Richard North, 14/01/2020
One of the fêted scriptures of the Tory right wing is a rather dire, to say nothing of unreadable, tract called Britannia Unchained. It purports to set out a new vision for a Conservative future, telling us that Britain “must learn the rules of the 21st century, or we face an inevitable slide into mediocrity”.
Actually, though, we’re already there, as witnessed by an extraordinary article in the fanboy gazette by the idiots’ idiot, Steve Baker MP, chairman of the European Research Group.
This is the man who is telling us that Britain (although he probably means the UK) “should prioritise American trade talks over the EU”, thereby prioritising a trade relationship which delivers £200 billion-worth of imports and exports, as opposed to the EU’s £648 billion (2018 figures).
Baker justifies this idiocy by asserting that “all our ambitions to solve domestic and global problems are underpinned by the need for a strong market economy”. Yet, he says, “all economies are vulnerable to threats to the global trading system”. And that is why “this empowered Conservative government” must make its manifesto commitments on trade “a pre-eminent strategic priority”.
Our manifesto, says Baker, pledged parallel trade talks with the EU, the US, Australia, New Zealand and Japan, aiming to cover 80 percent of UK trade with free trade deals in the next three years. “This whole-UK, whole-world policy is exactly the right approach”, he adds, “and Liz Truss has done brilliantly to secure it”.
Accepting the idea that Liz Truss is capable of doing anything “brilliantly” stretches credulity way beyond breaking point but, setting that aside, Baker sees “deep dangers” ahead.
He thinks that, by linking access to its markets with demands for regulatory harmonisation, the EU is making itself a “global outlier”. Thus, in his view, “we need immediately to end the UK’s timid Eurocentrism by negotiating simultaneously with independent, free-trading partners”.
Accepting the export of EU power, he says, “would deepen our recent humiliation as we succumbed to be a mere regulatory satellite, unable to join old friends as equal partners”.
What makes this so dismal a critique is that it comes from a man who has access to virtually every resource imaginable. Yet we have in Steve Baker someone who treads the earth seemingly totally unaware of the nature and extent of regulatory globalisation which has been building since the Second World War and with increasing speed over the last twenty years.
As to the EU’s role in all this, I explored one of the most comprehensive expositions in a blogpost I wrote nearly five years ago, headed the “Brussels effect”, reviewing a paper by Anu Bradford, a professor of law at the Columbia Law School and also a director for the European Legal Studies Centre.
The opening words of the abstract of her paper puts us in the picture, as she explains that her article:
… examines the unprecedented and deeply underestimated global power that the European Union is exercising through its legal institutions and standards, and how it successfully exports that influence to the rest of the world. Without the need to use international institutions or seek other nations’ cooperation, the EU has a strong and growing ability to promulgate regulations that become entrenched in the legal frameworks of developed and developing markets alike, leading to a notable “Europeanization” of many important aspects of global commerce.
If there is a single take-away point to be had from Bradford’s 68-page paper, it is that the EU is a global regulatory superpower, Her thesis – as I wrote back in 2015 – kicks into touch many of the ill-informed posturing of those who would argue that there is any immediate regulatory relief to be had from leaving the EU.
The European Union, she writes, sets the global rules across a range of areas, such as food, chemicals, competition, and the protection of privacy. EU regulations have a tangible impact on the everyday lives of citizens around the world.
To her specific audience, she adds, few Americans are aware that EU regulations determine the makeup they apply in the morning: the cereal they eat for breakfast, the software they use on their computer, and the privacy settings they adjust on their Facebook page.
The EU, we learn, also sets the rules governing the interoffice phone directory they use to call a co-worker. EU regulations dictate what kind of air conditioners Americans use to cool their homes and why their children no longer find soft plastic toys in their McDonald’s Happy Meals. This phenomenon, the “Brussels Effect”, is the focus of her article.
En route to exploring this phenomenon, Bradford takes a look at the so-called “California Effect” where, due to its large market and preference for strict consumer and environmental regulations, this US state is, at times, effectively able to set the regulatory standards for all the other states.
Businesses willing to export to California must meet its standards, and the prospect of scale economies from uniform production standards gives these firms an incentive to apply this same (strict) standard to their entire production.
