Liam Fox was off to China last week to talk about trade.
He has a romantic view of it. “For two centuries,” he told an audience in Manchester Town Hall in September, “we were the trading nation.” He spoke proudly of the Royal Navy’s patrol of the world’s trade routes and “the might and resilience of the British Merchant Navy.” He found it astonishing that “this small island nation, sitting at the northern end of Europe” had allowed its trade to be “outsourced” for the past 43 years to a common market that would develop into the EU.
Professor Stephen Weatherill’s reply to this nonsense (eulawanalysis.blogspot.co.uk/2017/01/what-is-free-trade.html) was sharp: “In Victorian times, to which Dr Fox pays much wistful attention… the UK’s economic and political strength allowed it to swagger its way to oceans of beneficial trading activity. The balances of power are different today.”
That is the very thing Brexit refuses to acknowledge. The rest of the world, meanwhile, sees it clearly. It is inconceivable, says Wetherill, that, post-Brexit, the UK will get anything other than a worse deal than it currently has either with the EU or with other trading partners.
It is madness to go into battle with your weakness more visible to the enemy than it is to yourself. However, that is not the only disability under which Brexit labours. It doesn’t seem to know anything about the terrain, the rules of engagement, the level of sophistication of the opposing forces or their likely degree of ruthlessness.
The Government got a glimpse of the ruthlessness when the US Administration, following a legal action by Boeing, decided to impose a 219% import tariff on Bombardier C-Series aircraft partly manufactured in Belfast. It was a nasty humiliation to a British Prime Minister who had rushed to Washington as her best hope of a trade deal and had invited the President on a state visit. And it followed on a row over chlorinated chickens.
Undeterred, Liam Fox and his Department continue to parrot the rhetoric about Britain’s glorious opportunities to trade on WTO rules that has perverted public understanding of the issues for the past two years. Essentially this rhetoric assumes, in the words of Stephen Weatherill, “that WTO rules offer some kind of basic, entry-level framework for international trade which is sitting, ready and waiting, for the UK to revert to.” It is far more complicated than that.
“There is no free trade, there is only freed trade [my italics], and it is regulated trade. The people of the UK have voted to quit the EU and that will lead also to the UK falling out of the scope of the EU’s several dozen free trade agreements with third countries. That will not grant the UK free trade. It will diminish the UK’s enjoyment of freed trade.”
Free trade in the form that Liam Fox imagines it is unregulated trade, says Weatherill, and that doesn’t exist. His elucidation of this is interesting. He explains that “governments intervene in markets for myriad reasons and in myriad ways, and they have been doing so for a very long time,” and cites the way the composition of ale and bread was regulated in England for centuries for the protection of consumers.
Markets “are and have long been built on the correcting influence of public regulation,” he says, and this “readily transfers to the transnational plane. State borders cannot possibly entail a process of private traders arriving in foreign lands and striking deals with local buyers without regard to local laws. Those traders will be required to comply with the local rules that govern the operation of markets… and those rules will doubtless be different from those that apply at home… These are non-tariff barriers to trade.”
There are two ways of dealing with these non-tariff barriers, he continues. The first is to decide that regulatory diversity should be ignored, but in effect this means placing one’s market under the jurisdiction of a more lenient regulator in another state. The second is to create a common rule-making body.
He does not think it necessary to point out, but I will, that we are leaving the second, which places us at the mercy of the first.
There is still an unresolved war raging between Michael Gove’s Dept of the Environment, which insists that chlorinated chickens will not enter the UK, and Liam Fox’s Dept for International Trade, which insists that they be allowed in as they do not pose a threat to human health. In fact it is not the health of humans that is under discussion here but the health of chickens, whose rearing conditions in the USA are so abysmal that chlorine is needed to disinfect their corpses, a matter on which Dr Fox has remained silent since chickens are beyond the remit of his Hippocratic Oath.
This internecine war over regulations will be the first of many. Meanwhile, the DIT has started to get an inkling that ahead of it lie deep waters.
