Brexit talks must reflect the simple fact that Britain does not need the EU

Brexit is becoming an increasingly unhappy experience for Theresa May. First the European Commission rebuffed her strategy. Then the Brexiteers seized the chance to hammer their message that she was anyway conceding too much. And now, a cleaner alternative—a formal free trade agreement with the European Union, such as the agreement recently completed with Canada—is reportedly being proposed by the Brexit advocates in cabinet.

This was predictable. In retrospect, it is clear that 10 Downing Street and those arguing for some sort of semi-EU withdrawal, did not devote enough time to understanding how the European Commission functions. Or more to the point, does not.

This was amply illustrated in the 100-page document tabled by the prime minister after the Chequers cabinet meeting convened to decide upon the UK’s negotiating strategy. That document was a policy melange. It comprised a rambling set of assertions from a variety of ministries, some entirely irrelevant.

Most astonishing was the complete disregard of the technically-sound analyses prepared in the Brexit department. David Davis, who marshalled a competent and informed set of officials to set out a game plan, was not consulted on the 100-page document. He resigned on the spot. The rest is history with Boris Johnson resigning as well.

The key problem for Downing Street is that it does not know how to negotiate with the EU. What must first be appreciated is that the EU has a dismal record of over-regulation as well as a nearly congenital incapacity to meet deadlines. It is now a decade behind in finalising accession to the EU of former Eastern Bloc economies.

The prime minister came away angry from her recent official meeting with the EU. She had expected a reasoned discussion. Instead the position was a predictably pompous “take it or leave it.” Obduracy is one of the few regulatory skills in Brussels.

One must presume the PM’s advisors assumed the EU was capable of negotiating with the UK. But two things should have been clear. First, there are deep divisions among EU members. And with such ructions, let alone the difficulty of securing agreement on any matter of importance among 28 governments, Brussels has a remarkable record of failing to complete major policy changes. There is only one way for the UK to manage this. Declare a position and threaten to walk away if Brussels does not cooperate. The UK has the money and has set out what it is willing to pay. It is a decent offer.

The debate over Brexit has occasioned a number of misleading assertions, prime among them is that the UK will be worse of economically. There is no basis for that, the contrary is the case.

Tariffs on goods are generally low. In today’s world growth is driven by investment and opening markets for services. The EU was supposed to have opened its services markets. It hasn’t. The UK and the US are the world’s biggest traders in this respect.

Freeing itself from the EU will enable the UK to negotiate trade agreements to open services and reduce barriers to investment. There are new markets among Asian Pacific economies which know they need to liberalise services and investment. And their growth is faster than the EU’s.

Capacity to negotiate trade agreements which open those markets will produce very significant growth opportunities for the UK. But you cannot do this until you properly separate from the EU.

Alan Oxley is a former Australian Trade Ambassador to the GATT (the predecessor to the WTO), principal of ITS Global, an advisor to the IEA on trade policy and analyst of trends in the Asian Pacific Economic Cooperation (APEC) group