Thursday, 8 September 2016

The Last Straw

This is not an easy blog post to write – but it has been coming for a while.

First, a bit of background. If you've read my blogs, you'll know I have advocated the EFTA EEA option as an interim step for Brexit - based on the the ideas in Flexcit / The Market Solution, written by Dr Richard North, whose EU Referendum blog is frequently referenced in my own posts.

I was something of a latecomer to the EU debate. I first started searching for information beyond mainstream media in early 2015. Following the General election of 2015 and the prospect of an EU referendum, I accelerated my search. I went through as much pro and anti EU info as I could find : think-tanks ; books; various blogs etc – I tried to make sense of the competing arguments and visions.

After many months, I came back to EU Referendum blog and Flexcit and the penny dropped on what they were saying. I'd also read “The Great Deception” by Richard North & Christopher Booker (an excellently researched history of the EU up to rejection of the EU Constitutional treaty in 2005). I had reached a clear conviction that we needed to leave the EU, but that it would be complex and would need to be phased – especially to avoid trade and economic fall-out.

I actually went as far as setting up a monthly donation to EU Referendum – nothing spectacular, but I wanted to support what I saw as research far ahead of the crowd. I also responded to the call for bloggers issued by Pete North (Dr. North's son & working associate) and started blogging in the autumn of 2015. Later that year, a private message group was set up on Twitter for EU Referendum and associated bloggers, which I was invited to join.

A tale of two bloggers


I happily concede I was very much a newby and a junior figure in the group. I privately wondered if I was only invited because of my donation. Certainly there were 2 members of the group who stood out for their efforts and impact:
Roland Smith. Involved in the EU debate for decades – widely known as “White Wednesday” on social media. In March 2016, Roland voluntarily gave up work in the run-up to the Referendum in order to campaign full-time and promote Flexcit / interim EEA ideas in Westminster via his ASI institute connection - with notable success.
Ben Kelly has been an active blogger for many years (via “The Sceptic Isle” and Conservatives For Liberty) and was especially prolific during the Referendum campaign. He brought a significant social media profile to the group and also edited the Leave Alliance web site (Leave HQ) during the referendum.

But dont just take my word for it. Pete North marked Roland and Ben out for special praise on the eve of the Referendum vote here.

Yet within a matter of weeks of the Referendum victory, Dr North had attacked the reputations and integrity of Roland and Ben and accused them both of “plagiarism” and “intellectual theft”.

Roland had promoted interim EEA ideas via the ASI but shorn of their Flexcit label and Dr North's name in order to attract new audiences. This was undertaken with the full knowledge of Dr North and was a notable success - as confirmed by Dr. North himself. Furthermore, on 2nd June, the ASI had invited Dr North to write a blog post explaining Flexcit and how the ASI articles had drawn upon his ideas. The flashpoint for Dr North's change of attitude seemed to be an apparently innocuous blogpost written by Roland on June 10th referencing some comments by Daniel Hannan that were reported in the Evening Standard. Dr North has a longstanding antipathy to Hannan – who Dr North also accuses of intellectual theft. A subsequent ASI post co-authored by Roland Smith (after the Referendum) on the advantages of an interim EEA option prompted Dr North to launch a full-on attack on Roland. By this time, various voices had come out in support of the interim EEA option with no apparent connection to Roland or ASI. The ideas were in the public domain and out of anyone's control. Dr North never did take up the invitation to write his own post for the ASI.

During the Referendum campaign, Ben had written a number of guest articles for newspapers and web sites – again interim EEA ideas were floated without explicit reference to Flexcit or Dr North in order to gain a wider audience. Ben's crime was to write a similar article after the Referendum for the IEA. Dr North reserves particular venom for the IEA - in his eyes they “rigged” their 2014 IEA Brexit competition and “snubbed” his Flexcit submission. A full-on attack ensued, including a particularly low blow by Pete North regarding some payments made to Ben. As far as I am aware, the majority of funds collected via EU Referendum and Leave HQ web sites were directed to supporting Pete in his full-time blogging activities. As someone who donated to these funds, I am extremely glad that some of the money made its way to Ben. His efforts in the referendum campaign were unstinting – he deserves every penny.

A question of ownership and loyalty


So what exactly is the “intellectual property” that has allegedly been stolen ? Dr North describes the essence of Flexcit as
(i) The EEA option as an interim step. I can confirm that Dr North and Flexcit was how I came across this concept. But there have been suggestions of the EEA option as a way to leave the EU pre-dating Flexcit and I have also seen other suggestions that  EEA could be used as a transition ahead of a longer term deal that are not associated with Dr North. I do not see how Dr North can claim sole ownership over this idea.
(ii) EFTA/EEA members have independent voice/veto in international organisations (unlike the UK) where international regulations and standards are framed. It is quite possible that Dr North was responsible for revealing the role of international organisations in framing regulations and standards, in particular the discovery of the“ diqule ” (dual international quasi-legislation). Whether revealing the way international governance works is copy-rightable is another matter.

It is clear that Dr North sees these concepts as his own personal intellectual property. But what is he expecting as a result ? Royalties ? The right to stop other publications by injunction ? He has stated he simply wanted acknowledgement that articles are based on his ideas. But ask yourself why license was given during the Referendum campaign to re-use material without Dr North's name or the Flexcit brand – and why such a strategy was so successful in gaining traction.

The answer is self-evident – Dr North is toxic to the cause he espouses. He has a long-standing reputation as a hostile, angry person and a history of bitter fall-outs. He alluded to this history on his blog in July when he launched an attack on Roland Smith . In reality, he actually has a much longer list of people and events that he views as “betrayals”. Having seen the appalling treatment of Roland and Ben, I have plenty of reason to doubt Dr North's version of past events.

A classic example is provided by the Leave Alliance launch of Wednesday 16th March. Two conservative MPs attended but walked out after Dr North had insulted Vote Leave, its leaders and Conservative MPs. The events are described on Dr. North's blog and Pete North's blog – judge the tone for yourself. Pete North states “the consensus is that Dad arriving late and in a foul mood spoiled the presentation a bit …. we had yet more calls to moderate behavior and language” before dismissing such calls outright. In other words Dr North's own supporters were uneasy over events but got short shrift. This was the last straw for one particular member who subsequently left the group.

The case for Dr North's intellectual property is thin at best and the charges of plagiarism against Roland & Ben are baseless. Will anyone who has followed Roland and Ben not be aware of their association with Flexcit and Dr North ? Does anyone seriously believe Roland & Ben wrote the articles for personal gain ? Their crime appears to be that their loyalty was to securing Britain's independence, not to the promotion of Dr North and the denigration of his enemies.

The Last Straw


Dr North spent much of the rest of the campaign attacking Vote Leave and the Leave campaign. He assumed defeat was inevitable and seemed to be relishing the prospect of revenge on those he would blame. Nor did the Referendum victory mellow him at all. He continues to attack all and sundry while complaining that “the bubble” ignores him.

So what happens when someone in “the bubble” approaches Dr North, as John Mills (head of Labour Leave) did recently ? Dr North published their exchange of letters in his "The Mills File" blog post of 27th August. Mills is clearly trying to understand what can be achieved as a minimum within the 2 years Article 50 time-frame. Dr North's responses had a familiar "passive aggressive" edge.

