly what matters in the new order.

What the EU seeks above all is uniformity of regulation and to expand that uniformity beyond its own borders. That it has achieved as much as it has is to its credit but I think we are reaching the limits of the possible. Democracy will always be a thorn in the side of the technocrat. There never will be a perfect order. We can only ever hope to bring a level of compatibility to individual sectors - and this will not be defined by geographic boundaries.

For as long as humans continue to evolve and as technology plays a larger part in our world there will always be a fluidity in authority and that which is legitimate does not necessarily stay legitimate. The one construct that continues to serve us well is the nation state. It is the means by which people can exert power over events. Nation states are as much as anything cultural authorities, having their own media and their own distinct conversations and debates. Only through this can there ever be a coherent manifestation of public will.

At the heart of the EU, though, is an anti-human ideology. It sees democracy as inconvenient to its ambitions. You can kinda see their point. Some of the finest minds in the world have spent years devising complex agreements designed to enhance trade only for it to be swatted by a regional assembly somewhere in the Belgium. It would be unfair to say that the EU has not responded to criticisms as to its status as a democracy. Only reluctantly has it allowed for member states to ratify comprehensive trade deals and look where that got it. 

Ordinary people are suspicious of these trade deals not least because they don't understand them. They are shrouded in mystery. This is only to be expected as people have been encouraged not to participate and their only input not politics is the occasional election. Informed consent is not likely in these such conditions. We need more direct democracy if only to get people used to participating in bigger decisions.

For as long as the EU exists it will be an unwelcome decoy distracting us from the many devolved authorities and distancing our own government from them. Without our politicians and peoples being tasked with participating in these global entities it is unlikely there will ever to be a national debate about their existence let alone their output. Brexit at the very least begins that conversation. Or it would do if we had a half way competent media. They are only just getting to grips with the WTO.

In the round there are no immediate economic advantages to Brexit. Even in the longer term whatever compensatory or corrective measures we take will only go some way toward restoring our trade to its present levels. This is as much to do with the ineptitude of those tasked with Brexit as Brexit itself. What matters more though is that Britain continues to set the benchmark for democracy. It cannot do this while it is a passenger inside the EU. Britain must have the right to refuse laws and it must be at liberty to take those measures necessary to adapt to globalisation.

Brexiteers have assumed that the EU is unique in being a heavily regulated sphere and that out of the EU we shed that entire mentality, moving toward a more anarchic arena of trade. This hasn't been the case for nearly three decades and the advancement of global regulation has ballooned since the establishment of the single market. Probably the EU's biggest export is regulation. There has been a realisation of its social utility and its value in reducing barriers to trade. This very realisation has transformed trade worldwide and it is here to stay.

The question is now one of how the UK interacts with the world and making the best of the opportunities afforded by leaving the EU. Before we can speak to that we need to move past the dismal narrative of Brussels being at the centre of the universe. Increasingly we find Geneva should be the focus of our attention - and we are late to the party.

Saturday, 22 April 2017

Global Britain: life beyond the EU

Wherever you look in those places where leavers gather online you will see that Brexit has become a wishing well where everybody has bold expectations of what will happen and what is possible. The assumption is that Brexit brings about absolute sovereignty and that we are stepping out of a regulated sphere and into an unregulated sphere where we can do what we want. I wish it were true but it isn't.

There is no scenario I envisage where there will be substantial deregulation save for a catastrophic crash out. In the modern world the very essence of trade is a trade-off between sovereignty and the common good. The EU is only one arena among many where we have ceded some degree of absolute control. We retain the theoretical sovereignty to withdraw but as Brexit demonstrates, withdrawal from complex systems is no simple undertaking.

We are told that Brexit is a rejection of meddlesome Brussels bureaucrats interfering with our lives. This is a deep seated narrative as old as euroscepticism itself. What we discover, though, on closer inspection is that the EU is only one part of the puzzle in a far larger nexus of international organisations and private authorities - none of which has ever seen a hint of democracy and their role is largely obscured by the focus on the EU.

