So, we finally come back to the starting point, back to square one. Parliament now faces the very same choice that the electorate faced when they placed a cross on a voting paper nearly three years ago, way back in 2016: Leave or Remain.
There is nowhere for MPs left to hide. All prevarications, deviations and diversions have failed: a second referendum comprehensively defeated; a Norway 2.0 type deal, EFTA membership and a customs union all thrown out; every attempt to derail Brexit decisively rejected. Also rejected is a no-deal departure. Bit by bit, Brexit has been stripped back to its bare bones much like a tree stripped of its branches and its bark right down to its core, its fundamental element; Brexit stripped to its beautiful simplicity: Leave or Remain.
The attempt by Speaker Bercow to prevent the Government bringing a ‘substantially same’ deal back to the Commons will make little difference. It is not the big spanner in the works that many Remainers hope it is; it will only delay a third meaningful vote to within a day or two from the default departure date which will only bring the stark choice facing MPs sharply into focus.
Theresa May’s deal may or may not be the disaster that the European Research Group say it is, but it remains the only vehicle through which the UK could leave the EU on or soon after 29th March. A delay beyond 30th June would be a betrayal for it makes no Brexit the only possible outcome. The option of voting against the deal because it’s not good enough is a kamikaze option: it serves no purpose other than keeping some MPs’ hands clean and their conscience pure.
The argument that being so close to 29th March, and that rejecting May’s deal at a third meaningful vote will leave no time for the necessary primary legislation to prevent the UK leaving without a deal, is far-fetched and reckless. In normal times, such restraints may prove effective; but we are not living in normal times. Given the will, and there is indeed a strong will among MPs, to stop a no-deal Brexit, Parliament will conjure up special emergency procedures to ensure the UK will not leave without a deal and the Speaker of the House will be more than willing to help.
A glimpse of a rethink was detected when Jacob Rees-Mogg asked the Attorney General if a different Parliament could unilaterally withdraw from the Withdrawal Agreement. The reply was clear and unequivocal, a sovereign nation can unilaterally withdraw from a treaty if it no longer meets its national interest. Other eminent lawyers may disagree as lawyers invariably do, but what is not in doubt is that untrammelled powers are bestowed upon countries once they become sovereign. This may be the start of a softening of the ERG’s approach to the deal. An all-or-nothing stance is the strategy of the desperate and the defeated. But the British people are neither desperate nor defeated. They know this deal is not so much an end but a start, a new start for Britain. What is done today can be undone tomorrow and what we agree to today can be changed tomorrow as the balance of forces tilts in our favour once we are out of the EU.
Sovereignty will bring to an end the chess game we’ve been engaged in with the EU and with all the pieces back into place, we’ll embark on a new match. The electorate has been steadfast in its determination to leave the EU, and so must their representatives in Parliament, especially those who campaigned to Leave and those who were the official leaders of the Leave campaign. They must make certain that the result of the referendum is honoured and that the UK leaves the EU.
The support of the DUP is important but no decisive. More decisive is the attitude of Labour, for the deal will not pass the Commons without support from Labour. Labour has as much responsibility as the Tories to facilitate Brexit, both its individual MPs and the party leadership – and Jeremy Corbyn has the greatest responsibility of all.
So far, Corbyn has managed to ensure that when it mattered, Labour did nothing to derail Brexit. No doubt an amendment promoting an alternative basis for a deal with the EU and another calling for an affirmative public vote on May’s deal if Parliament were to agree it will be put forward. But once these amendments are defeated – as they are bound to be – Labour will have to consider its attitude towards the deal itself, the only deal on the table. It is at that point that the Labour leadership must assert its authority, stand by its promise to respect the result of the EU referendum and ensure it goes through; there is no other honourable position for the Labour Party to take if it is to keep faith with its supporters and the country at large. Enough Labour MPs, whipped or otherwise, will support it or abstain to ensure its safe passage.
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As the dust settles after another hugely important couple of nights in Westminster, there are some who have sadly sought to issue recriminations about those Brexit-supporting MPs – most of 75 Conservatives and the 10 DUP MPs – who did not support the Withdrawal Agreement on Tuesday.
I am one of those MPs, and I think it’s really important to make something clear. The proposed Withdrawal Agreement that has twice been put before Parliament (and twice rejected by historic margins) is not merely a ‘bad deal’, it is simply not Brexit.
I don’t think many in Westminster are more passionate about delivering Brexit than I am. But Brexit meant one thing above all others: taking back control. The deal that was on offer to us on Tuesday – with its wholly unnecessary ‘Backstop’ – was not, even on the most generous reading, ‘taking back control’.
It would have handed Brussels 100% control of our trade and customs policy and precluded the UK’s right to sign trade deals with the rest of the world. Worse, when the EU signed a trade agreement with another country (for example, China), we would have been compelled to make all the concessions agreed to by the EU, but China would only have needed to offer its concessions to the EU 27, not to the UK. In other words, we would have become the EU’s expendable bargaining chip in negotiations.
Meanwhile, the Agreement would have stripped Northern Ireland of the ability to control and decide its own constitutional status – a right enshrined in the Good Friday Agreement. Northern Ireland would have been treated separately to the rest of the UK, and become a rule-taker in areas such as goods, agricultural products and VAT. As confirmed by HMRC, this regulatory divergence would have required the introduction of paperwork for those who wanted to trade between Northern Ireland and the rest of the UK. This went against express promises made by the Government that such a thing would never happen.
To top it all, the UK would have been unable to leave this humiliating state of affairs without the EU’s permission – a situation completely unprecedented in international law. Far from taking back control, the Agreement would have diminished our country to a state of unending ‘vassalage’. This was the bottom line of the Attorney General’s damning legal advice – an opinion echoed by many prominent international lawyers, including Professor Phillipe Sands, Martin Howe QC, and Lord Anderson QC.
It was surprising, therefore, to hear the accusation that those of us repudiating such an agreement were ‘risking losing Brexit altogether’, and will somehow be held responsible if the Government, Parliament and EU subsequently conspired to keep us in the EU.
