TRADING HOPES WITH ASIA

Despite lack of trade negotiation practice during half a century, while the European Commission did the job instead of UK officials, the UK now fields a team led by an Australian batsman, hoping for home runs in Asia.

South Asia, India, ASEAN, Japan and South Korea look to deals with Brexit Britain. Previously promising prospects with China look like a dead Peking duck hung out for lunch, unless we can pirouette past political problems.

But that takes us back to where I began my free trade journey. The day I started in Brussels on the Lome Convention and the GATT, they asked me – “What is the essence of a free trade deal?” to see if I knew my stuff.

I explained that free trade is monotheistic. There is but one God. The God of free trade. Then the theory of market driven trade makes sense. Comparative advantage decides who produces what at the best quality and price. Competition animates market forces. There is no unseen hand of Adam Smith.  We build the markets ourselves.

My listeners waited….so I continued… All the other Gods are in the footnotes !! The exceptions, the derogations, the subsidies, bringing them in and phasing them out, and the incremental steps reflecting that it is often better to travel hopefully than to arrive.

And then there is the way people actually behave given inconsistent market imperfections (which is OK since perfect consistent competition doesn’t exist).

And then there is COVID 19 telling us to build resilient global strategic supply chains closer to home. And then the Green Economy says sustainable growth is lower growth and sustainable global trade probably means less of it (as with palm oil?).

So when I was asked by the Commission to help prepare the Indonesia -EU deal my job was to work out how to help the Indonesian side, at their request. I didn’t even know that the EU paid people to work for the other side in trade negotiations, so that they had a better chance to be accepted and to work.

We ploughed through the ASEAN agreements with Australia, Japan, South Korea and India figuring out what worked and what did not. There was no EU regional deal with ASEAN because of Myanmar. Although ASEAN had been a bulwark against communism, the ASEAN states had no problem with diverse systems and one regional market. The problem for Europe was Myanmar, not market communism.

So the region-to-region deal died. Then we prepared the EU-Indonesia bilateral. Now what we learned, especially from the ASEAN-South Korea case, was that if we got it wrong we could chop Indonesia into two by mistake. The West side was more developed and would take off.  The East side was under-developed and would be hit hard without compensatory measures. The South Korean deal taught us this when in the Mekong Basin it hit Laos and Cambodia badly. Only Vietnam could keep up.

Just as Northern England did worse in the EU than the South East. The EU tried to balance this with Regional and Social policies but this was not enough. Unless you are careful and creative, free trade means that he that hath he shall have in abundance, and he that hath not, even that which he hath shall be taken away from him.

So how will a new raft of free trade agreements bring Brexit Britain into a brave new world of trading opportunities, eventually bringing equivalent benefits to the EU Single Market, if this can be done, without making the same mistakes again? Let’s see by looking at the EU experience in the Caribbean and West Africa next !!

@TerryLacey
02.09.2020