Granted, Mills has weaknesses in this area of debate (like many public figures in Westminster), but he at least accepted the need for additional protocols/agreements over and above the WTO framework and was aware of the financial services passporting versus equivalence debate. But Dr North's focus seemed to be on attacking his "enemies" for proposing options that are impossible, specifically because of the 2-year Article 50 timescale. Notably:
North describes negotiating an MRA as a hugely complex and time-consuming task, although previous posts by him and Pete North paint a different picture.
North highlights issues associated with customs code and drafting new customs law. He neglects to mention that the Flexcit / EEA option will also suffer from the same drawback.
Finally, in the last response, North states “Even the Efta/EEA agreement could be very tight, in two years. We could even find ourselves having to seek an extension of time.”

The admission that EFTA/EEA may require an extension of the 2 years deadline is critical. In fact, Dr North has admitted this several times since the Referendum:
24/6/16Even with the best will in the worlds - adopting the EEA core acquis unchanged - concluding the settlement within two years is going to take Herculean effort.”
29/6/16We could, for instance, apply for a three-year extension, making five years in all – thus taking the time-limit off the agenda. We could even make the total ten years.”
12/7/16leveraging an early notification against an agreement by the EU to extend the negotiation period – say to five years”
2/8/16Even with a fair wind, though, with every possible stratagem adopted, no realistic assessment will suggest that there is any reason for optimism. The chances of completing negotiations within two years have to be considered slight.”

Note also what Dr North states regarding the bi-lateral option in his  Monograph 4:
"On this basis, it is highly improbable that a de novo (bespoke) bilateral agreement under the aegis of Article 50 could be concluded in two years - something which is being increasingly recognised. Five years is probably more realistic. Whatever their attractions in theory, the bilateral options seem hardly viable, purely on the grounds of the time needed to negotiate them."

If an extension is contemplated for the EEA option, it can be contemplated for other bi-lateral options. The core Flexcit argument is that the constraints of Article 50 dictate the EEA option as the only option - that no longer stands.  

This is a highly significant change, but not an isolated one. A series of posts over recent months have changed the nature of Flexcit considerably. Co-incidentally, the first of these posts appeared within days of Dr North accusing Roland of thievery. It is as if North feels that the “old” Flexcit has had its day, and new ideas are required to create a “new” Flexcit, distinct from the one that in his own mind has been “stolen” by imagined "enemies". 

Flexcit is essentially the container for Dr North's research, but it also seems to be the vehicle for his own private wars.  For me it has become an unreliable source.

Ultimately, the Mills File post was the last straw for me. Dr North complains of “the bubble” ignoring him - in reality he does not want to share his ideas with “the bubble” - as evidenced by his treatment of Roland and Ben, who were singularly successful in promoting these ideas. It seems to me that Dr North is actually inside his own bubble – one where only he is right and everyone outside his bubble is to be attacked as “morons”, “children” or "behind the curve".

I will happily acknowledge I have learnt a lot from the Norths and will acknowledge their work in my posts. They do provide unique and interesting research around trade and regulations and I would recommend reading their blogs – just try and ignore the angry rant stuff. I have wondered for a while whether I should just drift away from the group quietly (as others have done). In airing my views on this blog I have probably set myself up for some brick-bats and vitriol, although I may escape that if I am considered to be too small-fry to bother with, e.g. “why give him the publicity”. In the end I have decided to be honest about my views – I hope it is the right decision.


Sunday, 19 June 2016

Brexit for a progressive immigration policy


In my last post, I quoted from British Future's "How To Talk About Immigration" in stating that the majority of the British public "hold pragmatic and nuanced views".  To illustrate this, I've reproduced one of their pie charts in the picture above. At this particular time, I feel it is important to emphasise that Britain remains a country where the majority are moderate and reasonable.

The shocking events of Thursday 16th June means two young children have lost their mother and a husband has lost his wife. I confess I wasn't aware of Jo Cox the MP, and I follow politics more than most people, but by all accounts she was an MP of particular compassion, dedication and integrity.

The sequence of events and the motive for the killing are unclear. We do not know whether this deed was prompted by mental illness or extremist views, or both, or neither. While the due process of law must be followed to uncover the truth, politically it does not matter - the killer does not speak for us. Leave or Remain, Left or Right, Black or White, Gay or Straight - he does not speak for us. I gather the man charged with this murder is Scottish - should he be convicted, that does not taint Scotland by association.

Regrettably, some in the Remain campaign have stooped to appalling opportunism in using the violent act of one individual to smear the entire Leave campaign.  The narrative being constructed is that to even question immigration policy or EU membership is akin to hate crime and in some way to blame for this weeks tragic event. That is a very broad demographic to accuse:
  • The Prime Minister, David Cameron, has consistently promised to cut net immigration to "ten's of thousands".
  • The Chancellor, George Osborne, in his Treasury economic analysis of EU membership refers to unskilled immigration being too high.
  • In recent days, Theresa May (Home Secretary), Tom Watson (Labour Deputy Leader). Ed Balls (former Labour Shadow Chancellor) have all spoken of the need for immigration control and limits of free movement within the EU.
  • Vote Leave contains Lord Owen (former Labour Foreign Secretary, former Leader of the Social Democrats, long-time europhile and recent convert to Leave), Gisella Stuart (German born and bred Labour MP), Priti Patel (Conservative minister, born in London to a Ugandan Indian family).
Are we really to believe that these people, along with half of the UK population, are toxic xenophobes ? I gather that the last 4 MPs to be murdered were victims of the IRA, whose political arm, Sinn Fein, support Remain - are Remain tainted by such association ? The  answer to both these questions is of course No.

UK public concerns over immigration

As for myself, while I'm clearly committed to Leave, my motivation is not immigration. I've historically had a liberal view on immigration "it's good for the economy - what's the problem?". But it was pointed out to me that I live in a rural part of the country and am a reasonably well-paid professional - so it was easy for me to be "liberal" on immigration.  Fair point.  So over the last year or two I have made a concerted effort to understand immigration concerns.

The main concern people have is simply the volume of immigration.   I personally don't have concerns over eventual population size or population density.  While England has a high population density by European standards (on a par with Netherlands), it is less than half that of Jersey or Guernsey. England's population problem is more one of distribution, arising from unbalanced economic growth.  But there are valid concerns over the rate of immigration that can be absorbed and integrated. In particular, an effectively limitless supply of low-wage labour resulting in :
- wage compression for lower paid UK workers;
- severely reduced investment in training UK workers, especially the young;
- increased load on services and infrastructure, especially as below median incomes contribute less in tax revenue than the value of benefits & services consumed.

But for me, the primary concern over EU immigration is fairness. EU non-discrimination rules mean that the UK Government must treat all EU citizens as if they were UK citizens in all matters of Government public spending: access to benefits, housing, apprenticeships etc. The EURES scheme requires UK jobs to be offered to workers across the EU, provides funding to EU job applicants and pays a bonus to UK companies for hiring EU nationals. Poorer and young Britons are squeezed out as a result.

By contrast, non-EU migrants have no recourse to UK Public funds and are unable to claim most benefits, tax credits and housing assistance, so usually contribute more in tax than they consume in benefits and services. Incredibly, the UK government are pursuing an anti-immigration policy regarding non-EU migrants:
- introducing a £1,000 per annum levy on companies for each skilled non-EU migrant they employ,
- requiring that skilled non-EU migrants resident for less than 10 years earn a minimum £35,000 pa or face deportation;
- last year, the NHS turned away 2,700 non-EU migrant nurses.

Most British people would support a system where the UK Government can target taxpayer-funded benefits and training at poorer and younger British citizens. They would also want to treat all non-UK migrants equally: repeal the £1,000 levy and £35,000 salary requirement on non-EU migrants; extend the rule on no recourse to UK Public funds to EU migrants; provide equal access to employment for migrants from any source, EU or non-EU.  The current immigration system only makes sense if you are ideologically committed to the idea of Britain as a province in a single European state.

