Is the EU protectionist?

In response to the Tony Barber piece in the FT "The EU is no protectionist racket"



- The EU’s FTAs are quite narrow and include Rules Of Origin constraints on manufactured goods.

- These are primarily goods trade deals which suit France and Germany but would not suit the UK. They also seek to impose EU product standards (more on this later).

- Public procurement is an area of French and German strength. It is why public procurement is one of the very few services that has been included in recent trade deals the EU have signed. However public procurement falls under State-Owned Enterprises (SOEs) or is classified as national security concerns. So though on the face of it it looks like the EU isn’t being protectionist via the trade agreement when it comes to actually awarding the contracts practice, these concessions are never awarded to foreigners. They impose local regulatory standards or clauses to make sure this is the case. The inclusion of the public procurement clause is a concession that will never result in anything for the counterpart.

- The US is not an innocent party, but it does have a legitimate argument that China, Korea and Germany have taken unfair advantage on trade by following mercantilist policies that restrict domestic market access via regulatory measures. The US is seeking to use its leverage to adjust this relationship.

- The US has already stated it would like to have a trade deal with the UK. There would be cheaper food in the UK as a result. the argument over such things as chlorinated chicken can be defused by clearly labelling produce and letting the consumer choose (c.f. free range eggs).

- Of course, the UK should depart from EU regulatory alignment where it is in the national interest. That is the point of taking back control. A significant trade deal that opens up markets in services and food is eminently in our better interests.

- The Irish border issue is not legally solvable. A fudge is required and will be found. The UK will not police it even if the EU wants to. The EU is being overly legalistic on this front, and technology will ultimately provide the solution. Lawyers have too static a view of a dynamic world, especially in this respect. The tendency for Eurocrats to regulate for the now, or the past, rather than the future is also why the EU is not going to end up with thousands of City bankers. Banking functions, including trading, are going to be dominated by AI and we should expect to see the supra-national FANG model become the norm in banking. The computer may sit where the regulator tells it to sit but those programming it won’t.

- They are protectionist by insisting other standards that might not conform to Rules of Origin requirements (in themselves protectionist). Erecting blanket trade barriers with the UK, even with products that do match their standards, because the UK won't enforce all of their standards domestically is pretty close to the definition of punishment beatings and protectionism.

- Setting EU standards is a form and force of protectionism that tries to export the cost of European social models on the non-EU supplier countries. It requires these countries to completely change the way they produce goods etc and instantly puts them at a disadvantage with French/German firms. This is why Dyson moved his production to Malaysia: they stitched the rules up to the UK's disadvantage. As a result, he pays the EU external tariff to export Dysons to the UK.

- The most liberal of FTAs is the Australia /New Zealand agreement, which involves Mutual Recognition Agreements. These accept that both countries' regulators are competent enough to be accepted by the other without the need for harmonisation. Harmony in this sense, though sounding peaceful, is the forced infliction upon other countries by the EU of the EU’s way of doing things (do it the way we want you to do it, not the way you do it) to their protectionist advantage. If you don't submit to being 'harmonised' with EU standards then you cannot have market access. A more sensible view would be that developed countries, by and large, have high enough product standards and service regulation that they should have Mutual Recognition Agreements instead of harmonisation.

-THIS IS NOT ABOUT TARIFFS, it's about Non-Tariff Barriers - which the EU excels at imposing. It's a French national pastime - remember the Battle of Poitiers with VHS recorders coming in from Japan? Why do they want to stop the UK from keeping the City? Because they want the business. True free-traders would allow it to continue with regulatory cooperation and Mutual Recognition. The BoE/FCA/PRA are amongst the best financial regulators in the world from a financial stability standpoint. The ECB et al, in appealing to financial stability risks as a reason for on-shoring, are applying the same logic as warning that building a bridge across the Thames will decimate the boat building business. It's protectionist.

- If the EU have always been such a liberal free trade loving union then why has it taken them decades to come up with these FTAs? Could it be that they feel threatened by the UK leaving? The UK had been pushing for such agreements years ago to no avail. If they had progressed with these earlier it may have defused some of the arguments for Brexit.

- Finally, let’s not forget that the EU’s very existence is based on a bilateral protectionist agreement to protect French agriculture and German steel and coal.