The WTO option could yet be better value than a costly negotiated Brexit
From the very beginning of the Brexit negotiations with the EU, the UK Government has placed a millstone around its neck by adopting a flawed measure of success. This has been a monumental mistake. The definition adopted has been the achievement of a free trade arrangement (so called “access” to the Single Market and Customs Union) when the measure of success of Brexit was not this at all.
The only meaningful measure, based on the proposition put forward at the referendum, is that we should take back control of our borders, laws and money – and that we should, if possible, be better off economically out of, than we otherwise would have been in, the EU. This has nothing to do with an FTA and can be achieved entirely independently of a deal. The PM allowed herself to become a hostage of the “nay sayers”, perhaps because her instincts were then those of a Remainer, whatever her view is now.
As a consequence we are seeing the culmination of a negotiating strategy conducted by the Government which seems to have taken an inevitable path, a path defined not just since the Florence speech but in fact from the very formation of the post-referendum administration. Albeit predictable, this course has been so utterly defeatist, bad for Britain and most tragically of all, unnecessary. All that being the case, however foreseeable, it has been difficult to countenance it would actually unfold in the way it has, the constant hope being, in the words of Baldrick of Blackadder, that the Government had a cunning plan.
Unfortunately, if there were a cunning plan it was worthy of Baldrick. After all, who in their right minds would pursue a deal that delays leaving the EU by at least two years (and some in Parliament and beyond would have it forever), have the “triumph” of extracting Britain from any say in EU affairs, take all the rules and pay a huge fee in taxpayers’ money for the privilege? It could only be worse if we then agreed to allow the ECJ to have continuing jurisdiction and restrict our freedoms to act for example in respect of tax, regulation, tariffs, fisheries and CAP reforms. Baldrick would truly have gone forth to gain an inch of territory at enormous loss.
The tragedy is that it need not be so. It has been reported that a sum as large as £55 billion has been offered by the UK. Even if this is not true, it serves as a warning to the negotiators that this is not Monopoly money. For example, £55 billion would be enough to “compensate” UK business for all the industrial tariffs the EU could apply, every year, for almost the next fourteen years. Not that business needs compensating in order to prosper in exports to the EU, since most of the world exports to the EU without being members of the EU, the Single Market or the Customs Union and without having a Free Trade Arrangement. And UK business is now enjoying a competitive currency valuation such as to far more than compensate for any tariffs the EU might apply.
By contrast, if we were to simply adopt WTO rules of trade and gradually remove external tariffs, starting with food, clothing, footwear and industrial components, our economy would boom. We could also deploy the unconscionable expenditure of taxpayers’ money instead to boosting the economy further through business and personal tax cuts and meaningful investment in infrastructure, housing and R&D, as opposed to the tokenism presented in the Autumn Budget. All these good things also constitute the building blocks of improved productivity, particularly if coupled with investment in training and reduction in the supply of cheap labour from the EU.
At last the CBI and the other business groups would have to stop bleating on about the productivity puzzle and would have no excuse but to invest their own cash piles in productivity improvement. After all, British business has been under-investing by comparison with Germany by about half, every year since 1870.
I have some (little) sympathy with the government. They have been grappling with a fifth column in Parliament, in Whitehall (particularly the Treasury), and in the business community – the unholy alliance of a self-interested CBI and TUC. In respect of this latter two, I can understand why narrow self-interest would dictate the status quo – least disruption, security of knowing what you have and a deep and justifiable distrust of government’s capability and capacity to deliver. But the failure of big business to back the national interest, in stark contrast to their German counterparts who have backed their government’s hard line to the hilt (even including the many German-owned multinationals in the CBI and the EEF), will go down in history as a great betrayal of the British people.
When the eventual settlement with the EU becomes clear, a much bigger question than the sum paid will be: what we are getting for it? Even a sum of £55 billion, which is justifiably causing outrage, represents just five years of net contribution to the EU had we stayed in, which itself demonstrates the profligacy of the EU and how right we are to leave.
While the progress to date has been conducted with all the imagination of trench warfare, the possibility of a good FTA and the preservation of our constitutional and economic freedoms may, looking back, I suspect, make it appear a relatively small price to pay.
However, if we are faced with anything less than a swift resolution of these freedoms, we must walk away and adopt WTO rules of trade while there is still time to plan. The Government must take back control of the timescale. It is bad enough to pay huge sums of taxpayers’ money when there is a better alternative to be had (WTO), but to do this and give up any of our newly-won freedoms would be an act of national betrayal and this Government would go down in history as one of the worst and no doubt the electorate would punish them mightily.
Of course, there is still time to adopt the better course. Have a cunning plan. Pay a little for our obligations. Abandon a blanket transition except in extremisfor specific technical issues. Focus talks on open skies, customs arrangements, access to finance, visa and residency rights. Stop trying to pursue an FTA of marginal benefit and instead declare for WTO. Crystallise the economic benefits of Brexit and massively boost the economy and the living standards of the British people. Promise this now, in order to give certainty and confidence to business. Leave in March 2019.
Put Britain first, develop a backbone, have courage, show leadership and be rewarded at the ballot box.
November 29th, 2017: BrexitCentral