A Progressive and Global Immigration policy

Contrary to much of the Remain campaign's claims there is a positive, progressive, global view of Brexit and immigration.

Liam Halligan in the Telegraph, who describes himself as from proud migrant stock, argues that there is a very strong pro-immigration case for leaving the EU. Halligan describes Britain as "inherently tolerant of migrants – superbly tolerant", but also argues that tolerance is dependent on confidence that immigration is being managed and that concerns of low-skilled, low-income British workers are heard. He cites  "tolerant and economically successful countries, with vibrant migrant cultures Australia, New Zealand, Canada" as examples of countries that "have migration controls".

Douglas Hansen-Luke, writing for United Politics, describes himself as a Brexiteer in favour of immigration. He states "Britain has always been an open, internationally mixed nation ... better at integration than most" and highlights the need for national debate (recognising the need for democratic consent).  He observes that in Australia "more than 25% of its population was born abroad", but "working immigrant arrivals contribute more in tax than they take out" reducing pressure on services and personal income has still risen strongly. He describes this as a "win-win alternative not a zero-sum game".

Immigration & EFTA EAA

I am associated with a group of bloggers advocating the "Liberal case for Leave", who advocate an initial exit to EFTA EAA, hence retaining freedom of movement, in the short term at least. Understandably, many in the Leave campaign baulk at this, but I would emphasise that (i) the EFTA EEA interim option is based on pragmatism and expediency and does not diminish or lessen my support and enthusiasm for the goal of a fair, controlled and global immigration policy; (ii) there are policy options available in the interim EFTA EEA stage which would allow an approximation to the desired immigration policy.

There are actually many things the UK Government should be doing now. No entry/exit records are kept for migrants and no record is kept when migrants become available for work. Implementation of systems to track migrants would enable identification of over-stayers and illegal workers. Coupled with rigorous enforcement of minimum wage, residential occupancy standards (eliminating over-crowded migrant bedsits, "beds in sheds" etc) exploitation of migrant workers and the knock-on effect of wage compression would be reduced. Improved NHS workforce planning would provide more training of British nurses and doctors and rely less on immigrant workers.

EFTA EEA membership entails accepting the current EU non-discrimination rules. However, as Phillip Hammond observed last year it is possible to exclude new EU migrants from benefits for 4 years. This could be applied to all UK Public funds (as per non-EU migrants) and extended to 5 years (when permanent residency is achieved). But this would also have to be applied to Britons aged 18 to 23. This could be mitigated by a "post-education" support targeted at young Britons, using the student loan scheme qualification rules or similar (British Citizen, ‘settled status’ as per Immigration Act 1971, or ‘ordinarily resident’). Those in training, work experience or low-paid jobs would be supported and Government initiatives such as apprenticeship schemes would be reserved for young Britons. This might be a way to provide "fairer" immigration within the rules as they stand today.

EFTA EEA membership does allow for unilateral use of "Safeguard Measures" (EEA agreement articles 112-3) in the event of serious economic, social or environmental impact. Liechtenstein have used these measures to control EU immigration. By implementing tracking/enforcement systems described above and withholding national insurance numbers, Britain could activate the EEA safeguard clause and control EU immigration. The flow of workers from low-wage states could be limited, although some low-wage labour will always be required for example, agriculture and the care sector. EEA agreement article 114 allows states to respond to Britain's action with counter-balancing measures, but they must be strictly necessary to redress any imbalance in EEA rights/obligations and should least disturb the functioning of the EEA. Wilder claims that imports of UK goods would be blocked seem unfounded.

Conclusion

There have been unpleasant overtones in the campaign, sometimes from Leave (in particular, Farage's crass poster) but more so from Remain, who have: 
- stoked unfounded fears for ex-pats (they are covered by "acquired rights"); 
- stoked unfounded fears over the border with Ireland (Common Travel Area dates back to 1921); 
- campaigned on strong restrictions of non-EU immigration; 
- and most perniciously, claimed that Leave want to abolish all immigration.

It is time for Remain to stop smearing their opponents. On social media, I have been variously labelled as an ignoramus who has never traveled beyond his village, xenophobe, racist, bigot, fascist, hater, war-monger, British imperialist and most bizarrely a Putin stooge (I've yet to receive any roubles). All before the terrible event of Thursday 16th June 2016.

In truth, the Remain campaign can only offer "more Europe". Uncontrolled immigration from an ever enlarging Europe (Turkey, Ukraine, Balkans and North Africa are all touted for EU membership). Increasing restrictions on non-EU immigration, shutting out Commonwealth allies and friends. No protection for poor and young Britons as all UK publicly funded benefits, services, schemes are open to all EU citizens.  Remain offer a dismal vision of a shrunken Britain inside Fortress Europe, turning its back on the world, taking its orders from Brussels, the employer of last resort for the EU, solving the problems caused by the abysmal failure of EU economic and monetary union.

By contrast, the Leave campaign have a vision of immigration policy based on democratic consent, both controlled and fair, and based on a Britain open to the world, not limited to the "little EU". A policy that allows support for poorer and younger Britons, while embracing those from around the world who wish to contribute to and participate in Britain's future. A future that embraces globalisation and makes Britain freer, more prosperous and happier - like Australia, Canada and New Zealand.

We have one chance in a generation to escape the dismal vision that Remain offers us. One chance in a generation  to dismiss the failed EU government from power. We must vote Leave for a brighter, progressive future for Britain.

Thursday, 9 June 2016

Brexit & the Immigration Debate



As we approach the climax of the Referendum campaign, I guess no-one should be surprised that immigration has come to the fore of the debate. In truth, immigration from the EU has never been my main concern. For me, the EU and immigration were both primarily questions of democratic consent. 

The words in the picture above are by Roland Smith, fellow of the Adam Smith Institute, renowned Brexit blogger aka White Wednesday. He eloquently captured what I had thought for a long time but was unable to put into words quite so clearly. You can read his full blog post here.

Immigration has been a big concern for a large proportion of the population for a long time. Simply putting this down to "xenophobia" will not do. We need to gain a clear picture of what Britain thinks.

What Britain thinks about free movement

The immigration issue is often conflated with Freedom of Movement - most unhelpfully in my view. Freedom of movement is essentially visa-free travel, which the vast majority of Britons benefit from and is also vital to Britains tourist industry, which had over 36 million visitors in last 12 months. Freedom of Movement also includes the potential to work/settle/study abroad, which is obviously an exciting opportunity to many people.

Freedom of movement is often seen as one of the few positives of EU membership. In truth, this is not really an EU accomplishment. Britain had visa-free travel with free western european nations in the 1940's.   People traveled/lived/worked/studied abroad before Britain joined the EEC in 1973, and while numbers doing so has increased dramatically, that is at least in part due to the revolution in global communications and travel since that time.

A YouGov poll suggests Brits like Free Movement but have concerns over controlling immigration to this country.  Before we all conclude "typical Brits, want to have their cake and eat it too", it turns out most countries have some degree of dichotomy in this respect. I take the poll as a positive, in that Brits are able to separate the issue of immigration from Free Movement and appreciate the benefits of Free Movement.

