Saturday 29 February 2020

19th century Brexiteers will 'decimate the most productive parts of the 21st century economy'

The University of Sheffield Political Economy Research Institute (SPERI) has produced a terrific summary of the sheer bewildering paradox of Brexit. I am grateful to Chris Grey's blog post (always the best) for pointing me to it. It has links to lots of authoritative work by respected independent bloggers and official sources and makes compelling arguments. Among the most telling, those who want to leave the EU to pursue what they think of as free trade, are labelled "19th century Brexiteers".

The paper has the title: Is Britain committing commercial suicide?  And the sub title: A 19th Century trade agenda will decimate the most productive parts of the 21st Century economy

This is the key point for me:

Advanced 21st Century FTAs are therefore not about facilitating simple ‘imports’ and ‘exports’ but rather constructing the regulatory architecture under which firms can undertake those complex processes across the transnational space, often by moving skilled people, capital and data around within it, not necessarily sending things to it.

Despite this, preposterous 19th Century Brexiteer narratives remain obsessed with largely-superfluous tariffs, equate exports primarily with finished goods, and believe ‘free trade’ arises spontaneously out of liberation from regulation. This mindset expresses incredulity when Brexit means Brexit and the demanded rupture actually does rupture frictionless trade which is assumed to be a natural fact of life, rather than the outcome of decades of carefully crafted institutional and regulatory compromises.

In the 21st Century, regulation makes trade happen. Considerably more is at stake than (low-value) finished goods exports: capturing inflows of globally mobile investment and human capital, and securing the ability to provide intra- and extra-continental (high value-added) services are critical. This is underpinned by the most advanced regulatory structures: the EU Single Market (ESM) and its network of formal FTAs, plus hundreds of other cooperation agreements (at least 38 with the US alone) which collectively facilitate ‘trade’.

Brexiteers completely misunderstand what the EU is and what it does.

None of it is new of course. Many people have been saying the same thing for years but it is brought sharply into focus by the media now starting to pick up on the 'race' to recruit 50,000 customs officers to police Britain's borders from next January.  Even if we conclude there is a remote possibility that we might win the race, the fact is we are looking at the inevitable result of deliberately misaligning our regulations with Europe. This is the friction, the sand being thrown into the wealth creating engine of British industry and trade by our own government.  It is complete insanity.

All of which makes this tweet by Andrea Jenkyns hard to fathom. The MP for Morley and Outwood thinks leaving without a deal and introducing maximum friction in exchange for some notional idea of sovereignty is somehow to be welcomed:
And the sheer ignorance and delusion which still pervades our thinking right up to cabinet level is made clear in this tweet by Paul Swidlicki, a trade expert at Edelman UK, who points to the flaw in Michael Gove's Commons statement on Thursday when he claimed the new USA-Mexico-Canada FTA (USMCA) which replaced NAFTA, did not require "regulatory alignment to one side's rules".
Swidlicki draws attention to Mexico having to change its labour laws and make provisions for surveillance and enforcement; not that much different to what the EU is demanding.  We can't even get that right.  These are the people that Andrea Jenkyns puts so much faith in to play hard-ball with the EU.

In a sign that member states are beginning to fortify their own positions, the French European Affairs Minister, Amélie de Montchalin, has hit back at Johnson's 'artificial' timetable and says the idea of an 'Australian' style deal for the UK is 'for the birds'. 

I suspect when the substantive talks begin in a few days time, with eleven different streams being conducted in parallel (all in English by the way), the EU will take our new red line on LPF matters as being the pivot around which the whole basis of the negotiations will turn. They tend to take these things very literally. The EU may well say, OK you don't want to negotiate on LPF or fish - let's turn to negotiating tariffs. 

We tend to look at non-alignment as some sort of liberation, the EU will see the other side of that coin (tariffs and quotas) and this is when reality will dawn on our side. They will have no problem in showing us the result of our own red line - precisely as they did in the WA talks. If the EU does not move then either we exit with no trade deal at all - or we capitulate. Don't worry it will be the latter.

Another thing which strikes me looking at the EU mandate and our Future Relationship paper is how both revolve around access to the single market and the many EU programmes. We are setting out how we want to access it while the EU are defending it. There is virtually nothing (indeed nothing) about EU access to our internal market. Make of that what you will, but it's clear to me the talks are on ground much more comfortable for the EU. They own the golden goose.

The FT are also reporting the UK will not participate in the Unified Patent Court. This underlines just how much weight we attach to having nothing at all to do with the ECJ which, according to David Henig, will rule us out of almost all EU programmes. He says it's a pity because ECJ involvement with the UPC is absolutely minimal. It's another wholly unnecessary difficulty for British industry to cope with. More sand to put in the tank.
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