- By Chris Kremidas Courtney
Realigning the UK-EU trading relationship is fraught with danger
Although a gross generalisation, it is nevertheless fair to say that the British were never believers in the European dream, with its vision of shared values and a common political culture. The UK sees its withdrawal in terms of trade: from London’s standpoint, Brexit is all about defending its commercial interests.
That’s understandable. So it’s particularly unfortunate that the ministerial team handling Brexit under Prime Minister Theresa May has failed to grasp the basics of international trade. Their misapprehensions were highlighted by the resignation of the UK’s ambassador to the European Union, Sir Ivan Rogers.
The Brexiteer ministers’ crucial mistake is to think that governments beyond Europe will be willing to award the UK lucrative trade deals – and that they are even able to do so. The powers of any government concerning international trade are limited to lifting barriers – something that, needless to say, has been the EU’s great achievement. The creation of cross-border business, meanwhile, is down to companies.
In today’s climate of creeping protectionism, it’s clear that Britain couldn’t have chosen a worse moment to leave the sheltering arms of the EU. Until the 2008 onset of worldwide economic crisis, international trade had for decades been expanding by seven per cent a year. Now it has slowed to less than 1.5%. There are fears that protectionist politics in Europe and the United States could whittle that down to almost zero. The Brexiteers’ brave talk of ambitious new trade deals beyond Europe is looking very hollow.
Sir Ivan’s point was simple. Realigning Britain’s trading relationship with continental Europe and the rest of the world will be very complex and is fraught with danger
While it lasted, booming world trade fuelled spectacular global growth, suiting developed and developing countries alike. Two-thirds of world trade is handled by multinational corporations, many of them based in America or Europe, while the shifting of production towards low-wage countries did much to create the Asian ‘tigers’ and support China’s development as the world’s largest national economy.
But now trade is under pressure. The World Trade Organization’s Doha Development Round, which promised a new era of multilateral trade liberalisation, lies in tatters. It seems unlikely that either the EU-US Transatlantic Trade and Investment Partnership (TTIP) or the US-Asia Trans-Pacific Partnership (TPP) will ever see the light of day.
The new protectionism is largely spurred by rich countries, which are responding to the shrinking number of industrial jobs at home. Forecasts from the WTO say that “in an open trade environment” developing countries are set in the years ahead to outpace richer competitors from members of the OECD, both in terms of exports and overall growth, by a factor of two to three.
Exchanging the benefits of intra-EU trade for the uncertainties of the global marketplace looks a poor deal for Britain. But until a general election in the UK can reassess the will of the people, it’s plain that the May government will press ahead with its undertaking that ‘Brexit means Brexit’.
Brexiteer ministers have little understanding of, or sympathy with, the treaty commitments the UK has made and that the EU-27 will be insisting on
The question is whether it will be a hard or soft Brexit – one of an abrupt severance or one that keeps economic disruption to a minimum. This is where the debate over trade becomes crucially important.
Sir Ivan Rogers’ widely publicised resignation comment about the “muddled thinking” of British government ministers reflects expert opinion on both sides of the English Channel. Free trade is the wellspring of economic growth, and depends on common technical standards and norms rather than on bargains struck by politicians. Untangling Britain from rules that safeguard the single market, while protecting the UK’s exporters, would indeed take a decade – just as Sir Ivan warned last November.
His warning drew the ire of 10 Downing Street, and brought accusations in the anti-EU right-wing press that he is a ‘Bremoaner’ who wants to overturn last June’s referendum’s result.
But his point was simple. Realigning Britain’s trading relationship with continental Europe and the rest of the world will be very complex and is fraught with danger. Unless British companies observe European rules and standards, their EU business risks drying up overnight.
In London other senior civil servants have joined Sir Ivan in warning of the difficulty of achieving a hard Brexit that avoids the collapse of negotiations with Brussels. The UK has virtually no seasoned trade negotiators after four decades in which the European Commission has handled trade issues on behalf of member states. Worse, the Brexiteer ministers have little understanding of, or sympathy with, the treaty commitments the UK has made and that the EU-27 will be insisting on.
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