Monday, 1 January 2018
The UK needs to establish its own trade strategy
There is no way to repaint Brexit as something which does not disrupt the flow of the international trading system. Nor as something which will not require a very difficult (and expensive) overhaul of the fabric of our domestic governance and the systems embedded in it. These facts hold true even if we commit to staying in the Single Market, which I believe we will have no choice but to. Our trading arrangements with the EU and third countries will find themselves fundamentally altered and we will need to radically reform the ways in which our civil servants are mobilised.
I am currently trying to get hold of Tim Shipman's new book Fall Out, which I am being forever recommended to read. Occasionally I see people I follow on Twitter sharing excerpts from it which highlight the difficulties pressuring behind-the-scenes mechanics in Whitehall. It does not appear to be a very pretty picture. From what I gather, Shipman highlights the unrest and unhappiness of many ministers, as well as the headless chicken-like effects on civil servants brought about by the government's complete lack of clarity as regards its desired Brexit outcomes and objectives.
Given that 40 years of EU membership necessitated gradual outsourcing of policy commitments, technical expertise and administrative systems, British governance has to some extent coasted along on auto-pilot. This is most easily captured by our exporting of our trade competence to Brussels and the current panic over policy repatriation more or less proves my point. Brexit involves collecting competencies our current strata of ministers played no part in shaping and so we were always going to experience a degree of what I would call intellectual atrophy.
In preparation for leaving the EU, we will need to cement a trade strategy. This strategy would need to concentrate as much on fostering domestic governmental reform as it would establishing international goals for our trade. The domestic side of things is important because trade policy begins at home. If we undergo a reset as a new and distinct customs entity on feeble ground, with inefficient departmental structures and parliamentary unrest as a result of inadequate transparency, we will not progress very far. These are obstacles we can do without erecting.
One of the reasons why I support Brexit is because I believe, on balance, we are more sovereign outside the EU. There are many trade-offs involved because the concept of sovereignty is nebulous. Perhaps some of the promised gains are overblown but neither is sovereignty uniformly illusory. Only one corner of the world is politically unified in this manner even with extensive globalisation. The role of parliament is a sensitive issue for me and I think we need to find ways of incorporating parliamentary procedures into our new trade strategy.
A trade strategy which respects the role of parliament would be in keeping with the purpose of Brexit and the direction most would like to see the UK head in. The current arrangements will see future trade deals negotiated by the UK ratified in accordance with the Constitutional Reform and Governance Act 2010. The Government will be expected to present parliament with the negotiated deal and an accompanying explanatory memo. The Commons decides whether it will vote and if it were to reject a deal, a three week period is launched for the purpose of amendment and discussion.
But parliamentary involvement must extend beyond this. Small crops of parliamentarians should be permitted access to texts prior to ratification through a parallel body comprising cross-party participation. There will need to be trust so as to minimise disruption caused by whistleblowing or mishaps when handling sensitive information. And then there is the problem of too much parliamentary interference undermining our negotiating position. Here we face a crucial test as regards our emergence as an independent negotiator. A balance will be found by trial and error.
One slightly tweaked solution, highlighted by the Institute for Government in this report, could be the development of a Canadian-style convention. On page 28, they note: "Canada has decided to expand parliamentary involvement in the ratification process through convention. In Canada, a new system was adopted in which the Government would table the agreement in Parliament for 21 days prior to ratification." The difference is subtle in that Canada affords a more secure window in which its parliament can scrutinise an agreement.
Being a constitutional cousin it makes sense to look to Canada for ideas on how to expand parliamentary involvement in trade policy. A convention might be a useful mechanism for us to work with. I also agree with the absence of a law requiring parliamentary ratification on the text of a trade agreement. Again it is one of those areas where sovereignty involves trade-offs. We can strengthen the role of the legislature in other, more creative ways without damaging our bargaining position or the credibility of our team of negotiators, who will need to learn by their own mistakes.
As I see it the main problem with the UK's constitution is a blurred separation between the powers of the executive (government) and the powers of the legislature (parliament). This is because the former comprises members of the latter. We have been left in a situation whereby parliament is used as a recruitment pool by the executive. Whips, government ministers, Parliamentary Private Secretaries and other MPs moonlighting in junior executive positions tend to vote robotically with the executive. Parliament's ability to hold the government to account, therefore, is much more limited than need be.
