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[Jahan Alamzad] Brexit shot across the bow for trade agreements

I wrote an opinion piece in April 2013 at the height of the Cyprus financial crisis and criticized the European Union for its handling of that crisis, particularly the heavy-handed approach of some of the strong members of the union. Now I am thinking maybe that criticism was too soft.

The American journalist of the early 20th century, H. L. Mencken, said, “For every complex problem there is an answer that is clear, simple, and wrong.”  Sadly, the case in point has become the saga of the United Kingdom’s membership in the EU.

When the EU was formed in 1993, and during the preceding years and events to it, much of the vital issues, particularly for supremacy priority of variety of laws, rules, and regulations within the union, were ignored. The proponents of the EU were dismissive of those serious concerns by emblematically saying, “We just beat the Soviet Union and won the Cold War. We will surely be able to manage all these matters amongst ourselves.”

Twenty-three years on, they couldn’t, leading to Britain exiting the EU that was packaged in the early 1990s as a simple solution to a tangled web of very difficult modern-day, cross-border industrial and commercial problems.

But, that was not the end of it. This year’s proponents of the “leave” campaign during the just-concluded referendum on whether to stay in the EU or not packaged turning away from the EU as a simple solution for Britain’s current ailments. In fact, Britain should have not joined the EU in the first place, but once in the union, it should have not exited. The “double negative” that Britain ignored, will be costly for no good reason but for the continued strive for simple solutions.

The main problem with international economic treaties is that identifying those who get hurt is easy, but pointing out vividly to benefits is tough. There are certainly people in the U.S. manufacturing sector whose jobs were shipped outside of the country, and it is not difficult to identify the hardship they have had to endure. But, also millions of Americans are using Samsung smartphones, driving Toyotas, taking cheap vacations to Mexico resorts and constructing their homes inexpensively with Canadian building materials. But, that doesn’t make sensational news as compared to any demagogue politician that screams daily about how the U.S. is losing in trade agreements and gets the center stage for that.

This Brexit vote is a warning to the future trade negotiators worldwide that the paradigm has shifted -- the proverbial shot across the bow. No longer it would be easy, even possible, to sell trade agreements on macroeconomic merits.

Whereas benefits of cross-border free trade agreements and regional economic zones have been significant for parties involved overall, way too many have gotten hurt due to such treaties. It is like a two-meter tall statistician drowning in a lake with an average depth of one meter!

This doesn’t mean that myopic protectionism, unsavory nationalism and gutter politics of xenophobia are the remedy. Globalization, along with its associated movement of labor, is real and stays that way going forward. Those denying this are narrow-minded at best and bigoted at worst.

What will not remain the same is crafting an easy solution and then selling it to the constituents as a panacea for righting the quandaries of free trade agreements. Politicians and advocates of such methods are simply quacks.

Also those who advocate minimizing the role of the government are part of the problem, not the solution.

What any negotiating government ought to do now is to figure out as accurately as possible the different facets of the impact on those that lose when free trade agreements go into effect. That impact needs to be communicated clearly with the citizens. Then effective and robust solutions must be devised and implemented a priori to those agreements punching in the blows.

It can be done. The perfect example is the free trade agreement between Korea and the U.S. It took a long time to reach the KORUS FTA. Detractors argued that it would lead to destroying jobs in the U.S. In fact, exactly the reverse happened. U.S. jobs were created since the volume of exports to Korea increased, and Koreans concluded that staying in Korea and prospering as a result of the trade with the U.S. is hugely preferred. Now, the U.S. is Korea’s second-largest trading partner.

In his masterpiece, “The Grapes of Wrath,” John Steinbeck wrote, “You‘re bound to get ideas if you go thinkin’ about stuff.” Instead of keep looking for politically expedient solutions that can be put in sound bites, governments ought to think first, then come up with beneficial trade proposals, but carefully plan to accommodate for disruptions in the lives of those not benefiting from those agreements. Hear Steinbeck’s words before acting!

By Jahan Alamzad 

Jahan Alamzad is a management consultant.  He lives in San Carlos, California, and can be reached at -- Ed.