Red Cliffs Of Dawlish

Red Cliffs Of Dawlish
Red Cliffs Of Dawlish

Tuesday, 3 May 2016

Global Trade: Goodbye Uncertainty, Hello Change!

 TTIP like the EU/EZ appears to be grinding to a halt...

In the previous blog, the approach taken was to create a picture that helps explain some of the following:-
In this blog we're going to see how this works again heavily drawing from the works of Dr. RAE North in particular The Definitive Plan for the UK to Withdraw from the EU: FLEXCIT: The Market Solution) and some of the other "Blogger's Army" sources and The Leave Alliance associations still further:-
  • Our politicians themselves are the greatest source of "Uncertainty" to which they continually harangue the public to "vote the right way" once in so many decades when they're forced to deliver a token show of democracy to which they immediately set about corrupting and invoking "heightened uncertainty and FUD". This is the negative picture which I started with in the previous blog's opening illustration.
  • This "uncertainty" retards our decision-making processes out of step with the emerging "reality" at Global level which again I illustrated using a graphical "rate of change" visualization. And here is the heart of the EU Referendum question: Tapping that rate of change by voting Leave and removing as a by-product or default a major source of Uncertainty: Both our own (The Prime Actors in The Great Deception) Establishment defeated by the people and secondly the ailing EU which by it's very design the "unstable and incomplete EU Treaties" are a major source of "Political Uncertainty" driving further "Economic Uncertainty" Eg: A fragile EUrozone.
  • Some examples will be used to suggest this positive change, is empowering in expanding and explaining how things appear to work and hence work for us and our trading partners.
Again referring to the previous "battleground" inanity we see that "Trade" is heavily considered a part of the Economic Uncertainty used to prevent a Brexit Leave vote in the public and indeed the polling proves this "big idea" is more potent than Migration. Today we see more Legacy News-Media on this subject:-

In considering any alternative to European Union membership, Brexit must:-
  1. Secure Access to The Single Market
  2. Apply for Withdrawal from Political Union via the legal process: Article 50
  3. Ensure Trade Continuity
  4. Understand the context and conditions for Political Negotiation process to achieve all the above.
  5. Only then, does the question of Migration amongst other policies, become a relevant subject at that stage of the process.
  6. So firstly Migration should not be 1. and secondly there's bigger fish beyond Migration (5.) in 6., the second most powerful argument for leaving the EU: Prosperity via Global Trade change.
We've already covered 1 and 2 and indeed Trade Continuity has been covered as per The Leave Alliance The UK will not have to renegotiate its trade deals and various other bloggers.

We that for both sides of the argument: Trade is now conducted in multifarious ways and the EU is by far not the only actor in this activity and as such the UK could take even greater actions outside the EU to boost Global Trade.

Looking again at the above, and in connection to the latest developments on the leaking of TTIP documents, then comparing to the plethora of different channels by which trade relationships are formed:-

Trade Argument 1:

The globalisation of regulation should be at the heart of the Leave campaign
"When dealing with international trade, it is said, it is much better for businesses to deal with one set of regulations that the 28 of each of the Members States of the EU.

There lies much of the justification for participation in the EU's Single Market but it is also one of the strongest arguments for ditching the EU and moving on. If, after all, it is better to replace 28 sets of regulations with one, it has to even better for the 162 members of the WTO to get together and replace all their regulations with one set."
However if we consider as above the "network effect" of a larger set of trading nodes, then the same logic applies, why not be part of a global standard for Trade?
FLEXCIT: The Market Solution - 10.6 International Regulatory Cooperation (IRC)
"In particular, it notes that, for large or more advanced economies (or regional blocs), harmonisation might prove difficult as both parties have usually already developed a complex set of advanced standards and regulations. When large trading partners seek a reduction in their bilateral regulatory barriers to trade, it thus concludes, mutual recognition of existing standards may be an easier and better way forward. However, whenever possible, rather than developing competing and often incompatible regional standards, using global standards is the best option."  

Trade Argument 2:

Arguing for membership of the EU as a large bloc leads to stronger negotiating clout than lead to a poor deal with a stronger negotiating partners such as China or the USA.
Well hot off the presses, just in: We're seeing that there's a lot about TTIP that's negative and driven by "power play" and indeed this itself is increasingly grinding the whole process to a halt:-
 EU Referendum: the TTIP leaks
"We've not written a great deal on TTIP on the blog (although it is covered comprehensively in Flexcit) for one very good reason. I've never believed is will happen. Even if it is finally agreed (which I doubt), I would expect Congress to refuse to ratify it.

Now, it appears, it may not get even that far. The massive leak of hitherto restricted documents by Greenpeace Netherland is being widely reported – not least be the BBC as spelling the death-knell for any agreement.  

