Breezy Brexiteer free trade bonanza promises face lopside leverage test
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Breezy Brexiteer free trade bonanza promises face lopside leverage test

Monday, 14 December 2020
This is an opinion article by an external contributor. The views belong to the writer.

Most experienced trade experts who have toiled for decades in the trenches negotiating multilateral or free trade deals have always been bewildered by the British Brexiteers breezy promise of a free trade bonanza upon exiting the European Union.

That bemusement is based on years of lengthy give-and-take bartering that has become ever more complex and often futile due to the globalization backlash that has made trade policy a political minefield. The efforts to follow up the 1993 General Agreement for Tariffs and Trade (GATT) with a World Trade Organization (WTO) deal that covers far more than tariffs and quotas are one example. More than 25 years and numerous rounds later – Seattle, Doha etc. – the efforts are on hold if not at a dead end.

The recently failed EU efforts to reach a free trade agreement with the United States as well as the pending EU-Mercosur deal, which is on a lifeline, are just as instructive. The Transatlantic Trade and Investment Partnership or TTIP – as the EU-U.S. Negotiations were known – made little progress despite nearly three years of negotiations.

They floundered over not only market opening issues such as public procurement, agriculture and services but also on regulatory issues, including investment, competition and environment protection as well as geographical indications. And that was among two parties with relatively similar standards of living that already engage annually in more than $1 trillion in trade.

The EU trade negotiations with the Mercosur nations of Brazil, Argentina, Uruguay and Paraguay – first launched in 1996 but only finalized a year ago – are on the rocks because, again, trade issues are dynamic and politically sensitive.

In this case Brazilian President Jair Bolsonaro’s return to slash and burn policy in the Amazon has pushed climate change onto the agenda. The deal is now stuck in the Council of Ministers and in the European Parliament due to demands for enhanced sustainable development regulatory commitments from Mercosur nations.

And going forward future multilateral or bilateral trade deals will only get more complicated and difficult. Political demands to include tax dumping, human rights and other democratic freedoms in trade agreements have become ever louder, especially in Europe.

For the past three decades I have chronicled these international trade trends whether it be on the nitty-gritty anti-dumping technical level or on the big political stage. So when I listen to British Prime Minister Boris Johnson and his government’s sound-bite EU-U.K. trade talk arguments, especially when it concerns fair competition, dispute settlement and fisheries, I am reminded of a last-minute, cut-and-paste university term paper scrabbled together from an outdated text book.

Unfortunately such low-grade policy gets little pushback from a general public or media with minimal understanding of complex trade minutiae.

“We just want the same free trade terms that the EU has agreed with Canada,” is by now a familiar refrain from Johnson and his minions. The argument’s premise is fundamentally flawed for various reasons. First off, it falsely insinuates there is some off-the-shelve free trade framework all nations must use.

Another flaw with the “We want Canada” pitch is that it pretends the U.K. is some far away island nation with an underdeveloped economy instead of a former EU member with a shared border and free trade supply chains built up over more than 40 years. Financial services, aerospace, auto production, agriculture, energy and other sectors including fisheries are cross-border markets often intertwined by joint ownership and other multi-faceted commercial factors.

When it comes to the issue of fisheries, chutzpah is the only way you can describe the British government’s “international law” justification. Why international law is so sacrosanct it justifies excluding EU fishing rights but can be discarded when it comes to ensuring the integrity of the EU single market on the Irish and Northern Ireland border is a contradiction the British government conveniently sides steps.

The refusal by the U.K. to accept a trade dispute mechanism is also a Swiss cheese argument. The North American Free Trade Agreement (NAFAT) contains one. TTIP called for one. The WTO has been issuing binding trade dispute settlements for 25 years. For some reason the WTO decisions do not impede U.K. sovereignty but a dispute body to resolve EU-U.K. differences impacting the EU single market would.

In many ways the shallow, often inconsistent British free trade arguments are predictable. After all U.K. had to build a trade team from scratch over the past two years and it now includes political appointees and negotiators with minimal experience. Not that there are a shortage of qualified British trade experts. But most of them either still work in the European Commission under a new passport or have retired.

The glaring U.K. Government trade policy inexperience is not only reflected in talks with the EU. The U.K. free trade negotiations with the U.S. have already hit some of the same brick walls that paralyzed TTIP. And that was before the defeat of chief Brexit cheerleader Donald Trump. Those walls will only get thicker now that U.S. President-elect Joe Biden has made it clear a U.K.-U.S. free trade agreement will be contingent on an open Irish border that respects the Good Friday Agreements and the EU single market.

The key reckoning British free trade proponents must accept concerns leverage. Any nation seeking unfettered market access with a populace four, five or even 10 times larger can not dictate the terms, especially when they are inconsistent. Trade experts will be watching closely how the U.K. manages this lopsided leverage equation when and if it negotiates free trade deals with China or India that include labor, environmental and, yes, even level playing field standards.

Meanwhile as the EU-U.K. trade talks go to the wire there is one aspect about Brexiteer arguments that is not surprising. When you have a losing hand the tried and true negotiating tactic is to run down the clock. If that fails the only choices are capitulation or to walk away. Either way the next move is to rebound with a good blame game.

By Joe Kirwin