What Britain thinks about immigration

The think-tank British Future have undertaken a thorough study of the UK public's attitude to immigration and produced what I think is an important and valuable report "How To Talk About Immigration". In summary, they find that the majority of the British public "hold pragmatic and nuanced views" :
  • 83% “To belong to our shared society, everyone must speak our language, obey our laws and pay their taxes – so that everyone who plays by the rules counts as equally British and should be able to reach their potential”. The concept of "being British" is open and based on creed (rule of law, free speech, common language and values), not race or where you were born.
  • 75% “the public should have a say in the decisions that are made about immigration.” This is the argument for democratic consent.
  • 70% “would rather the government delivered on a realistic target to limit the immigration it can control, rather than a higher target that it may not be able to meet.” Government needs to provide transparency and confidence that immigration is under control.
  • 65% “Immigration can help fill gaps in the workforce: migrants do the jobs that need doing but which we struggle to fill, like care work and seasonal fruit picking. But for this to work we need to make sure standards like the minimum wage are enforced so British workers aren’t undercut and migrant workers aren’t exploited”. Fairness remains a very strong sentiment for the British.
  • 61% see "both pressures and benefits" and believe "we should control ... and choose the immigration that’s in Britain’s best economic interests". This group is identified as the "Anxious Middle" and their anxieties splits into two distinct camps: half are worried primarily about economic impact; the other half are worried primarily about cultural impact and integration (with particular anxiety over the muslim community). 
  • Either side of the "Anxious Middle": 24% think immigration is bad for the economy and should be minimised; Just 7% think unlimited immigration is good.
This chimes with my own conversations with a range of people, both in the flesh and via social media. I've summarised thinking about immigration under 3 headings: control, fairness, security.

Control

The following public statements made in recent years sum up much of the argument around "control" of EU immigration:
"On low-skill immigration we believe there was too much of it from the EU. There is one important thing about the EU. The founders of the EU had in mind free movement of workers, not free movement of job seekers. The problem we have at the moment is ... high-skilled people coming from other countries to do low-skilled jobs here."
"In Britain, the scale of migration by East European workers seeking jobs across the English Channel has been the biggest driver of anti-EU sentiment by far. And the current refugee chaos is pouring fuel on that fire ... Europe’s leaders have shown no interest in revisiting the rules on free movement of labor ... if Europe does not eventually agree to restore borders and impose controls on economic migration, the initiative will pass to populist forces on the far left and right."
"When unskilled immigration is too high, its scale and speed puts pressure on public services and benefits, infrastructure and community cohesion. In particular, the UK’s largely non-contributory working age welfare system ...  EEA migrants are a significant recipient of in-work benefits and this is putting pressure on the benefits system."
So who do you think made these statements. UKIP ? right-wing Tory politicians ? Anti-immigration think tanks ? Wrong. The sources were (i) the uber metropolitian liberal Chuka Umunna in Jan 2014; (ii) former Labour shadow chancellor Ed Balls in Feb 2016; (iii) George Osborne's Treasury Analysis of economic impact of EU membership para 1.112.  It appears that there is more of a public and political consensus than is often thought.

A significant number of voices in the metropolitan media strongly advocate unlimited immigration (representing the 7% minority view), based on economic theory (more workers = more demand = expanding economy) and statistical analyses. The British public however are not convinced. There plenty of studies that suggest the gains in the long run are minimal. In 2008 the Lords Economic Affairs Committee said it found no evidence that net migration produced significant economic benefits. While short-term gains are made from re-balancing the workforce age profile, long term, gains are eliminated or even reversed if (i) GDP growth is not raised above long term trend and (ii) capacity to absorb high immigration is hampered by breaching infrastructure capacity. Both of these seem to apply to Britain - we appear to be creating a larger economy, not a richer one.

It should also be noted that controlling the flow of immigration is not just a British issue. Poorer Eastern Europe states and Mediterranean states subject to economic devastation courtesy of the € are also worried about emigration.  The outflow of many of their young and talented provides a looming demographic problem. Latvia and Estonia have swathes of ghost towns (newly built with EU funds) housing a dwindling population of mostly older citizens.

Fairness

There is a strong body of opinion that the current immigration system is unfair. The UK Government is not allowed to discriminate between UK and EU citizens, so EU citizens have access to UK benefits (covering housing, employment, in-work benefits etc) and services (Health and education services) on the same basis as UK citizens.  Even if the sums involved are not huge, many people feel the principle is wrong and uniquely disadvantages the UK's system. As George Osborne's Treasury report states: 
"the UK’s largely non-contributory working age welfare system is intended to support people who move off out-of-work benefits and into work. Because of the distinctive features of the UK welfare system and the current EU rules, an EU national who has not previously contributed in the UK was able to take a low-paid job here and immediately claim benefits at the same rate as a UK national."
Unlimited EU immigration and EU non-discrimination rules also impact on higher education, training and employment opportunities of young British. Douglas Carswell describes in a blog post from 2013, how a residency test is used to avoid making student loans available to all EU students - but a British student in his constituency who had spent a short period abroad did not qualify for a loan and subsequently had to leave University. David Cameron's promised 3 million paid apprenticeships are being offered to Romanians. Melanie Phillips in the Times laments the impact on investment in youth training since mass immigration from the EU started: 
"Some claim that immigrants are vital for the NHS and businesses needing skilled workers. But last year 37,645 British nursing students were turned away from courses; and employers’ federations have refused to invest in training young British people, with employer spending on serious apprenticeship programmes having collapsed since the late 1990s."
Under the EURES scheme (partly funded by British taxpayers), all positions advertised in UK jobcentres have to be offered to workers across the EU. Funding to EU nationals is provided for attending interviews in the UK, relocation costs and even English lessons (see YfEJ job-seeker benefits). UK firms are paid a bonus (up to £1000) for hiring EU nationals (see YfEJ employer benefits).

By contrast, the current immigration system is distinctly unfair in the treatment of non-EU migrants. From the 6th April 2016 non-EU skilled workers (excluding some jobs, such as nurses) who have been resident for less than 10 years will need to earn at least £35,000 pa to settle permanently in the UK. From April 2017, Businesses will have to pay £1,000 pa for every non-EU skilled worker.

Security

The phrase "securing our borders" is often heard.  It is a vague phrase, perhaps designed to play into peoples general fears without specifying particular policies.  It conjurs up a vision of erecting barriers, walls and beefing up security personnel, all of which has a negative / defensive tone. Actually, the physical measures we take at our borders are entirely within our power, hence irrelevant to the EU question. And for all Theresa May's tough talk, she has systematically reduced spending on these areas.

The Remain campaign thought they had a winning "security" case with the various European security and intelligence sharing arrangements such as Europol, Schengen Information System, Prum DNA database etc. Until it was pointed out that EFTA states and others also participate. Some Remain campaigners have now switched to arguing that inside the EU we have "influence"over the EU security agenda.  Which in practice amounts to Theresa May attending the Justice & Home Affairs council once every 3 months, where she is in any case excluded from much of the agenda due to UK opt-outs. Furthermore, outside the EU, UK security / intelligence capabilities would be free from the risk of being subsumed into a single "European Security Union".

"Securing our borders" is more about judicial power to decide who can remain in our country. Human Rights law is governed by the European Convention on Human Rights (ECHR) arbitrated by the European Court of Human Rights (ECtHR), Asylum law is governed by the 1951 UN Convention on Refugees, i.e. not EU institutions or treaties. But, Article 6 of the Lisbon treaty & Article 18 of the Lisbon Fundamental Rights Charter effectively binds member states on Human Rights & Asylum law. David Cameron's Sovereignty Bill and Theresa May's wish to address problematic Human rights rulings are empty promises while the UK remains in the EU.