We need to be crystal clear: the only people who would be responsible for ‘no Brexit’ would be those who vote to take no deal off the table, or to extend – for no good reason – Article 50. The vast majority of Parliament voted to trigger Article 50 in full knowledge of its significance: that we would – in both domestic and international law – be leaving the EU on 29 March 2019 with or without a deal. They also stood of manifestos reiterating the same promise.
If some individuals now regret those decisions, so be it – but they ought to look the electorate in the eye and admit that, rather than hunting around for Brexiteers onto whom to deflect the blame. As the final acts of this drama unfold, I will vote for a good deal, if one can be secured, for the Malthouse Compromise, if this can be delivered, and if needs be for leaving without a deal. But I will not let down my conscience, my constituents or my country by voting for a deal that doesn’t deliver Brexit at all.
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There is a strand of thinking right now that Brexiteers should plump for May’s Deal regardless of whatever escape clause paperwork might yet come back in Geoffrey Cox’s suitcase. The premise carries a fundamental flaw.
Let’s leave to one side the range of problems that are left in the Withdrawal Agreement even if the Irish/Northern Irish backstop is fixed. The infamous £39 billion. The surrender of assets, except the stuff that’s radioactive. The complete loss of control over fisheries management, risking the prospect of a ‘final clear out sale’. The locking of the UK into the ECHR, despite previous Conservative pledges to develop human rights law domestically (as Australia, New Zealand, and Canada somehow manage to do).
Or for that matter, the worrying issue of the ‘Rioters’ Clause’, Article 18 of the backstop. This trip wire allows the Commission to suspend any part of the deal where the UK or Northern Ireland gain a competitive advantage. It also operates as the one area where the UK could unilaterally pull out of the backstop, but only if there is mass civil unrest – a fate which the clause itself correspondingly increases over time. Alarmingly, it remains off the general radar.
Let’s assume that we have resolved to abandon these issues and others beside, write them off and put faith in what may prove to be a legal post-it. What then? I would suggest we ought to pay more thought right now to the prospects of delivery. Without this, going for a WTO plus bilaterals, including the Contingency Measures that the Commission and individual member states have already signed up to, would make more sense.
At some point the UK will seek to move away from the backstop. The objective will be to seek a fresh trading arrangement, one that accommodates the EU’s genuine need to ensure that products enter the EU market that are compliant with EU rules – and, it should be added though it rarely is, applies conversely as well in the interests of the UK consumer. Let’s not forget after all that tasty Findus horse lasagne. But the incentive will be for the negotiators to deliver something convenient and easy, closer to the model of a customs and regulatory union applied to all of the UK rather than just to those exporting.
Frankly, the events of the last couple of years should demonstrate that Brexiteers cannot afford to put blind faith in their negotiators, current or potential. Even if the backstop is magically delivered, the delivery of a meaningful Brexit itself remains at high risk. One is left reflecting on whether, had the UK model and approach been copied in Riga and Tallinn in 1991, the Baltic States would today still be part of Russia.
It would be grossly unjust to sweepingly place everyone in the civil service on the same charge sheet. There are many inspiring, professional, bright, competent and visionary people amongst its ranks. But the toll of forty years of membership of the EU system has, inevitably, had an impact on the general systemic psychology of Whitehall. George Eustice’s resignation letter contained a notable statement that DEFRA “more than any other government department, has embraced the opportunities posed by our exit from the EU.” My own experience over the years has shown very mixed levels of open-mindedness towards EU matters across departments, with officials dealing with Fisheries indeed proving rather more keen to address core treaty failings than counterparts for instance in the Foreign Office (no doubt because they were the ones always left holding the wrong end of the policy toilet brush).
Caveats noted, one cannot though ignore the issue of core affiliation amongst top management. Tony Connelly, in his book Brexit and Ireland, recalled the first conflab of the leading civil servants of both countries after the referendum; “‘It’s fair to say that on the other side, most of the people in the room wouldn’t have been happy with the [Brexit] situation,’ recalls one Irish secretary general. ‘So there was a degree of remorse and regret on their side, and equally on our side.’” I can well believe it: I have a letter beside me from as far back as 1998, from an official in the European Union Department of the FCO stating that “we should not ignore or deny the benefits which the European Union brings and which are too often downplayed.”
The same discussion with the Irish “involved a lot of talk” about the UK potentially wanting to stay in the Customs Union. The detail should also alert us to the wider and perennial risk of what happens with civil servants left devoid of clear direction or firm grip: the prospect of dropping policy on ministers’ laps if they don’t work it out themselves. And sometimes even if they do: I recall one former minister at the Home Office telling of a particular policy that he had been presented with, which on asking around with predecessors turned out to be something they had binned but which mandarins had pushed quietly, and repeatedly, back on the agenda for their successors.
We might also consider the proven back history to policy drift involving two of the four negotiating pillars in play, on Justice and Home Affairs and on Defence. The ratio of the Danes using their opt outs in JHA compared to us runs to around 17:1, and they have even walked away from Europol while still EU members. By contrast, when the ECJ was given direct competence over JHA matters under the Stockholm Process, the UK Government signed straight back up to a third of the agreements despite open and vocal backbench Conservative opposition. Meanwhile, as Veterans for Britain has documented, MoD policy towards signing up to, signing off, or sidling away from EU Defence initiatives can only be described as haphazard and, one suspects, dependent on which minister is in the chair on the day. None of this bodes well for guaranteeing a robust and truly intergovernmental form of end deal.
I do not wish to exaggerate the extent to which our form of government is run as a Technocratic Synarchy; a number of political diaries over the years suggest this is determined by the character and resolution of a given minister. What this ought to alert us to, however, is the risk arising from running a process of negotiation around a Political Declaration that remains as ill-defined as Mr Messy, and which senior Commission negotiator Stefaan De Rynck recently acknowledged could deliver an end set of terms that ranged anywhere from an FTA to a combo Customs Union and Regulatory Union.
