Brexit

Brexit: why no deal is really a good deal

BY Gavin Rice   /  11 September 2018

“Brexit means Brexit”. That much-maligned, oft-ridiculed soundbite, for many the very embodiment of modern political message-control gobbledegook, was in fact both a PR masterstroke and a highly substantive commitment made by Theresa May. Far from being tautologous, uttered by a Sphynx-like leader intent on being all things to all voters, Theresa May’s most famous slogan provided a punchy headline for what was a fairly clear statement of political direction. At her first conference in October 2016 May, at the encouragement of her former chief of staff and head policy wizard Nick Timothy, committed her government to three things which, as the clock runs out for a final agreement on Britain’s future relationship with the EU, she would do well to remember.

First, the prime minister stated publicly that Britain would not be moving to membership of the EEA, the status endured by the people of Norway, nor would we be imitating Switzerland’s startlingly complicated web of arrangements (which, incidentally, does not include free movement – though this has been declared illegal by Luxembourg).

Any deal, she said, would have to grant Britain a much greater degree of sovereignty over trade policy, including the freedom to set our own customs regulations and trade tariffs, than any such ‘soft Brexit’ fudge. Nick Boles, a Remain-backing Tory MP and opponent of the prime minister’s current Chequers plan, has recently campaigned for EEA as a stepping-stone (or, more likely, a delaying tactic) towards a final deal. This plan would run the risk of simply parking Britain in a never-ending, worst-of-all-worlds limbo where we would remain indefinitely, especially if Jeremy Corbyn ever enters No. 10.

Secondly, May, showing rare political nous, declared that ending free movement was a red line. Although Lord Ashcroft’s Report on voting motivations in the referendum showed immigration to be only the second most important issue for Leave voters (after sovereignty), the prime minister knew that if after a clear victory on the largest turnout in British political history she betrayed the electorate on immigration, trust in British democracy would be utterly broken, along with her own credibility as a leader and a deliverer of Brexit.

Finally, startling incredulous Eurocrats in Brussels, May immediately committed herself to ending the jurisdiction of the European Court of Justice, the court which repeatedly interfered with and overruled UK courts, many of whose most important legal cases concerned the expansion of its own power – when it wasn’t trampling on the rights of British fishermen.

All of these principles were reaffirmed with crystal clarity at May’s famous Lancaster House speech. The prime minister went even further, specifically ruling out British membership of the Single Market and the customs union. She was right to do so.

It’s frequently (and disingenuously) claimed by Remain dogmatists that the vote to leave did not imply a ‘hard Brexit’ because specific alternatives were not mentioned on the ballot card, and that the government therefore did not have the mandate to interpret the result as a call for full independence. This is dishonest nonsense. It would have been impossible to run a multi-option campaign on an issue already plagued by mind-bending technicalities and complications, and on which it was already a struggle for the Electoral Commission to agree on a question that was both simple and fair.

Are Remainers really saying that because of the complexity of the issue there should never have been a vote? General elections are complicated – with enormous and detailed manifestos that nobody reads published by every party. Are we really saying that those elections are unfair, too?

It’s completely reasonable to draw the inference from the vote to Leave that this meant leaving the Single Market and customs union too. Politicians from all sides made this clear during the campaign, and Vote Leave made trade independence a crucial component of their “Take back control” campaign message.

What’s more, Single Market membership (and, depending on how intransigent Brussels chooses to be, customs union membership) would necessitate a surrender on free movement. Stemming the tide of uncontrolled mass immigration that followed the EU expansions of 2004 and 2007 and implementing a rational, independent border policy was a key promise made by both Leave. EU and Vote Leave (the unofficial and official Leave campaigns), and it’s simply unthinkable that leave voters would be satisfied with any final deal that didn’t achieve this goal. Since the main benefits of Brexit cannot be achieved while remaining in these structures, it’s both politically pointless and anti-democratic to argue that we should stick with them.