The need for Reform

There is a lot of heat and noise generated over the immigration debate. But British public opinion on the issue is more nuanced and pragmatic than the media debate suggests.  Indeed, I've encountered many who are angry over immigration primarily because they cannot understand why a few simple reforms cannot be implemented, for example:
  • Access to benefits/training schemes. Remove obligation from host states to provide equivalent access to EU migrants for first 5 years (until they achieve permanent residency). This would be reciprocated and also apply to Brits in the EU. Answers the "fairness" question and avoids "benefit tourism".  If the UK had a shortage of labour, it could still offer benefits to attract migrants. If a poorer nation wanted to discourage emigration, it could offer incentives to their nationals to stay.
  • Freedom of movement: Retain visa-free travel and opportunities to work/live/study throughout the EU, but allow some national control over volume of  low-wage immigration, either via the benefits system (as described above) or by virtue of applying a brake when high volumes have negative social or economic impact.
  • Non-EU migrants: UK Government should drop unfair policies regarding settled non-EU migrants and relax overly strict visa rules which block skilled / talented migrants from beyond the EU. I personally endorse and support freedom of movement arrangements with Canada, Australia & New Zealand (see Commonwealth Freedom of Movement Organisation).
  • Human Rights / Asylum Law: Only a tiny minority wants to scrap all human rights law and reject all asylum seekers. But a significant majority are unhappy at the abuse of these systems and would want a more balanced, common sense implementation of Human Rights and Asylum. 
Implementing a reformed immigration policy is a massive topic in itself. Particularly if we consider what could be achieved outside the EU, or in EFTA EEA as an interim position. Given the length of this current post, I will save that discussion for my next post,

What has become painfully clear is that the EU is incapable of offering any meaningful reforms. Fundamentally, the EU sees itself as a single state and insists that member states recognise all EU citizens as their own. The British public on the whole seem committed to the idea of British citizenship first and then fair and equal treatment for all non-UK citizens. The EU has judicial supremacy over Britain, so we cannot address the problems of Human Rights and Asylum Law.

If we want the British people to decide British immigration policy, we should not be committing to the EU's political union by voting to Remain. The only way to get democratic consent on the immigration debate is to Vote Leave.

Thursday, 2 June 2016

A profound choice







This referendum is the most momentous decision we will take in our lifetimes. The Referendum should be hinging on big questions like our national identity, who governs us and how do we see our place in the world for the next 40 years. There should also be a clear understanding of what the EU's purpose and aims are and whether we share those aims. Perhaps the most succinct statement on this was provided by Francois Hollande, in an exchange with Nigel Farage last Autumn "Do you really want to participate in a common state?"

The EU's aim is a single European State

There should be no doubt that the purpose of the EU is to create a single European state, governed from Brussels, absorbing formerly independent and autonomous nation states. But don't just take my word for it. Here's some quotes from European politicians over the years:
"We have sown a seed... Instead of a half-formed Europe, we have a Europe with a legal entity, with a single currency, common justice, a Europe which is about to have its own defence. " — Valery Giscard d'Estaing, President of the EU Convention, presenting the final draft of the EU Constitution, 13th June 2003
"The proposals in the original constitutional treaty are practically unchanged. They have simply been dispersed through old treaties in the form of amendments. Why this subtle change? Above all, to head off any threat of referenda by avoiding any form of constitutional vocabulary!" — ValĂ©ry Giscard d'Estaing, 2007, referring to the the Lisbon Treaty achieving the aims of the rejected EU constitution
"The Constitution is the capstone of a European Federal State." — Guy Verhofstadt, then Belgian Prime Minister, now an MEP.
"The European Union is a state under construction." — Elmar Brok, Chairman of the European Parliament’s Committee on Foreign Affairs
"Of course the European Commission will one day become a government, the EU council a second chamber and the European Parliament will have more powers."  German Chancellor Angela Merkel addressing MEPs,  November 2012.
"We need a true political union ... we need to build a United States of Europe with the Commission as government and two chambers - the European Parliament and a "Senate" of Member States ... European Parliament elections are more important than national elections ... This will be our best weapon against the Eurosceptics." — Viviane Reding, Vice-President of the European Commission, January 2014
“For my children’s future I dream, think and work for the United States of Europe” — Matteo Renzi, Italian Prime Minister, May 2014
Also, we have our very own Kenneth Clarke, in a rare moment of honesty from a British pro-EU politician:
 "I look forward to the day when the Westminster Parliament is just a council chamber in Europe." — Kenneth Clarke, Conservative Chancellor in International Currency Review Vol 23 No 4 1996 
This is reinforced by the proposals for the next EU treaty, The Fundamental Law of the European Union, published by the federalist Spinelli Group of MEPs, through the Bertelsmann  house in late 2013. The pre-amble contains a a telling paragraph:
"This proposal for a Fundamental Law of the European Union is a comprehensive revision of the Treaty of Lisbon (2007). Replacing the existing treaties, it takes a major step towards a federal union. It turns the European Commission into a democratic constitutional government, keeping to the method built by Jean Monnet in which the Commission drafts laws which are then enacted jointly by the Council,representing the states, and the European Parliament, representing the citizens. All the reforms proposed are aimed at strengthening the capacity of the EU to act."
Nor should anyone believe that this is a recent development. The EU was always conceived as a vehicle for supra-national federal union, dating right back to its founding organisation, the European Coal & Steel Community (ECSC) established in 1951:
"Through the consolidation of basic production and the institution of a new High Authority, whose decisions will bind France, Germany and the other countries that join, this proposal represents the first concrete step towards a European federation .."  — The Schuman declaration May 1950
"By the signature of this Treaty, the participating Parties give proof of their determination to create the first supranational institution and that thus they are laying the true foundation of an organised Europe.” — Europe Declaration made on 18 April 1951, at the signing of the Treaty of Paris establishing the ECSC

Supra-national EU erodes national sovereignty

Perhaps the biggest mis-conception in the public mind  is to confuse the EU with other international organisations.  Nothing could be further from the truth.

Organisations such as the UN, NATO, WTO, the Commonwealth and the myriad of organisations making international regulations / standards (e.g. UNECE, Codex Alimentarius, ILO) are inter-governmental. They are based on bi-lateral or multi-lateral agreements between sovereign governments as equals or partners. These agreements will include specific and limited obligations and commitments entered into freely for mutual benefit between the partners (e.g. Nato's mutual defence clause, trade agreements that open markets etc).   Nations are free to co-operate, form alliances and partnerships on an issue by issue basis. Decision making is based on consensus, voluntary opt-in and allows for opt-out or right of reservation. For example, NATO does not have majority voting: each nation makes its own decision regarding military action and is free to leave inside one year under a recognised process - as France did in the 1960's .

The EU is uniquely a supra-national union. The EU treaties create over-arching legislative, executive, and judicial authorities.  Powers or competencies are passed from the member states to the union, and the union then exercises power in these competencies in a sovereign manner. Hence the obligations and commitments made by member states are essentially open-ended. The relationship is hierarchical rather than multi-lateral, as member states are subordinate to the union.  The member states are fixed in a permanent alliance with each other and the Union will tend to represent the member states in international forums. Decision making is by majority rather than allowing voluntary opt-in or right of reservation. If the pro-EU camp are to be believed, leaving the EU is so complicated and fraught as to be practically impossible - although they would wish us to believe that so as to deny us a Leave option.