Part of the reason it escapes scrutiny is that the media is not interested in it. There is political drama and the subject matter is just not sexy enough. International standards on dehydrated garlic or vehicle wing mirrors is not going to raise pulses. Insofar as anything is newsworthy from this shop it is usually corruption but then the news that government is corrupt is akin with the sky being blue.

The other reason it escapes our attention is that a lot of it is quite worthwhile and not especially controversial. Do we really need an extensive public debate about every last detail of governance?

Without much scrutiny from the outside world, nerds sitting in windowless rooms in Geneva have done more to improve quality of life and enhance trade than anything since containerisation. These can be small innovations to reduce workload or safety enhancements that extend and preserve life. This though is lost on the general public. Regulation is perceived petty interference rather than the lubrication of complex societies. We may complain that it exists but we would miss it were it gone.

Take the traffic light for instance. It's there to tell you what to do and it stops you doing things. We all hate waiting at traffic lights. The presence of them though is why we have free flowing traffic most of the time without gridlock lasting twelve hours as happens in many African cities. Think of all the time it saves.

The assumption is that regulation is designed to limit human activity whereas if you look at virtually everything the WTO does, and in more recent years even the EU, the effort has been to harmonise regulation, eliminate red tape and increase the efficiency of supply chains. Rather than being risk averse as some have it, the system simply acknowledges risk and designs systems to mitigate them. Quite a good idea if you don't want baby formula mixed with floor cleaner.

But then regulation goes much further than that. There are realms of standards setting and regulation that border on exciting when you consider the potential. Some of the regulatory conventions to bring about a global single market in digital services are set to be transformational. These really are major innovations that will bring about the next revolution in consumption and will change the face of work as we know it.

Meanwhile the self driving car and improvements in the internal combustion engine, along with electric motor efficiency have been driven by standards and regulatory demands. None of this would have happened without it. Given the choice manufactures very often would carry on making the same inefficient junk they have always made.

In energy, demand side management is a regulatory innovation which removes the need to build power-stations and eliminates many of the negative externalities of power generation. It gets the Ukippers riled because they can't have pointlessly energy hungry hoovers but just one system of standards has radically altered energy production and enhanced technological progress. Regulation adds value and eliminates costs. The downside that people moan about is the upfront costs. That's actually systemic investment which everybody always says they want to see more of!

The question is who is driving this and to whom is it accountable? There is nothing wrong with technocracy just so long as it is subordinate to politics. We have it the other way around. Politics responds to the technocracy.

This is fundamentally what is wrong with the EU. Policy agendas in the EU start deep in the bowels of the commission, often at least ten years before they get to be rubber stamped by the toy parliament. One does not vote in a government. The agenda is a constant regardless of who is returned to the European Parliament or indeed who is running member states. Ever closer union is the root command.

All the demand side management stuff was an ISO concept, adopted and improved by EU, gold plated, formulated then submitted for faux scrutiny in the parliament where MEP inputs are largely ignored or removed. The people are most certainly not in charge of the agenda nor do they get to change it. It might have been an idea to put this on pause slap bang in the middle of a financial crisis when energy bills were sky rocketing. As much as the system is not democratic, it is not responsive or self-aware.

The big question for our generation is how introduce any kind of legitimacy to it, and secondly how do you do it without destroying its many worthwhile accomplishments. It is interesting that less than a hundred days into the Trump administration that the President has rowed back on a number of pledges to drive a horse and cart through the globalist order. Somebody has patiently explained the value of it.

Then there's the real question of why leaving the EU doesn't get close to resolving this very conundrum. This is a question not yet being asked because people on both sides of the debate assume the EU is the centre of the regulatory universe. So far as most people are concerned, the media especially, Brussels is the engine of regulation and the rest of the world just does as it pleases having ultimate sovereignty.

As per the diagram above there are any number of anonymous functions in global governance, some considerably larger and more influential than the illustration implies. Not least UNECE and the WTO. To my mind these represent not only the future of trade but effectively make the EU redundant by creating the foundation of a genuinely multilateral global single market. That then begs the question as to whether the EU still serves a function.

