Richard North, 15/04/2019  

When all is said and done, probably our biggest mistake in approaching the EU referendum was in failing to realise the extent to which our system of government had deteriorated. Thus, we had not appreciated that it would not be capable of meeting the challenge of managing the Brexit process.

The failure, in part – but only in part – came about because of the profound ignorance of most of our politicians and their media fellow-travellers, who have neither the knowledge needed to forge a workable Brexit settlement nor, it seems, the capability to learn.

That too we under-estimated. We were aware that many politicians were not the sharpest knives in the drawer, but it would have required a huge leap of faith to have believed that almost the entire collective would have difficulty in coming to terms with as basic a concept as a customs union.

After all, the concept has been with us for more than a century and been part of our system of government for 47 years, since we joined the EEC. But then, since any real discussion of the process of European political integration has been excised from the UK political discourse, I suppose we should have known that politicians were not going to be up to speed on EU matters.

Nevertheless, it still comes as a shock to find that, nearly three years into the Brexit process, the "debate" between the two main parties – such that it is – is dominated by something so basic as whether, on leaving, we should agree a customs union with the EU, with the two sides arguing about the effect this might have on our ability to conduct an independent trade policy.

Yet, I have seen arguments that suggest that, if this is what it takes to get Labour on board and thus get the Withdrawal Agreement through parliament, then the government should concede the point so that we can move on.

However, from what David Lidington was telling Andrew Marr yesterday, that is not going to happen. Talks are to carry on this week but Lidington is looking for "compromise on both sides". If that doesn't work, he says, then the government will put a set of options before parliament, with a system for making a choice. Then parliament will actually have to come to a preferred option rather than voting against everything.

That, in itself will be novel, but it doesn't get us past the situation where the government will be putting a series of options to parliament which, if implemented after we leave the EU, will not provide a sound basis for a working relationship and certainly will not prevent the Irish backstop kicking in.

We are therefore, caught in a weird fantasy world where opposing parties are battling over issues which have no relevance to the matter at hand and, even if resolved, will contribute next to nothing to a stable, post-Brexit environment.

Even now we can see the absurdity of the respective positions, with Marr challenging Lidington about adopting a common external tariff, only to get the predictable mantra that the government is seeking to get the benefits of the customs union – no tariffs, no quotas and no rules of origin – yet still have the flexibility to pursue an independent trade policy with other third countries.

We've long given up on the idea that Marr might be capable of pursuing a robust, informed line of questioning, but if he had got anywhere towards mastering his subject, he would not have left the matter there.

Specifically, for the UK to avoid rules of origin, the UK would either have to adopt the EU's common external tariff, or it would have to commit to a unilateral harmonisation of its own tariffs, through adoption of the EU's WTO tariff schedules – which is what it is already doing. But either route will limit its flexibility to conduct an entirely independent trade policy, as we could not reach trade agreements with third countries which settled on more favourable tariff agreements.

But what has not been properly explored is that, even beyond tariff levels, the UK will need to maintain a high degree of regulatory alignment with the EU, over product standards and other matters, applying those regulations to its imports from other third countries. This in turn will further limit its ability to secure independent trade deals as the UK will not be able to deviate from the EU single market acquis, even if we have not formally adopted the rules.

In short, therefore, the whole idea of pursuing an independent trade policy – at least in the immediate aftermath of leaving the EU (after the expiry of any transition period) – is a chimera. Our flexibility will be minimal. Furthermore, even if we were able to secure our own terms, it is unlikely that we would get better deals than we have already.

The government thus has got itself into a bind, arguing with Labour over things that really don't matter, in a situation which I've suggested is analogous to two bald men fighting over a comb. We achieve nothing even if Labour backs off completely and concedes all of the government's points.

This, of course, is where we have been badly let down by the Conservative dogma on "fwee twade" – as Pete puts it - and the mantras of the trade wonks who like nothing better than to immerse themselves in the technical minutiae of trade deals, while completely missing the big picture.

One of the myths that pervades this discussion is the canard that the EU is not very good at signing up trade deals, citing its relatively poor performance over the last decades, compared with other trading nations.

Any serious student of this issue, however, will understand that the EU's slowness – until relatively recently – in forging new bilateral trade deals stems from its long-term commitment to the multilateral trading system and its preference for working within the ambit of the WTO, the UN and others.

A search through the Europa website using the keywords "multilateral" and "trade" will yield dozens of papers attesting to this commitment, and it was only the failure of the Doha WTO round in 2006, under the watch of Peter Mandelson, that triggered a change in emphasis. Only then was it conceded that the multilateral movement has stalled.

Then, the primary cause of failure was the disagreement between the US and EU over agricultural subsidies, but it remains the case that some of the biggest gains to be made in international trade rest not in bilateral deals between nations – or blocs – but in global deals, mainly in the areas of regulatory alignment or mutual recognition.

With that, in a beneficial way, we have seen the emergence of plurilateral agreements, skirting the dramas of the global talk-fests, allowing agreements to be made between small groups of countries which can then gradually be expanded to include other interested parties.

We have also seen the emergence of non-state actors, such as the Basel Committee on Banking Supervision, and the ISO, with its revolutionary Vienna and Dresden Agreements. Then there is the steady but unspectacular growth of UN organisations such as UNECE, the efforts of which are quietly transforming international trade, with barely any recognition or understanding by national legislators.

Yet, the very mention of organisations such as UNECE is enough to bring the sneering classes out in high-dudgeon, ready to defend their turf, often from a position of maximum prejudice and minimal knowledge. This is despite its pioneering work on WP.29 and automotive regulation and the ground-breaking WP.6, working alongside the OECD on regulatory cooperation and standardisation.

These areas are fertile territory for a major trading nation such as the UK. By forging alliances with other independent states, we could establish a role as the "honest broker" – or some such – standing in between the giant trading blocs of the EU and US, much as the Cairns Group sought to do during the Doha Round.

One can see little progress, however, when we have domestic politicians hung up on the centuries-old concept of the customs union, to whom the very concept of IRC is completely foreign.

When the trade wonks and the media are equally stuck in a rut and the trade policy debate is bogged down in the tired concept of expanding bilateral trade agreement, it is unlikely that we will be in a position to benefit from the new-found freedom that Brexit is supposed to give us.

In my days working with the poultry industry, I came across groups dedicated to releasing battery hens and reintroducing them to the open range. To their consternation, they found that one of the first things the birds did on release from their cages was to try to get back in them, where there was food, warmth and security.

The released birds thus had to be gradually introduced to their freedom and be taught how to exploit it. It would seem that the UK must be treated in a similar way, especially as there are so many who would prefer the secure embrace of Mother Europe. But there is an exciting world of opportunity out there, if only MPs knew what it was, and how to use it.

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