Too many politicians pay lip service to Brexit while doing their best not to implement itby / May 24, 2018 / Leave a comment
The Brexit negotiations are clearly in difficulties. A process which started out with reasonably clear objectives has become increasingly compromised. Remainers may not have been happy with the outcome of the 2016 European Union referendum, but at least it seemed reasonably clear where the result was leading. As laid out by the prime minister, we would leave the customs union and the single market and we would negotiate a free trade deal broadly along the lines of the existing Canadian model, hopefully with rather more on services than the EU agreement with Canada provides.
This is a deal which the EU27 would very probably have accepted. Arrangements of this kind would clearly have satisfied Leavers. With tariff-free trade and as much co-operation as possible—albeit on an intergovernmental basis rather than as a full member—on all other matters of common interest between the UK and the EU27, this outcome could well have assuaged most of the fears of Remainers.
At least we would then have saved ourselves from paying a very large net sum of money into the EU coffers every year. We would have regained control over our borders and our laws. We would have been able to disentangle ourselves from the common agricultural and common fisheries policies. We would have been able to negotiate trade treaties with whomever we wanted. These are important gains.
Instead, we are in danger of drifting into a much less satisfactory position where we are formally outside the EU but effectively bound into it—with all the disadvantages of membership still in place but with the UK having no say in the decisions the EU takes about its future—and all because of fears about trade which look remarkably insubstantial on close examination.
UK firms don’t have to be in the single market to trade with EU27 companies. Whether they do this successfully or not depends on whether they are competitive. The additional costs involved in operating on a free trade rather than free movement basis are small—something like 1 per cent at most. This is an insignificant cost increase compared with recent movements in the exchange rate, which has risen some 15 per cent since its low point following the 2016 referendum. Even if we had no free trade deal with the EU, WTO tariffs on goods between the UK and the EU27 would only average about 2.5 per cent. This is why it is so unlikely that trade between the UK and the EU27 will collapse, whatever the Brexit outcome. Why should it?
So where does this leave us? The reality is that the unwillingness of a large majority in the House of Lords and only a marginally smaller one in the House of Commons fully to accept the result of the 2016 referendum has left the country negotiating with the EU27 without conviction and coherence. The danger is that we finish up with a rotten and unstable political deal—worse than either being in the EU or fully outside it. In consequence, our relations with the EU will continue to be unsettled, dominating UK politics, with all the baleful and damaging divisions that this entails.
So where will we be when we finally know what the arrangements between the UK and the EU27 are going to be? In trading terms, whatever the outcome, not much will change. UK and EU27 companies will continue buying from, and selling to each other. What will be different, if we are not careful, is that the fifth or sixth largest economy in the world will have lost control of the management of much of its commercial and economic policy to foreign interests with no great sympathy for the UK or its needs.
And we have got into this position largely because too many members of our political elite, while paying lip service to the result of the 2016 referendum, have done their best to ensure that it is not implemented in the spirit which the vote implied. The big danger is that this produces both a very poor outcome to the Brexit negotiations, and an ever-widening measure of distrust between our politicians and electorate. Parliament should never have promised to abide by the result of the referendum, voted by a large majority to implement Article 50, and got itself elected in 2016 very largely on manifestos promising to implement Brexit, if its members didn’t really mean what they said.