The argument is often made that there is no such thing as absolute sovereignty. It is certainly true that (i) national decisions are constrained by considerations for neighbours, allies and  other inter-national factors (ii)  joining & co-operating with allies is often necessary.  This of course has always been the case. Sovereignty is not unfettered power, it is the ability to choose our path/allies/commitments and accept the consequences.  But it is clear that membership of the supra-national EU means that we increasingly pass decision making to the EU and are unable to choose our allies from around the globe - that is real loss of sovereignty.

EU institutions & democratic deficit

As indicated by Angela Merkel, Vivian Reding and many others, the EU's political institutions mirror that of a state. There are 2 revising chambers: the EU Parliament representing the peoples of Europe and the and EU council representing the members states.  The EU commission is referred to as a "supreme government" by European federalists but as "just a civil service" by UK Remain campaigners trying to downplay their significance. In fact the EU commission is both civil service AND government.  It has sole power to initiate and propose new or amended legislation (as supreme government) and also undertakes the drafting of all legislation (like a civil service). Commissioners are appointed by national governments and swear an oath of loyalty to the EU.

The European Court of Justice acts as a supreme court for ruling on the EU treaties and EU law. The Lisbon treaty also includes the Charter of Fundamental Rights & Human Rights legislation as general principles of EU law (Article 6). Asylum Law is also included in EU law via Article 18 of the Charter of Fundamental Rights. Recent UK government proposals to amend the European Communities Act 1972 and assert Parliament as sovereign were abandoned. The supremacy of European Union Law was established as long ago as 1963, in the "van Gend en Loos" case and subsequent ECJ case history increases the scope of EU judicial supremacy.

This institutional structure is essentially the one proposed by Arthur Salter in his 1931 publication "The United States of Europe", based on the League of Nations (which had a Secretariat, Council of Ministers, Assembly & Court). Crucially, Salter proposed a Secretariat as a permanent body of international civil servants, loyal to the new organisation (not to the member countries) and with supreme authority over national ministers. Salter also suggested splitting up member states into regions to further erode nationalism - all in the name of peace and avoiding further Franco-German conflict. Salter's close friend and former colleague at the League of Nations, Jean Monnet, adopted this blueprint for the EU's fore-runner (the ECSC).

The EU suffers from democratic deficit, not just because of these institutions but also due to the lack of a European identity, or "demos". The EU commission recognised this issue in its white paper on European governance in 2001. Citizens of the member states see democracy in terms of national issues and vote accordingly. There is a continuing decline in turnout for EU parliamentary elections. But what emerges from the white paper is not a proposal to empower the people, or return powers to member states, but an approach to undermine existing national institutions and "europeanise" them. You can read a well-researched  critique of this white paper here  (ghost-written by Dr R North for a younger Nigel Farage before he became pre-occupied with immigration).

It seems clear that there is simply no room for national democratic self-government in the EU. The EU is built upon a plan dating from 1931, when many intellectuals preferred rule by technocrats and had little confidence in democracy. Its anti-democratic nature is hard-wired.

EU's growing competencies erode national governance



The EU's competences, or powers, are defined in Articles 2-6 of the The Treaty of the Functioning of the European Union (TFEU) and represents a large range of powers already transferred from the UK:
  • The UK  has no power to act in exclusive competences such as commercial/trade policy, tariffs, competition rules etc. 
  • The UK can only act in shared competences where the EU has not (yet) legislated. The UK's scope is increasingly restricted as the EU increases its activities. For example, an Energy Union is currently being planned. The UK has a general opt-out of Security & Justice, with 31 specific opt-ins for measures such as the European Arrest Warrant.
  • The UK's economic, employment and social policy must fall within EU guidelines and co-ordinate with other member states policies. Despite the € opt-out, the UK is still subject to the EU's competence on economic policy which aims to achieve convergence for monetary union. 
  • Even in areas where the UK is not prevented from acting, it is not free from EU actions in the same field to implement programs, conduct common policy or supplement the UK's actions. 
The EU also has competence for external affairs, specifically to "define and implement a common foreign and security policy, including the progressive framing of a common defence policy." This policy is defined and implemented by the European Council (Heads of State) and the Foreign Affairs Council (consisting of Foreign, Defence & overseas aid ministers) acting unanimously. So the UK retains a veto (with some exceptions as defined in Article 31). However, the direction of travel is clear:
  • The Lisbon treaty established: (i) the "High Representative of Foreign Affairs", essentially the EU's foreign minister; (ii) the European External Action Service (EEAS), essentially the EU's foreign ministry and diplomatic corps. 
  • Lord Owen, the former foreign secretary, in a recent speech noted "the range and the activity of the EEAS are inexorably increasing  and so is its cost ... At every stage this creep is resisted by the British government initially and then absorbed. Meanwhile we have seen substantive cuts in the budget of the Foreign Office". 
  • There have been many european voices (including President Juncker) calling for an EU army, an EU Defence Union and so on. A highly-informed and balanced analysis on Defence and Brexit can be found at ThinkDefence blog. While he sees little change in the short to medium term, he concludes "the question we should be dealing with, do we want a single EU state with a single EU Navy, Army and Air Force? ... The long term points to ever closer political, and that means military, union."

The EU usurps national representation in international organisations

But perhaps the most dramatic and least understood loss of national power is the way the EU increasingly usurps the role of national governments on the international stage.  The UK is increasingly bound by common policies and the requirements of Article 34, which as a recent blog by LostLeonardo explains, means the loss of influence, vote and right of reservation in international organisations.

With legal identity secured by the Lisbon Treaty, the EU is  keen to upgrade its "limited status" in "organisations and fora where important decisions are taken" (see Vice-President Ashton's Strategy communication to the Commission, dated 20.12.2012). The implication is that member states will be reduced to passive observers and in the fullness of time lose representation entirely. The EU has already assumed competence in the International Maritime Organisation, with predictably negative results (See Pete North Politics blog). Britain is the world's No.2 in services provision, but we have no national representation at the  Trade in Services Agreement (TiSA) negotiations, unlike EFTA states Norway & Switzerland, unlike Commonwealth allies Canada, Australia & New Zealand.

The direction of travel is clear. The UK will end up with as much influence on the international stage as Texas or California.

Conclusion - The honest Referendum choice

Voting to Remain is not a simple "stay as you are option". As Allister Heath states in the Telegraph: "Comfortable, middle-class voters who are considering sticking with the devil they believe they know need to think again. Voting to remain is a far greater leap into the unknown than voting to leave. It’s self-evidently normal to be independent and prosperous: just look at America, Australia, Canada or Singapore. But there are no known examples of a previously independent democracy being subsumed into a dysfunctional, economically troubled technocracy and doing well as a result. As mad gambles go, it is hard to think of anything worse."

We need to recognise the EU for what it is - a political project to create a single state, governed by bureaucracy/technocracy instead of by democracy (the consent of the people). The Referendum can be boiled down to one very simple choice : Should Britain be a self-governing nation, trading and co-operating with nations in Europe and around the world ? Or should Britain be subsumed into an undemocratic United States of Europe ?

Wednesday, 18 May 2016

Trade - A World Beyond Tariffs




If the economy is central to the Referendum debate, then understanding trade in relationship to our EU membership is fundamental.  Regrettably, the public debate and understanding of trade is poor and to be honest it takes time and effort to understand properly. In this post I will try and summarise what I have learnt over the last year or so on this crucial topic.

Trade is a primary characteristic of human civilisation. Trade is essentially the exchange of goods or services.  This allows individuals / communities to specialise in the production of specific goods or services and exchange their produce with other individuals / communities who have specialised in a different product. Specialisation, together with innovation (the use of a new idea, device, or method) equals more efficient production of goods and services.  Increased productivity means there is more goods and services to exchange, so everybody is better off.

