As I mentioned yesterday, talks started this week with the USA on a trade agreement and I noticed a report in Al Jazeera with some interesting comments from a couple of trade experts who have achieved near celebrity status due to Brexit, namely David Henig and Dmitry Grozoubinski. Readers of this blog will know I mention them frequently because they seem paragons of logic in an increasingly irrational world.
First, Henig makes the point that the economic gains of a trade deal are at best minimal (the government's own analysis puts it at increasing GDP by 0.2% in ten years time) but could actually be negative. He suggests this could be the case if it makes the terms of a UK-EU trade deal harder or more difficult to achieve. This may then be another unique trade deal alongside the UK-EU one where we are diverging and not converging to the detriment of trade and GDP. Negotiating another with the Americans also with negative overall consequences would add to our dismal record.
Grozoubinski than says something which is, in my opinion is both blindingly obvious yet not realised or understood by most people.
He says this:
"Anyone expecting a free trade agreement to transform either economy is likely to be severely disappointed," said Grozoubinski, now a visiting professor at the University of Strathclyde and the founder of ExplainTrade.com.
"The US and UK are some of the most open and liberalised economies in the world, with their remaining major trade barriers unassailable, politically entrenched and fiercely defended by activists and special interests. A free trade agreement certainly has the potential to improve the business climate for some exporters, in some ways, some of the time - but the average citizen likely won't even notice it's there."
In other words, inside the EU we are already one of the least protectionist economies and so is the USA. Many barriers to trade have already been removed in the past. What remains are the really hard nuts to crack. Agriculture being one of them, but there are others too.
The Americans know they have a very competitive Agri-food sector. Grain crops are grown in flat, highly productive fields the size of entire counties in England and harvested by giant combines moving steadily northwards like locusts from the Gulf of Mexico to the Canadian border and beyond as cereal crops ripen according to planting times and latitude.
It is a massive operation that provides cheap provender as well as feeding Americans and much of the world through exports.
Our own farmers will find it difficult to compete. What Grozoubinski calls "politically entrenched and fiercely defended by activists and special interests" is in truth a lot of farmers, often small ones and struggling to survive. If this amounts to a "special interest" then God help us all.
What he's right about is that it is going to be politically unthinkable (I hope) to make the kind of serious concessions which underpin and are the logic behind free trade deals.
One of the raisons d'être for the creation of the EU was to ensure the security of Europe's food supply. In Britain we already import 40% of our food and to reduce this even further would be insane in my opinion. The coronavirus pandemic has demonstrated what an uncertain world it is. Nobody knows what is around the next bend. Can we rely on someone else to direct food to Britain if they face shortages themselves? Mmmm.. I'm not sure.
This will be a major sticking point. To deliver a deal which has "negative GDP consequences" and which the "average citizen won't notice" but at the cost of severe damage to our farming industry would be politically difficult if not impossible.
But the very fact we are talking of it as a possibility is a sign of the times. With a reckless PM in charge of a cabinet of non entities anything could happen.
On a more hopeful note, I watched Kier Starmer face Johnson for the first time across the despatch box yesterday. It was a master class in forensic questioning and on an extremely sensitive subject, Covid-19. But Starmer was sure-footed and measured, striking the perfect balance between fair criticism and political point scoring.
Under this "manically disorganised" prime minister there will be plenty of bigger and easier targets and if Johnson was uncomfortable yesterday, as he clearly was, he will find it far more difficult in the weeks and months ahead. Starmer does detail like a lawyer and will ruthlessly expose Johnson's many shortcomings. I look forward to it.
