Pete North, 19/12/2017  
 


This year has been a tortuous waiting game. If you've mastered the basics of Brexit then you are streets ahead of the media and light years ahead of the government - so each day is met with exhaustion and impatience. Just when you think we cannot possibly keep drifting, another month goes by where we churn over the same handful of issues in the hope that something might filter through into the mainstream debate.


Now, though, we are at a point where even the dimmest hack is aware of the gulf between what the government wants and what it can have. Theresa May is still wrapped up in her Florentine delusions even after Michel Barnier has on a number of occasions thrown a bucket of icy water over them.


In any normal circumstances that would force the government to choose between two very distinct options. Options dictated by the limitations of international law and our basic constitutional requirements. We need a whole UK solution and one sufficiently harmonised so that the Northern Ireland border remains open. But these are not normal circumstances. We have a government fundamentally split on the issues and hopelessly detached from reality. 


Consequently, we will go through the tiresome routine of presenting our unrealistic demands to the EU only to be told in no uncertain terms that what we ask for is not possible. We will go through the predictable routine of explaining why this cannot happen while the Tory spin machine blames EU intransigence and lack of flexibility whereupon we will, yet again, see the likes of Liam Halligan pushing for the WTO option. 


Only in the final hour when all other options have been exhausted will we see any movement where again we will see the entire issue kicked into the long grass once more. We will have our "transition" agreement and a vaguely worded outline of a future relationship which will be hailed as a breakthrough. It would appear that we will get no closer to a resolution until we are in formal trade talks. This is already dubbed a "transition to nowhere".


In some respects, while this extended uncertainty is undoubtedly bad for business, it does at the very least give us the time to close the noose of reality. Mr Barnier is most helpful in this, spelling out that frictionless trade under an FTA is not possible. If the government continues to "capitulate" then eventually we will arrive at the conclusion that some or other configuration of the single market is the only path available to us. 


In practical terms that means continued regulatory harmonisation, an independent dispute mechanism built on the same design principles of Efta (if not actually associate membership) and a customs agreement tracking the common external tariff and adopting EU rules of origin. 


The latter aspect, the customs agreement will be a contentious issue. The hard line Brexiters, obsessed as they are with tariffs, still labouring under the misapprehension that the customs union is what prevents trade independence, will be most unhappy to discover that galloping off and erasing tariffs with third countries is not on the cards.


This is where the sequence of events actually works in the favour of leavers. Were these talks to happen under the aegis of Article 50 it would give the remainers the upper hand in asking, as the insipid David Allen Green has, what’s the point of a Brexit when nothing changes? That question, though, is one that will be answered ex post-facto when we see what "sovereignty" is at the bottom of the cookie jar. 


In the broadest of terms continued regulatory harmonisation and customs alignment would suggest Brexit in name only. This is the line the remainers will push, as will the Brexiteers since they are nearly always on the same side of every argument. Such a settlement largely obliterates the classic eurosceptic rationale for Brexit - deregulation and "free trade".  


Brexiters will see no difference. It will be widely panned as a betrayal of Brexit - while the remainers bleat their "I told you sos", willfully ignoring the very consequential distinctions. This is where what is not talked about is as significant, if not more so, than that which is talked about. That is the question of where we stand in the world as an independent country and a distinct customs entity - and what tools are newly available to us. What can we do that we couldn't do before? 


This is where Brexit finally gets interesting, because this is the starting point of Brexit, not the end point. This will separate the men from the boys when we see who drifts off to add their ignorance to a wholly different issue. This is where we begin to address what we call the "double coffin lid", whereupon we discover that the constraints of EU membership are replaced with a different set of constraints.

We have heard much from the Brexiteers about those WTO rules but we are in fact dealing with people without the slightest comprehension of what that entails. Moreover, WTO is cited as though it provides only a skeleton framework for trade, when in actuality it is a system almost as elaborate as the EU itself opening up entirely new dilemmas and challenges. This is something neatly encapsulated by a comment on yesterday's blog
"What you describe is an emerging network of global regulatory bodies which rule on subjects that would once have been considered domestic political matters. They co-operate with each other and with transnational entities like the EU and the UN, and they can be influenced by NGOs and corporations which have the money and connections to run an effective lobbying operation. Collectively, they form a network of power in which it is hard for the public to even determine which node is ultimately responsible for any given decision, let alone have any influence over it, and where the line between technical regulation and the exercise of political power is hopelessly blurred. It’s a form of technocratic government without a central source of authority, so I suggest it should be called “distributed technocracy”.
THAT, people, is at the heart of this debate - and one which Brexit only really shines a torch on. It brings little, if any, remedy. Peoples are demanding ever more democracy while power, real power, travels in the opposite direction - and further off the radar. This is the question that will be central to the politics of the new generations. How do we reap the rewards and benefits of globalisation and regulatory cooperation while maintaining transparency, but more importantly, how do we do so in ways in which peoples can usefully exercise vital powers over it? There is a universe of debate to be had right there. 