Markets are simply a place or organisation that promotes the exchange goods or services.  Once money was invented and we left bartering behind, trade and markets multiplied and extended.  As trade multiplies, specialisation and innovation increases, hence productivity increases, everybody is better off. You get the picture, trade is a good thing.

Tariff is the common term used for taxes on imports or exports, effectively a tax on international trade (a tariff is actually a list of  products with their corresponding customs duty).  Mercantilism, the dominant economic practice in 16th to 18th century Europe, featured a national economic policy focused on maximising domestic production and trade surplus, typically applying high tariffs to deter imports especially of manufactured goods. Typically such policies led to war and colonial expansion.  You get the picture, tariffs are a barrier to international trade, and are a bad thing.

Free Trade.  In 1776, Adam Smith published his famous "Wealth of Nations", criticising Mercantilism, and arguing for removal of import /export controls & tariffs, which might protect specific domestic industries but hurt the trading nation as a whole.  Access to more / larger markets allows nations to specialise, so dividing labour more efficiently and increasing productivity. Smith's philosophy is a founding work of classical economics and classic liberalism. Free-trading liberal democracies, based on this philosophy, trade freely for mutual benefit, become inter-dependent and avoid war. You get the picture, free-trade as in removing barriers to international trade, is a good thing.

Adam Smith explained that if one nation is more efficient in one product, but a second nation is more efficient in another product, both countries gain advantage by specialising in their strengths and then trading their products.  This is termed absolute advantage as the basis for trade.  In 1817, David Ricardo demonstrated the counter-intuitive concept of comparative advantage, where even if the first nation is more efficient in every product, both countries still benefit by specialising in their strengths and trading. You get the picture, trade is to mutual benefit, even between mis-matched nations.

Free-Trade area is a group of nations who have signed a free trade agreement (FTA) and co-operate to reduce and remove trade barriers.  Examples include NAFTA (North American Free Trade Agreement covering America, Canada & Mexico) and EFTA (European Free Trade Association) formed by Britain and 6 other European nations in 1960 as an alternative to the Common Market.

A Customs Union also eliminates tariffs and trade barrier between member states, but unlike a free trade area, the member states have a common external tariff for all trade conducted with countries outside the customs union. Member states are unable to negotiate their own external trade agreements. The German Zollverein customs union founded in 1834 was instrumental in unifying the German states. The 1848  "March Revolution" in the German states led to calls for German economic and politicial union. The German empire was formed in 1871 following 3 wars: the Second war of Schleswig against Denmark in 1864, the Austro-Prussian War in 1866, and the Franco-Prussian War in 1870–71. You get the picture, customs unions focus on internal economic and political integration with a protectionist approach to external trade.

In 1931, Arthur Salter proposed the German Zollverein as a model to create a "United States of Europe" funded by a common external tariff on all goods imported into the union, with “a political instrument to determine how the distribution [of those funds] should be made”. Ultimate authority would be given to a permanent body of international civil servants loyal to the union, not their home countries. Tellingly, a 1956 British proposal to create the Common Market based on a free trade area was rejected as it ‘offered no prospect of a European political union’. The Common Market was instead instituted as a Customs Union along Salter's lines in 1957, with Britain opting for free trade in EFTA in 1960.

A "Leap in the Dark" 

"A leap in the dark". An apt description of the UK joining the Common Market or European Economic Community (EEC) in 1973.  In joining the Customs Union, Britain surrendered its independent trade policy to Brussels and with it freedom to strike free trade deals.  Free-trade links with EFTA and the Commonwealth were sacrificed. Britain's efficient agriculture came under control of the Common Agricultural Policy, which required hefty payments from Britain, primarily to subsidise inefficient French agriculture. Britain's territorial fishing waters, home to 70% of Europe's fish stock, became a "shared resource" and over subsequent decades the Common Fisheries Policy decimated British fishing.

The economic case for the EEC was that Britain needed the cold blast of competition with the dynamic common market economies.  But in truth, the most dynamic growth had occurred before the formation of the Common Market. Post-war reconstruction and the economic miracle fostered by Ludwig Erhard in West Germany. A historical shift of workers from the countryside to the cities (which Britain had undergone a century earlier) and so on. The whole case for Britain joining the EEC was in any case undermined when the remaining EFTA countries secured free trade access to the Common Market, culminating in an agreement on industrial goods in 1977.

Subsequent decades have not made Britain's decision look any wiser. Our former EFTA and Commonwealth allies enjoyed stronger growth than the EEC/EC/EU. Australia and New Zealand prospered by unilaterally lowering tariffs, diversifying into new markets and products. By contrast, the EEC/EC/EU economic performance has been "sclerotic", more so as political integration increased and especially with the devastation wreaked by the Euro. The EU's continuing enlargement to 28 member states has not stopped it's share of world GDP shrinking. The Euro-zone has barely grown at all since it started.  While a seemingly dynamic Common Market may have appeared attractive to the "sick man of Europe" that was Britain in 1973, the position now is entirely reversed.

Tariffs around the world are now much lower thanks to the work of GATT (General Agreement on Tariffs and Trade) established in 1948.   I should point out that there is a case for higher tariffs - developing nations should have tariff protection against developed nations while they build up a competitive economy.  The Generalized System of Preferences (GSP) provides such a mechanism. Unfortunately, the developed world, and especially the EU, are pursuing policies that harm rather than help the developing world, as explored by fellow blogger The Brexit Door. The EU protects its own Agriculture (subsidies and high external tariffs), pursues predatory fishing practices and use its "clout" to force African nations to lower their import tariffs on manufactured goods. Africa faces a high barrier to its agricultural exports but is unable to protect its manufacturing industries against the EU's highly developed industries. The result is an Africa dependent on Western handouts and bribes from foreign corporates. The EU seems to resemble a mercantilist empire ignorant of the free trade insights of Smith and Ricardo where trade is for mutual benefit..

So it all seems straightforward and unarguable. Britain should leave the mercantilist, protectionist EU customs union, lower tariffs (following Australia & New Zealand's example in the 1970's), look to global trade for growth and enjoy the ensuing free trade bonanza.  Unfortunately, it is not quite as simple as that.

Non-tariff barriers 

Despite the global reduction in tariffs achieved by GATT and WTO, despite technical advances in containerisation and shipping, despite the expansion of air freight, growth in global trade has stalled. Other barriers to trade have become more significant, so-called Non-Tariff Barriers (NTBs).

Pre-GATT, tariffs are estimated to have been an average of 22%.  Subsequent reductions in tariffs achieved by GATT & WTO have effectively been wiped out by the rise in NTB costs, which are variously estimated at around an average of 20%. There are wide variations between geographical regions and industrial sectors, e.g.: the Atlantic Council estimated 25.5% NTB cost to the the US automotive trade;  the World Bank estimates NTB costs in Africa average 40%.