This effect expands to become the “Brussels effect”, when firms trading internationally find that it is not legally or technically feasible, or economically viable, to maintain different standards in different markets.
Thus, when trading with the EU requires foreign companies to adjust their conduct or production to EU standards – which often represent the most stringent standards – or else forgo the EU market entirely, they tend to adopt those standards uniformly throughout their entire enterprises.
This is, I wrote, summed up in one paragraph, telling us that:
… export-oriented EU firms to seek consistent and predictable regulatory frameworks. Uniform regulations have abolished obstacles for doing business within the common market – it is more complicated and costly to comply with multiple, sometimes conflicting regulations than with a harmonised regulatory scheme. And once all European firms have incurred the adjustment costs of conforming to common European standards, they have preferred that those standards are institutionalised globally. Hence, to level the playing field and ensure the competitiveness of European firms, EU corporations have sought to export these standards to third countries.
This, I asserted, is the crunch issue. As trade has globalised, so has regulation, and when it comes to the choice of standard, firms will always opt for the most demanding, simply because it is cheaper and more efficient to work to a single standard than it is to work to multiple standards.
Yet. so limited is the understanding of Steve Baker that all this passes him by, leaving him to believe that the EU regulatory regime is a “global outlier”.
In meeting ambassadors and their teams, he tells us, “I have found categorical differences of approach. Our European partners regard our decision to leave the EU with bewilderment”.
“It has been necessary”, he says, “to reassure them that, overwhelmingly, Tory Eurosceptics are free traders with an expansive view of prosperity and our friendship with the world, that we reject technocracy and have faith in the collective wisdom of the people, expressed in the markets for products, services, culture, ideas and public policy”.
This brings the man to assert that “our friends in Australia, New Zealand, Canada and the US are fearless in accepting our commitment to civilised values, impatient in their desire to see us become international equals” If they are bewildered, he says, “it is only because we have been hesitant in reorienting ourselves to the global outlook we have chosen. These old friends outside the EU are those we need most right now”.
Baker is thus quick to call in aid the US Ambassador to the UK, Woody Johnson, who recently argued that having a trade deal with the US … will strengthen your hand when you are negotiating with your, you know, your closest geographically trading partner, which is the EU”.
Woody Johnson reminds us that America is the world’s largest economy, which somehow equates with it “offering huge potential to our businesses”. The Americans, Baker says, are ready to negotiate and are prioritising us. But, he is at least aware that “the window for success” is closing as the US heads into presidential elections.
And it is for that reason that Baker feels this government must fully commit to parallel trade talks, immediately prioritising the US. The day for action on US trade, he says, is the day we leave the EU.
His real problem, though, is this is all he has, arguing that when the EU demands level playing field provisions, we must agree the UK will not distort our markets artificially to secure advantages that ordinary commercial processes should yield. But, he says, this cannot mean harmonisation.
Regulatory competition, he says, “is essential to discover the best ways to secure the best outcomes for consumers, especially for the poorest, who cannot afford to game the system”. We must recognise that neither socialists nor our European Commission friends will choose to accept that approach. They evidently believe in power and exporting it.
So, because the Americans apparently believe in “regulatory competition”, that’s why they are “our greatest friends”. They too, he says, “fundamentally believe in liberty, that pioneering spirit that rises above mere materialism, along with ambition and courage and the hope that a better future is there, not merely to be discovered, but to be created through the energies of an entrepreneurial people seeking tirelessly to serve others for profit and moral sentiment”.
And that seems to be the level of rhetorical BS that sustains the ERG, one so divorced from real world conditions that it is not parallel negotiations that Baker is after. He needs a parallel universe.
Global trade, and the whole process of globalisation, relies increasingly on the harmonisation of trading standards. Common standards, applied in a uniform fashion, facilitate trade, breaking down barriers. And such is the regulatory power of the EU that, if we want to be a “global outlier”, all we have to do is follow Baker’s advice, throwing away our EU links “to boldly start with the US as we leave the EU”.
Still, as Pete points out, it gives Labour a useful stick with which to beat the Tories, just supposing they ever have a leader with the ability to exploit it.