The global trading system needs a jump start; the UK should lead the way

The case for leaving the EU should be ambitious and speak of the great opportunities independence affords us. We should be getting the nation excited about the opportunities, sadly we are getting bogged down in number crunching and NHS memes while the opposition replies with increasingly hysterical fear mongering. This is not the great debate we might have hoped for.

The Leave campaign should be conveying the positive ideas of how we can make the world a better, more prosperous place. For that, we must speak of how Britain can be a champion of trade, intergovernmental cooperation and reform; gradually breaking away from the protectionist EU model, and looking beyond the limited bilateral model of trade and towards multilateralism.

A post-Brexit Britain must be open, globalist and working to develop links with emerging economies and pioneering the elimination of technical barriers to trade, otherwise known as “non-tariff barriers” (NTBs). When we leave the EU, Britain can play an active part in kickstarting the global trading system and reinvigorating global trade. We will not be alone in doing so, but free to build coalitions and ad hoc alliances (including with the EU as and when appropriate, for we will still be allies with much common ground) to drive reform and spread prosperity.

We rely for our prosperity on international trade, yet the improvements in global trade have stalled. Remain campaigners are keen to point this out because they are advocates of regionalism and are deniers of the clear direction of travel – globalised trade facilitation through a global regulatory system and multilateralism.

The debate on trade is often dominated by tariffs but here there has been much progress in this area and the focus on tariffs is an over simplification of the issue. Despite the technical advances over the last twenty years  the huge benefits from reducing tariffs through GATT and WTO have been curbed by the growing scourge of NTBs.

Thus, while tariffs were estimated at about 22% before the General Agreement on Tariffs and Trade 1994 (GATT), recently the Atlantic Council reported the cost of NTBs to the US automotive trade was 25.5%. The World Bank estimates NTB costs in Africa average 40%. The average value for NTBs is estimated at around 20%. This means they have wiped out all the gains from tariff reductions.

There are however rays of hope for the emerging global system though progress has slowed, it has not stopped. Of vast significance is the Bali trade facilitation agreement under the aegis of the WTO in December 2013 – which, in an exciting development, was ratified by India just last month. The Agreements reaffirms the validity of the non-discrimination principle of the GATT and seeks to reduce red-tape and streamline customs procedures on a global scale. The impact could be massive; when fully implemented it is said that it could potentially increase global GDP by almost $1 trillion. The World Bank proposes even higher figures.  If all countries reduced supply chain barriers halfway to global best practice, global GDP could increase by 4.7% or $2.6 trillion, potentially worth about $60 billion a year to the UK, which is far more than the dubious figures being bandied around by some Leavers regarding what we would save in EU membership fees.

World trade overall could increase by 14.5%, or $1.6 trillion, far outweighing the benefits from the elimination of import tariffs. For example, an agreement on a global tyre specification for passenger vehicles could save $40 billion a year. An ostensibly simple thing like standardising nomenclature for existing pharmaceutical products could save $20 billion. Adopting electronic documentation for the air cargo industry could yield $12 billion in annual savings, and prevent 70-80% of paperwork-related delays.

These savings, though, will not happen spontaneously. We are talking here of potential, very exciting prospects, but they will not be fulfilled automatically. It will take a huge amount of work and, crucially, leadership. It is in leadership of this global model that the EU fails due to its parochial nature and proclivity to load everything it does with political implications. While the WTO agreement is a celebration of multilateralism in world trade, the EU obsession with regional trade agreements (such as TTIP) is diverting attention from policy interventions which could give a far higher rate of return.

By forging ad hoc alliances and building a coalition of shared interests, the UK can put the global interest back on the agenda. Breaking away from exclusionary and restrictive regional trade agreements, it could instead give priority to multilateral trade facilitation and thereby have a galvanising effect on world trade.

This is the positive agenda. In a world that is increasingly global, EU Member States are surrendering their voice, vote and right of reservation to the supranational empire of the EU, which represents not their national interests but the “common position” of the EU-28.

With potentially $2.6 trillion at stake from improved global trading; we need to break out of our European mindset and look out to the world and all the fantastic possibilities and opportunities that a globalist outlook offers us. The “world” is where we need to be – and it is where the world needs us to be.


Ben is the Conservatives for Liberty Web Editor.  He blogs at The Sceptic Isle. Follow him on Twitter: @TheScepticIsle

Follow @con4lib on Twitter

Like Conservatives for Liberty on Facebook

The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty

 

Leave a Reply

Your email address will not be published. Required fields are marked *

*