If one does accept the Transitional Agreement as the route, delivering a final deal that honours the Brexit vote will depend entirely on the quality of leadership and management operating within the Cabinet Office, and even then it runs at very great risk, because of the nature of the task that is being undertaken. One is taken back to the Westwell Report, that reflected upon the limits of the civil service in Margaret Thatcher’s day;
“The Civil Service is a much more formidable obstacle to national recovery than the trades unions. It is difficult for 90 Ministers and a handful of advisers to shape history, in the face of three or four thousand senior civil servants who see it as their job to defend the status quo”
Or again to Norman Straus’s Number 10 Policy Unit paper back in 1981, reflecting on the formation of the top echelons;
“Their lifetime in the Civil Service, and the qualities of obedience, caution, don’t make trouble, observe precedent, which got them to the top are the definitive disqualifications for being able to reform the systems and handle a period of turbulent national change.”
This is before we even get into the matter of delivering clearly enunciated policy that has been unanimously agreed. For an example, I invite you to reflect on the perfectly obscure yet enlightening example set out in Appendix L of the third volume of Churchill’s war memoirs. This relates over a couple of pages how an instruction reached at Cabinet level simply to deliver two tanks to Egypt went badly awry owing to a train of administrative circumstances, including a deceased brigadier, a dinner conversation, a distracted NCO, and an absence of grease. Churchill excuses the anecdote by saying, “I print these details to show how difficult it is to get things done even with much power, realised need, and willing helpers.”
No doubt due and wider balance will be restored across Whitehall simply with the passage of time, the advantage of hindsight, and the operation of fresh recruiting, training and promotions, though it will take some years to percolate into the cadre levitating into the Lords. But for the moment, our current administrative climate is not the best environment to be blindly entrusting people with delivering on referendum pledges. How much more so when you have a poorly-silhouetted exit door, and you aren’t even yet sure the key fits?
Michel Barnier hinted at it on Friday night, but the Irish delegation told me straight in Brussels on Thursday: they will never agree a subsequent agreement or variation to the Withdrawal Agreement which replaces the backstop that is not a customs union. Whether that is for the whole UK, or Northern Ireland on its own with a full customs border in the Irish Sea, is up to us, according to Barnier. As Patsy in Absolutely Fabulous might have said: “Cheers. Thanks a lot”.
From our International Trade Select Committee meetings in Brussels last week, in particular with the UK and Irish delegations, a crystal clear picture emerged of where we are in the negotiations and what lies ahead if Parliament is so foolish as to approve the Government’s capitulation to the EU in the Withdrawal Agreement. It would absolutely not be taking back control of our money, borders and laws.
The only reason the EU would prefer the backstop to end is that it does not give them enough control. They want us to adopt all EU rules in social and employment law, for example, and to give them access to our fisheries – as well as placing our defence and security within the EU structures.
But no other agreement than a customs union will be granted to us by the EU, meaning they will also control our trading conditions and trading relations with third countries, both in terms of the levels of import tariffs we need to charge, which disadvantage our citizens and businesses, and access to other markets. And they could further encourage products for our market to be shipped through Rotterdam so that the EU either keeps the revenue from tariffs on our imports or gives third countries free access to UK markets without them having to offer it to us in return.
Moreover, the customs procedure required by the Withdrawal Agreement, for every single commercial consignment between Great Britain and the EU, and each one crossing a new internal border between Great Britain and Northern Ireland imposed under the backstop, was again admitted to be unworkable and needing to be changed because of its friction and inefficiency.
Not only does it create an obligation for antiquated “wet ink stamps” on physical certificates for 200 million consignments per annum to be provided and processed by UK customs officers and businesses, with much more cost and delay at and behind borders than the cheap and efficient normal electronic declaration procedures for customs; but it does not obviate the need for export and rule of origin declarations which proponents of a customs union wrongly think avoids them.
To cap it off, it was admitted that in order to make changes to this which the UK Government admits are necessary, the process that would have to be used would be a decision on any superseding law or regulation made by the Joint Committee, as established by the Withdrawal Agreement. Any change to these anti-trade measures would need – yes, you guessed it – the EU’s permission. That is in fact the permanent structure for our future relationship that is set up by the Withdrawal Agreement: a secretive decision-making body not subject to UK democratic scrutiny in which the EU has veto power and therefore full control.
I hesitate to use analogies when it comes to Brexit, as most are imperfect and inappropriate, but it seems to me that a decision to leave is not best implemented by giving power to a person who does not want you to leave, over conditions for your future interaction with them and others on a permanent basis. As we might advise someone in a somewhat coercive, controlling relationship, it is almost always best instead to make a clean break.
In this case we know that the groundwork has been put in place to manage a clean break in a way that is not damaging to either party. I am not someone who thinks the EU is a bad person, and this is evidence. A nine- to twelve-month transition has effectively been arranged by way of unilateral actions in respect of aviation, haulage permits, aerospace and vehicle certifications, agricultural product access, electricity interconnects, insurance recognition and a raft of other areas. And under the “Malthouse Compromise” proposals we would continue to offer constructive cooperation, money, citizens’ rights and zero tariff free trade. So there is in fact no such thing as “no deal” by not agreeing the dubious terms of the proposed Withdrawal Agreement.
There was a Commons majority for the Brady amendment requiring replacement of the backstop. The EU took offence that the Prime Minister whipped for it, perhaps realising that the terms she had been offered, some at her own ill-advised instigation, were unacceptable. But that is where the sustainable majority in the Commons is: for a normal, balanced relationship between parties who wish to be friends. So submissive and confused by the EU the Government may have been, that it failed to act on Parliament’s clear instruction to table Malthouse alternatives. However they are practical and available, not at all fanciful or futuristic (as some have tried to paint them) and do not “involve a significant number of derogations from EU law” as the Prime Minister perhaps mistakenly claimed.
Instead of this cycle of suspicion, aggression and talking past each other, the parties should seize the chance to talk about the practicalities in an informed and rational way so as to achieve a good negotiated agreement whether inside or outside the Article 50 notice period for leaving the EU. The “Malthouse Compromise” sets out a framework and coherent strategy to find mutual interest in which to get it done. We would be fools not to insist that this is the way forward rather than the inappropriate Withdrawal Agreement, which does not create a stable or satisfactory solution, notwithstanding that many have obviously put a lot of effort into trying to make that work, in both the UK and EU delegations.
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In the same way as a centre back, with his team 1-0 up at the dying seconds of a football match, concedes a corner to avoid the build-up of an attack, Theresa May agreed to a sequence of votes in mid-March that includes a vote on No Deal followed by a vote seeking to extend to Article 50 if the deal she brings back from Brussels is defeated.