So what about the loathed Chequers plan? In short, it would commit the UK to most of the rules and regulations of the customs union – and possibly some slightly watered-down version of free movement – while leaving us unable to strike free trade agreements (FTAs) with other countries. Initially blasted by Michel Barnier, the EU’s chief negotiator, his now-softened position still only sees Chequers as a “useful basis” for a deal, meaning he is sure to insist on further concessions. To Brexiteers, it represents a surrender on the very freedoms Brexit was meant to restore.  Not only does the Chequers plan please almost no-one, there is no way that the parliamentary arithmetic would allow it to pass in the necessary “meaningful vote” on the deal. Members of Rees-Mogg’s European Research Group (ERG) are poised to shoot down anything that commits the UK to a “common rulebook” with the EU on goods and services, while Labour seems hell-bent on rejecting any deal put before the House.

By insisting on pursuing the Chequers plan – a plan in which May’s front bench are the only team playing and the stadium is empty – the government is actually making No Deal more likely. This is completely unnecessary, since both Barnier and the head of the European Council, Donald Tusk, have indicated their happiness to pursue a more limited free trade agreement like that enjoyed by Canada, but it’s becoming increasingly the most likely outcome.

What will ‘No Deal’ mean? The phrase itself is misleading. Doom-mongers howl about Britain “crashing out”, a “No Deal cliff-edge” and a “Brexit catastrophe”. We shouldn’t be taken in by such alarmism. In fact, a group called Economists for Free Trade have this week published a paper outlining the huge advantages for both businesses and consumers that a No Deal scenario could bring.

If Britain leaves the EU without a bespoke arrangement it will continue to trade under World Trade Organisation rules. This means that it will be able to set its own tariffs and customs regulations – they’ll be set by the WTO at first, but the UK could unilaterally adjust them one at a time as it pleases. It’s an established economic fact that removing trade barriers – even if your partner nations don’t reciprocate – has a beneficial effect overall, boosting competition and lowering prices on key goods for UK consumers. Even if the EU slapped its draconian Common Customs Tariff on British exporters in an unnecessary act of spite, the UK government would not need to reciprocate. Only exporters to the EU, not importers, would be affected; given that the EU sells more to us than we do to them, the effect of this trade barrier would not be catastrophic by any means.

What’s more, all the recent evidence suggests that the UK economy, far from entering a post-Brexit apocalypse, is actually doing rather well. Unemployment is at a 43-year low, income inequality is at a 30-year low, the Treasury’s forecast of a 6% fall in GDP proved a phantasm, and exports – yes, exports – have grown by 12% since June 2017, without almost all of this growth accounted for by countries outside the EU. That is to say, the impact of us leaving the EU on this trade activity will be – to coin a phrase beloved of Boris Johnson – diddly squat.

There is one last elephant in the room. In 2017 exports of goods and services to the EU accounted for just 13.4% of the British economy – the vast majority of our GDP comes from goods and services made, supplied and purchased here in the UK. While not insignificant, the amount of EU trade is in fact very small considering the media’s hyperbolic rhetoric about post-Brexit Armageddon. In any case, are Remainers really saying that this 13.4% of the economy will simply cease to exist? Of course not – the worst case scenario is that some British produce becomes subject to customs checks and the Common Customs Tariff. Is this really the end of the world, given the new deals the UK will make in the long run?

According to the EU Commission itself, over the next 10-15 years 90% of world growth will come from outside Europe. Trading on WTO terms would grant Britain the freedom to seek preferential deals with the USA, Canada, Mexico, India, and emerging markets in the Far East – the places where the world is actually growing. The process would be speeded up since the EU already has negotiations on the go with many of these nations so much of the gritty paperwork will already be done.

Should Britain really pass up the opportunity to become a global player in a world in which the centre of economic gravity is shifting eastwards, simply to satisfy the alarmists in the Guardian newspaper and a small band of critics in Parliament? The head of the WTO himself said that No Deal would not be the “end of the world”; initial turbulence would be overcome once agreements start being signed and the markets get used to the new reality.

The answer is clear. If Britain moves to trade with the EU under WTO rules, like every other normal country in the world, we would be free to control our borders, set our own rules and seek preferential agreements with the parts of the world showing dynamism and innovation – including the countries in the Anglosphere that share our language and traditions. After that, if the EU is so inclined, we could strike a Canada-style free trade agreement that preserves our economic freedom without the pressure of the timetable to which we’ve been tied as a result of Article 50.

Since May took office both she and her officials have stuck to the line that “No deal is better than a bad deal” – they should remember that principle now.