Chequered history
May can do better than her Brexit compromise
Theresa May’s Chequers proposal, spelt out in last week’s White Paper, represents an enormous climbdown from what she initially appeared to be aiming for, laid out clearly in her Lancaster House speech in January 2017. In particular, by tying us in to EU regulatory standards on goods, it would make it difficult to secure Free Trade Agreements (FTAS) with other countries, including the United States.
Nevertheless, you could argue that this minimal Brexit is better than nothing, and some Leavers have. But this surely depends upon what the other possibilities are. This deserves the serious analysis that Mrs May and her team have apparently not given it.
There are broadly two options. The first is to accept one of the off the shelf arrangements. The one that most closely accords with achieving a full Brexit, corresponding to what people voted for two years ago, is the recently agreed EU deal with Canada.
This is not ideal for us, but it is pretty good. It might be possible to add some bells and whistles that extend the scope of the agreement, particularly with regard to services. This is what is known as “Canada plus”.
With or without the plus, this would give us tariff and barrier free trade between the EU and the UK while ending free movement of people, the payment of substantial sums of money to Brussels each year and the jurisdiction of the European Court of Justice, while enabling us to sign FTAS with whoever we wanted to.
Interestingly, the EU offered us the Canada deal earlier this year but this was turned down by the Prime Minister, supposedly because it wasn’t ambitious enough and because it would not provide a solution to the supposed “problems” concerning the Irish border. Since then Mrs May’s ambitions have decayed to the delivery of abject surrender while not saying so.
As to the Irish border, it has been clear for some time that these “problems” have been manufactured by the Remain-leaning establishment precisely as a way of blocking off a full Brexit. There is no need for a hard border between the Irish Republic and Northern Ireland. It is perfectly possible for goods to move freely across the border, relying on pre-registration and subsequent random checks. There is already a soft border between the Irish republic and Northern Ireland with regard to currencies, duties and tax rates. This would continue.
Of course, it is possible that the EU will not now agree to something like the Canada deal. And the clock is ticking. In that case, there is another perfectly viable option, namely “no deal”. After all, as Mrs May used to say, “No deal is better than a bad deal”. In fact, this “no deal” expression is potentially misleading. It doesn’t mean that we couldn’t or shouldn’t have a deal on anything with the EU, including landing rights for planes, participation in various joint bodies etc. What it means is simply that we would leave the EU without an agreement on trade, and would operate under World Trade Organisation (WTO) rules.
The WTO option is widely misunderstood. It should hold no terrors for us. We currently do the bulk of our trade with non-eu countries under WTO rules. And if we left the EU without a deal we would not have to hand over the £39billion “divorce settlement”.
Moreover, the WTO option leaves substantial areas of policy choice, including over what our tariffs are. We could decide to drop tariffs on particular goods but not others; for instance, on cars, which currently incur tariffs at 10 per cent, and/or on car components, where the rate is five per cent. Or we could decide, unilaterally, to drop all our tariffs to zero. We could start to negotiate FTAS immediately. Just because we fail to secure a trade deal with the EU before next March does not mean that we can never secure such a deal.
Indeed, we could put the EU “at the front of the queue” for trade deals. We would be able to conduct these negotiations without the pressures emanating from the ticking clock imposed, arbitrarily and ridiculously, under the Lisbon Treaty. Of course, trading under WTO rules would still leave the much dreaded “trade
‘Umpteen countries around the world sell huge amounts into the EU without being Single Market members’
frictions” and possible delays at the border as we lose the supposedly huge advantages of Single Market membership. But these frictions have been massively overblown by the UK establishment. WTO rules oblige members (including the EU) to facilitate frictionless trade.
John Mills, the Eurosceptic economist and Labour donor, has come up with estimates of border costs that are a fraction of the official ones. His view is especially worth noting because, unlike the civil servants behind the official view, he runs his own very successful business importing large amounts of consumer goods. I know whose estimates I believe. Some critics will say that this is all very well for finished goods but not for the businesses that operate complex supply chains.
To listen to them you would think that these only operate within the EU. In fact there are complex supply chains operating across the world, including many countries in Asia. They seem to manage without common currencies, single markets and all the other paraphernalia so beloved by the EU. Meanwhile, umpteen countries around the world sell huge amounts into the EU without being members of the Single Market.
How do they manage to overcome those pesky barriers, I wonder.
Whatever disruptions and difficulties may occur in the immediate aftermath of a full Brexit, this does not represent the final destination. Only when FTAS are in place with a broad swathe of countries, including the US, will we be able to see the full impact.
The argument that we must accept the Chequers fudge just does not add up. Who do they think they are kidding – us or themselves? “There are none so blind as those who will not see.”