On the other side of the House, Jeremy Corbyn had to concede some ground as well. He ’embraced’ a second popular vote with very scant details of what the options would be. No matter how this is spun by a fumbling People’s Vote campaign, his embrace is destined to suffocate not resuscitate. Even if Labour proposed such an amendment, and that’s highly unlikely, the chances of getting a majority of MPs supporting it is nil.
The threat of No Deal remains regardless of any vote to remove it; No Deal is the default condition of Article 50 and as the Prime Minister explained with impeccable logic, the only way that threat can be removed is to revoke Article 50, a route that only the likes of Chuka Umunna and Vince Cable would be prepared to entertain.
By setting up a panel of nine lawyers to examine what the Prime Minister comes back with is an indication that the ERG is willing to accept an addendum, a statement, a protocol rather than an actual change to the wording of Withdrawal Agreement. The insistence on legal guarantees that the backstop would be temporary or could be brought to an end is a posture that will have to be abandoned if Brexit is to become a reality. The prize of re-gaining sovereignty is far too precious to be held hostage for a few words in an agreement, an agreement that can be changed by mutual consent or unilaterally once we’ve left the EU. As to the question of why chain ourselves to something if we intend to break out of it soon after; it’s purely practical – this is the only path to Brexit.
In the next few days, Parliament will be faced with a stark choice: agree the deal the Prime Minister brings back or delay Brexit through an extension of Article 50, which is a euphemism for no Brexit. A no-deal outcome is not on the cards and Parliament will take whatever steps necessary to stop it. The idea that some legal niceties would prevent Parliament from doing so is fanciful. It will become clear to any Brexit-supporting MP – or MP with a Leave-backing constituency who does not wish to alienate their electorate – that the Withdrawal Agreement is the only mechanism by which the UK can leave the EU on 29th March.
Those who argue that the Withdrawal Agreement is ‘Brexit In Name Only’ should reflect on the fact that Brexit is a single binary act, much like a divorce; there is no such thing as divorce in name only, even if the divorcees keep a very close relationship afterwards. Neither is the Withdrawal Agreement a ‘Brexit deal’ as it is often portrayed. Rather, it is a post-Brexit deal; it lays out what our relationship with the EU may look like after we’ve left, a relationship that we are at liberty to shape the way we wish once we are out of the EU. Similarly, there is no such thing as a Tory Brexit or a Labour Brexit or for that matter a People’s Brexit. As important as the Withdrawal Agreement is, it’s secondary to the actual act of leaving, an act which immediately restores our sovereignty and changes our relationship with the EU from being a subservient member to an independent counterpart.
Regardless of how the ERG or the DUP decide to vote on the Withdrawal Agreement next week, Theresa May will need Labour support. With workers’ rights and environmental protection guaranteed by Theresa May as far as any Prime Minister can, bearing in mind that no Parliament can bind a future one, the difference between Labour’s current policy of a ‘customs union and close alliance with the single market’ and those of May’s ‘dynamic alignment’ and ‘level playing field’ is minuscule. For Labour, there is very little in the Withdrawal Agreement to object to unless your intention is to derail Brexit altogether. Indeed, if Labour’s customs union was to be road-tested through rigorous negotiations with the EU, it would fall apart as it collides head on with Labour’s policy of economic regeneration through state aid and public ownership and control of key utilities.
Whatever the official line is, enough Labour MPs will either vote for or abstain when the Withdrawal Agreement comes back to Parliament – enough to ensure its safe passage through Parliament, if not at the first time of asking, then certainly on the second. That has nothing to do with the Government’s £1.6bn Stronger Towns Fund meant to heal some of the wounds of those areas that felt left behind. The driving force has always been and remains that of workers who demand that their vote to leave the EU is respected and acted upon.
Hemmed in by vitriolic attacks from within and an orchestrated onslaught from without, Jeremy Corbyn has to tread carefully as we approach the end game. The Labour leadership knows of its responsibility to deliver Brexit on the specified date: theirs is not a late nor convenient conversion to a cause but a lifelong belief, a belief not motivated by a fear of a backlash from working class communities, but a genuine opposition to what the EU stands for.
A free vote for Labour MPs has been floated. For a national party to have no policy on the most important issue facing the country since the Second World War, for that’s what a free vote means, would be an abdication of responsibility that would reflect badly on it in the future. Better for Labour to whip MPs to abstain, explain that this is the only way to enact Brexit on the agreed date and vow to re-negotiate the Withdrawal Agreement when in power.
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One way to assess the value of the Customs Union to the UK is to track the trajectory of our principal export sectors over time. Since 1998, the UK’s fastest growing major goods exports (globally) have been pharmaceuticals, transport equipment and motor vehicles — in that order. None owe their commercial success to the Customs Union. Pharmaceuticals are almost free of global tariffs and so are aerospace products, which contribute 92% to the UK’s transport equipment exports.
Meanwhile the UK’s motor vehicle exports to EU peaked in 2007; the UK’s outstanding growth in the vehicles sector is powered purely by global enthusiasm for British motors.
But any meaningful analysis of the impact of the Customs Union has to place UK sectors into proportion – which means ranking them according to two-way trade. Here, there are two easy winners. UK–EU trade in motor vehicles is easily the country’s biggest, worth £67.5 bn in 2017. Next comes trade in food products and agriculture, worth £39.8 bn.
As the leading sectors in UK–EU trade, these pair have three things in common: they enjoy the highest levels of protection of any manufacturing sector in terms of the EU’s external tariffs; they generate the UK’s biggest EU deficits (£28 bn and £19 bn, respectively), and they are both represented by industry bodies that want the UK to maintain seamless trade with the EU.
First, cars. Using a three-year average at the start and end of this period and adjusting for inflation, UK motor-vehicle exports to EU have managed only fractional growth in 20 years: just 0.4% per year since 1998, or 6.7% over the entire two decades. Unnervingly, that growth is concentrated in the first half of the 20-year period. Adjusting for inflation, the value of average exports for 2008‒2017 (£15.03 bn, in 2015 prices) was lower than 1998‒2007 (£15.92 bn). This means by some measures, motor vehicles exports to EU are falling. Zero tariffs; zero market barriers; zero growth.
