For some time, I have listened to the words of many Brexit friendly Tory MPs and wondered precisely where they were coming from. Despite singing the praises of free trade and open markets, what the EU has achieved in this arena is always completely discarded by this group. Likewise, getting something similar in terms of trade, only across much more of the world; bigger markets, and even better, on Britain’s own terms completely, is what is apparently possible in a post-Brexit world. Coming from a Remain perspective, I have been perplexed by their faith in this regard.
But I finally get it. If you take someone like Dan Hannan – but anyone in that particular Brexiteer grouping would do – the one key piece of information that makes sense of everything they think is this: they believe that free trade, across the whole of the world, is completely and utterly inevitable.
If you believe this, their criticisms of the EU make complete sense. If free trade is going to happen no matter what, why settle for something that is geographically specific, ties the nation state’s hands in a myriad of ways, and is mired in too much red tape? Why not leave the EU to set the nation up as a free agent for the free trade avalanche that is unstoppably headed our way?
Only thing is, I don’t see anything to back up free trade being inevitable at all, and in fact see the precise reverse as being the case. I think protectionism is much more natural than free trade, for reasons that are easily understandable within human behaviour. In an uncertain world, holding onto what you’ve got and keeping out as many foreign elements as possible is completely rational. You can only have something like free trade if everyone involved believes that everyone else involved will play fairly and stick to the rules pretty much 100% of the time. To achieve such a state is really, really difficult and should be cherished. That’s why I like the EU: for all it’s faults, the free trade zone it has created is nothing short of miraculous from any realistic historical perspective. Nation states simply do not trade freely with one another as a matter of course, whatever Dan Hannan thinks.
The most horrible irony of all of this is that what almost certainly led the Hannans and Redwoods of this world to consider free trade as inevitable was the success of the EU itself, at least its trade component. Hell, if France and Germany could have completely tariff free access to each other’s markets only a few decades after WWII, what could be possible for free trade the world over? They are blind to the fact that there could be elements of the political project in there that made the free trade portion achievable. Again, if worldwide free trade is inevitable, the political bit seems not only pointless but likely counterproductive.
One of my big fears for the future is that by the middle of this century we look back at the free trade zones as they currently exist and marvel at them having ever been possible. A protectionist, dystopian world which would equally horrify the Tory Brexiteers and myself. Perhaps one day, ironically enough, the Brexit bunch might have nostalgia for the EU having ever existed. In the meantime, I have to hope that the Tory Brexiteers are actually correct regarding the global free trade being predestined.
Global free trade is not inevitable. It has already happened. It has done so for centuries, if not millenia. Except now, the magnitude of this trade is growing at a faster pace than has ever been seen.
Protectionism is instinctive, but it is not natural. Monopolies are unfavourable to the consumer, but they can be broken by competitive free trade. Uncompetitive monopolies can only remain entrenched when protectionist policies are put in place, hurting both the industry and the consumer. This can only happen when industry lobbyists play dirty with politics.
Thus it is protectionist trade, not free trade, that requires sticking to the rules.
Global trade on the whole is not free, nor has it ever been. Customs warehouses have existed for centuries, as have smugglers. And of course lobbyists play dirty all the time, sometimes with government connivance. The achievement of the EU to provide free trade even if only within its borders is indeed an outstanding one that should not be abandoned lightly.
Sorry, the practice of customs warehouses and the smuggling is in order to circumvent the rules that are set in place to restrict free trade.
Yes, the EU has achieved free trade within its borders at the expense of global free trade. This is by definition protectionist. It’s just protectionism on a larger scale.
A bonded warehouse is a useful logistics mechanism to hold products centrally in one market and ship from bonded central inventory to multiple markets outside that regulatory market. This is not a product of a protectionist conspiracy unless you believe all countries should have no tariffs or duty and Brexit unicorns deliver products across borders gracefully.
Your view of global trade is high-level and conceptual.
Unlike those who support Brexit from an ideological viewpoint (extreme right and left) I deal with reality.
I need to invoice in Mexico via the government, follow obscure regulations in India, pay outrageous tariffs to get competitive product into Brazil, provide working B2B systems within China and clear bulk shipments to Switzerland. I can’t imagine any of that is a concern to you because reality is not part of Brexit.