I take the view that so long as the EU exists it will continue to exploit public ignorance of global governance taking all the credit and the blame to establish itself as the de-facto authority. It obscures the rest of it from sight while at the same time being the biggest obstacle to achieving global free trade. It is by nature a protectionist entity as Britain is about to discover first hand from the outside.

This is why as Britain leaves the EU there must be a concerted effort to raise the profile of the many international organisations that produce much of the rules we live by. Over the last two years this blog has explored the extent to which even the EU is a law taker subject to what is known as "fax democracy". Very often even the EU is not fully aware of those rules it adopts via standards bodies. For a long time we have been dealing with the middleman when in fact Geneva, not Brussels is the hellmouth of regulation.

In order to steer and speed up the creation of a global single market the UK needs to be a full and active participant and in so doing attract the attention of a largely dormant and ignorant media which for too long has been obsessed with Brussels should it even bother to report on these affairs at all.

Much noise has been made over the last year over the issue of sovereignty. Pure unadulterated sovereignty no longer exists and I rather suspect it hasn't for a long time. Nations have been bound by their agreements for as long as there have been nations. By leaving the EU we, at the very least, retake the right to say no and the right to refuse and propose regulations. We are about to enter a completely different universe of governance.

In this we need to formulate new ideas and new strategies, some of which I have outlined here, with a view to increasing our soft power and steering the agenda. In this we cannot expect that Britannia will once again rule the waves in that Brussels will still remain a regulatory superpower but by enhancing and promoting the international rules based trade system we can weaken the EU's protectionist barriers not just for our own needs but for the world as a whole. This has been done before by Australia by forging ad hoc alliances at the WTO. Helpfully, the EU is of its own volition handing ever more of the regulatory agenda to these bodies which is why we are, in the long run, better off out.

When we look at the more technical aspects of Brexit we find that the World Customs Organisation is now the lead body on a number of issues from intellectual property to seamless customs. There are WTO rules and UNECE systems all of which supersede the EU and, if expanded to become the global benchmark will ultimately (eventually) mitigate the self-imposed harm we do by leaving the single market.

Once we are outside of the EU will find we are part of a very large club of nations excluded from participating in European markets with EU member states being powerless to correct that. By forging sectoral alliances, in services especially, there is every possibility of being king maker - and the deciding vote in the establishment of new global conventions and standards.

Ultimately I am working on the assumption that the EU is life limited. Some predict imminent implosion but we see precisely that kind of speculation every single week. I think it will be with us for a while yet. What is a near certainty though is that the EU will not survive as a meaningful entity and will eventually be dismantled. Now is the time to be building a viable and non exclusive alternative to the EU.

This is, incidentally, why I do not favour ideas like CANZUK in that it's old fashioned thinking. Static unions of nations in the modern trade environment are far too rigid and with diverse economies serving different regulatory superpowers, commonality and integration is very often undesirable, implausible and ultimately pointless. Britain must retain and exploit its agility to the maximum, being able to switch alliances according to the forum and the subject matter. If we are leaving one rigid bloc there is little sense in creating another.

Britain should be working with the international community to build a genuine community of equals without a central authority promoting a technocratic agenda. Technocracy and democracy must travel hand in hand. The dismal europhile vision of a Fortress Europe is no more desirable than the shrinking vision of Britain throwing regulations on the bonfire. The WTO gives us a blueprint toward a fairer more inclusive system of trade which allows for national sovereignty - the right to say no.

One of the global initiatives presently under way is the establishment of global rules for e-commerce. Some of the key obstacles to e-commerce in the developing world include weak internet infrastructure, a lack of legal and regulatory frameworks in many countries, cyber-security, trade barriers, and a need for payment solutions.

As the linked article notes "To help ensure that developing countries can benefit from e-commerce, they need to retain the right to create trade barriers to allow new digital industries to develop inside their own borders and become more competitive, said Kwa, just as they have done in the past to protect manufacturing industries. As digital commerce grows, developing countries must be free to "help their companies deal with it." Adopting global trade rules now could take away their ability to do that, she suggested".