But here’s the problem: since 1998, imports from the EU have motored along nicely, growing at 3.6% per year. The result is a gigantic £28 billion deficit just in motor vehicles and parts — almost sufficient to write off the UK’s entire surplus in its trade in services.
Meanwhile, in the non-frictionless, non-seamless, non-Customs Union world of non-EU trade, UK exports have leapt ahead by a staggering 7.9% per year. Virtually all of the UK’s growth in motor-vehicle exports since 1998 is attributable to selling premium models to countries outside the EU: principally China and the US, but also ultra-high-end luxury models to the Middle East. The result is that despite being worth just a third of EU exports in 1998, exports to non-EU countries zipped past EU exports in 2012 and are now worth substantially more — £25.3 bn to £19.6 bn in 2017.
And thanks to the iron laws of mathematics, this difference will now accelerate away.
So, for the UK’s most-valuable trading sector, the Customs Union has operated as a one-way street. EU-based car-makers have retained a vice-like grip on the UK’s most-valuable import market with an 83.8% share that has dropped only fractionally since 1998. But there’s no reciprocity. Instead, UK auto manufacturing has relied for growth on global markets, with the result that the EU’s share of UK exports has plummet from 73.5% in 1998 to 44.7% in 2017.
Incidentally, this is easily the fastest switch-around of any major UK export sector, in the sense of exports switching from EU to non-EU countries since 1998. What’s more, the prominence of North America and China as markets for the UK’s premium marques implies that the proportion of the UK’s global motor exports already conducted on WTO terms probably exceeds the 73% average for UK goods.
Thus, the net effect of the Customs Union since 1998 has not been to create a springboard for UK manufacturing into continental Europe. Instead, it has placed a springboard in continental Europe, for overseas car manufacturers to ramp up their exports into the UK. Net investment has drifted from the UK to elsewhere in EU, and the growth in the UK’s auto deficit from £8.1 bn in 1998 to £28 billion deficit in 2017 is the living, haemorrhaging proof of it.
In employment terms, that springboard has bounced, very roughly, the equivalent of 40,000 jobs straight into continental Europe (This calculation is approximate. The UK’s trade deficit with the EU has widened by £17.32 billion (in 2015 prices) from 1998 to 2017. In the US, NBC estimates that wages contribute 10-15% of the cost of the average motor vehicle, and the average salary of a UK car worker, according to Auto Express, is £39,000. Using the lower figure, gives a value equivalent of 44,410 jobs. ).
The lethal aspect to this trend, however, is the way it is now edging into the UK’s premium sector – the power-house of the UK’s non-EU export growth since 1998. Jaguar‒Land Rover has now inaugurated production of its I-Pace and E-Pace models at Magna-Steyr in Graz, Austria, while BMW produces its second-generation Countryman models at VDL Nedcar in the Netherlands. Tellingly, the UK job losses announced by Jaguar-Land Rover in January 2019 followed the opening of a new £1 bn factory at Nitra, Slovakia, an investment decision that predates the UK’s 2016 referendum, and was part-induced by €125 million of EU-approved Slovak state aid.
Thus, for the UK’s biggest traded sector, the theoretical benefits of the UK’s membership of the Customs Union have failed to translate into measurable benefit. The protection of a 9–10% external tariff has not stimulated demand for UK-made vehicles and parts among EU customers over the past 20 years. Nor yet have the supposed obstacles of trading on WTO terms held back British motors from tripling sales (in real terms) since 1998.
The only observable impact of Customs Union membership has been to preserve the UK as a highly lucrative captive market for EU producers, with an 83% share of motoring imports.
Food for thought
Trade isn’t just exports, though. The equally vital role of trade is to secure for UK consumers the best quality goods at the lowest price. And if there’s one sector where this matters more than any other, it’s the UK’s second-biggest EU trade sector: food and agriculture.
At 0.7% of GDP, the UK’s agricultural sector is easily the smallest per head of any major economy in Europe. The UK is, perforce, a massive importer of food and agriculture products — currently to the tune of £42.9 billion per year. And so, even for non-free-traders, this is one area of trade where the interests of UK consumers easily outstrip the interests of UK producers.
Consequently, the UK’s strategic interest should be uncomplicated: to enable UK citizens to buy the cheapest and the best-quality food available on global markets. Yet this is precisely what the Customs Union prevents. By imposing ultra-high tariffs on non-EU food and quotas on imports, the EU forces UK consumers to purchase food from EU producers, who just happen to be the highest-cost food-producers on the planet.
But here’s the kicker: thanks to the Customs Union, the UK’s forced dependency on high-cost food is actually rising (Tab 8, Food, in UK’s Top 10 Sectors). Back in 1998, the EU supplied 67.8% of food products imported into the UK; this has now risen to 76.3%. The balance moderates slightly if you include agricultural produce (e.g. cereal) but agricultural produce is just 23% of the food that the UK imports. Add that to the mix and the UK’s reliance on EU for imports of all food-stuffs is still increasing, and stands at a 69.9%, totalling £30 billion in 2017.
Does this matter? Recent analysis from the Institute for Fiscal Studies by Peter Levell downplays the effect which the removal of tariffs would have on consumer prices, asserting the net effect on average households of the removal of all tariffs would be just 0.7% – 1.2%. The excellent analysis misses three factors, however: the effect of competition, the role of regulation, and the qualitative impact of changed spending habits – especially on less-well-off households.
First, the opening up of a protected or captive market to global prices would instantly stimulate competition, and competition would then become the dominant price-setting factor, not the old tariff differential. If overseas food producers bit straight into EU producers’ market share, EU producers would have to do reduce prices and become more efficient to retain market share (or gain fresh subsidies). There’s no telling how far price reduction would go but the dynamic of fresh competition for market share is the factor that would drive price reduction, not the original tariff advantage.
