Friday, 30 September 2016

No, Dr Fox, that WTO dog won't hunt

"Who does it harm more if we end up in a new tariff environment?

"Does it harm more those who sell more to the UK, or the UK? It's in everybody's interests that, as we move forward, that we have at least as free a trading environment as we have today." - Dr Liam Fox

There's nothing wrong with ambition. But at some point it becomes impossible to defy facts and reality. Liam Fox needs some education about how global trade works, or if he already knows then he needs to indulge in a bit of honesty and stop deluding himself that his vision for trade after Brexit is achievable.

The UK is currently a participant in the European Single Market and enjoys preferential trade benefits from that participation, such as tariff-free movement of goods and removal of non-tariff barriers to trade. Dr Fox has made clear he wants the UK to leave the single market and trade under WTO rules. That is a perfectly acceptable view even though it would mean negative economic and commercial impacts for the UK.

Countries that are not participants in the single market and who trade with it under WTO most favoured nation (MFN) status rules do not enjoy free or preferential trade with single market members. They have to impose tariffs when importing from the single market, are subject to tariffs when exporting to it, and are also subject to a variety of non-tariff barriers (NTB) to trade that are costly or time consuming or both. The tariffs are equal for every WTO MFN status country. Sure, goods can flow in either direction, but the terms are subject to hard and fast rules.

The only way countries can avoid the WTO MFN rules, that require them to set tariffs on imports and have them applied on exports, be that with other countries or blocs such as the EU, is to complete a bilateral free trade agreement (FTA) with them, or become a participant in a regional trade agreement (RTA). The European single market is an RTA and Fox's wish is that we leave it in addition to leaving the political entity that is the European Union.

So while it may be, as Liam Fox puts it, "in everybody's interests that, as we move forward, that we have at least as free a trading environment as we have today", by being a mere WTO MFN country that is an impossible dream under global trading rules.

The only way the UK can have as free a trading environment with the EU as we do today is to be a participant in the European single market. Full stop.

It is an impossibility, logical or legal, that any country that is not part of the single market can have equal preferential, or better, terms for trade than the RTA's own internal members have between each other. It cannot be achieved even with a supposedly comprehensive free trade agreement such as the EU-Canada deal - and especially not under WTO MFN status.

The sooner Liam Fox grasps this, and stops wasting our time with his flights of fancy, the better.

Update: New Westphalian takes on Fox's speech here.

Sunday, 25 September 2016

Do journalists even know what the single market and customs union are?

People who only take a casual interest in political matters, including Brexit, can be forgiven for being confused if they rely on the media for education and information. A staggering example of this can be found in a piece published late last night for the Sunday Telegraph:

The problem with this piece is that it isn't true. In the first paragraph Tim Ross refers to 'withdrawing from the European Union's single market'. In the third paragraph he refers to Britain being unable to make its own trade agreements 'because it is part of the EU's "customs union"'. He is confusing readers by conflating two completely separate entities. Confirmation that Ross is all at sea is when he goes on to say this:
Dr Fox is expected to signal his strong intent that once outside the EU, Britain will take up a fully independent place at the WTO and will be free to strike competitive deals with countries across the world.

In order to achieve this, Britain would have to leave the EU single market’s customs union.
But the customs union is the European Union itself. So once outside the EU we would no longer be part of the customs union. Further, the EU doesn't belong to the single market, which his comment suggests. A country can be outside the customs union but participate in the single market. Three countries already have that position, Norway, Iceland and Liechtenstein. It would be nice if Telegraph journalists tried to understand these things before publishing such confused nonsense.

So all Liam Fox will be doing is reiterating that Britain will be leaving the EU, will therefore no longer be part of the customs union and will once again, by default, speak with its own voice at the WTO.

Fox will not be saying anything about continued participation in the single market, because no formal negotiation or decision about Britain's post-EU position has even taken place. If he were to say something so premature, you can be sure Theresa May will be dancing a Tarantella on his head shortly afterwards.

Thursday, 22 September 2016

Do the anti EEA crowd even know what British exit from it will entail?

Last Friday the pages of City AM played host to an op-ed by Global Britain's Brian Monteith, in which he declares 'the Single Market is the problem – not the solution'.

Having read the piece after it was linked on Facebook the question I'm left asking is, how can Monteith or the article be taken seriously? 

For example, nowhere in the piece is there any mention of non-trade barriers, which are potentially far more harmful to British exporters than the tariffs he focusses on. There is also no recognition of the fact there are no commercial customs facilities in place to deal with goods entering continental Europe from the UK, which will be needed if the UK exits the EEA.

Also Monteith either fails to grasp or deliberately ignores the chasm of difference between participation in the single market and trading with its member countries, instead using the meaningless 'access' descriptor. This is something I have covered previously on the blog.

Perhaps when Monteith starts considering the real world implications of leaving the EEA and shares some evidence of knowledge and understanding, people can assess his arguments in a balanced way. But the piece he splurged on City AM is essentially useless.

Continued participation in the EEA is an invaluable first step after Brexit. From a trade and regulation perspective it keeps things as they are, giving stability and certainty to our commercial and finance sectors and maintaining inclusion in useful programmes, after we cease to be an EU member state and cease to be bound by the European Court of Justice. Continued participation in the EEA would enable the UK to negotiate a new settlement with the EU without time pressures or uncertainty.

It is a fact that the UK would have to become a member of EFTA once again in order to enable continued participation in the EEA. That means paying contributions to EFTA for administration of EEA participation. Like Norway the UK would also be required to make payments to various institutions and initiatives to help fund programmes and development of east European countries. 

But looking at the big picture, the sums would be significantly less than our EU budget contributions and not remitted directly to the EU itself to fund the bloc's activities. It would be worth the cost and likely represent a saving on the costs of mitigating impacts of leaving the EEA and getting to a position where goods can move efficiently from Britain to the continent.

Wednesday, 21 September 2016

A special kind of deceit

Labour leadership candidate, Owen Smith, is either too stupid or too dishonest to be leader. Why? Because of his assertion that there should be another referendum on Brexit because people were misled by leave campaign 'promises' about what would happen if a leave vote was achieved, such as an extra £350m being available for the NHS.

It's a ludicrous assertion. The leave campaign highlighted what it believed could be done with savings it said would be achieved by leaving the EU. It was not a promise. It was not part of a manifesto of policies for implementation by Vote Leave after the referendum vote. Vote Leave is not the government and it wasn't standing for election.

The Elliott/Cummings cabal was simply setting out what it claimed might be possible (however ridiculous) for the government of the day to do with money it believed could be saved by leaving the EU.

Had the remain side won, the result could not be subsequently challenged on the basis that the remain campaign 'promised' there was no plan for an EU army, or that the UK would not pay any additional budgetary contributions to Brussels. As a mere campaign there was nothing they or Vote Leave could say that would bind the government to particular actions.

The referendum result is being attacked by any means possible by people who refuse to accept the will of the majority of voters. The reality is Owen Smith knows his assertion is a cynical and calculated piece of deceit. His sheer disdain for a democratically-determined decision and fatuous attempts to apply interpretation to the result in order to undermine it, because he didn't get his own way, is petulance on steroids.

In that Smith is no better than Tory peer, Baroness Wheatcroft, another sworn opponent of democracy, who believes voters should know their place, shut up, and leave decision making to vested interests and party machines. Voters should remind these people who are the masters and who are supposed to be the servants.