I try to understand the logic of the Tory Brexiters and this is the only sane reason I can come up with…
http://www.theneweuropean.co.uk/top-stories/the_problem_with_the_english_england_doesn_t_want_to_be_just_another_member_of_a_team_1_4851882
What does your convoluted example have to do with Brexit or the EU?
Are you denying that the EU is protectionist?
Convoluted? In terms of trading complexity these are very simplistic summaries, but of course true.
If you want a dumbed down yes/no Dan Hannan answer “Is the EU protectionist?” Yes in some areas, and the opposite in others.
The reality is for some industries and products the EU is very protectionist, and in others it has specific objections like state subsidy and anti-dumping measures. You can debate if the Chinese government is a victim or directly supporting certain industries. In others barriers are created with high environmental standards and safety regulations. You can argue either way that is protectionist or just a product of a developed economy. In other areas the EU is very open to trade, has a whole series of FTAs, EPAs, WTO schedules, agreed standards and trading agreements.
The EU is the world’s largest trading bloc and uses their power to emphasise farming protection, but then you need to compare it to other countries before you label it as protectionist. In my view really high levels of protectionism are visible in markets like India and Brazil. The US has very tough barriers to entry in regulatory enforcement, local sales tax rules, legal costs, and corporate governance.
Most Brexit supporters just want black and white answers.
The EU is therefore labelled as protectionist and the fantasy is developed that we can easily shift trade to the furthest geographic areas and protected markets. Geography has a huge impact on my ability to service customers from the UK in our time zone, meet complex product regulations, warehouse products, ship directly quickly, return products, provide language support with local staff, meet legal and tax obligations.
The reality is that since WW 2 most of the world has formed regional unions or trade blocs of some kind, including customs unions. These blocs are deepening and countries are only joining them, not leaving them. Most of the blocs seek to emulate much of what the EU has, including single markets and free movement. A number have single currencies.
What the Brexiteers don’t understand is that the world outside the EU is not made up of hundreds of free wheeling nation states – it is made up mostly of blocs and alliances, most of which come with obligations and restrictions on ‘free trade’ outside those alliances. Outside the EU the UK is going to struggle to find nation states free of obligations to others with whom to forge trade deals.
The list below if of every country and territory in the world. The fact that so few countries have no trade memberships speaks for itself.
LIST OF UNIONS, COMMON MARKETS & FREE TRADE ZONES
EUROPE
EUROPEAN UNION/EEA
Austria
Belgium
Bulgaria
Croatia
Cyprus
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Latvia
Lithuania
Luxembourg
Malta
Netherlands
Poland
Portugal
Romania
Slovakia
Slovenia
Spain
Sweden
United Kingdom
Norway
Iceland
Liechtenstein
EFTA
Norway
Switzerland
Iceland
Liechtenstein
EU CUSTOMS UNION
EU States plus
Andorra
San Marino
Monaco
Turkey
Akrotiri and Dhekelia
Guernsey
Jersey
Isle of Man
CENTRAL EUROPEAN FREE TRADE AGREEMENT (CEFTA)
Albania
Bosnia and Herzegovina
Macedonia
Moldova
Montenegro
Serbia
Kosovo
NO MEMBERSHIPS
Vatican City
CARIBBEAN
CARICOM (CARIBBEAN SINGLE MARKET AND ECONOMY – CSME)
Antigua and Barbuda
Barbados
Belize
Dominica
Greneda
Guyana
Jamaica
Saint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines
Suriname
Trinidad and Tobago
CARICOM (PARTIAL CSME)
Bahamas
Haiti
EUROPEAN UNION
Guadeloupe
Martinique
St Bathélemy
