Wednesday, 1 February 2017

Our Pets Will Be The Eagles, Our Crest A Rampant Bear

When I was young back in the 80s, Germany didn't seem like a very cool place at all.  It was the land of mullets and unironic moustaches and dreadful pop music built on an endless oompah beat. It was also a country that still had political and business leaders tainted by their youthful associations with the Nazis.  It's funny how things can turn around in a single generation.  Nowadays, Germany is seen by many as the leader of the free world.  It acts alone in showing compassion for refugees and standing up to Donald Trump's racism and xenophobia. Less importantly, that 80s oompah beat is now the best thing ever and hipsters the world over have a tendency towards retro facial furniture. All thanks to the Germans.  I haven't even mentioned Kraftwerk yet.


If I had the choice of living in a country more like Germany or one more like the US, I know which one I'd choose.  I'm obviously way out of step with my fellow UK citizens because they chose the US.  The EU Referendum was never presented in those terms but that's exactly what it was:  be more like Germany or be more like the US.  We're going to learn quite soon what it means to be more like the US. We're going to learn that at the worst time possible because being more like the US means being more like Donald Trump's distorted vision of the US.

I've spent far too much time banging on and on and on about how trade deals are concerned with harmonising standards and resolving investor-state disputes that arise from legal interpretations of those standards.  The idea that leaving the EU will grant the UK the freedom to control its own destiny is a fantasy. Membership of any international organisation from the OECD to the G7 to the UN places limits on the power of governments to act independently.  Trade deals are no different.  Trade deals with the US will be no different, either.  A trade deal with the US just means the UK will move away from EU standards and towards US standards.  If it doesn't do that voluntarily it will be forced to but only after losing costly investor-state disputes adjudicated by free trade tribunals. Signing a trade deal with the US will make the UK more like that US.  There is no getting round this fact.
School uniform proposals for Wolverhampton Comprehensive 2019
What does it mean to be more like the US?  What does it mean to be more like Donald Trump's vision of the US?  We've seen some of that already in the way that Theresa May refused to criticise Trump's bizarre border policy aimed at stifling the rights of refugees. Despite the scale of the protests that erupted all over the UK I honestly doubt many people are all that bothered.  I'm bothered by it and I'm sure everyone reading this is even more horrified but we're a minority of people who hang around the internet reading reductio ad absurdum analyses of the UK's indecipherable trade policy.  It pains me to say it but most people really couldn't give a toss about refugees because what they really care about is their own life and their own family.  The rest of this post is aimed at them.  How will a US trade deal impact on their life?



The NHS


One of the biggest advantages of the NHS is that it negotiates prices on pharmaceuticals as a single entity on behalf of the entire health system.  A market with a single buyer but multiple sellers is heavily stacked in the buyer's favour.  This is great news for the UK because keeping down the cost of life-saving drugs means they are more affordable and more widely available. It's not such great news for those pharmaceutical companies because they're denied the opportunity to maximise their profits. A monolithic NHS is the last thing they want. What do they really want?  Well, they want to neuter the buying power of the NHS to level the playing field of buyer and seller.  That is the only way they can start selling their products at sky-high US prices.

How might the buying power of the NHS be neutered? That is quite simple and would only involve the implementation of a UK mirror of the 2003 Medicare Modernization Act.  This explicitly forbids the federal government from negotiating drug prices and from establishing a list of preferred drugs.   Both of these functions are currently carried out in the UK by the NHS.  The NHS not only negotiates drug prices for the entire system, which pushes down the price, but also establishes a list of drugs that it believes reflects the best efficacy per unit cost.  Drugs companies can be very sneaky and sometimes demand high prices for new products that have much cheaper alternatives.  It requires vigilance and unity to keep abreast of their tactics. Breaking up the NHS and legislating to forbid its component parts from acting in unison is a sure-fire way of improving the stock price of Glaxo.