Peter Ungphakorn’s piece on the International Centre for Trade and Sustainable Development website (https://www.ictsd.org/opinion/nothing-simple-about-uk-regaining wto-status-post-brexit) surveys these waters and is not optimistic about our chances of navigating them.
“The UK is already a WTO member, but its membership terms are bundled with the EU’s. Re-establishing the UK’s WTO status in its own right means both the UK and the EU would negotiate simultaneously with the rest of the EU’s members to extract their separate membership terms…
“For its part, the UK would have to negotiate with the EU itself, the US, China, Russia, India, Brazil and any trading nation or group of nations that matters… It would only take one objection to hold up the talks because the WTO operates by consensus.” (It has 162 members.)
… “To be an independent WTO member, the UK would be creating its own rights and obligations out of the EU’s. Extracting UK beef quotas out of the EU’s would require negotiations with all the countries, including Brazil, Argentina, Australia, Canada, New Zealand, Paraguay, Uruguay and the US, with which it has agreed beef quotas. The exporting countries will be pressing for the UK beef quotas to be increased, while British farmers will be pushing in the opposite direction.”
Now for the real game-stopper: “We don’t know what most of the EU’s current commitments in the WTO are. The UK would be negotiating a share of key quantities that are unknown.”
Becoming an independent WTO member would only become relatively simple and quick for the UK, he explains, if it becomes “Much more of a free trader, with low import duties across the board, and minimal subsidies for farmers.” No wonder there are politicians who advocate this route. They think it’s the only one that can be done, and never mind the cost. But what exactly is the cost? “Domestic opposition would have to be overcome first.”
The withdrawal of subsidies is not what the farmers of Cornwall voted for. There would be a lot of anger. And since the free-trading model would be associated with a wholesale loosening of regulations, and since those regulations concern consumer protection, worker’s rights, the protection of the environment and the numerous other matters the EU has officiously taken upon itself to worry about, it would not be surprising if the protests of farmers spilled over into generalised fury. I do not like the sound of the word “overcome” in the last sentence quoted.
Faced with a choice between a maze of mind-boggling complexity with a black hole at its centre and a sea of pitchforks outside Downing Street, what is a politician to do? Make sure that not a word of what is going on gets out, naturally.
Liam Fox is trying. He has signed an agreement with his American counterparts in the UK-US Trade and Investment Working Group that any information relating to trade negotiations between the UK and USA will be “held in confidence unless otherwise jointly decided” (https://www.gov.uk/government/publications/arrangement-for-exchanging-information-during-the us-uk-trade-and-investment-working-group).
The information will be kept secret “for four years after the conclusion of this working group.” That should be long enough to stitch up the electorate.
The rationaldebate blog devotes an unsettling post to this development (https://rationaldebateblog.com/2017/12/21/uk-us-trade-deal-to-be-shrouded-in-secrecy). It notes the looming shadow of TTIP (the Transatlantic Trade and Investment Partnership) in the background. “This, too, was going to be negotiated in secret, and it was only massive public protest that opened up (and arguably scotched) the deal.”
TTIP, says the blog, would have made the NHS vulnerable to the US private healthcare market, would have undermined UK food safety standards, and would have incorporated the Investor State Dispute Settlement in the treaty. Those three key risks are still very much at the core of any trade deal with the US.
The ISDS mechanism, which is least understood, “gives foreign investors the right to take our government to private, secret arbitration panels to curb regulation… There is no appeal. Essentially it is a tool for multinationals to take over government… Local companies have no access to such arbitration panels and are therefore disadvantaged in their home markets.”
It is as impossible to reconcile this with Brexit’s mantra about taking back control as it is to reconcile what many British farmers voted for with what, under a hard Brexit, they will get.
“One has the increasing impression,” says Professor Weatherill, “that those who drove the people of the UK to vote for Brexit and who are now in charge of plotting the future do not understand the first thing about what ‘free trade’ means today.”
No, but they understand the political implications of it perfectly.