Richard North, 16/04/2019  
 


Rather nicely on cue, after yesterday's piece on the historic preference of the EU for multilateralism in its approach to global trade, now switching to the pursuit of bilateral agreements, we see a press release on the opening of negotiations between the EU and the US, on two separate trade agreements.

This new initiative follows on from the failure of TTIP, the talks on which collapsed in 2016. After 14 rounds of talks, neither party had agreed on a single common chapter out of the 27 being deliberated.

What is particularly striking about the new talks, though – after the vast sweep of TTIP – is their drastically limited scope. There are only two heads, the first on the elimination of tariffs for industrial goods and the second on conformity assessment, the latter extending the existing MRA covering telecommunications equipment, electromagnetic compatibility, electrical safety, recreational craft, pharmaceutical GMP and medical devices, plus marine equipment.

As to the elimination of tariffs, it is interesting to note that the scope is being confined to industrial goods – excluding automobiles - thus avoiding the contentious agricultural chapter which brought the Doha Round to a premature halt.

It is also interesting to note that these talks stem from a meeting between Jean-Claude Juncker and Donald Trump in the White House last June. In their joint statement, they pledged to work towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

They also pledged to work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans. These areas, however, do not seem to have been included in the current talks.

The delay of nearly a year between announcing an intent to negotiate, and the next procedural step – in this case, the approval of the Commission's negotiating mandate – is indicative of the general tempo of international trade talks. But in fact, talks on tariffs have been going on "forever", with EEC-USA relations taking up a considerable part of the Tokyo Round of the GATT talks in 1979, especially in the chemicals sector.

Forty years later, we see many of the same items on the agenda, the difference being that this time we are looking at bilateral talks, as opposed to the multilateral trade negotiations under the aegis of GATT.

But, while tariffs is one part of the talks, extending the Mutual Recognition Agreements on Conformity Assessment is the other, underlining the importance of such agreements in facilitating the flow of trade between the parties. Yet, even though these MRAs are clearly trade agreements, there is still a wide constituency in the UK which argues that trade between the US and the EU (of which the UK is part), has been undertaken only under WTO rules.

Yet, as I reported almost exactly three years ago, before the EU referendum, there were something like 38 EU-US "trade deals", of which at least 20 were bilateral.

Some limited recognition of this came in February this year, when Liam Fox announced a continuity deal with the US, where the parties agreed to continue the existing MRAs negotiated by the EU. At last there was some media coverage of deals in existence, gainsaying the WTO argument.

Now, there is almost a sense of triumphalism in the EU as it has been able to announce that it is going further than the UK in trade deals with the US – an unspoken reproach to those in the leave constituency who thought the UK could do better outside the EU.

Adding fat to the fire, we have Nancy Pelosi, the US House of Representatives speaker, on a visit to London, warning that there would be "no chance whatsoever" of a US-UK trade deal if the Northern Ireland peace agreement was weakened by Brexit.

Although any trade deal would in the first instance be negotiated with the US executive and approved by the president, in the US system trade deals have to be ratified by Congress. And it is because of that, the Democrat Pelosi asserts that any deal would be "a non-starter". 

She says she has told Theresa May, her de facto deputy David Lidington, Conservative pro-Brexit hardliners and Jeremy Corbyn during their meetings and conversations while in London that there would be no trade deal if Brexit undermined the 1998 Good Friday Agreement. "To all of them, we made it clear: don't even think about that", she said.

This is another dimension of the impasse over the Irish backstop, where Ireland is beginning to mobilise support in the United States, which has a strong historical affinity with Ireland. A hard border in Ireland which put the peace process at risk might, therefore, invoke active hostility from the United States, which could have considerable political implications.

Little of this, however, seems to be getting through to the UK legacy media, in a situation where both the newspapers and the broadcasters continue to obsess about possible leadership changes, and the prospects for the European elections, and even a general election. At the time of writing, coverage of the EU announcement on US trade had been sparse, and there had also been minimal references to the Pelosi intervention. Parochialism and displacement activity rule supreme.

Thus, yesterday, when I reintroduced the theme of IRC, it was unsurprising that there was so little recognition of it. People prefer to talk about the things of which they know something about and in trade terms, free trade deals represent the limit of general knowledge.

In this context, not only does IRC have the handicap of being virtually unknown, it also falls between the Europhiles, who dislike it because it provides a partial solution to the UK's need for an independent trade policy, and the Eurosceptics with their obsession with "fwee twade" and their hatred of anything that they didn't actually invent.

Then you have the Muppet tendency in the think tanks, represented most recently by the IfG, with the publication of a 48-page report. This takes us down the well-worn path of negotiating a future relationship with the EU, dwelling on the minutiae of administrative details, without in any way discussing the range of deals, and the different types of arrangements that we might consider.

The one thing it does do is point out that we will be extremely pressed for time, something we were stressing in Flexcit, nearly five years ago. Even with an extension to the transitional period, the UK will be hard-pushed to conclude the necessary agreements before we cut the ties.

Yet, on Sunday, I remarked that I had estimated that the Brexit process might take twenty years, pointing out how little we have achieved in three years. Where the EU and US now have talks spanning forty years just on the issue of reducing tariffs, a mere twenty years looks remarkably compact.

Thus, we come back to the same issue. Given the paucity of knowledge amongst our political classes, the venality and triviality of the media, and an almost total lack of vision coming from the think tanks and trade wonks, there is no way we are going to conclude anything usable within a decade – or two.

It is absolutely pointless embarking on a journey when we have no idea of the destination, the route to be taken or even the means of transportation. Until we have had that debate, we cannot take a first step with any confidence. But before we even have any debate, we must learn anew what it takes to conduct a serious public discussion, avoiding the grandstanding, the polemics and the hyperbole.

Until then, the best we can hope for is some glorious fudge, and the result isn't going to be pretty.






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