The United Kingdom – Free Trade Nation or Foolish Nation? Beyond the Limitations of the Brexit Debate

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The following piece was written by City-REDI’s Prof. John Bryson.

I returned from Singapore recently having missed the media discussions of the results of the UK local elections. Nevertheless, the papers, radio and television are saturated with coverage of the June general election and Brexit. As I write this, the radio is on in the background and Jeremy Corbyn is claiming that “this election is not about Brexit, but what type of Brexit’” and that elites want to hijack Brexit. He is, of course, wrong. This election is about the UK over the next five years and only one aspect of this includes negotiating the UK’s divorce settlement from the European Union. And, of course, there might be no such settlement, but still a divorce. This election should be about beginning a process by which the UK develops a new relationship with the evolving multi-polar global economy. This is not about the UK/EU relationship, but the development of the UK as a global trading free trade nation.

There are two points that I want to make. First, we need to put the term Brexit to one side and find an alternative word. Interpretative frameworks are important, or in other words, labels matter. We experience the world and interpret the world through language. The origins of the word Brexit can be traced back to the Greek crisis of January and February 2012 and political and media discussions regarding Grexit or the possible forced exit of Greece from the Eurozone.  The so called Brexit is very different – a referendum in which the citizen’s of the UK voted. I am very aware that the outcome of this democratic process is contested. But, democracy is democracy. Thomas Hobbs, in what is regarded as the earliest and arguably most important example of social contract theory, argued in Leviathan (1651) that individuals’ surrender some of their freedoms and submit to the authority of a ruler, or state, in exchange for protection of their rights. Central to this process is the agreement to accept the decision of the majority. This gets me back to the term Brexit. The Oxford English Dictionary has traced the origins of this word back to Grexit and Peter Wilding. Wilding is the founder and director of the British Influence think tank and campaigned for the UK to Remain in the EU. To Wilding, Brexit was a sad word. This ‘sad’ and negative word that is also backward looking needs to be challenged and replaced by a more forward looking label.

We need to raise the question of ‘what word or label should, must, replace the negativity of the word Brexit?  In ten years time, Brexit will be very much in the past, but what will be in the future. In a bookshop in Singapore, I came across a collection of essays entitled “The Air-Conditioned Nation” and another entitled “Singapore: Smart City Smart State”. We could perhaps argue that the UK is shifting towards being a “Smart Nation”. Some in the European Commission, and elsewhere across the European Union, might argue that the UK is now a backward looking “Foolish Nation”, but perhaps we need to return to an older debate or label – “Free Trade Nation”. This concept of a free trade nation is outward looking at a time when the EU project is largely inward looking towards the EU Internal Market, Single Market or Common Market. The “Brexit” debate ignores the fact that the Single Market is only a Single Market in name compared to, for example, the U.S. single market. The development of the “four freedoms” – goods, capital, services and labour – across the EU is a stalled project with too many largely invisible non-tariff barriers in operation distorting the operation of the Single Market. Silver Cross prams, for example, met the EU requirements for prams, but could not be sold in France; French trade officials claimed that this product did not meet their own safety requirements.

Second, the anti-Brexit argument is partly about maintaining access to the Single Market, but this Free Trade Area is the outcome of a set of decisions that are designed to advantage some EU member states and disadvantage other nations. The UK has the opportunity to take the high moral ground by developing the UK as a Free Trade Nation that advantages the UK, but does not disadvantage people living in developing or emerging economies. A good example is the distortion the EU Common Market places on the flows of coffee from Africa to the developed market economies within the EU. The design of the EU Common Market reduces African nations’ ability to benefit from their agricultural and food industries. Some EU nations gain and African growers are disadvantaged. All this reflects distortions that come from incremental decisions about tariffs that are the outcome of EU member states and private sector interests lobbying the European Commission. Coffee is an excellent example of the distortion that the EU Single Market imposes on Africa. In 2014, Africa earned $2.4 billion from growing coffee, but coffee processers located in Germany earned around $3.8 billion from re-exporting processed coffee and we must consider the question of “how much coffee is grown in Germany?”. This is a classic tariff trap in which an advanced nation gains by disadvantaging African coffee growers. How do we understand this distortion to the global economy? The Common Market distorts global trade by imposing tariff and non-tariff barriers. For coffee, the EU imposes a third country duty of 7.50% on imports of processed or roasted coffee, but there are no duties imposed on imports of unroasted green coffee. Consequently, the bulk of Africa’s exports of coffee to the EU are unroasted green coffee. Companies located in EU member states benefit from capturing the added value that comes from transforming a basic commodity, coffee, in to a high value commodity – roasted coffee or branded coffee. It is worth noting that the United States and Canada do not levy import duties on processed coffee (roasted or soluble). It is perhaps surprising that the U.S. takes the high moral ground when it comes to African coffee whilst the EU takes a very different position. One could argue that the European Common Market advantages elite EU coffee processors and disadvantages those in need. This perhaps places a very different perspective on Brexit and elites.

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