TLDR: Beef; cars; shampoo; lawyers; builders; trains; regulators.
In May this year I was still looking forward to a Conservative Civil War. The referendum campaign was going to be brutal for the Tory party as it pitted an exit minority against Cameron’s more loyal MPs. The fallout after a comfortable remain vote was going to be brutal. There would be recriminations, defections, maybe the odd coup attempt. Cameron would hang on, but he would be so weak that his party couldn’t pass much of its manifesto and even the hapless Corbyn might start looking good.
None of that happened. However, the unity the Tories are showing now with their new leader and jenga tower opposition masks a second conflict in the making, one which will emerge from the party’s ideological divide during the Brexit process.
This blog will not discuss article 50, the various exit models or WTO membership. Later than I would have hoped, mainstream conversation is now covering these well. Instead I will zoom through the issues which pit different Tory factions against each other. These factions are:
- free-market liberals, libertarians, globalists
- small-c conservatives, migration sceptics, protectionists
- Parliamentary sovereignty champions, ‘Runnymede conservatives’
Daniel Hannan is a good example of the first, John Redwood of the third, and perhaps Peter Bone of the second.
All we seem to hear about at the moment is a proposed free-trade agreement with Australia. Leave aside how long this will take to achieve. A free trade deal with Australia will split the Conservatives over its core goals. Australia will prioritise getting good access for its beef and dairy, as it has done in its other trade agreements. Group A will be perfectly on board with this and jubilant that it will provide British consumers with cheaper food. However it will really threaten many British farmers, especially if group A have already won the argument over reducing agricultural subsidies. Group B could kick-off. (It just Australia that poses this problem, it’s the most immediate example.)
USA trade deal – TTIP
You get a similar issue with an America trade deal, or with joining the EU USA trade deal (TTIP). America will outcompete Britain in all kinds of areas including car manufacture and heavy industry. American workers have fewer rights and protections than British ones. To compete we may either see longer hours, eroded labour law, or simply many British jobs being lost. The country may benefit overall but many communities will lose out. Groups B and C may also have grievances over consumer protection being, we don’t know for sure yet, but it looks like TTIP will corrode pharmaceutical and chemical standards, may introduce GM foods and unusual agricultural practices, even dirtier car engines.
The other controversial element of TTIP, which has provoked pretty wide opposition in France, Germany, and Belgium, is the investment protection clause. I’ve written about it elsewhere and it is a nuanced subject, but essentially it may allow big companies to sue states, thereby influencing their lawmaking process.
This was a rallying cry of the anti-EU left in the referendum campaign, and something about which both Ukip and group C were vocally critical. However at the moment it looks like Washington will not budge on the investor protection clause being part of TTIP, and indeed it is part of most other trade deals Britain is already in. Backing out such deals would dismay group A and hammer the economy, since they are included in deals we have through the EU, such as with Korea, South Africa, Mexico. Backing out of these would send pretty negative signals to the markets, which are already pessimistic.
Developing world trade agreements
Ministers in the new government, including those from all three groups, are proudly promising trade deals with populace developing countries such as China, India, and Brazil. Such deals could of course bring many benefits. However, in return for opening up their markets, we know that these countries typically ask for their companies to be able to send workers to the partner country to complete contracts. What that means is, Indian company X wins a contract to build a swimming pool in Brighton, possibly by undercutting British firms’ bids, then sends 30 Indian builders to Brighton for a year to do the building. You can see why group B may not be delighted by this. Even worse, Indian builders may operate under Indian employment law and wage law, much lower protections than British workers enjoy. If you accept that a court reason the country voted for Brexit was to limit immigration then this looks like a poor outcome.
Government procurement and trade in services
This points to a problem with the current direction of global trade deals in general, which is to liberalise services and government contracts by stopping states favouring their own companies, thus allowing free markets to operate. Historically, the British civil service has observed such rules quite honestly, which is why a lot of our energy infrastructure is owned by foreign companies, a lot of our trains and police cars are manufactured by in foreign factories, even the running of our prisons and migration detention horrors contracted out to firms with headquarters elsewhere. This is something that group B and sometimes group C detest.
Major WTO deals in the near future include the Trade in Services Agreement and the Revised Government Procurement Agreement (TiSA and GPA). These will both advance the globalised situation. Both will also make it harder for the British government to support British industries like steel, manufacturing, or coal, either by offering them cheap loans, tax breaks, or lucrative contracts. Those would be seen as perverting competition.
[The GPA is actually already passed but as I understand, not fully in force.]
Worldwide regulation convergence
as is kind of implicit from all of the above, it looks like product and service rules and even the rules affecting how governments buy things are being gradually brought into line, at least among Western countries. This will be accelerated and cemented by TTIP and by TPP (a similar deal between America, Japan, South Korea, Australia, Mexico and others). Because UK companies want to sell to one of these places, and to the remaining EU. They will have two follow a lot of the rules agreed in these deals, whether Britain has signed up to them as a country or not. This might cause a lot of frustration in the Tory party and among voters, especially when we could have influenced TTIP much more as an EU member state. There’s no real way to avoid the situation other than Trump winning the presidency, Britain retreating from global trade. Both cheerful alternatives.
Hopefully that was interesting and covered topics a little beyond what the news cycle is focusing on. I am sure they will be the battlegrounds of the future. I have no idea who will win.