Why would the UK agree to breaking up the NHS and on what basis would the US demand it?  It's simply a question of symmetry and fairness.  The UK will be able to sell its drugs to the fragmented US market at sky-high prices so it seems only fair that is reciprocated in the UK.  It is a perfectly reasonable demand and it would be hard to resist.  It will also be a top priority for US negotiators because it is the last bastion of state-controlled spending in the UK. This isn't a detail that merely encourages trade or reduces friction in the supply chain. Make no mistake, this will open up the entire UK health system to the free market for the very first time, instantly creating a health market worth hundreds of billions of dollars to US pharmaceutical companies. This is a huge prize.

The UK is struggling to maintain the NHS in its current form.  It's struggling to financially maintain it but it is also struggling politically.  Lobbying forces are hard at work to undermine the system because the spoils are so huge.  A sudden hike in costs is going to make that struggle even harder. What is the alternative?  Well, a US-style insurance system is the obvious alternative.  Make the people pay for their own healthcare.  This is great news for the US insurance market because they can sell us expensive insurance schemes to pay for all those over-priced drugs we'll be taking. Why would the UK agree to this?  Well, it's that reciprocity again.  UK insurance companies will have access to the fragmented cash-cow of the US insurance market so it seems only fair that we open up our system in return.

The NHS as we know it will end the day that the UK signs a trade deal with the US. The principle that everyone should have the same health opportunities will be buried that day, too.  The very last remnant of the post-war consensus will disappear in a haze of big money.  

The Environment


We don't have to guess what effect a US/UK trade deal would have on the enviromment because we only have to look at Canada to find out what happens.  Canada, of course, is the most sued country in the world under free trade tribunals.  Most of these investor-state disputes are attempts to overturn environmental legislation so that Canadian resources can be opened up to US firms.  Here's a single case out of many: Quebec Province banned fracking but that wasn't enough to deter US investors from suing for the right to frack anywhere they wish.

The NAFTA trade deal was signed long before Donald Trump even became a household name as a star of reality TV.  It was signed at a time when environmental protections were an important consideration.  As a consequence, NAFTA has side agreements entirely devoted to the environment.  These side agreements reference international treaties such as the Stockholm Declaration on the Environment.  It is simply not the case that NAFTA cast aside all environmental concerns and left the North American countryside open to any and all exploitation. What about now?  What kind of agreement would Donald Trump sign now?  This is a man who thinks global warning is a lie that only acts to undermine the profit margin of Western industry. Donald Trump campaigned on a policy of rejecting international agreements on pollution and energy consumption. Donald Trump is someone who thinks money trumps everything, even the air that we breathe.  The chances of protecting the UK's most precious resource after signing a US/UK trade deal are as slim as Kate Moss after a heavy cold.

Transparency


If you think the European Court of Justice is a conspiratorial front for the liberal elite then just wait for the tribunals that will adjudicate on US/UK trade disputes. It is widely rumoured that TTIP collapsed because the EU would not accept secretive courts being appointed to resolve EU/US investor-state disputes. Lacking the transparency of the ECJ, these tribunals would furtively divert taxpayers' money to US corporations and financial institutions. This was unacceptable to the EU, as we'd all hope it would be, who wanted adjudications to be carried out with significantly more transparency.  Would it be unacceptable to the UK?  After all, a mature democracy doesn't let that happen, right?  Think again.  The problem with the ECJ was that it was transparent.  In fact, it was only that transparency that let the UK press pick over its every judgement and misinterpret its findings year after year. The last thing the UK Government wants is another ECJ on its hands because that would endanger all those trade deals it wants to sign. I would guess they would only be too pleased to have unpopular judgements held in absolute secrecy.

Harmonisation


Let's take a quick look at disputes lodged by the US at the WTO because this is a good indication of the kind of policy issue that will be a target for US harmonisation.  I've picked out a few choice items from the first quarter of a truly long list. 
It's clear the US doesn't like dealing with countries that subsidise their industries.  If you think that leaving the EU will allow the UK Government to throw money at Port Talbot to secure the scraps of the UK steel industry it might be time to think again.  Farmers that have been protected from global uncertainty by the EU Common Agricultural Policy will now be left to fend for themselves.  Leaving the EU won't make their lives better at all because they'll be left to compete in a race to the bottom of the chemically washed chicken market. Eating all that chemically washed chicken and gen-tech potatoes won't make our lives any better, either.

