It’s time to aim for Canada-plus. And if that fails, WTO terms it is
Chequers is dead. But even if we can’t get a trade deal, leaving without one would be far from disastrous
It’s pretty clear now that a consensus has emerged that Theresa May’s Chequers deal went too far. The UK was offering too many concessions – in the shape of a Common Rulebook, subservience to the European Court of Justice and a glorified customs union in all but name. Conservative party members don’t want it, Leave voters don’t want it and the British people don’t want it. Even Remainers like Justine Greening are now openly dismissive of the Prime Minister’s plans. Polls such as the one in yesterday’s Telegraph show that Chequers presents an existential threat to the electoral prospects of the party. Eight in 10 voters don’t believe the Tories are handling Brexit well – and that rating has fallen off a cliff since Chequers. Downing Street’s facile “It’s Chequers or no Brexit” is rightly seen as risible and simplistic.
So now, surely, it’s time for a rethink. There’s still time to rescue the ambitious and eminently negotiable Canada-plus free-trade agreement, which was Government policy until not much more than two months ago. My hunch is that this will eventually be the basis of our future trading relationship with the European Union. Both Donald Tusk and Michel Barnier have been explicit that such a comprehensive accord covering goods and services can be achieved.
It’s nothing short of scandalous that, for want of technical solutions and political commitment (now even being demonstrated by the Irish Taoiseach), our own Government has allowed the Northern Ireland border issue to become a boulder in the road to such a deal by virtue of Mrs May’s obduracy and poor advice from her Europe adviser. But until we can call the EU’S bluff and force them to build a hard border – something we have vowed never to do and which they won’t – we are at an impasse, and so must plan for other scenarios.
The EU should be certain that we have, and will exercise, other options. That is why the Brexit Secretary, Dominic Raab, is right to focus on planning for “no deal”. What would that mean? That the deal would become a World Trade Organisation deal, a clearly available and better alternative to the humiliating Chequers surrender.
Leaving on WTO terms does not mean we do nothing else: it means that we accelerate our trade deals with the United States, our accession to the Trans-pacific Partnership and our direct negotiations with the key countries with whom we have free-trade agreements through the EU (in particular Switzerland, South Korea, the Efta countries, Mexico and Canada). Indeed, our growth in existing trade under WTO rules is more spectacular with countries outside the EU than inside it. In 2017, for the ninth year in a row, UK exports to the EU were massively outstripped by those to countries outside it.
The WTO rules are the foundation of open trading systems between nations: it is the goal of the WTO to reduce trade barriers, not to impose them. Our existing trade with countries with whom we don’t have preferential trading arrangements is underpinned by WTO rules and a network of mutual recognition agreements that we could and should replicate. There is no reason why other countries who want to trade with us won’t want to do this. Businesses across the EU will hope to protect their existing market share of sales and see them grow, so they will still be doing their best to sell to us at as competitive a price against the rest of the world as their costs allow, especially with the prospect of a US trade war and punitive tariffs being levied by the Trump administration.
Fears about shortages of food or medicines, meanwhile, aren’t founded in an unwillingness by EU businesses to trade with us. Nor are they about an inability to trade, or any trade boycott. Such fears focus largely on potential difficulties in taking goods through customs, and are invariably based on worst-case, often illogical scenarios. We know, for instance, that border crossings between Turkey and Bulgaria – one of the busiest trade borders in the world – can be seamless, with very low friction, because the recording and inspection of goods does not have to be done at the border. The use of mutual standards recognition aids this process.
We would also probably choose to unilaterally recognise EU regulations and standards in order to ensure that products land on shelves in a timely fashion. If the EU chooses not to reciprocate, it would damage its own businesses. And anyway, why would there be a shortage of avocados, lettuces or orange juice from the EU when we already import avocados from Israel, lettuces from Jordan – and, were it not for the EU’S punitive tariffs on orange juice (20 per cent), we could import such produce from Australia?
A bad deal with the EU – such as the Chequers deal – is one that extorts a high price for trading with its members, forces us to be under the jurisdiction of the European courts and opens our borders to unrestricted movement of EU citizens. When other countries, such as Japan and Canada, have trade deals that require none of those conditions, why should the UK – the EU’S largest export market – tolerate such conditions?
WTO would allow us to take in skilled workers from India, New Zealand or the United States. We would be able to set our own tariffs, reducing many of them to encourage greater trade and economic growth and help poorer developing countries trade their way out of poverty. We would be able to accelerate trade agreements with markets that matter to us, and improve our own regulatory system. By preventing us from doing these things, the Chequers deal imposes a high cost on UK consumers – one that is frankly not worth paying.
For all that, Canada-plus is still in play. Despite their bombastic and tin-earred rhetoric over the last year or so, Messrs Tusk and Barnier have finally signalled a safe haven for our beleaguered premier. It’s a small landing strip and the weather is bad, but it’s the only flight path left if she wants to avoid defenestration and civil war in her party. Otherwise, WTO planning should reign supreme.
As Mr Barnier has often said: time is running out. It was never so true.
Stewart Jackson is former chief of staff to David Davis and was MP for Peterborough between 2005 and 2017