Supply chain issues and customs procedures are a major barrier to trade with developing nations, as described by EU Referendum blog :
  • Nigeria: Chronic traffic congestion and corruption at the port of Apapa, part of the Lagos complex costs an estimated £20 million per day.
  • Ghana: delayed customs clearances at seaports cost importers $70+ million annually in demurrage charges, and millions more in extra rents.
  • Brazil: Poor internal transport & communications infrastructure creates delays and potential demurrage costs of around US$25,000 per vessel per day. Customs clearance takes 12 times longer than in the EU.
  • South-East Asia: Substandard infrastructure, poor quality control and a corrupt business environment in the rubber market result in an unreliable supply chain. Carried inventories are extended by 90 days, equating to 10% higher landed costs.
  • India: Complex Rules of Origin (ROO) mean that trade beyond raw materials faces expensive hurdles.
  • Air freight: Adopting electronic documentation along the global cargo chain could save US$12 billion per annum and prevent 70-80% delays associated with current physical paperwork.
  • World Economic Forum report suggests reducing supply chain issues could increase global GDP by nearly 5% and global trade by 15%. 
  • The 2013 Bali agreement on Trade Facilitation will boost trade by reducing costs and delays for traders, through measures that provide predictability, simplicity and uniformity in customs and other border procedures.  Fully implemented, it could increase global GDP by almost $1 trillion. 
  • A video tweeted by Maersk (a major global shopping & container corporation) explains how trade facilitation will boost global trade especially for developing nations and is well worth a view here.

Technical barriers to Trade

But the biggest barriers to trade, particularly for trade with the EU and other developed nations, are so-called Technical Barriers to Trade (TBTs).
  • These barriers occur where nations have differing regulatory regimes (i.e. technical product standards and regulations to protect consumers and natural resources).  Exporters face difficulties and cost in adapting their products to meet the regulations of a foreign market.  Furthermore, nations often seek to protect domestic markets by introducing regulations that effectively discriminate against foreign competitors.
  • The rationale for the Single Market is that a common "harmonised" set of regulations are established, so removing these technical barriers between member states. Which is why the introduction of Single Market introduced a flood of new regulations.
  • The need for harmonised standards and regulations has grown as globalisation has increased. Finished products are now often assembled from components sourced around the globe.  In simplistic terms, using imperial size bolts with metric size nuts is not going to work ! The need for common standards extends beyond the EU.
  • The Single Market also provides a regulatory barrier to exporters outside the Single Market. The EU is negotiating so-called "2nd generation" trade agreements with foreign countries. These include tariff reductions, but also focus on harmonising regulations, including recognising where each others regulations are equivalent or achieve the same objective, (termed "mutual recognition").
  • The EU's "bi-lateral" agreements are painfully slow - typically 5-10 years. The "big-bang" approach of harmonising all regulations is further complicated by taking into consideration the protectionist interests of all 28 EU member states. The EU-US TTIP agreement appears to have stalled completely on attempts at regulatory harmonisation.

Globalisation and Multi-lateralism

The process of regional integration and bi-lateral trade agreements has hit a brick wall. A patchwork of bi-lateral agreements also complicate world trade, leading to what is termed the "Spaghetti bowl effect". A global, multi-lateral approach is needed. Fortunately, in the same way that GATT worked to lower tariff barriers globally, the WTO is paving the way for global action on barriers to trade via a series of agreements:
  • The WTO Technical Barriers to Trade (TBT) Agreement covers trade in all goods (both agricultural and industrial) and requires that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade. In particular, article 2.4 states that members SHALL use international standards where they exist. Article 6.3 encourages members to enter into agreements to mutually recognise each others conformity assessments (so that products tested in the home market are accepted as meeting required standards in foreign export markets).
  • The WTO Sanitary and Phytosanitary (SPS) Agreement allows Governments to implement national food safety and animal and plant health measures, but not for protection of domestic producers. Measures should be based as far as possible on the analysis and assessment of objective scientific data. Governments “harmonise” or base their national measures on the international standards developed in the "3 sisters" :  FAO/WHO Codex Alimentarius Commission (food safety); World Organisation for Animal Health, formerly the Office International des Epizooties (OIE); International Plant Protection Convention (IPPC) (plant safety).
  • The General Agreement on Trade in Services (GATS) is the first and only set of multilateral rules governing international trade in services. Ranging from architecture to voice-mail telecommunications and to space transport. Covering Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies. Individual countries choose to open markets in specific sectors but can also choose to reserve certain sectors for national treatment (e.g. Health services).  Since January 2000, services have become the subject of multilateral trade negotiations, the so-called DOHA round of negotiations.
  • The WTO Intellectual Property Agreement covers trade and investment in ideas. Internationally-agreed rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets – “intellectual property” – should be protected when trade is involved.
These can be seen to provide a framework for a "Global Single Market".  As I discussed in a previous post on rules adopted by EFTA EEA states, the standards and regulations that govern this emerging Global Single Market are defined in a myriad of international organisations. Organisations based on an inter-governmental approach of consensus, voluntary opt-in, right of reservation, best scientific knowledge and best working practices. Regulations can be proposed by any member state who want to initiate harmonisation efforts to reduce trade barriers.  The best example of this is the "International model" of regulation developed by the UNECE WP.6 working party. In short, these various international forums foster international co-operation to reduce trade barriers.

The contrast with the supra-national EU is telling.  The EU commission holds sole power to propose and amend legislation.  The EU council and parliament make decisions by qualified majority voting, the UK can and is regularly outvoted. Moreover, the bulk of the European Single Market regulations are approved by committees (chaired by the EU Commission) and are not even subject to EU Council and Parliament votes. Increasingly, the EU are simply "rubber-stamping" international regulations, although it does not prevent the EU from "gold-plating" some regulations, particularly when big corporate interests lobby for a complex implementation to stifle their small business competitors.

And the most damning point is that within international organisations, the UK is relegated to the role of an EU proxy.  A Global Single Market is being forged and we have surrendered our voice, vote and opportunity to take part in shaping its creation. We are not at the "top table". Fellow blogger LostLeonardo has produced a number of excellent posts on this topic, notably on Article 34 ,  the fallacy of "clout" in trade negotiations and "embracing-a-global-role"

Conclusion

Britain, more than most nations, relies on international trade for its prosperity.  The EU is barely growing and its many economic problems, not least the Euro, are not going to be resolved any time soon. Fundamentally, being locked into the EU's custom union, behind the EU's common external tariff, with trade policy surrendered to Brussels, is very much against our long-term interests.  It is clear Britain has to look to free trade and wider horizons to prosper.

But it also has to be understood that trade has moved on in recent decades.  Non-tariff barriers are now dominate concerns over tariffs.  An independent Brtiain wishing to forge trade links with developing nations, will face non-tariff barriers. As an independent nation, Britain could choose to direct overseas development aid and its diplomatic and military resources to addressing these problems particularly for developing Commonwealth countries in Africa. Coupled with a progressive approach to tariffs for developed nations, Britain would have a tremendous opportunity to assist developing nations in international trade, with long term benefits for all.

The most important and least understood barrier is technical barriers to trade and how "harmonised" regulations are needed to break down these barriers. The Single Market provides our current regulatory regime and simply walking away from the single market would leave the UK open to technical barriers equivalent to an average tariff of 20% or more.  Fortunately, it is possible to Leave the EU, but keep the Single Market. The EFTA EEA option provides a route out of the EU while maintaining current Single Market access. It provides political and judicial independence without risking trade and hence risking our economy. The UK would regain it's voice and vote in international organisations and play a full part in shaping the emerging Global Single Market.

Ultimately, the emerging Global Single Market provides an escape route from the EU's control of the Single Market. Increasingly, the EU is a redundant middleman, simply rubber-stamping international regulations.  Most importantly, the WTO TBT Agreement article 2.4 states that compliance with international standards shall allow market access. In time, it will be possible to forge a trade relationship with Europe based entirely on international regulations, without the unwanted and unwarranted involvement of the EU's political institutions.

The EFTA EEA option means it is safe for us to Leave and provides a first step in our journey away from the EU. Remain means we miss out on the global opportunity of a lifetime.