EU Referendum

EU exit: a variety of solutions


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The Compleat Bastard notes that [what passes for] the debate on Question Time yesterday was entirely dominated by the immigration issue. Completely missing from the discourse was any reference to the EU.

Consequently, says TCB, we can now say that Ukip is no longer an anti-EU party. It is a single issue party centred on immigration and has little else to say for itself. Euroscepticism is now without a political champion.

One who would take the place of Ukip, it would seem, is young Daniel Hannan, who has just published a pamphlet via the Centre for Policy Studies (CPS), but he presents a case of such startling superficiality that it has failed to attract any publicity (so far), other then a print-out of the press release from John Redwood.

A few queries by way of a comment, posted on Mr Redwood's blog, were however, deleted within a matter of minutes, illustrating the level of enthusiasm for debate shared by Mr Carswell and some others – although they did subsequently re-appear.

Readers, therefore, can enjoy via Mr Redwood a discussion on the merits of Mr Hannan' proposals, specifically as to whether, in presenting them as a "reform" agenda, young Daniel has in mind that Mr Cameron would be taking the Art.48 route of treaty amendment.

If this is what he does have in mind, he must know that the UK must attain a majority just to get the proposals on the European Council agenda. And, should he overcome this hurdle, which may prove impossible, he must then know that the nature of the changes proposed would require a convention as well as an IGC, against a probable timescale of 3-4 years, ruling out a 2017 referendum.

This notwithstanding, the chances of an Art.48 "reform" succeeding, on the grounds set out by Mr Hannan are probably nil, in which case we would be looking at an Art.50 notification. One wonders why this eventuality is not mentioned in the CPS pamphlet.

But it is in Art.50 negotiations that, one assumes, we could conform with Mr Hannan's assertion that we could "do better than Switzerland" in reaching an agreement with the EU, even though we are given no clue as to how long ab initio bilateral negotiations would take.

Nevertheless, given that it took Switzerland took 16 years to reach its present state of accord with the EU - which includes freedom of movement provisions more stringent than in the EEA agreement – one wonders whether Mr Hannan thinks we could reach an agreement within the initial two years set for the Art.50 negotiations.

If we could not come to a final agreement in such a short period, it would be interesting to learn of Mr Hannan's ideas. Would he seek an extension, and if so how many years would he be prepared to continue the negotiations before a deal was reached?

If, a prolonged delay was anticipated, one then wonders what alternatives to a bespoke bilateral agreement Mr Hannan might suggest. In particular, it is germane to ask whether he might consider it appropriate to manage our withdrawal from the EU in easy stages? Or would he rather than go for the "big bang" approach which would require us to undo the fruits of forty years of economic and political integration all in one series of negotiations - and then take what we are given as final?

The point about Mr Hannan, and by the same token, Mr Redwood, it that they don't debate such issues. For ten years or more, the Tory Eurosceptic "establishment" has been banging the same drum, with not an original idea to share between them. Nothing outside their tiny, self-referential circle is ever acknowledged, or allowed to taint their private debate.

One is rather saddened, therefore, to see the CPS motto emblazoned on the Hannan piece: "To question the unquestioned, to think the unthinkable, blaze new trails". The think-tanks, largely like the authors they employ, seem to have stopped thinking. 

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Were they at all on the ball, they might be looking at this - an article in EurActiv which, on the face of it has nothing to do with Mr Hannan's preoccupation but, on closer scrutiny, has everything to do with it.

The article tells us of a "window of opportunity" for relaunching negotiations between the European Union and Brazil on a bilateral trade and investment agreement, one brought about be the CEOs of 27 leading companies involved in trade between the two partners, who are very keen that there should be such an agreement.

But the fascinating thing here is that the elimination of tariffs, which is the normal fare of free trade agreements, was very much downplayed. Instead, the main concern was the harmonisation of regulations, the lack of which was considered to be the main barrier to the development of business and trade between the two blocs.

This was in the context of the EU-US TTIP talks, where the creation of a new system of rules for investments and trade of goods and services was in progress.  The parties are not particularly interested in a straightforward agreement on tariffs - they are looking for something more complex, in terms of a deal on regulatory harmonisation.  

Professor Alfredo Valladão, from the Paris Institut d’Etudes Politiques and president of EUBrasil Advisory Board, was concerned that the TTIP system would be imposed to the rest of the world, arguing that Brazil and its manufacturing sector should get involved in the debate, "in order to avoid being marginalised by the extremely fast emergence of a new global economic paradigm and its regulations".

This then brings to light the fate of the stalled EU-Mercosur talks, which have been ongoing for over 15 years. Mercosur is, of course, Latin America's "common market" and Brazil is to take the leadership for the duration of 2015.

It is then, during 2015, that the parties are looking to closing the deal, even though in June 2014, EU External Action Service Director Christian Leffler had declared: "There is no sense in holding discussions if both sides are not ready".

