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Peter Jones: Impact of Karel de Gucht’s work

American president Barack Obama couldn't buy European apples at home even if he wanted to. Picture: Getty

American president Barack Obama couldn't buy European apples at home even if he wanted to. Picture: Getty

Karel de Gucht’s work on trade barriers could have a profound effect on Britain’s future in Europe, says Peter Jones

KAREL de Gucht never has been, and probably never will be, a household name in Scotland. I feel slightly guilty that until invited to talk to him in Edinburgh at the weekend, I was only dimly aware of him. And yet he is a politician whose work over the next year could have a big effect on the Scottish economy and on the course of British politics.

That’s because he is the European Union’s trade commissioner. It is a big and important job which completely belies the contemptuous verdict of Danish TV’s Borgen of such jobs – “in Brussels, no-one can hear you scream”. Let me assure you, if Mr de Gucht screams in the next 12 months, it will echo round the world.

That’s because he is in charge of European negotiations with the United States over what is known bureaucratically as the Transatlantic Trade and Investment Partnership, or acronymically and more snappily as T-tip. What it is all about is creating the biggest free trade area in the world, hopefully by the autumn of 2014.

That should excite you, for the future of trade is at the heart of the future of the world economy.

Mr de Gucht is a former trade, foreign, and deputy prime minister of Belgium. He is also a man with a big hinterland, interests sweeping well beyond the murky business of politics, as he showed when I asked him to exemplify the importance of free trade to jobs.

He leans forward and produces a surprising analogy: “You know the book by the director of the British Museum – A History of the World in 100 Objects? Every one of those objects is a product of trade.”

His point is that when anyone produces something which is new, which may be more beautiful than anything that has gone before, like a stunning sculpture, or may just be more useful, like a really effective mousetrap, other people will want to buy it. And when those people are in different countries, that’s international trade, which benefits both the purchaser and the seller.

The problem with the modern economy is that borders between countries tend to have barriers to trade, either of the cash tariff variety which increases the price of the tradeable object, or of the non-tariff regulatory type which says that those foreign mousetraps can’t be sold in a country because they don’t meet domestic legal requirements.

Get rid of the barriers, and the producing country’s mousetraps will cost less in the importing country so more will be sold, creating more jobs, while the purchasing country will have less bothersome mice, also creating value for that country.

Between the EU and the US, tariffs on goods average about 4 per cent and up to 10 per cent in some cases, while the regulatory barriers are reckoned to add between 10-20 per cent. These barriers range from stopping a European airline’s Europe-Los Angeles flight which drops off half its passengers in New York from filling its seats with new passengers for the New York-Los Angeles leg to banning the sale of European apples in America.

Estimates by the Centre for Economic Policy Research, London, suggest that, depending on the scale of the barrier demolition, between £4 billion and £10bn could be added to British GDP by 2027. On a pro-rata basis, Scottish exports could be boosted by between £1bn and 
£2bn. “It’s big for the UK and big for Scotland too,” says Mr de Gucht.

And since American and European governments have a common and rather urgent interest in getting their economies growing faster, creating more jobs, the chances of a deal look pretty good.

Furthermore, Mr de Gucht points out, a US-EU free trade zone would encompass about half of the world’s GDP, meaning the regulations, standards, and norms it sets are very likely to become those adopted by the rest of the world to get access to EU-US markets. That in turn would make it easier.

Should it come about, the political impact may be even greater than the economic benefit. Part of the reason that there is such Euroscepticism in Britain is that the pro-European case is just not being made.

Those who think the UK would be better off out of the EU are extremely adept at getting their voice heard with all sorts of allegations of Brussels’ interference in British affairs. Some complaints are real, but many are not, especially those to do with the European Convention on Human Rights, which has nothing to do with the EU.

But a T-tip deal which boosts growth and jobs would be a pretty solid answer to all that stuff. Moreover, it would highlight the tariff and other barriers between Britain and Europe that might well go up if Britain was to remove itself from the EU and hence go outside an EU-US trade zone.

Mr de Gucht is well aware of these implications and the boost it would give to David Cameron in turning back the anti-EU tide. If a deal was struck, he says, with diplomatic understatement: “I think he would be among the people that would be very pleased with it.”

There may be those who would argue that Britain, because of the much-vaunted “special relationship”, is quite capable of striking its own trade deal with the US.

But Mr de Gucht has no doubts that it is extremely unlikely that America would prefer such bilateral talks with a nation of 60 million people when it can deal with those people and 440 million others in the world’s richest market in one go.

The discussions will be an enormous exercise covering some 28 different areas of trade and each with their own teams of negotiators. He says: “The UK has a preferential bond with the US for historical reasons, but the US would never engage in such a negotiation at this level of ambition, trying to get common norms and standards, common regulation, unless it were with the kind of economy we [the EU] are – the biggest in the world – because it is a big effort.”

For Mr Cameron, these talks are not just an economic game-changer, but a potential political game-winner.

 

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