Thursday, 1 September 2016

Only fools and trade deals

Let's start with a not-hilarious joke.  When is a trade deal not a trade deal?  When it is conjured from the feverish imagination of David Davis.  Ha ha ha ha ha ha guffaw ha silence. I shall enter that for best joke at the Edinburgh Festival.  Take that, Stewart Lee!  He would finish off the joke by berating the audience as a diversionary tactic.  As an experiment, I shall try that out:  shut up you idiot readers, this is brilliantly written and hilarious but you are too stupid and ignorant to understand my genius.  Hey, that feels great.  Just for my own pleasure, expect more haughty derision littered throughout the rest of this post. 

This post is going to be about trade deals.  One of the mantras of the Leave campaign is that the UK will be free to conduct its own trade deals and that these will be innately better trade deals than the trade deal we have with the EU and, by extension, the trade deals the EU has with other non-EU nations. They will be British trade deals, after all.  It occurred to me that I didn't really know much about trade deals.  To be honest, I don't imagine many people know much about trade deals.  Does the UK government even know that much about trade deals?  What we do know is that by leaving the EU and conducting our own trade deals we will be able to "take back control".  It must be true because it came from the mind of David Davis.  Hmm, but was he really telling the truth?  Is a new world calling?  Let's find out together.

I thought it might be interesting to look at the North American Free Trade Agreement (NAFTA).  This is a complex trade deal that encourages trade between Mexico, the US and Canada.  More specifically, the agreement eliminates a wide range of tariffs and duties but also involved a number of side agreements to harmonise intellectual property rights, protect the environment, and even includes some legislation to safeguard workers' rights.  These side agreements have exciting names such as 
"North American Agreement on Environmental Cooperation" and "North American Agreement for Labor Cooperation".  You're probably thinking this sounds a lot like EU-lite.  I'm thinking that too. There's going to be a paragraph or two on this exact point at the end of this post.  Hey, don't just jump there right now.  Ok, go on, but you're missing out on a moderately interesting argumentative preamble so it's your loss.

NAFTA negotiations began in 1990 and came into force in 1994.  That's right, it took almost 4 years to come to an agreement.  What's more, the terms of the agreement were gradually implemented so that the process was only completed in 2008.  That's right, it took 18 years to fully negotiate and implement NAFTA.  To make matters worse, NAFTA superseded the Canada–United States Free Trade Agreement (CUSTFA), so it wasn't as though they started from scratch.  How many years did it take to negotiate and implement CUSTFA?  That is an almost impossible question to answer because the US and Canada have a long history of bi-lateral treaties.  Nevertheless, I'm going to have a stab at an answer using the power of arithmetic.  Let's see, CUSTFA was signed in 1988, while the first US-Canada trade agreement was in 1855.   I make that 133 years. Alright,  alright, I agree, I'm playing fast and loose with definitions for comic effect. But it was definitely hilarious.  Yes, you idiot readers, it was.  I am the king of light-hearted EU blogging.  Admit it! Admit it, you fools!

If  you want to know more about NAFTA tariff ranges or the CANAMEX corridor I suggest that you peruse the information super-highway but before you do that take a hard look at yourself in the mirror.  Is this the person you want to be? Have you let your younger self down? To be perfectly honest, I couldn't really be bothered reading more about NAFTA or CUSTFA because they are just so huge that I didn't know where to start.  If you take a look at any of the side agreements you quickly realise that they are similarly enormous and reference other legal frameworks such as the Stockholm Declaration on the Human Environment.  I'm just not going to plough my way through all that for a bunch of idiot readers.  Do it yourselves, you feckless losers.  Wow, this does feel great, Stewart Lee is on to something here.  Ok, getting back to the main point, I'm far more interested in how these treaties affected sovereignty and control.  Yes, how might they be affected? Everyone say it together out loud - how might they be affected?

One criticism of NAFTA is that it has led to a significant transfer of manufacturing jobs from the US to Mexico.  Some studies put this figure at 700,000 jobs, others closer to 1 million.   After all, if goods can be produced cheaper in Mexico and still be sold without any tariff disadvantages in the US and Canada then what business wouldn't do that?  A further criticism is that the boom in manufacturing in Mexico has led to a mass displacement of agricultural workers, many of whom displace themselves even further from their home town to a life in the US. In the following table we can see significant growth in the number of Mexican immigrants in the US during the NAFTA years.

So far, we've seen that NAFTA led to disputes about the ability of governments to protect jobs, and also led to significant pressure at the borders.  If this all sounds horribly familiar then read on because now we're going to learn that it can also lead to the court system being bogged down in disputes between local policy and NAFTA rules. Let's say you represent a consortium of US investors and want to set up a golf course in beautiful Canada. The Canadian government denies you the right to plough up an area of designated beauty but you in turn argue back that you are completely compliant with all NAFTA legislation on the environment and that your rights, protected by NAFTA, are being illegally undermined.  I do hope you enjoyed the Trump satire there because if you didn't I will hunt you down and call you bad names like turnip and toilet-head. Boy, now I know how Stewart Lee feels on stage and, let me tell you, it is grrrrreat. Before I get carried away, here is a real investor-state dispute: Canada tried to ban the import of a gasoline additive from a US company called the Ethyl Corporation.  The Canadians lost the case and had to pay $15,000,000 in addition to overturning the ban.  Perhaps more topical is an ongoing case for $119,00,000 over a fracking ban in Quebec.  This kind of investor-state dispute has led to the Canadian government gaining the accolade of the most sued government in the world under free trade tribunals.  Here is a list of ongoing cases against the Canadian government. Quite impressive, isn't it?