What this points to in the Hannan context is three things. Firstly, while Hannan sees his "reform" as an opportunity to reduce the amount of regulation coming from Brussels, those who are pushing for new trade deals (including the TTIP) are looking for a new round of centralisation, with regulation rather than tariffs being the central issue.

Secondly, we see how lack of regulatory convergence has taken pole position as the more important trade barrier. Yet, in key areas of our economy, Hannan would seek divergence - a reversion to a simple tariff agreement and greater national independence on rule-making.

Thirdly, with Mercosur taking 15 years not to achieve a trade deal – to say nothing of TTIP which rests on the Transatlantic Declaration of 1990 – we see an example of how long it takes to negotiate (not) trade deals. Hannan might think that the UK can do better that Switzerland, but he really does need to specify how long it would take to reach the perfect deal.

Taking an overall look at the Mercosur situation though, we see it being argued that this agreement hasbecome a straitjacket, an obsolete form of relationship that is keeping its members isolated, when it needed to be "open and connected to the world" - i.e. focused on systems and regulatory convergence.

The point that emerges from that is that there are different types of trade agreement, with different impacts – something which Hannan forebears to tell us. Chile, Colombia, Mexico and Peru have in recent years been pursuing their own Pacific Alliance with greater success. It is orientated toward Asia but, in order to present a cohesive front, it is pursuing a high level of economic integration, leaving Mercosur standing.

The logic here is that, in pursuing the free trade agreements, if they are to be effective (for some of the partners, at least) economic integration is de rigueur - precisely the model that Hannan rejects. 

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That actually means that the idea of a free trade agreement, as suggested by Hannan, isn't an option after all. If agreed on lines that are likely to have the desired effect, we are looking to a degree of economic integration which would be unacceptable, presenting us with a relationship with the EU that would be very little different - in key respects - from what we had at the moment   

That leaves us looking for an alternative model.  And one which deserves exploration is the type which does not involve formal, geographically-anchored country agreements. Instead of portmanteau deals between nations, we need to look at sector or product deals. And the best examples, for the moment, come with the deals brokered through the UNECE-sponsored World Forum on Vehicle Regulation Harmonisation, a process we've labelled "unbundling".

The latest development here is the international agreement on tyre standards for passenger cars, where a new system for certification has just been adopted for product certification, known as Global Technical Regulations (GTRs).

This, as the name applies, is actually a global agreement, aimed at providing uniform regulation for an industry worth $200 billion a year, employing over 600,000 people globally. Currently, it is producing 3.3 billion units annually and the industry is expected to grow to $220 billion by 2015.

The point here is that, while TTIP could - in theory - produce a boost to the global economy of $500bn annually - over a wide range of products - it is unlikely ever to come to fruition. A deal on tyres - just one product - could, potentially deliver about $40bn, which has a much better chance of being achieved.  Do a series of deals, product-by-product, and you will get to your TTIP target, while the negotiators for the "big bang" are still talking about what sort of coffee should be served at the conference tables.

Even then, "unbundling" is not plain sailing. At the last minute, though, the US abstained, leaving the new regulations to apply to those which voted for them, including the European Union, China, Canada, India, Japan and Russia. The regulations, therefore, are not binding on the US.

Nevertheless, the adoption of a new GTR on tyres developed under the aegis of the World Forum, "will ensure that the same testing procedure is adopted not only by Europe, but also by other countries such as Canada, Japan, China, India and Korea". Considering that the Asia/Pacific region is by far the largest market for tyres, accounting for over half of global tire demand in 2010, this is still very significant.

Even without the US, this agreement will reduce market-entry technical barriers and ultimately facilitating trade between major automotive markets, but without the baggage that accompanies so many free trade agreements – free movement of tyres without free movement of people.  Quietly, with no reporting of publicity in the UK media, it is actually delivering results. 

The way is still open, of course, for the US to come on board - as the second most important destination for EU tyre exports, we need it to join up.

The problem, though, is that both sides have strongly divergent approaches to regulations and market surveillance.  The EU's system is based on the UNECE 1958 agreement, based on type approval, while the US system is based on regulations promulgated by the DOT-NHTSA (Department of Transportation/National Highway Traffic Safety Administration), reliant on self-certification and strong market surveillance.

These philosophical differences are also stalling the TTIP negotiations, but at least the US dropping out does not prevent a partial agreement being reached with the rest of the world - and a partial agreement is better then nothing at all. At any time, talks can be resumed to bring the United States back on board. 

This points to the reality, of there being different solutions – different ways of doing things – which haven't even begun to permeate the brains of the Hannan and his ilk. A little while ago, I wrote about stretching the debate. This really is what we need to be doing, and we can't afford to wait ten years for Hannan to discover something new, and tell us all about it. We need solutions, and we need to be identifying them now.