Can the state choose winners anyway?

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One of the issues at the heart of the failing trade talks with the EU is the question of state aid to industries. It’s a long-standing myth that the EU forbids such aid; it does not, it merely insists that all member states follow a common set of rules so that no member state can give an unfair competitive advantage to companies based in its territory. And that ‘level playing field’ is a key precondition of allowing tariff and quota-free trade across borders. Despite the way in which the Brexiteers have presented the issue, the EU is not, as I understand it, insisting that the UK abide by the precise same set of rules, merely that the rules are sufficiently equivalent that they do not confer an unfair advantage. The obstacle in the talks is that the UK a) is unwilling to share its proposed new rules, and b) takes the position that allowing the EU any oversight of such rules is an infringement of absolute UK sovereignty. The second point is undoubtedly true; absolute sovereignty is necessarily restricted by any requirement to agree changes to any rules with a trading partner, but that does rather overlook the fact that the same will be true of any trade agreement with any country or bloc. All trade agreements involve some degree of common rule-setting and any party which then unilaterally changes the rules (which is what the UK is insisting it has the right to do) can expect the other party or parties to retaliate by restricting trade in affected goods or services.

The first point is the more curious one. It’s possible that the UK’s reluctance to share its proposals is simply down to the fact that the government doesn’t itself have a clue about any proposed new regime. Given the levels of incompetence shown to date on other issues, that is certainly a strong possibility. Another suggestion is that there will be no strategy other than responding to events and opportunities as and when they arise. Again, the ‘seat of the pants’ approach to government which we’ve seen to date makes it impossible to rule that out. What is certain is that no sensible trading partner is going to sign up to a tariff and quota free agreement with a state which insists that it can unilaterally start giving out subsidies on a whim. 

Tom Peck suggests that “The Brexit we appear to be gearing up to receive is one which liberates Dominic Cummings to invest vast amounts of public money in risky tech start-ups; this was always the entire point of Brexit”, and that Cummings believes that “...in the future, only countries at the forefront of the fourth industrial revolution will be able to shape the future”. It’s a credible suggestion, and if that’s the aim, no-one should be surprised if the rest of Europe is unwilling to conclude a trade agreement with a country using state aid in pursuit of dominating the technologies on which they all depend. There are, however three problems with such an approach, regardless of the EU's attitude towards it.

The first is that it depends on Cummings and his ilk being better at identifying winners and losers than anyone else. The only person who believes in his omniscience is the man himself, but there is no credible evidence to back it up. And, as Richard Murphy points out here, the idea that the state is best placed to pick winners is complete anathema to traditional Conservatives in any event. It’s also contradicted by decades of experience.

The second is that, although the ‘UK’ has a very good record in science and technology, many of the scientists and technologists working in the UK are either themselves non-UK citizens or else are working in collaboration with international teams. Whilst the government ‘bigs up’ developments achieved in UK universities, for instance, it seems to overlook the underlying international nature of many of those achievements. Making it more difficult for the UK to attract EU citizens and cutting the UK off from some significant sources of collaborative funding don’t look like decisions that a country which seeks to be at the forefront of technology would take.

The third is simply one of size. China, with a population of 1.4 billion, could put 60 million people (equivalent to the entire population of the UK) to work in the same fields, and even if they were only 10% as effective, they would still achieve more. The idea that a small offshore European island can ever compete with that is a silly one; the only way that the UK can hope to compete is in co-operation with others.

And that brings us to the heart of what Brexit is about. The world’s past was all about competition and rivalry; the future, with issues such as climate change to deal with, has to be about co-operation and teamwork. The EU is a far-from-perfect vehicle, but at its heart is the idea that countries which competed with, and fought, each other in the past can build a better future by acting together. Brexit, on the other hand, is based on reviving old rivalries and conflicts, to the ultimate detriment of all.