This is a important facet of international development where in other circumstances we see the EU using its might to force LDCs into liberalising their trade before they are ready to compete. This is often a driver of migration - which ultimately means the EU has a hand in drowning thousands of people in the Mediterranean. For a supposedly liberal and progressive entity it sure does have a lot of blood on its hands.

When we examine the history and the ideology behind the EU we find that it is built on a number of deceptions and is generally phobic of democracy. Its modus operandi is to abolish the nation state and in so doing abolish any kind of democracy and accountability. It is an anachronism. In an ever globalised world with and ever more complex and elaborate web of regulators and private authorities the nation state and that right to say no becomes ever more vital. The EU as we find it is a tyrants dream in that agendas can be injected, by NGOs and corporates alike without ever having to win the backing of the people.

This is why climate change dogma exists in every tier of the EU. This is also why the EU issue is the fault line of a culture war as a "liberal" progressive agenda, and the morality that goes with it, is imposed on peoples without their consent and without the means of redress. Voting certainly achieved little until we had our referendum.

Ultimately the debate needs to refocus on what matters. Brexiteers should cast off their phobia of regulation and embrace it for its social and commercial utility. There is nothing in wrong in principle with adopting evidence based rules for the smooth running of trade. Even the obscure and seemingly absurd regulations still serve a function. The complaint has always been an inadequate means of veto and the lack of transparency and democracy. Brexit goes some way toward restoring that balance, but as illustrated above, there is still much work to do and the fight for democracy and genuine free trade is only just beginning.

Friday, 21 April 2017

Plenty of options, none of them good.

I can't really come out strong for anybody in this election because I am faced with two equally depressing choices. On the one hand we have the left who want to drag us back into a stagnant status quo and keep us under the dead hand of Brussels, and on the other we have demented Tories intent on severing important ties with the EU for absolutely no good reason to no commercial or diplomatic advantage.

For all that is said about the insanity of Jeremy Corbyn's economics there is nothing all that sane about present Conservative policy either.

Politically, I am in a very weird place. I'm very much down with the whole reinvention and renewal vibe of Brexit - and I will fight the remain crowd to the death to make sure it happens, but at the same time I find myself at odds with Brexiteers who are going off half cocked with some very silly and damaging notions. They seem to think absolutely everything is up for grabs and we are free to do as we please.

The latest fad among Brexiteers in CANZUK which is one of those unflushable turds. It bares no relation to anything going on in the real world even if it were technically achievable and economically worthwhile. Which is isn't. The EU is our neighbour, our largest single trading partner and a regulatory superpower. Leaving the EU does not mean escaping its gravitational pull and erecting barriers in order to do so serves no advantage since EU agreements with third countries ties them into EU rules as well. They are unable to tinker with their regulatory regimes in order to accommodate us and more to the point, unwilling.

What we can safely assume is that the UK will retain most regulations forever and will probably carry over most EU directives for at least a decade. I don't really expect much deviation from the current regime in fishing and the only immediate changes we are likely to see is in agriculture. That is going to be a stone cold mess. Agriculture reform is never done well.

What this means is that any free trade agreements will be limited to those presently geared toward serving the EU market and since regulation isn't up for trade that restricts the nature of such deals to commercial cooperation and tariffs which are already low. The latter makes little difference and will be eaten by currency fluctuations and the former was never prohibited while we were in the EU.

The main focus beyond trade agreement with the EU will largely be replicating those deals we already had via the EU. This is when tedious little Toryboys will be gloating pointing at all the "bumper deals" we have rolling through the door, when in fact they will be worthless bits of paper that we didn't really utilise even as EU members. Certainly any deal with China is likely to be asymmetrical and impossible to exploit. You need serious investment capital to overcome Chinese trade barriers. It's barely worth the bother. SMEs can't really take advantage of them - and if trade is not geared for SMEs then they are unlikely to be beneficial so far as you or I are concerned.