We've dipped into some of the documents to take a look, and it does seem that there are some quite substantial differences, even after nearly three years of negotiations, with the starting gun actually being fired in November 2011."

In fact there's a whole load of different ways to formulate trade as per the above diagram also from FLEXCIT above comparing the approach of the US-EU talks on the objective of TTIP:
  1. Remove Trade Barriers
  2. Standardize Regulations (from the infograph summary)
Concerning the Trade Barriers there's numerous methods:-
  • Integration/Harmonization through Supranational Institutions (EU); perhaps on some areas Climate Change this may or may not be fruitful as a larger bloc? But it is one of the typologies described by the OECD, there's many more:-
  • Treaties/Conventions
  • Inter-National Cooperation Agreements
  • Joint Standard Setting via Inter-governmental bodies
  • Adoption and Recognition of International Standard Bodies standards
  • Trade Agreements with regulatory conditions (RTA's, FTA's)
  • Mutual Recognition Agreements (MRA's)
  • Unilateral Convergence
etc! In many sectors different approaches and/or what is termed "Unbundling" When it comes to trade, the EU isn't that good at it as per Pete North.

Here we see that there are negatives with EU Membership as Pete describes. Another example detailed in FLEXIT and again by Pete, is concerning the IMO and the EU: And they call this "cooperation":-
"This barely requires additional commentary, save to say that here is your irrefutable proof that detailed regulation (hard law) is made by global entities (and that is the trend throughout) - and that the EU removes our vote and overrides our veto in instances that are critical to our economic interests. It also sabotages the timetables to prevent any challenge to barely legitimate assumption of competence. It should also be noted that it is our own civil service report saying this."
And back to FLEXCIT and how this fits in with the UK:-
"The  UK  government  is  fully  aware  of  the  extent  of  IRC  and  has  its development agency, DfID, describe it as "the range of institutional and procedural  frameworks  within  which  national  governments,  sub-national governments, and the wider public can work together to build more integrated systems for rule making and implementation, subject to the constraints of democratic values such as accountability, openness, and sovereignty"
And here we have a powerful argument for Brexit at the core of this globalization argument which as per: The globalisation of regulation should be at the heart of the Leave campaign

Trade Facilitation – a couple of definitions 
  • simplification, standardization, and harmonization of procedures & processes and associated information flows to move goods through the supply chain in a transparent and predictable manner”
  • “identifying and addressing bottlenecks that are imposed by weaknesses in trade related logistics and regulatory regimes and that prevent the timely, cost effective movement of goods.”


itself globalization and the rate of change and influence of prosperity at global level as per Dr. RAE North at
EU Referendum: why is Vote Leave trying to lose?
"The point here is a simple one. We rely for our prosperity on international trade, yet the improvements in global trade have stalled. Despite the technical advances in containerisation and shipping, and the expansion of air freight, the huge benefits from reducing tariffs through GATT and WTO have been wiped out by the growing scourge of non-tariff barriers.

Thus, while pre-GATT tariffs were estimated at about 22 percent, recently the Atlantic Council reported the cost of non-tariff barriers (NTBs) to the US automotive trade was 25.5 percent.

For sure, a single, global figure for NTBs is almost impossible to compute and there is no agreed methodology for calculating such a figure. Furthermore, a single value is probably not relevant as there are huge regional and sectoral differences. 

The range varies considerably, from a few percent to as high as 45 percent, growing to 73 percent in some sectors. The World Bank estimates NTB costs in Africa average 40 percent. Nevertheless, what is known as the "ad valorem tariff equivalent" (AVE) - the average value - for NTBs is variously estimated at around 20 percent. It has wiped out all the gains from tariff reductions.

Enter the Bali trade facilitation agreement under the aegis of the WTO in December 2013. As we reported at the time, and has been remarked upon since, the impact could be huge. When fully implemented, it was said that it could increase global GDP by almost $1 trillion.

That is probably an under-estimate. The World Bank offers even higher figures. If all countries reduced supply chain barriers halfway to global best practice, global GDP could increase by 4.7 percent or $2.6 trillion, potentially worth about $60 billion a year to the UK, far outstripping the illusory value of any savings from leaving the EU

Furthermore, world trade overall would increase by 14.5 percent, or $1.6 trillion, this figure itself far outweighing the benefits from the elimination of all import tariffs.

In terms of detail, we have seen reports that 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 percent of paperwork-related delays.

These savings, though, will not happen spontaneously. Nor will they happen without a great deal of work – and leadership. And it is there, in that latter category, that the EU is not delivering."
I think this is a positive of the UK leaving the EU and using the UK's very capable and competent array of strengths to be a force for positive change at global level.


The Market Solution: Stage Five - Trading with the rest of the world