Shanker Singham:

Government shows little understanding of what it will take to seize this oncein-a-lifetime opportunity

When the Cabinet finishes its meeting at Chequers later this week, it will quickly become clear whether ministers have blown the chance of a lifetime and failed to seize the great opportunity of Brexit. Two years after the referendum, the Government still shows little sign of realising what it will take for Britain to become an independent trading nation and unleash the potential of our economy. The real Brexit cliff edge is fast approaching.

The Cabinet looks set to be asked, once again, to consider some form of customs union, partnership or partial membership of the single market. We’ve been here before. While the Government claims its “third way” customs proposal will be different from the New Customs Partnership discussed in April, it appears it will still require us to collect money on the EU’S behalf. Staying in a single market for goods, meanwhile, would mean aligning UK regulations with the EU’S, despite the fact regulatory alignment was meant to have been settled at Chequers in February. Like a zombie apocalypse, ideas thought dead seem continually to resurrect themselves.

It is worth restating why these are bad ideas. The Government wants free circulation of goods with the EU, but most border checks do not concern tariffs but adherence to regulations. So to achieve the Government’s aims, we would have to accept harmonisation with single market rules. Not only are these rules getting more burdensome but, as Canada’s former WTO ambassador has said, accepting them would mean not being taken seriously as a trading partner in negotiations: “Either you have the freedom to strike trade deals and manage an independent trade and regulatory policy, or you don’t. If not, you’d be better off remaining in the EU.”

Any relationship that locks us into accepting EU laws means only partial freedom to negotiate with other countries. It means little capacity to improve our own regulations. And that means losing the extremely rare chance to transform our economy.

This applies to any combination of EEA or Efta-type deal. Membership of EFTA combined with joining the EEA Agreement with the EU, would mean having to adopt all EU single market legislation. Despite a theoretical right to opt out of rules, the mechanism has never been used: the consequences would be too severe, as Norway found when it tried to diverge from a directive and was threatened with loss of market access in unrelated areas. This goes for Ukraine’s deal and for Turkey’s. Look under the bonnet, and the mechanism is always that the smaller party must harmonise with the EU, as Brussels aggressively pushes its growth-sapping regulations onto its competitors. Britain must break free, not least because, as a non-member, we would have no say over its rules.

So is the UK about to miss the great opportunity of Brexit? If the outcome of the Chequers meeting is the UK agreeing to harmonise with the EU or limit our control of our own tariff schedule, we will know that no trade deals in the future are possible; and the ability of the UK to improve its own regulatory system will be gone.

The price would be high. According to the Australian Productivity Commission, pro-competitive regulatory reform boosted Australia’s GDP substantially, and liberalisation led to 5 per cent growth from 1986 to 2016. But such results will not come by magic. They require actual decisions.

Rather than the endless attempts to keep Britain a rule-taker, what we require is remarkably simple. The UK needs a comprehensive free-trade agreement with the EU, advanced trade deals with other countries, the freedom to make our own regulation, and a short transition period to get systems ready. We can do this by putting text on the table for the EU, giving them something to react to that is not a speech or a white paper.

If the course is not set soon, the opportunity will slip through our fingers. And when future generations ask what went wrong, we will have to explain that our own fear caused us to sacrifice the interests of consumers, future businesses and the British people, for the sake of a few vested interests who wanted the status quo maintained. They will not forgive us.