The US is typically a country that regulates less than we're used to here in Europe.  This is bad news for a country that wants to harmonise with the US because it will have to give up its power to legislate for health and safety, quality assurance, controls on pollution, labelling standards etc etc. Donald Trump thinks the US is a regulatory nightmare and intends to slash regulation after regulation. It's all laid out here.  I can't recommend this highly enough if you've run out of horror movies to watch.  It's a quite terrifying document that manages to count the cost of regulation without accounting for any of its benefits.   Here's a list of the kinds of regulations under threat:
  • Any regulation that encourages investment in renewables 
  • Any regulation that limits the production and exploration of coal, gas or oil
  • Health and safety at work regulations that are deemed to be non critical
All of this is coming soon to a town near you.

Negotiating Imbalance


Here's the real problem with a US/UK trade deal. The issue is that Donald Trump campaigned on a clear message of protectionism.  He immediately cancelled TPP on taking office and quickly followed that up by throwing a tantrum about NAFTA and demanding its imminent demise. If that wasn't enough he is in the process of humiliating one of America's closest trading partners by threatening punitive tariffs to pay for a huge wall to keep all those unpleasant foreign humans as far away as possible.  Donald Trump doesn't want to sign a deal with anyone. He is signalling this as loudly as a boorish oaf ever could by telling the entire world that from now on every US trade deal needs to have a 30 day cancellation policy.   For Donald Trump the status quo of no deal at all has a spectacularly high value.  His policy statement from last September makes for interesting reading for anyone attempting to coax the US into any kind of trading relationship.  The UK, on the other hand, is desperate to sign a trade deal. Moreover, the political survival of the leading Brexiteers is conditional upon them signing trade deals.  Any US/UK trade deal whatsoever would be a feather in their cap because the press aren't going to examine it in any detail.  Walking away from a trade deal is not an option.  The problem is getting Donald Trump to bother picking up his pen.

I don't need to spell out what happens if one person wants to buy but the other doesn't want to sell.   For the UK it means giving up the NHS.  If we're lucky we'll make it to the third or fourth day of talks with our health system in one piece.  Everything else I listed here will be signed away by day three.

Balance of Trade


Here's a fun fact to finish.  The UK generally has a terrible balance of trade but its trade with the US is actually a rare win. That's right, the most recently published trade results reveal that the UK exports more to the US than it imports.  What are the chances that will be reversed after desperately signing a hasty trade deal?  That's a rhetorical question and I leave it to the reader to make up their own mind.


This can all be avoided by voting Yes in a 2nd indyref,

Terry

PS Today's post was a bit of a monster. Next time will be nice and short and a bit more frothy.  The last few posts have been a bit fact-heavy so maybe it's time for an update on the Brexit emotional rollercoaster.






11 comments:

  1. Terry, I think that's the best presentation of what will happen with US/UK trade relations I've read.
    I've been trying to argue some of these points, especially with regard to the NHS, for some time, with some success / acceptance, but in the main have been met with disbelief.
    Your post provides a cogent underpinning which helps me arrange my arguments better.

    By the way, and somewhat off topic, there was a very revealing moment on the R4 Today programme when one of the presenters described the intention of SNP MPs to vote against triggering A50 as a "revolt".....
    So, representing the two thirds of Scottish voters who wish to remain in the EU, spread across every Scottish region, party policy, majority Scottish Parliament wishes etc. Is a "revolt"....
    What does that say about a) English attitudes and b) the BBC?

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    1. Thanks!

      The idea that "the people have spoken" and "the will of the people" has really taken root. 45 years of GEs fought on pro-EU manifestos all forgotten by a single non-binding referendum with a tiny majority. I always think of the BBC and the London media pack as being a bubble world. In this world a slogan becomes an accepted fact very quickly if it is repeated often enough. These people think, eat and sleep in slogans so they tend to forget quickly that other views exist. In their mindset a new political order has taken over. Group think at its very worst.

      Scotland is a footnote in all this mess. Not to us, obviously, but to Westminster. I'm sure we'll get our say before this is all concluded. I just can't envisage any outcome by the end of March that would satisfy Nicola Sturgeon.


