Post-Maastricht Euroscepticism

Many on the Leave side, like me, find European economic integration acceptable, but oppose political union. This notion that the ‘common market’ is good but ‘political union’ bad is historical, forming a prominent part of post-Maastricht Eurosceptic philosophy.

The Maastricht Treaty was the catalyst for the modern Eurosceptic movement, and Brexit arguably its inevitable outcome. With the inclusion of justice and home affairs, a common foreign and security policy, monetary union and the social chapter, it was a major advancement of political union. Since then, the “invisible hand” of the EU’s power has incrementally increased its influence on national political institutions law by law, taking great leaps forward through major treaties.

Creating a Single Market

In truth, increased British Euroscepticism can be traced to the Single European Act, signed in 1986 under the Thatcher government, and which set an objective of establishing a Single Market by December 1992. In practise, this meant a transformative shock treatment and wholesale replacement of UK technical regulation to conform to the European standard and complete the internal market.

By signing the Maastricht Treaty, the Major government made the conscious decision not to phase integration in but to push it through all at once. This was an economically harsh approach, with small businesses having to bear the brunt of the costs of transitioning to the new regime – if indeed it was financially viable.

This bitter pill also flagged a major change in the way this country was governed. Take the UK Weights and Measures Acts 1985, implemented to comply with the EU directive 80/181/EEC which was designed to harmonise weights of measure in the Single Market. Resentment of this legislation is notorious and even members of the public understood it as an imposition by the EU. It’s easy to understand why many dislike pettifogging rules enforced by jobsworth officials.

Nonetheless, like Thatcher’s other major economic reforms, the upheaval was a matter of short term pain for long term gain. ‘Advantages’, Thatcher said in her 1993 memoir The Downing Street Years, ‘will indeed flow from that achievement well into the future.’

However, what’s done is done. Young people simply do not care about the ‘metric martyrs’ – it is all ancient history. The nostalgia for the old ways of regulatory independence is as pointless as calling for the re-opening of the coal mines.

The modern age of globalisation

With the benefit of hindsight, we can see that this regulatory revolution was an inevitable outcome of the modern phase of globalisation. There is now a vast economic system of technocracy characterised by standards produced by international regulatory bodies designed to facilitate trade and drive regulatory cooperation on a global scale. This is system of collective decision-making, consultation and debate, with various actors sharing their research and technical expertise to reach consensuses.

Even when it repatriates its trade policy, the UK will have to participate in these global trade and regulatory bodies which produce standards covering just about every product and sector you can think of. It will soon find itself having to reach compromises, negotiate and build alliances to get what it wants. It cannot act unilaterally if it wants to reap the benefits of the global trading system and it will not always get its own way.  

With all this in mind, cutting our economic ties with the EU seems pointless as well as detrimental and reckless. Does it matter that our regulations, many of which will derive from global standards or EU regulation, have a “made in Britain” sticker slapped on them? There is no escaping the regulatory influence of the EU and there is no escaping the necessity of complying with global standards.

Common market good?

“Common market good, political union bad” is a rational and pragmatic form of euroscepticism that acknowledges the benefits of economic integration. It’s effectively a guaranteed opt-out of ‘ever closer union’, creating a looser association between the UK and the EU.

Its proponents didn’t used to be so isolated. In 2012, one prominent Brexiteer said this:

‘I believe that the best way forward is for Britain to renegotiate a new relationship with the European Union – one based on an economic partnership involving a customs union and a single market in goods and services.’

This was Liam Fox, the international trade secretary, who used to call for us to ‘go back to a common market’, but now rejects that idea and this week said that a Customs Union amounts to a ‘betrayal’. Owen Paterson used to be an ardent supporter of the ‘EEA option’ and here he is arguing that we can enjoy the economic benefits of the market and continue political cooperation while still leaving the EU.

Eurosceptic organisations have been misleadingly ambiguous when it comes to articulating proposals for trade arrangements. Vote Leave, for instance, has declined to endorse any specific Brexit scenario. When pressed, they commit to the idea that Brexit should mean leaving the Single Market. However, they avoid confronting the realities and complications of this by pushing the duplicitous line that there is a ‘free trade zone that stretches from Iceland to Turkey’ of which Britain would remain a part. This disingenuous campaign tactic effectively allowed them to say the UK would leave the Single Market while remaining in it – the first sign of the ‘have your cake and eat it’ strategy.

Since the referendum, Leavers in parliament have become increasingly radicalised and argue that economic integration is not only disadvantageous to the UK, but effectively a betrayal of the referendum result. In a complete turnaround from years of Eurosceptic tradition, they now argue that the whole idea of a ‘common market’ is akin to EU membership. This means that Single Market membership or anything close to it is unacceptable. Apparently, it is a betrayal to have common product standards to facilitate trade.

Seemingly, they are blind to the fact that trade is facilitated by regulatory convergence and this is the main objective of all trade agreements to one degree or another. There are, of course, different levels of convergence but it makes sense to align closely with your most important trade partners. Hence why Canada aligns with the US.