When it comes to Brexit we are told this means a global Britain flying the flag for free trade yet bizarrely the Brexiteers can't put up barriers to trade fast enough. It doesn't matter how many times you patiently explain the system it doesn't seem to sink in. They regress.

The ultimate silliness of all this is that if you want a good reason to leave the EU then it is that this bilateral approach takes years and very often falls flat. The only reason many of them succeed at all is simply because of the EU's economic might. Singapore made significant concessions in order to obtain an agreement with the EU. Out of the EU we don't have that so the very last thing you would want to do outside of the EU is adopt the exact same approach to trade. You need entirely different approaches using an entirely new methodology.

When we first started to examine the process of leaving the EU it rapidly became apparent that in the best case scenario the best we could hope for was an economically neutral Brexit deal and only by seeking to keep as much of the single market as possible. The strategy we proposed was to use the EEA agreement which has its own system of waivers, safeguards and opt outs where we could gradually discard the elements we did not want. Instead the Tories are going to sever the whole lot all at once meaning that we will end up begging for single market readmission when we face the consequences. Obviously we will pay a price for that.

It was never a good idea to campaign for Brexit on economic grounds. Trade wise there are no silver bullets and there are no sunlit uplands. At best we will see a re-ordering of trade and some market movements by way of trade substitution which at least restores a degree of dynamism to the domestic market but in net GDP terms this still comes at a loss.

As far as I see it, Brexit is more a cultural and social revolution than an economic one. From that perspective I just don't see a downside to it at all. The consensus establishment had run out of ideas and is on borrowed time. As soon as Brexit is wrapped up the Tories are as dead as Labour. This for me cannot come soon enough. When that happens we will start to ask serious and long overdue questions about the viability of the party system. Perhaps an utterly botched Brexit makes this more likely.

My only cause for hope in all this is that the EU has doubled down on its stance that the integrity of the single market is not up for debate. One by one the EU is closing down the options. May is faced with a long transition under EU jurisdiction and a weak deal at the end if she insists on keeping her red lines. She will have to crack eventually in which case she will be faced with an ultimatum. An EEA style agreement with guest membership of Efta or ejection without a deal. More than likely May will have realised by then that walking away is not an option. I think that penny might have dropped already. A no deal scenario is too horrible to even contemplate.

Hard Brexiteers would have it that without a deal we would be totally free to do as we please, slash regulation ans taxes and become a tax haven. Shock doctrine. Historically this has never worked and results in authoritarian oligarchies. More to the point we would have to break with a number of global treaties to make this happen in which case we would lose a good deal of soft power and international trust. The "freedom" we would gain from dropping out without a deal is the same freedom you have when you are evicted and all your belongings are thrown into the street.

Presently I am not placing any bets as to the outcome. I do not have a good track record when it comes to political predictions. May keeps her cards close to her chest and she is prone to u-turns. That makes the success or failure of Brexit a fifty fifty split. There is still a high risk of accidental Brexit and if the EU plays hardball all the way and doesn't play it well then May could conclude there is nothing in it either way and go for broke.

In the end the EU cannot flex too much. For all the issue illiterate grunting we have heard from Tories about the German auto industry being keen to do a deal the reality is turning out to be different. German firms value the single market more than they value trade with the UK and can easily find ways to sell their overpriced unreliable barges.

With all that in mind I cannot in good conscience support the Conservative Party without a clear indication of intent. The empty mantras and sloganeering is not enough to go on. I have zero confidence that they have understood the issues and they are extremely lacking in competence. Since they are set to win regardless in the absence of an alternative I think I will vote for an independent candidate if I bother to vote at all. The fullest extent of my efforts over the next few weeks will be to highlight the incompetence and stupidity of May's Brexit approach, if for no other reason than historical record.

The one good thing that will eventually come from this is that it will finally expose Tories as shallow, ignorant, anti-knowledge tribalists. If it wasn't already abundantly clear, that is.