Second, some tariffs are particularly high, and their removal would disproportionately impact some households’ quality of life. As the IFS itself has itself pointed out, the least-well-off 20% of UK consumers spend more than 20% of their income on food. Imagine, then, the consequence of eliminating the effective 60% EU tariff on beef. Argentinian and Brazilian producers would charge into the UK market, and prices would quickly drop. But the effect would be qualitative. Families – and individuals, more to the point – would change spending habits and start eating high-quality beef, while paying less for the novelty. On them, the effect of tariff-free food would be immense.
Third, creating an open market in UK food stuffs wouldn’t simply be a matter of removing tariffs, but of reforming regulation to ensure it becomes non-discriminatory. And for consumers to benefit, a post-Brexit UK would also need to ensure compliance among trade partners. Analysts need only contemplate the effect – on consumers and UK car production – of the 2015 demise of the Land Rover Defender, when Jaguar Land Rover decided to comply with EU emissions regulations which other European car makers chose to flout. Without re-regulation, and compliance among trade partner, UK markets – especially food markets – will not become genuinely open, and value won’t flow to consumers.
In summary, a practical test of the utility of the Customs Union has to rest principally on the experience of motor vehicles, and food/agriculture. They are the UK’s two largest two-way sector trade with the EU and it’s where protective EU tariffs have the greatest trade-distorting impact.
In both cases, the trade data for 1998–2007 show the effect of the Customs Union is to retain or grow the UK as an essentially captive market, without reciprocal benefit to UK producers (in the case of cars) or UK consumers (in the case of food). And even from UK food producers’ perspective, exports of food products to markets outside the EU have grown faster than inside it (3.5% to 2.7%) despite the high tariffs and regulatory burdens common in trade in food. The rise in salmon sales to Korea following implementation of the 2011 FTA implies that the UK has much to gain from negotiating access to Asian markets – not just for fish, but also cheese and beverages.
I invite you to step through the experience of all the UK’s biggest trades by downloading the spreadsheet The UK’s Top 10 Sectors. The story described above repeats to a greater or lesser extent in each. The UK’s record inside the Customs Union is so unrelentingly poor that it begs a bigger question: do other countries fare any better? Is the UK’s experience just uniquely, inexplicably bad?
To answer that question, in a final instalment I will compare UK performance against other EU countries, non-EU exporters, the US’s and the Eurozone’s own growth rate.
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There’s a difference between what the Customs Union was supposed to achieve in theory and what it’s actually achieved in practice. Thanks to historical trade data published by the UK Office for National Statistics (ONS) in September 2018, we now know the difference is huge. By making multiple comparisons in UK, EU and non-EU trade since 1998, it’s possible to judge the UK’s record inside the Customs Union over the past 20 years, and assess the value of seamless, tariff-free trade with the EU in terms of what it’s actually achieved.
All my data is sourced from ONS September 2018 release unless otherwise stated and compiled in two spreadsheets: UK’s Top Ten Sectors, which analyses each principal UK traded sector in turn, from motor vehicles to beverages; and UK Trade in Goods & Services which directly compares UK’s trade in goods and services. Both cover the period 1998 to 2017 and I would encourage readers to download are inspect them.
Export Growth: 1998 to 2017
For a first-pass assessment of UK’s trade record in the Customs Union, divide all UK exports into four, roughly equal parts: exports of goods to the EU (worth £164 billion in 2017); exports of services to the EU (£117 billion); exports of goods to non-EU countries (£175 billion); and exports of services to non-EU countries (£162 billion). Now, using the historical trade data published by the ONS in September 2018, calculate the average yearly growth rate for each of these four categories from 1998 (or 1999 for the services data) to 2017 (the method used is to take a three-year average at the start and end of the time period, and then adjust for inflation using the ONS’ own import/export deflator).
The results are perverse. The UK’s slowest-growing export trade since 1998 is goods exports to the EU, which have grown by just 0.2% per year since 1998, or 3.7% over 20 years. Yet this is precisely the sector that is supposed to benefit from tariff-free trade within the Customs Union. And even 0.2% is misleading. Most growth occurred pre-2007; adjusting for inflation, average annual exports in 2008‒2017 were actually lower than 1998‒2007 (See Tab 3 in UK Trade in Goods & Services, Section 2, line 77. £144.7 bn as opposed to £145.6 bn in 2015 prices).
Conversely, the UK’s fastest growing exports are services exports outside the EU, unimpacted by either the Customs Union or Single Market regulation. At 5.6% per year over 20 years, these exports have grown so fast in the last 20 years, they are now worth almost as much as UK’s entire goods exports inside the Customs Union.
Next fastest is UK’s services exports to the EU, growing an impressive 5.2% per year. This sector is marginally impacted by the Single Market. A portion of financial services are impacted by EU regulation, although financial services exports contribute just under one-third, or 31% of UK services exports to EU. (Overall, just 11% of UK services exports are financial services exports to the EU – for a breakdown of UK’s services trade see Tab 2, UK Trade in Goods & Services).
Meanwhile UK’s goods exports to countries outside the EU countries – and outside the Customs Union – have grown at a crisp 3.3% per year since 1998. This sector is heavily influenced by the Single Market, whose rules apply to most goods made in UK, but they are conducted outside the Customs Union. And thanks to the trade-database research of Michael Burrage, It’s Quite OK to Walk Away, we can approximately calculate the proportion of UK’s non-EU exports that has been conducted on World Trade Organisation (WTO) terms.
Taking the year 2015, Burrage estimates that 6% of UK’s exports went countries with whom UK enjoys an EU-negotiated free trade agreement (FTA). Another 8% went to European Free Trade Agreement markets. This means, approximately 73% of UK’s exports to non-EU countries was conducted on WTO terms. Much of the rest (principally Switzerland) is with countries that impose near-negligible tariffs on non-food imports.
Consequently, the 3.3% per year growth rate achieved by UK’s non-EU goods exports is a strong and accurate reflection of UK companies’ ability to trade on WTO terms. Since 1998, UK businesses have proved more adept at growing markets outside the Customs Union than in it, despite the tariff and customs barriers they confront in most non-EU trade. Meanwhile, UK businesses have failed to grow markets inside the Customs Union, despite the fact that this trade with the EU is tariff free.