Having left the EU, the UK will be an independent actor, alone in defending its interests, seeking out like minded allies across a spectrum of issues, where the strength and quality of our relationships can have a profound effect on multilateral efforts, and indeed pressure the EU into doing things it otherwise would not. 

This is where we climb into a wholly new domain of trade politics so far as the UK debate goes. Generally speaking politicians can only really think in terms of tariffs and it has taken the Brexit debate to even register the concept of regulatory barriers. Regulations, however, are not the only kind of non-tariff barrier. 

In the years following the Second World War, much of the global effort centred on the eradication of tariffs bringing us where we are today where the majority of tariffs are low enough to be considered inconsequential. It is only in the last twenty five years have we seen a global drive toward a universal framework of regulations and standards, a process that has snowballed ever since the WTO agreement on Technical Barriers to Trade. Having eliminated most of the disruptive tariffs, regulatory barriers have become central to trade disputes.

That is in part addressed by global efforts toward harmonisation and is strengthened by every FTA signed with the EU which places WTO values at the heart of its trade policy, as will the UK. But what we find is that the process is never complete and protectionism will exist for as long as goods cross borders. One such example is the use of risk assessments which can override all other considerations even when there is mutual recognition of conformity assessment. 

Resolving these such disputes, one of the main functions of the WTO, depends heavily on scientific and veterinary evidence, where protectionism is difficult to prove and can rapidly result in trade agreements negotiated in good faith becoming asymmetrical. Without the WTO as a respected institution then it's every woman and man for himself. 

This, therefore, points to the need for full and active particpation in the WTO ecosystem ensuring British vets, scientific advisers, diplomats, engineers and lawyers are part of the process. In the same way the European Commission became an extension of the British civil service we must ensure we continue to shape and strengthen the institutions which amplify our soft power and influence.

The art of trade is a long, involved and complex process spanning multiple platforms, comprising of hundreds of different specialisms where agreements between standards bodies and quasi-regulators can be equal in significance to even the most ambitious bilateral FTA. This is where the UK as a standards powerhouse can be a broker, and as a services economy we are well placed to drive fintech and trade facilitation measures. We are not helpless down and outs. 

The WTO is just one forum in a myriad of other influential bodies - all of which have major implications for trade. Food standards are every bit as consequential and politically significant as tariffs. For instance, a standard on the maximum amount of a certain grain fungus per tonne is less to do with food safety as it is preventing Egyptian competition. Nobody comes into the world of food standards without a hidden trade agenda. 

Similarly Co2 and Sulphur limits on shipping has precisely zilch to do with looking after the environment. It's about the big boys with the new ships with newer engines shafting the midsize competition. So Codex and the International Maritime Organisation (to name just two) are places where corporates lobby to ensure standards protect their position in the marketplace. 

That "bonfire of regulations" as promised by the Brexiteers is not coming. Nor are any sweeping liberalisation measures as preferred by the Minfords of this world. Those ideas stand defeated and it would be a failure of politics were they allowed to take root. What we can expect though, is that Britain as an independent actor will have agility, freedom of association, and to a point, a dose of British prestige, battered though it may be.

The EU will focus its efforts on clumsy bilateral FTAs while the UK plays a wholly different game without having to ask Brussels for direction, engaging in trade at the micro level, building up incremental achievements. Though little of this will make the headlines, the cumulative effect will eventually, if we play our cards right, lead to Britain becoming a respected broker and valued global citizen. 

If you were looking for silver bullets and magic wands from Brexit then Brexit of itself is going to disappoint. If however, you view Brexit as just the first step on a long journey toward restoring independence and having a meaningful presence in world affairs then there are reasons to be optimistic. What it does mean, though, is looking at the system as a whole and navigating it with skill and patience. 

It was never the case that Brexit would bring about absolute sovereignty or full regulatory independence but what it certainly does do is put our destiny back in our own hands and gives us the power to decide our own direction. We shift our political and cultural attention from Brussels to Geneva and start thinking beyond the encrusted dogma of FTAs. 

As things stand, there is a concerted effort to demoralise the leave sentiment, where self-appointed Brexperts will seek to reinforce the Brussels tunnel vision, implying that single market participation makes us a voiceless supplicant waiting by the fax machine to be told what to do. A dishonesty as old as Brexit itself. 

Though we can stick it to the Brexiteers with the best of them for their hopelessly inadequate comprehension of the issues, the next few weeks will likely expose the dishonesty and equally myopic approach of the remainers whose perceptions extend only to Brussels and no further. Sooner or later the elephant in the room will make itself apparent - and then, maybe, we can have a worthwhile debate. There is plenty to do in a post-Brexit world. We just have to take the blinkers off. 






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