Photo Credit: Jakob Huber (https://www.flickr.com/photos/eci_ttip/22894178185/)

 

Free trade is more under threat today than at any point since the 1930s. That might seem an odd remark on the day that CETA, the free trade deal between the EU and Canada, cleared its final hurdle and was adopted by the European Parliament. Yes, CETA is the most ambitious free trade agreement the EU has yet negotiated, and includes enhanced services access not seen in other trade deals, but the whole process has been dispiriting for advocates of free trade. CETA, an agreement between two of the oldest international trading partners in the modern FTA era, started with significant goodwill and was seen as a crucial precursor to a transatlantic free trade deal between the US and EU (TTIP). Ultimately, it has taken 7 years, very nearly failed, and encountered an onslaught of opposition from across the political spectrum, and in the process has helped kill off the likelihood of TTIP ever seeing the light of day.

For many politicians in Europe the message of CETA has been it is simply not worth the effort trying to conclude new EU trade deals, the bloc has become too large with too many competing interests to be a reliable trade negotiator. The US seems to have reached that conclusion, even before President Trump’s election, and it was a persuasive argument used by those on the leave side of the Brexit referendum campaign. Those of us on the Remain side were not convinced the same protectionist forces at play in Europe would not also make themselves heard in the UK, even pre-Corbyn Labour was spreading false stories about TTIP privatising the NHS. Theresa May has been encouragingly pro-free trade since her arrival in Downing Street, and the government’s vision of a global Britain, if it can be pulled off, will alleviate the fears of many liberal free traders on the Remain side of the argument. Yet, not for the first time in our island’s history, Britain will need to battle against the prevailing global headwinds.

Events have overtaken advocates of free trade deals in Europe and North America, the financial crisis of 2008 continues to cast a long shadow over the international economy. In parallel with the eurozone crisis it has crippled the economies of much of Europe, which have seen anaemic growth for nearly a decade, in some cases longer. More, not less trade is the solution to this prolonged stagnation, but as in the 1930s, the voices of protectionism are decrying globalisation and free trade as the causes of poverty and inequality. People are not interested in the evidence of history – when Hoover and Roosevelt’s America put up protectionist walls in the 1930s it suffered the deepest economic depression of any major economy. The new deal, and subsequently the need to supply the US war machine, helped alleviate some of the worst symptoms but it was the onset of a new era of international trade that brought unprecedented prosperity to the American middle class.

Protectionism led to a lost decade of prosperity in much of the world after the Wall Street crash, and there is a very real risk of history repeating itself today in Europe and beyond. The single market has always been a flawed project, never living up to its Thatcherite founding ideals. The UK, the strongest advocate of the single market, is leaving it, and whether it can survive remains to be seen. France and Germany have always been more interested in a single market in goods rather than services, and recently launched European Commission plans to bolster the single market in services, despite being relatively unambitious, are already meeting resistance from powerful players in Europe.

The WTO has helped ensure that tariffs have not been the biggest choke on international trade for some time. Whether inside or outside a trading bloc, the problem du jour is non-tariff barriers. Every single day the single market comes under threat from new non-tariff barriers created at every level of government, from parish councils to the corridors of the Elysee. These are new diverging regulations, rules and requirements which often unintentionally make it difficult or impossible for a non-local business to offer its services or goods competitively or at all in a market. In my day job I helped research and write a report on non-tariff barriers last year, which was inspired by the voices of small businesses in the UK. At meetings in the UK I attended for years every time anyone tried to talk about the benefits of the single market all you ever heard back was stories of problems trading inside it. The reality for many small businesses is that the single market doesn’t exist for them – there are just too many unnecessary and unfair regulatory hoops to jump through to make trading across Europe worth their time. It is easier for most of them to do business in Cincinnati than Calais.

If the single market is going to survive in future, and a successful single market is in the interests of every country in Europe, whether they are in it or not, then it needs real buy-in from governments of all colours. That takes courage in these protectionist times. At the moment there is little evidence of any real leaders in continental Europe willing to make the case for free trade and in less than a year’s time protectionists may be in power in several of Europe’s biggest capitals. If the EU is no longer able to protect free trade within the single market, or conclude ambitious free trade agreements with external partners, then it will degrade into simply a protectionist bloc.

The government, aside from the practical impossibilities of staying within it with no say on its rules, has probably also come to the conclusion that the single market doesn’t have a real future in coming to its decision to no longer try to remain a member. A club is no longer worth belonging to if the membership fee outweighs the benefits. If that does come to pass, then a free trading nation like the UK will have made the right decision in choosing to leave, but renewing old friendships and reaching out to new markets will be critical if our closest neighbours pull up the drawbridge and cut themselves off from the world. A free trade deal with America is a good start, and looks achievable, but even with new trading partnerships the UK’s interests will still be damaged by a protectionist EU. So even from outside the bloc, we should continue to press the case for free trade in Europe, and the world.

 

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