What’s to blame for this discrepancy – or more accurately, what’s not to blame – will be analysed in Part 3 of this analysis, when UK’s export growth is compared to Euro-area growth, intra-EU trade, UK productivity, and EU–US trade over the same period. But in a straightforward assessment of the value of the Customs Union to UK, the data are unforgiving: that part of UK exports that is governed by the Customs Union is easily UK’s worst performing.
The Customs Union: Qui Bono?
Not so with EU imports, however. Back in 1998, UK’s EU goods trade was roughly in balance, -£5.6 bn in current prices). But since then, imports from the EU have grown at a strapping 3.4% per year. The import sectors displaying the fastest growth are motor vehicles, (with imports growing 3.6% p.a., to reach £47.7 bn in 2017), food products (5.3% p.a., to £23.2 bn) and pharmaceuticals (7.3%p.a., to £22 bn), with this last import category showing especially rapid growth since 2011.
So, since 1998, the track record of the Customs Union has been to take a trade relationship that was trim and balanced and turn it into a £95 billion deficit, which is larger – per head – than the US trade deficit with China.
Here again, the ONS November-release trade data helps because we can see to what extent UK’s services trade with the EU will ever balance this equation out. And the answer is: it won’t.
Services exports to EU may be growing nicely (5.2% p.a., as opposed to services imports growth of 3.0% p.a.) but the £36 bn surplus it generates pays for just one-third of UK’s deficit in trade in goods. And since the difference between UK’s goods export‒import growth rate (3%) is wider than the difference in the UK’s services export‒import growth rate (2.2%) it never will – so long as UK maintains its current terms of trade with the EU.
The perverseness of UK’s EU-trade outcomes extends to the deficits UK incurs on those individual trade sectors most impacted by the Customs Union (See Tabs 2-11 of UK’s Top Ten Sectors. Data for each sector is presented in turn, in order of the total value of UK exports. Together, these top ten sectors contribute 80.9% of UK manufacturing exports, or 71.1% of UK goods exports). The UK’s two biggest two-way trade sectors with EU are motor vehicles (worth a combined £67.3 in 2017) and food & agriculture (£39.8 bn). These are also the two sectors where the EU’s common external tariff (CET) exerts the biggest impact on UK trade, and theoretically provides the greatest ‘protection’. Yet these are simultaneously the sectors where UK incurs its biggest deficits (See Tab 1, UK’s Top Ten Sectors. ‘Manufacturing’).
Both of these deficits have increased dramatically since 1998: by £19.2 bn (current prices) for motor vehicles, and £14.1 bn for food & agriculture. These deficits reflect a surge in imports from fellow Customs Union member states, for which no commensurate reciprocal gain or trade-off can be found in any other sector of UK’s goods trade. In other words, there is no trade-off within the Customs Union.
At this point in the analysis, it’s worth stepping through the 20-year trajectories of each of UK’s top ten goods-trade sectors to try to map supposed tariff-free advantage with actual outcome. What you find is either a sizeable and growing deficit: food products (-£14.4bn ); and beverages (-£2bn ); or stagnant growth plus a sizeable deficit: motor vehicles (0.4% p.a., -£28.bn); machinery (-0.1% p.a., -£7.2bn); chemicals (0.7% p.a., -£3.5 bn); computers and electronics (-5.8% p.a., -£11.3 bn); basic metals ( 1.% p.a., -£3.4 bn ); and electrical goods (-0.9% p.a., -£4.4 bn). Since we have now compassed 72% of UK’s goods exports, the obvious verdict is hard to swerve.
Damningly, the only two of UK’s top-ten EU traded sectors that have performed strongly since 1998 derive next-to-zero commercial advantage from the Customs Union. The UK’s second biggest export sector – transport equipment, which is 92% aerospace related (and therefore trades tariff-free) – has climbed a decent 2.7% per year. And UK’s pharmaceuticals exports (up 6.3% p.a. to EU, since 1998) gain minimal competitive advantage because major developed economies abolished tariffs on end-user pharmaceuticals during the Uruguay Round, which concluded in 1993.
So, on the basis of the UK’s own 20-year trade data, there is not one, single major sector of trade in which the Customs Union has delivered clear, demonstrable benefit to UK since 1998. Shown in aggregate, across all UK trade, the failure is stark. What’s troubling – for UK consumers, at least – is that the Customs Union appears to be turning the UK into a series of tightly controlled captive markets for EU producers. To see how, I shall in due course take a detailed look at the 20-year history of UK’s two biggest EU traded sectors — motor vehicles and food.
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In the EU referendum of 2016, 60% of Labour constituencies voted to Leave the European Union. However, in the last two years you would have thought the very opposite was true, whether this is because of the behaviour of Labour MPs or the Labour leadership’s inaction on Brexit.
More than failing its voters in constituencies which voted to Leave, Jeremy Corbyn and his lack of direction has, above all, failed the country as a whole by providing an ineffective opposition to Prime Minister, Theresa May, within Parliament.
Last week, the Labour leader betrayed millions of Labour voters, the country and his own well-documented eurosceptic beliefs by committing to a second referendum after his suggested Brexit deal was rejected by Parliament. This is nothing more than a partisan panic move to try and stop the wave of Labour MPs ready to jump ship from the party.
Corbyn has said this is just following party policy set at the Labour Party Conference last year – which, by the way, was attended by only 2.1% of members and 0.09% of Labour voters. So, for Corbyn to suggest this is ‘the will of Labour voters’ is simply untrue.
Since the EU referendum in June 2016, Labour has had more policies on Brexit than you can count on one hand, all the while attempting to prove they are both pro- and anti-Brexit. While this may be politically expedient in terms of preparing for the next general election, it has deprived the country of an effective Opposition.
This has escalated in the past fortnight following the resignations of nine Labour MPs, eight of whom have joined the so-called Independent Group – a group which consists of nothing but Remainers and second referendum campaigners. One of their major goals in leaving the Labour Party was to try to pressurise Jeremy Corbyn into backing a so-called ‘People’s Vote’ – a ploy which seems to have worked.
All those MPs are refusing to call by-elections, meaning that despite being elected on platforms to deliver Brexit, they are now betraying their voters by not doing what they were sent to Westminster to do. This is an abject betrayal of the trust placed in our elected representatives.
Brexit should not be an issue with which to play party political games. This should have been a real chance for MPs to come out of their entrenched positions of bickering with each other across the House.