Regulatory divergence is the key to Brexit success, according to Boris, Fox et al, but there is a fundamental contradiction at the heart of their Brexit vision. Conservative Brexiteers are champions of free trade; they think open markets and free trade boost our economy and bring tangible benefits to British consumers. Accordingly, they want an independent trade strategy to pursue these aims and take advantage of Britain’s global links and historical relationships.

However, the contradiction is that a necessary pre-requisite to their position is a significant downgrade of our trading relationship with the EU. They champion the CETA+ option, but cannot seem to accept that this means greatly increased trade barriers with the EU. There is cognitive dissonance in play here; to be pro-free trade is surely to support the closest possible trading relationship with our most important partners. Instead, they are vehemently opposed to the existing framework for trade with the EU, a regional trade agreement that has gone further than any other in abolishing barriers to trade in goods and services.

When pressed, the benefits they argue this will bring is a deeper trade agreement with the US. In his pitiful ‘road to Brexit’ speech, Johnson claimed Britain could begin to promote its esteemed ‘organic carrots’. But British businesses and every credible trade wonk agree that the potential benefits of divergence are outweighed by the divergence costs. The Brexiteers in government are full of the joys of opportunity, but totally cloth-eared in response to the warnings being issued from every British industry.

Leading us down a cul de sac

Impervious to facts and devoid of credible ideas, the leaders of the Eurosceptic movement led us down a dead end, rejecting viable solutions that would have prevented the crisis we are in. The onus was thus on the Eurosceptic parliamentarians to offer voters alternative ideas. On this they have failed, their ideas have lacked detail and have proved unworkable.

They said we can ‘simply’ (a favourite word of the Eurosceptic old guard) leave without a deal and trade on World Trade Organisation terms ‘like the rest of the world does’ (note, no developed country trades under WTO rules alone). For some reason, despite all the evidence, they have convinced themselves that this means reverting to a swashbuckling, freewheeling world of nineteenth-century free trade.

What it actually means is that trade with the EU would be severely disrupted with the establishment of a myriad of tariff and non-tariff barriers between Europe and Britain. This should be anathema to advocates of free trade. A kamikaze Brexit is a potential economic and political disaster not a great opportunity to be embraced.

Now they champion CETA+, but have no answer to the fact that this will create a high friction trade relationship with Europe – not to mention the question of resolving the issue of the Irish border. The Canada option is not enough and having tied the Prime Minister’s hands, the government has fewer options with which to dig us out of our weak position. We may well end up with the worst of all worlds.

The back-stop solution is a trap

The government has already pledged that there will be no hard border in Ireland and has agreed to a ‘backstop’ solution should no alternative be found. The backstop is a ‘Trojan Horse’ Customs Union which prevents a hard border in Ireland by creating a ‘common regulatory area’ that includes key parts of the single market.

Its scope — while not including services or other aspects of EU integration — is wide and means following EU legislation on goods, agriculture, environment, value added tax, state aid and energy market rules. All of this will be under the ever-watchful eye of EU judges, as the commission legal draft notes: “In particular, the Court of Justice of the European Union shall have jurisdiction”.

Unless we want Northern Ireland to separate from the rest of the country this will have to apply to the whole UK. In essence, this means we would be partial members of the Single Market but without any representation, and trapped in a bad, inflexible agreement completely skewed in favour towards the EU. Unless we change course, this is our destination.

A deep and special partnership

Meanwhile, EEA members have harmonised regulation as well as establishing and maintaining robust institutions to manage their ability to make the rules. They have also signed a range of trade agreements with non-EU countries to expand commercial opportunities and increase their competitiveness. A close economic relationship with looser political ties is the best of both worlds – and a superior position to the backstop trap we may well fall into if the government doesn’t change direction.

Despite the Lord’s rebellion, however, I doubt that the EEA option is a realistic possibility for several reasons; from free movement of people being political anathema to voters, to the engrained perception that EEA-membership is a form of EU vassalage.

However, an agreement which involves deep economic integration managed by robust joint institutions that is more EEA than CETA is possible and should be pursued.

Such a partnership can be achieved by bundling agreements on trade, investment, security and political cooperation into an overarching Association Agreement, managed by a robust institutional framework consisting of a joint Anglo-Euro court, committees and a market surveillance authority. This would create a far deeper trade relationship than is possible in a basic FTA and include wide-ranging cooperation across various fields.  

As part of the Association Agreement the UK and EU would begin in a state of full regulatory alignment, effectively creating a UK-EU free trade area and allowing for far greater market access than an FTA. There would be potential for regulatory divergence, but this would be monitored, carefully managed and would come with penalties to market access.

It must also include a preferential and liberal EU migration policy to reflect the close economic partnership, participation in some EU programmes and agencies and some form of payment into the system in exchange for this cooperation (it doesn’t come for free).

A new system for trade and cooperation between the UK and the EU. Economic integration, a strong alliance with wide ranging cooperation, while putting an end to political union. This close association could lead to a constructive and mutually beneficial relationship between the two sides and finally lay to rest a longstanding cause of domestic political unrest in the UK.

If this is where we end up, it would be a truly successful Brexit.