( A Ten minute Read)
The idea that globalization has become unmoored from geography – and Britain is about to reap the rewards – is wishful thinking.
All evidence points to the opposite conclusion:
In fact, Britain is not about to enter a “post-geography trading world”.
Brexit will damage the UK’s flagship services sector, rather than liberating it.
In this day and age of technology services are increasingly delivered electronically, with financial transactions, advertisement mock-ups, and architectural blueprints sent to clients over the internet.
While this is true trade between two countries is greater if they have larger economies, and less if they are more distant from one another.
It is inconceivable that to this day it is not understood by the British people that the EU is the UK’s natural trading partner; that the single market has done more to raise trade in services than free trade agreements (FTAs); and that any barriers thrown up as a consequence of Brexit will be hard to offset with lower barriers to trade with the rest of the world.
The EU is a rich, large market that is on the UK’s doorstep, and its single market has proved more effective at reducing barriers to services trade than bilateral free trade agreements. The EU’s rules have led to an estimated 60 percent boost to services trade between EU member-states.
When it comes to goods and agriculture, the idea that trade is detached from geography is flat wrong.
Products and services are increasingly bundled together as one, services find themselves bound to the physical geography of manufactured goods.
While technology has certainly made interactions at a distance easier, these interactions still often require both parties to be in the same place:
Services are largely delivered by people and nearly half of the UK’s exports are now in services.
While it attempts to negotiate a new relationship with the EU, the outcome of which is highly uncertain, all of this undermines the government’s ‘global Britain’ narrative.
Britain is becoming a semi-detached member of the EU, outside the euro and the Schengen zone, and increasingly eurosceptic.
One does not need a crystal ball to see that the EU needs reforms, but there can be no half-way house between a free trade agreement and full membership of the single market. Nor can there be ‘Managed divergence’.
IE: The UK and EU commit to regulatory alignment in some sector while allowing the UK to diverge from new rules in others in the future.
This amounts to cherry-picking, which the EU has made a red line.
The EU-27 cannot agree to a system where the UK converges when deemed to be in its interest, but diverges in those sectors in which it could gain competitive advantage with the rest of the world.
It would be a political feat for the EU and UK to agree which rules are crucial for maintaining a level playing field, and which matter less. Certain rules matter for the operation of several different markets (chemical regulations have an impact on other markets for products that use those chemicals, as well as on the environment), and some are highly specific to a particular market.
Since the economic impact of regulations is very hard to identify objectively, any disputes could prove impossible to manage.
If the UK chose to diverge from one part of the EU’s insurance regime, should the EU have the right to curtail market access in the sector as a whole?
There is no getting away from that a free trade agreement would lead to more checks and paperwork on UK imports at the EU’s border – especially in highly regulated sectors like agriculture, medical devices, pharmaceuticals, chemicals, and cars, which would no longer be subject to the EU’s rules.
It is also not possible to do services-only trade deals.
So what’s left on the table is a fudge-
or- What’s in it for me?
One way or the other finding a solution is entirely dependent on EU goodwill with or without a transition period the time is ripe for EU reform.
The EU’s institutions, the European Commission is losing the trust of some governments because of the perception that it is increasingly dependent on the European Parliament.
It should return to an equidistant position between the Council of Ministers and the Parliament.
National parliaments should play a greater role in EU governance.
It is time to transcend the traditional battle between communautaire and inter-governmental thinking.
The EU cannot succeed without both federal institutions and a major role for governments; they must work together.
As long as the European Union is made up of independent nations with their own elected governments, their problems are going to be essentially local and they will need local solutions. Squeezing them into the same monetary straightjacket has clearly failed and adding a fiscal union would just exacerbate an already unsustainable situation. Governments need the flexibility to deal with their own problems.
History tells us citizens will not accept taxation without representation.
Fiscal union would, therefore, would not be a major step towards a true political union. Fiscal union would entail a ballooning of the EU budget – provoking endless bickering among the 27 (or more) member states on how to share it out, not to mention the expanded scope for graft and bureaucratic inefficiency.
It’s a recipe for gridlock.
All human comments appriciated. All like clicks chucked in the bin.