Britain must choose: capitulate, or fight for free trade
Summer fever has taken hold of the Brexit movement. Wishful thinking is endemic. Those who deplore the Chequers plan are clutching at straws in a search of painless alternatives. The bitter truth is that Britain has only two viable options. It can accept a neo-colonial arrangement as a ruletaker in the customs union and the single market, under the sway of Euro-judges. This is where the Chequers plan will end up. Or it can rearm (politically) and prepare to fight its way out of the EU with no illusions.
One straw is that the EU will politely co-operate with Britain if it opts for a WTO regime in seven months time. Another is that the Norway option can be weaponised to outflank the EU – to “sod off Michel Barnier” in the words of one Spectator warrior.
Both notions rest on the charming assumption that the EU abides by international law. It is naive British faith that Brussels will respect our rights as a WTO member, or our legacy claims as a contracting party to the European Economic Area.
The EU has already stated in its Article 50 notices on Brexit that it will not in fact respect international law. It has flagged a punishment strategy to be activated if the UK attempts to break free – partially or fully – from the EU’S political and regulatory orbit.
Professor David Collins, from City University, has created a stir with two pieces – for Brexitcentral and for the Spectator – arguing that alarmist predictions of lorry queues and trade mayhem on Brexit day are legally absurd. Britain will have exactly the same law and regulations as the EU. It therefore may not lawfully impose a battery of new rules and barriers.
“There is no way that the EU could get away with placing additional arbitrary restrictions on goods imported from the UK after Brexit. New UK-EU non-tariff barriers would be illegal under WTO rules immediately after exit, even in a no-deal scenario,” he wrote.
Prof Collins is right about the law. But he is wrong to suppose that the EU cares a damn about such niceties, or that WTO courts offer meaningful protection.
In the case of Brexit, the EU’S “notice to stakeholders” states that it will not abide by WTO principles. The document on cars, for example, says that the EU will not recognise UK standards on the morning of March 30 2019. It will put up regulatory barriers.
This breaches the WTO ethos in another fundamental way: it denies the UK the same “mutual recognition” secured by other trading partners, and is therefore illegal discriminatory behaviour. It is little use arguing that Britain would win an appeal case. We are in a knife-fight.
People react differently to this type of intimidation. Judging by the wolf pack attack against Prof Collins, there is a fatalistic view among the UK trade fraternity that Brussels would flout WTO law – ie, will behave like an international thug – and therefore that Britain should “get real” and give up any hope of self government.
They do not have much sense of history, or democratic Fingerspitzengefühl. The sort of settlement they have in mind cannot possibly endure. The UK would be a colonial outpost in an imperial system, without a Council veto or votes in the European Parliament, with even less ability to counter Brussels than today. Such a state of affairs would guarantee future conflict. It would probably blow up within five years, leading to an outcome even less palatable to hard Remainers.
The parallel delusion is sudden interest among hard Brexiteers for the Norwegian EEA model. This idea of a temporary safe harbour was plausible two years ago. Given what we now know about Commission strategy, it no longer makes any sense for Brexiteers. The EU would threaten to block the final withdrawal agreement unless Britain remained in the customs union as well, exploiting the neuralgic issue of the Irish border in exactly the same way as it is doing now. And with the customs union, the trap closes. We would no longer be able to negotiate trade deals.
The cold reality for Brexiteers is that if they do not like Chequers, they must fight. Shanker Singham, a former WTO negotiator at the Institute of Economic Affairs, says nothing can be achieved as long a Britain clings to the EU’S regulatory structure and the perennial acquis. “We’re prevented from doing
‘Nobody wants to talk to us. The moment Chequers came out we ceased to be of any relevance to the US’
any deals until we have clearly taken the customs union and the single market off the table.
“Nobody wants to talk to us. The moment Chequers came out we ceased to be of any relevance to the US,” he said.
The Government has done almost nothing to prepare for a WTO fallback plan in the hostile circumstances of illegal EU sabotage, what old colonels might call an “opposed amphibious landing”. It should start immediately, and on a massive scale.
It’s too late to fashion customs infrastructure for normal WTO trade. Our only choice is to tear down all tariff barriers on March 30 and opt for unilateral free trade, with some tariff protection and rural support for farmers. It could be done with a built-in reversion to tariffs after two years. This would preserve the UK’S negotiating leverage for trade deals with both the EU and the rest of the world.
An emergency fiscal fund of 4pc to 5pc of GDP – up to £100bn – should be pre-funded to cushion the shock for vulnerable sectors. “Shovel-ready” infrastructure projects should be lined up and ready to go. The Treasury should be standing by with a blast of stimulus.
If these steps were taken, Britain might hope to avoid a bad recession in the crucial first phase, unlike exposed parts of the eurozone where EMU fiscal rules ensure paralysis. The visible asymmetry would be sobering for Brussels.
The EU would come under colossal pressure from its own business lobbies to save Airbus, chunks of the car industry, and supply chains, and to safeguard their £90bn trade surplus in Britain. It might then request a free-trade deal with Britain under normal terms of “mutual recognition” without colonial demands. But we should not count on it.
The current appeasement government is incapable of pursuing any such policy. Theresa May’s coterie is frozen with fear and captured by status quo interests. It must be swept aside, and quickly.
It is now obvious that the Tory base has lost confidence in the party leadership. This is untenable. The 1922 Committee must bring this crisis to a head and allow a vote. The rush of events has suddenly restored the fortunes of Boris Johnson. If it be him, so be it.