EU Referendum: Britain's trade policies

02/04/2016

Such a man, in the nature of things, should know something of what he writes. And such a sober Swede, when he declares that "Boris and the Brexiteers are talking nonsense about Britain's trade policies", at least deserves a hearing.

If one stands back from Mr Johnson, though – as just one of the generic herd – and talks for a moment of the "Brexiteers", then he still has a point. Refer back to my recent post on Matt Ridley, and many more that Pete and I have written, and you know that Erixon has a point.

But it's Johnson who Erixon goes for, describing the effort it would take to imagine "Boris" as a trade negotiator, "haggling with dry regulators over technical barriers to trade like phytosanitary rules and mutual recognition of standards in nuclear engineering".

These throw-away lines tell their own tale, making a none-too-subtle point. Trade policies are complex, and require mastery of detail. And, if there are two things Mr Johnson doesn't do (amongst others), they're complexity and detail.

Thus, writes Erixon, [his] relish for the Brexit cause hides neither his confounding story about Britain's future in trade policy nor his obvious ignorance of the matter. "Unfortunately", Erixon continues, "his fellow Brexiteers do little to suppress the suspicion that, on post-Brexit trade policy, they really have no idea what they are talking about".

We need not ourselves repeat Erixon's charges about Johnson's enthusiasm for CETA, the EU-Canada trade agreement, or indeed the later embrace of the free trade agreement between Australia and the United States from 2005.

The fault line our Swede identifies is that a stand-alone Britain won't get trade deals that advance free trade or provide its companies with better conditions to trade. "Brexiteers", he writes, "imagine a free-trade utopia to descend upon Britain if it votes to leave, but the reality is rather that Britain is too small an economy to wring meaningful trade opportunities from the hands of the large and populous economies".

This, of course, is an anathema to the serried ranks of leavers. They argue indignantly that the UK is the world's fifth largest economy. There cannot be any question about the rest of the world wanting to do deals with us.

Mr Johnson, for instance, recently told Andrew Marr that his key argument for Brexit is that it is a once-in-a-lifetime opportunity to strike new "trade deals with the growth economies around the world". In other words, if Britain leaves the EU it could cut deals with China, India, Indonesia, and other emerging economic powers.

Now here's a thing, and one we rarely hear discussed outside specialist circles – the difference between bilateralism and multilateralism. This is the difference between the narrow trade agreements and working at a global level.

Erixon, in response to Johnson's optimism, points out that for decades the UK government and other free-traders have argued against bilateral agreements.They prefer trade liberalisation to be directed to the World Trade Organisation and deals involving all economies, not just two.

This is the doctrine of globalisation, where the arguments made for the EU's 28 member states are multiplied six-fold, and whatever problems there are in getting deals are intensified almost exponentially.

Sadly, that is about as far down the road as Erixon takes us, but then he is writing for the Spectator. That means that there is a serious limit to what the editorial staff can cope with, before their brains explode.

Therefore, we only get hint of the problems confronting us. But Erixon is allowed to note that many bilateral trade agreements aren't worth the paper they're written on, that many do little in terms of liberalisation and many simply reshuffle trade rather than create more of it.

What he doesn't point out, though, is that the expansion of global trade has stalled. Nor – as we have reported so many times – are we allowed to know that the system in many ways is breaking down. This is illustrated by the report we cited, which has EU tariffs on US automotive goods averaging eight percent, with the estimated costs of NTBs coming out at the equivalent of a 25.5 percent tariff.

Rightly, Erixon states that "the Brexiteers don't seem to have updated their trade politics for a while", and indeed they haven't. They still talk about cutting tariffs through free trade agreements, when the world has moved on to a new level of reality.

That reality is about confronting the ever-growing complexity of NTBs in an inter-dependent world where a family saloon has more than 10,000 different types of component, sourced globally from primary suppliers in forty or more countries who are in turn supplied from many more.

It is a reality where the OECD charts eleven separate mechanisms in what it classifies as International Regulatory Co-operation (IRC), all of which are devoted to facilitating international trade, and only one of which encompasses the traditional free trade agreement.

It is a reality which has seen the growing phenomenon of Transnational Private Regulators, where non-governmental bodies regulate the conduct of private actors across jurisdictional boundaries. Their reality is one of inter-institutional agreements, where the primary currency is voluntary standards made outside the framework of formal law, yet which reach deep into the global regulatory system at every level.

It is a reality where the driver of change at a European and even global level has been the United Nations Economic Commission, Europe (UNECE), which has been developing and continues to develop an "International Model" of regulation, through its WP.6 Working Party on Regulatory Cooperation and Standardisation Policies.

It is a reality where the framework for the practical implementation of technical harmonisation is catalogued not by the EU or any other single trading bloc, but which builds on schemes and formal mechanisms for implementing the Agreement on TBT, where organisations actively involved include APEC, ASEAN, OECD, UNECE and the World Bank.

Not any of this pervades Mr Johnson's alternate reality, where he cures all known problems with a dismissive wave of a manicured hand. All he needs is the creation of a vague "British option", which must have properties which can only be little short of magical.

With global organisations preoccupied with their own realities, coming to terms with the recent Trade Facilitation Agreement, Erixon warns that "Boris and his co-campaigners are in for a hard confrontation with reality if they think stand-alone Britain could sign better free trade agreements".

No doubt, he ventures, "it could negotiate a trade deal with India". But, he asks, "what exactly is the evidence or logic behind the notion that India would offer the UK better market access than what the EU got?"

That, however, is not the point. What makes Mr Johnson think that any trade deal of any nature would be worth having, when the real need is to improve the global system overall, bringing in the fresh ideas that are needed to re-energise world trade and keep the global economy healthy?

Thus, while we're not entirely on the same wavelength as Erixon, we cannot begin to disagree with him when he reminds us that there is a debate to be had over EU trade policy. Nor can we disagree with him when he adds: "what should worry those who want freer trade for Britain is that Boris and his group are talking nonsense – not on a marginal issue, but one that they have promoted as a central cause for leaving the EU".

That is the truth. And the worst of it is that you simply cannot have a rational debate such people - people who are so profoundly ignorant. As I remarked earlier, it's like trying to have a conversation on nuclear physics with the three-year-old. That might be entertaining, but ultimately it is a completely fruitless exercise.