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
Turks and Caicos Islands
Cayman Islands
British Virgin Islands
Anguilla
Bermuda
Montserrat
Netherlands Antilles
Saint Martin/Sint Martin
Guadeloupe
Martinique
St Bathélemy
Aruba
NO MEMBERSHIPS
Suriname
Cuba
CENTRAL AMERICA
CENTRAL AMERICAN INTEGRATION SYSTEM (CAIN OR SICA)
Belize
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panama
Dominican Republic
NO MEMBERSHIPS
None
EURASIA AND CENTRAL ASIA
EURASIAN ECONOMIC UNION (EEU)
Armenia
Belarus
Kazakhstan
Kyrgyzstan
Russia
COMMONWEALTH OF INDEPENDENT STATES FREE TRADE AREA (CISFTA)
Armenia
Belarus
Kazakhstan
Kyrgyzstan
Russia
Ukraine
Uzbekistan
Moldova
UNION STATE
Russia
Belarus
NO MEMBERSHIPS
Azerbaijan
Tajikistan
Turkmenistan
Mongolia
SOUTH AMERICA
MERCOSUR
Argentina
Brazil
Paraguay
Uruguay
Venezuela
EUROPEAN UNION
French Guyana
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
Falkland islands and South Georgia
ANDEAN COMMUNITY (CAN)
Bolivia
Colombia
Ecuador
Peru
PACIFIC ALLIANCE
Chile
Colombia
Mexico
Peru
NO MEMBERSHIPS
None
MIDDLE EAST
GULF COOPERATION COUNCIL (GCC)
Saudi Arabia
Bahrain
UAE
Oman
Qatar
Kuwait
NO MEMBERSHIPS
Iran
Iraq
Jordan
Israel
Lebanon
Syria
ASIA
ASSOCIATION OF SOUTH EAST ASIAN STATES (ASEAN)
Indonesia
Thailand
Malaysia
Philippines
Singapore
Vietnam
Brunei
Laos
Cambodia
Myanmar
SOUTH EAST ASIAN FREE TRADE AREA (SAFTA)
Afghanistan
Bangladesh
Bhutan
India
Maldives
Nepal
Pakistan
Sri Lanka
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
British Indian Ocean Territory
NO MEMBERSHIPS
China
Taiwan
Japan
East Timor
North Korea
South Korea
AFRICA
EAST AFRICAN COMMUNITY (EAC)
Kenya
Tanzania
Uganda
Burundi
Rwanda
SOUTH AFRICAN CUSTOMS UNION
South Africa
Namibia
Botswana
Lesotho
Swaziland
ECONOMIC COMMUNITY OF CENTRAL AFRICAN STATES (ECCAS)
Angola
Burundi
Cameroon
Central African Republic
Democratic Republic of Congo
Equatorial Guinea
Gabon
Sao Tome and Principe
Rwanda
ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)
Benin
Burkino Faso
Cape Verde
Gambia
Ghana
Guinea
Guinea-Bissau
Ghana
Ivory Cost
Liberia
Mali
Niger
Nigeria
Senegal
Sierra Leone
Togo
COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA (COMESA)
Djibouti
Eritrea
Ethiopia
Egypt
Libya
Sudan
Comoros
Madagascar
Mauritius
Seychelles
Burundi
Kenya
Malawi
Rwanda
Malawi
Uganda
Swaziland
Zambia
Zimbabwe
Democratic Republic of Congo
EUROPEAN UNION
Mayotte
Réunion
Canary Islands
Madeira
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
St Helena
French Southern and Antarctic Territories
NO MEMBERSHIPS
Mozambique
Tanzania
Mauritania
Cape Verde
Republic of Congo
Morocco
Comoros
Somalia
South Sudan
AUSTRALASIA AND THE PACIFIC
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
French Polynesia
Pitcairn
Wallis and Fortuna
New Caledonia
NO MEMBERSHIPS (PACIFIC ISLAND FORUM PROPOSED 2021)
Australia
New Zealand
Federation of Micronesia
Fiji
Kiribati
Marshall Islands
Nauru
Palau
Samoa
Solomon Islands
Tonga
Niue
NORTH AMERICA
NAFTA
USA
Canada
Mexico
EUROPEAN UNION OVERSEAS COUNTRIES AND TERRITORIES
St Pierre and Miquelon
Greenland
NO MEMBERSHIPS
None
You have to realise that it is NOT all about Free Trade. It is also about the constitution of the Nation you are dealing with. The Eu is the world’s finest example of a free trade grouping that is overall law-abiding, democratic and tied together by strong treaties.
This is an important distinction, you could not, for example, have a similar agreement with China. There views on trade are very different – take copyright as an example, they willingly copy and pirate anything and trade it globally.
It’s worth pointing out that Australia and NZ have CER (Closer Economic Relations) and TTTA (Trans-Tasman Travel Area). Not quite an EEA style agreement, but it does support freedom of movement and the two have been working for decades on closely harmonising customs etc.