Britain needs to be agile, adaptable and able to act independently in an increasingly competitive, globalised world. When I say the EU is “cumbersome” I mean that due to the fact that the EU is a bloc of 28 countries all with their own interests, and the EU itself has interests and an almost imperial attitude to its political agenda, agreements that could otherwise be negotiated relatively quickly drag on and on, and often fail.
Allow me to elaborate.
There are many potential situations in which would be beneficial for Britain to negotiate a free trade agreement because a particular country (we shall call them country A) has a burgeoning industry that could supply us with parts for our aircraft assembly lines.
It all seems so simple.
Government officials from both countries should meet, discuss the potential for a mutually beneficial agreement and commence negotiations. Within a relatively short time frame a new partnership has been formed or further developed and both parties are reaping the benefits.
Sadly, we are not an independent country and we do have control of our own trade policy, so instead we consult Brussels and try and arrange something via the EU.
However, the EU doesn’t simply want to create a simple arrangement to benefit a British industry, it has many, many other interests and reservations and an agenda to pursue. It wants a more all-encompassing agreement covering a range of industries across the union.
Now the interests of the EU itself and a number of member states come into play.
Finland is brought into talks because it exports refined petroleum of which country A is an importer, and Italy is now in on the negotiations because of an opportunity to export cheese, and Polish sausages now come into the mix.
However, country A is not happy with how the increasingly wide ranging and complex talks have developed, and for whatever reason does not agree to import Italian cheese. Negotiations stall.
Eventually a compromise is reached between country A and the EU and this is put to the 28 members states, prolonging talks further.
There is tentative progress and it seems the compromise may be agreed upon, but then the Netherlands becomes disgruntled and steps in because the compromise is not in its own national interest; it is also an exporter of refined petroleum and it feels the compromise reached will have a negative economic impact on them.
Denmark also stalls talks because it feels the agreement may be detrimental to their own cheese industry.
So then, to another round of negotiations.
Round two of negotiations are nearing a successful conclusion – after years of talks – but lobbying from the French aerospace industry concerned about the British competition leads to the agreement being voted down.
It goes back to square one and we spend a few more years negotiating – when all we actually wanted was an agreement that Country A would comply with an international standard in its production processes so that we could allow imports. The bottom line is that unbundled “trade deals” – or mutual recognition agreements (ie agreeing to accept that Country A’s regulatory standards are as good as our own) happen a lot faster and can be enacted sooner than the EU’s insistence on domineering trade deal that often include cultural and political reforms as part of the EU’s agenda. What could have been concluded in a year ends up taking a decade – and we are powerless to speed that up because we do not control our own trade policy. Leaving the EU would mean we could open up new markets by a process of unbundling, without insisting on invasive reforms and a core complicated and needlessly comprehensive agreement.
Mexico is an interesting example of what can be achieved even by a country with a relatively small economy (Mexico’s GDP is $1.295 Trillion) with the agility and independence to act in the globalised economy and take advantage of its strengths and flexibility. Through a policy of pursuing free trade agreements – including with major economies such as China, Japan and the EU – with 45 countries it has been able to lower tariffs for its car exports across the world and achieve favourable deals on the import of components. It has gained a competitive edge over the USA, the world’s largest economy, because the USA, like the EU, has protectionist trade barriers around its market. Mexico has achieved this by making simpler, separate agreement rather the kind of vast, all-encompassing deals the EU prefers. This is a better model for global trade, the EU does things in an old-fashioned and inefficient way.
Imagine what the UK (with a GDP of $2.989 Trillion) could achieve if it regained control over its trade policy. We have a flourishing automotive, aerospace and pharmaceutical industry and growing creative industries and a tradition of facilitating free trade by breaking down barriers. Now we are compelled to adopt a common EU position, and wait years while the EU lumbers through negotiations for vast, bundled “big bang” trade deals – with other Member States quibbling over issues related to their own interests and holding back, or even preventing agreement – and we have to go to the EU to ask them to pursue agreements beneficial to our industries. If we leave we’d be able to act independently, and have the agility and flexibility necessary to prosper in the modern era of globalisation, this freedom to act is a fundamental strength befitting of a major modern economy.
This article was originally published by the author 21 June 2016 https://thescepticisle.com/2016/06/21/regaining-our-trade-policy-why-we-need-agility/