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  2. you're a cheery bugger!
    I always love your interventions and observations. You educate me and entertain me all at once, a killer talent.
    Thank you.

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    1. This blog started out full of jokes and hopes for the future. It's just misery now. Day after day of Brexit misery. But, come on, that Mike Mareen track is an earworm. You don't get that at Wings over Scotland!

      Thank you so much for your kind words.

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  3. Another excellent post, brilliant of how things will be. Was it all worth it? Are there some people somewhere who are actually happy about any of this?

    I see the 'disgraced ex minister become disgraceful minister', Liam Fox, has slipped out a quiet (but embarrassing) written answer about trade, while everyone's attention was elsewhere. Everyone but Ian Dunt, that is.

    http://www.politics.co.uk/blogs/2016/12/06/very-quietly-liam-fox-admits-the-brexit-lie

    So, we're taking back control to do exactly what the EU would have done. Except of course we'll sign up to a one-sided suicide pact with Trump. And we are the side that will be suiciding. OK, I know, it's not a word, but it's what we'll be doing nonetheless.

    We are losing large numbers of nurses and doctors because they don't feel welcome and don't reckon there's a future here for them. (Who could blame them after Hunt's speech at the Tory Conference?) I quote from Mark Frankland's blog: "A few days ago the Royal College of Nurses released some figures which they probably hoped might generate some concerned news coverage. Applications from nurses from EU countries wanting to come to Britain to work for the NHS have fallen by 94% since June."

    http://marksimonfrankland.blogspot.co.uk/2017/01/i-wonder-if-medical-scientists-who-have.html

    We need these people, but they don't want to come to what they think of as a nasty little inward-looking, xenophobic country.

    So, what this was REALLY all about, the xenophobic Daily Mail reader's dream, will actually bring none of the benefits they were promised.

    We will take back control to hand it to the Americans, who will downgrade all the safety stuff, and send us GM foods etc. We'll be fracked by their companies and our health service will be bought over and privatised. We will keep almost every single trade tariff the EU has. We'll have to beg foreigners to come here and work becasue we have so few qualified people, so Tesco will still be full of people speaking Polish and Bulgarian.

    Our universities will have lost the best research projects and a least 25% of their students. Fees will have to rise in English universities.

    Still, I'm sure it was all for the best of someone somewhere.

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    1. I saw Ian Dunt's article earlier today. Some months ago Liam Fox had already admitted in a speech that our WTO schedule would be exactly as it is today with the EU. He only admitted what everyone had been telling him for month after month after month.

      That's a bleak vision on Mark Frankland's blog. I don't know how the government intend on recruiting all the people needed to run the country. There is a real problem that the UK for almost a whole generation had a strong currency and didn't need to pay for training or staff retention. How is all of this going to be paid for now? Tax increases?

      Who does benefit from this? I really don't know. People that don't like foreigners at the bus stop. That's about it.

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    2. Probably won't be much point in standing at bus stops in a few years as there won't be anyone left driving them.

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  4. More gold Terry. I don't have anything more intelligent to add than that.

    Cheers!

    Hugh

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  5. Another interesting take on the whole Brexit situation and not the kind of insights/forecasts we can only wish for from the British media and national broadcaster.
    Speaking of which, as the Beeb like the NHS is publicly funded, could that organisation be subject of takeover or purchase by US networks?

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    1. That's a good question. I don't think the BBC will be directly affected for a few reasons that immediately spring to mind.

      1. There are publicly-owned and non-commercial TV and ratio networks in the US.

      2. The BBC already buys shows from independent production companies. As it is, there is nothing to stop them buying US shows from US companies that they think will appeal to UK audiences.

      3. The BBC doesn't have a monopoly on UK television. As a consequence, its existence doesn't weaken the ability of a US production company to air their show on any UK television network. The BBC doesn't have the power to "distort" the UK TV market in the way that the NHS does for health.

      4. New platforms like Netflix and Amazon might present a better target for US production companies. UK audiences like watching shows with a UK slant on UK telly. Netflix, on the other hand, is a good opportunity for UK customers to watch original US TV. If that is popular then we'll see TV stations air those types of show as well.

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