Let's do a quick recap.  NAFTA has limited the ability of governments to stimulate jobs growth, increased levels of cross-border migration, and resulted in local lawmakers having their good intentions for the environment overturned in the courts. Does anyone still think David Davis is right that signing our own trade deals will let the UK take back control?  I don't.  Any trade deal we sign will necessarily come at an attempt to level the playing field for all parties.  That can only be achieved through setting out common rights and responsibilities.  After all, what kind of fool from country A would sign a trade deal with country B when there is simply no hope to competitively manufacture products for sale in country B?  Sadly, I suspect David Davis might be exactly that kind of fool.  A quick google for "NAFTA criticism" will show that almost all civic and legal friction has resulted from differences in attitudes to the environment or in levels of economic development or in health and safety standards.  This might explain why TTIP has thankfully reached an impasse. Doesn't it make more sense to pursue a trade deal with the nations most closely aligned to your own?  Your immediate neighbours, perhaps.  Oh yeah, we had one of those, didn't we?

I don't want anyone to come away from this blog post thinking I'm against trade deals.  I could easily follow up this post with stories about how NAFTA transformed North America for the better. The US is even pursuing a further trade deal known as the Trans Pacific Partnership so they must see some value in them.  Also, I live here in sunny Switzerland as a direct result of trade deals so it would be paradoxical to be against them.  My only point here is that trade deals necessarily involve ceding power to the deal itself because contracts always lay out the rights and responsibilities of each party. This seems to have escaped the collective mind of the leading Brexiteers.  What's more, instead of trade deals with countries most closely aligned to our own values and economies, we are now hell-bent on agreements with countries that have quite different approaches to workers' rights or the environment or employment law or taxation.  As a consequence, the middle ground on these deals will be far, far away from either side.  I can imagine many putative UK trade deals will either stumble in endless negotiations like TTIP did or eventually prove even more unpopular than the EU due to the legal imposition of rights and responsibilities that are out of touch with British sentiment.

Will we see more articles about scary US cleaning products?  Answers on a postcard to David Davis MP.
What will Nigel Farage have to say when a consortium of Malaysian investors sues the UK government in a UK court and wins the case?  Maybe they want to open up a centre of nocturnal Malay folk dancing near Nigel's house . Will he finally be happy and free? Will the Daily Mail rail against investor-state disputes with any of the energy they devote to the ECHR?  Will the Daily Express devote every front page to stories about dangerous American shampoo?  I don't know the answer but I definitely don't want to be a citizen of the UK when I do find out.

Over and out,


PS I promise to be polite and respectful next time.  Don't know what came over me there.  Too much Stewart Lee on youtube, I think.

PPS If you enjoyed the trade deals theme there is more to come.  Fascinating stuff.  Who would have thought comprehensive trade deals with your nearest neighbours make good sense?


  1. Yep. That was a good piece, despite all the wounding insults to your loyal readership. (Munguin ran off in the huff and it cost be a pound of shrimps to get him back! You owe me!)

    Seriously your point that none of these trade deals, which take extremely clever trade negotiators/lawyers years and years...and years... to sort out, come without some of the stuff that the EU involved, seems to have been lost of the top Brexiters.

    David Davies seems to have the notion that within a short time we can have arrangements with Germany and France, Italy and Estonia, and whoever else, seemingly forgetting that they are part of the EU. Deals with Canada, USA, Japan, China et al may be possible but they will have minuses as well as plusses and they are 10 years off.

    And frankly, much though I'm against England building nuclear power stations with our taxes, they've made a VERY bad start with the Chinese by putting Hinkley Point on hold.

    Imagine, if you will, a period where there is no trade agreement with, for example, China! What will be be able to buy? No computers, no washing machines, dvds, irons, shavers, sex robots... what am I saying>? Scrub that last bit.

    I wonder if they seriously do live in a world where they believe that Britain is so important that deals will be done, negotiated by the half a dozen or so trained negotiators that Britain has, which will be totally advantageous to the UK, and the Chinese, Russians, Canadians, Americans and the rest of the EU will bend over and be...

    Anyway. Munguin wants cray fish now. This is all your fault.

    God save the Queen. Toodle Pip for now.



  2. I'm assuming David Davis really thought he was right about trade deals during the EU referendum campaign. Surely someone has sat him down and had the talk by now. I imagine he is someone who will only learn from his own mistakes. Fine for putting up a shelf or attempting to fix the washing machine but not so great for the future of the UK. When I was younger I thought that politicians might be corrupt but at least they had some of the required core competencies. How naive.

    The issue with Japan and US trade deals etc is that they are already partners in complex trade deals. Do those existing agreements impose conditions that might limit their ability to make further trade deals? I need to find that out.

    Hinkley Point is a great, erm, point. Not a good start at all.

    Sometimes it is nice to try on a different hat. Today, it was acerbic comic Stewart Lee's hat. Didn't really fit. Thankfully, Roy Chubby Brown's hat went straight in the bin.

    Cheers for reading.

  3. LOL...

    As long as you don't try on that daft hat that that awful blood(y) princess had at Willie's wedding.

    I've got this feeling it wouldn't suit you any more than it suited her...although to be fair you're undoubtedly better looking.

    It seems to me, and I may be missing something, that there is a naivity about this whole thing that might be possibly acceptable if it were the island of Sark (pop 600+/-) that was negotiating, but is incredible when you consider that this is supposedly a major power.

    No one planned anything in advance. No one has the foggiest idea what to do. No one seems to understand, or even to have contemplated, the simple truths you laid out above.

    What the actual... OK, enough Tris!

    Cheers for writing (love your posts).

  4. The more I look, the bigger the mess appears to be. If we all agree to stop looking will it go away?

    What you might think is a picture of a poorly stuffed otter is actually my face. It was taken at a taxidermy museum a few years ago. Time has taken its toll so I'm not as handsome now.

    1. Still prettier that Eugenics or whatever she's called.

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