A new trade strategy which prioritises the role of parliament links to constitutional reform in that it can have a domino effect. Upon policy reconstruction, other departments can look to establish mechanisms which carve out concise roles for the legislature in terms of scrutinising legislation. This could help get us some way to to clarifying and further separating powers between the executive and the legislature. Rethinking the structure and efficiency of our constitution should be the name of the game and I see Brexit as a way of encouraging this.
There are opportunities to revitalise constitutional discussion right across the system, I am not just talking about trade. Brexit forces us to think about who we are and where we are going once again. I also think localism will emerge as an elephant in the room. The adminisrative burden on Whitehall will be immense even if we retain our EEA membership. Reshaping our fisheries and rural/agricultural policies will be monumental tasks in and of themselves. Devolution of powers, perhaps for the sake of unloading the burden and freeing up resources, could well be necessary.
Don't be surprised if Brexit leads to widespread system revamps in terms of recruitment upsurges, administrative systems and communicational pathways. Trade is cross-departmental by definition. We will need to carve out an effective horizontal format between government departments which facilitates direct communication and encompasses the necessary and relevant points of contact. This I would suggest might well extend to Committees represented by trade union officials and business leaders, all of whom will be invested in the policy consequences of pipelined trade negotiations.
By integrating Whitehall's departments we can ensure that negotiators have access to the feedback of industry and interest groups. There is no one way to do it but finding the right communication linkages will be crucial. Seniors in government will need to be briefed by working groups and from there the Government's Trade Policy Strategy Board Committee can be directed. Industrial leaders and devolved administrations will need to see sections of text for additional comment before negotiations are concluded. This will help to inform the demands of our new negotiating team.
But ultimately it is in the global arena that we will need to be most active. We hear talk of a global Britain leading the way in free trade promotion. There is merit to this idea but it will depend very much on where we focus our energies. Actions speak louder than words. Tariff reduction, for instance, is not a priority even if it was reciprocated by other countries, and if we stay in the Customs Union will not be viable anyway. If we want to bat for trade liberalisation then we will need to place the knocking down of regulatory (non-tariff) barriers to trade at the forefront of our strategy.
We can do this, as I have written elsewhere, by championing global initiatives designed to steer regulatory systems towards one another. Not all NTBs are actionable, given disparities in national laws, cultures and trade policies, but many are. UNECE's Single Window is an exciting development in modern trade which I am following closely. Its purpose is to simplify paperwork procedures for participants across supply chains into an integrated online interface. I use it just as an example, but these sorts of ventures are where we can support, or perhaps lead, trade facilitation efforts.
Britain already does play a role at Standard Setting Organisations, but it is limited by the aegis of the Common Commercial Policy. We have nonetheless demonstrated effectiveness as far as tackling corruption at the ISO and I do not argue we are totally alien to existing agencies. It will be a case of trying to figure out where our interests lie and what we can do to promote them. Sitting in discussions and voting with other countries matters. Funding research projects which inform technical standards matters. There are avenues which exist 'upstream' of Single Market and EU level for us to work in.
Whitehall will need to familiarise itself with the fact that regulatory protectionism is a hugely pertinent issue which has developed as a kind of knee-jerk response to low tariffs and exposure to international competition. A focus on tariff reduction will be a complete waste of time and resources. Relearning trade means discovering what is important and what isn't important to those involved in trade, and my fear is that those Brexiteers demanding a free trade utopia after leaving the EU are trying to steer an intellectually vulnerable government in the wrong direction.
Another point is that a trade strategy can only account for things we can control. We do not yet have an army of experienced negotiators and there is no available shortcut round this. We are not the world's largest market and have not traded independently since 1973. We will have ring rust and will need to take advantage of whatever necessary to aid acclimation to the global system, whether it be copy and pasting existing trade agreement text into our negotiating armoury or learning how to navigate international bodies and gain access to privileged 'rooms' and committees.
I take the view that in challenge there is opportunity. The current intellectual impasse affecting government departments and the ongoing governance struggles will continue for the time being, but they are not immovable or necessary obstacles. The vote to leave the EU was a vote for a domestic reset as much as it was a vote for a global reset. For the UK it is sink or swim time.