Last month Jeremy Corbyn flip-flopped between repeatedly refusing to meet with Mrs May to discuss Brexit, to then sending her letters outlining Labour’s Brexit ‘position’ – if it is at all possible to call what he proposed a ‘position’. Included within his proposal was the need for the UK to stay in the Customs Union and the Single Market, both impossible if we are to deliver Brexit.
Corbyn has played political games, making Brexit a party political issue, knowing the Prime Minister has alread -, and rightly – ruled out his suggestions as they would mean the UK having to accept the EU’s freedom of movement rules, European Court of Justice jurisdiction, as well as sending vast sums of money to the EU every year.
Meanwhile, throughout this whole process the Prime Minister has put forward a damp squib vision for a global Brexit Britain. Labour had held no formal collective position – being led by Corbyn as a eurosceptic Labour Leader! Now, in the final weeks before Brexit Day, it appears the Labour Party has decided to betray their Leave-voting supporters.
They want to block attempts to pursue our global trading future with World Trade Organisation rules when we Leave the EU. Instead, Corbyn has bowed to pressure from a vocal minority in favour of cancelling Brexit, while ignoring the groundswell of Leave Labour voters in the North.
With Parliament in its current state of disarray, Labour had a real chance to stand up for working-class Labour Leave voters and demonstrate that their voices will be heard. Instead, they have capitulated to the minority of strident London-centric liberal Remainers in their party, chanting for another referendum vote – which was clearly ruled out in the Labour Party manifesto at the last general election. In doing so, Corbyn and Labour have shown no backbone or belief in their own opinions or support for those of their voters. The communities they have sworn to represent and stand for are once again being sold down the river.
Even when the Labour leadership has attempted to become involved with the Brexit process, they have been determined to undermine the UK negotiating position at every stage. At a recent press conference, the Government stated there must be compromise on the Northern Irish backstop by the EU and there are ‘set in stone red lines’ – such as leaving the Single Market.
Yet after the Prime Minister’s most recent trip to Brussels, the following day Corbyn travelled to Brussels to meet with EU negotiators with a delegation of his front bench, only to tell them and the press, that Labour would in effect capitulate to the EU’s demands. By playing these political games, the Labour Party continually undermines the talks and deliberately seeks division within the UK’s negotiating position. Brexit is about making this country a truly great global nation again and it should not be about scoring cheap political points.
Instead of a principled Opposition with a clear line of argument which could have pushed the Government into delivering a solid, true and clean Brexit, we have seen political deception, with the sole focus on trying to play the Great British Public for the fool. This has been followed by a Labour Leader betraying his own beliefs – all for a far-fetched idealistic dream of attempting to gain political power.
The decision to fall in behind the ‘Peoples Vote’ campaigners will come back to haunt the Labour leadership. We need to Get Britain Out of the EU as quickly as possible and make sure we deliver on the will of the British people for our global future – even if Labour Party MPs don’t seem to remember how their constituents voted in the EU referendum!
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The most likely effect of Jeremy Corbyn’s announcement that Labour will support some form of second referendum is to increase the probability that the UK leave the EU without a formal trade deal.
That so many Labour MPs have pledged to stick by their election pledge to honour the 2016 referendum means that a second referendum remains highly unlikely. And a good thing too given the serious damage it would do both to democracy and, due to the division and business uncertainty it would bring to the UK economy.
Corbyn’s U-turn will, however, cement the impression in the vital Leave-voting heartlands that Labour is a party of Remain. Just as importantly, it will stiffen the EU’s impression that they have no need to make a serious move on Theresa May’s demand that the unacceptable Northern Irish backstop be re-written. Why give any ground when so many of our parliamentarians and the official Opposition are stating openly that are prepared effectively to cancel Brexit on 29th March rather than allow the UK to leave without a trade deal?
It should go without saying that if the EU know we will not leave without a deal, then they have no incentive to change the backstop. And with no change to the backstop, the Withdrawal Agreement as it stands looks dead in the water.
Attention now is likely to switch to whether Theresa May will reverse her long-standing promise to leave the Customs Union with the aim of tempting enough Labour MPs to back a Withdrawal Agreement.
For some months, the Labour front bench has taken to endless repetition of the “permanent customs union” mantra as if this is some sort of magic key to unlocking the Brexit stalemate. In fact, nothing could be further from the truth. The real puzzle is why journalists (as well as Labour backbenchers) do not subject this flagship policy to more scrutiny. As as soon as you do, it becomes clear a permanent customs union does not solve the problems it is aimed at and creates even worse ones of its own.
The fundamental arguments against the EU’s Customs Union are well established: it works as a protectionist mechanism to protect large EU companies from overseas competition. Although many tariffs are low, this is not the case for significant sectors such as food, clothing, footwear and cars. As a result, prices for hard-pressed consumers are higher than they should be, companies have little incentive to invest in improving productivity (which in turn limits wage increases), whilst poorer countries can find they are effectively frozen out of EU markets limiting their ability to develop.
On those grounds alone, it’s odd that Labour MPs think this is going to be a vote-winning strategy, but that is only the start of it.
Being in the Customs Union after we have left the EU would leave us in the same situation as Turkey – having to accept whatever tariffs the EU decide on whilst having no say in trade negotiations. But, even worse, when the EU strikes a future new trade deal with another country, say India or Argentina, we would be bound to accept zero tariffs on imports from that country, but with no obligation on them to drop tariffs on UK exports.
It is sometimes suggested that the UK could keep a say in future trade policy, possibly through the EU and UK forming a new customs association going outside EU boundaries. If you believe that the EU would ever countenance such a proposal, perhaps I can introduce you to a friend of mine who has a splendid bridge for sale. No doubt, the EU would be happy to pledge to ‘consult’ with the UK on future trade deals and tariffs but we can safely rule any significant role in decision-taking and safely rule in the European Court of Justice having the final say on our trade laws.
Have John McDonnell and Jeremy Corbyn forgotten TTIP – the proposed US-EU trade which they hated by so much? By strong-arming the UK into a ‘permanent’ customs union with the EU, they would forfeit any power for a future Labour government to stop such proposals in the future.
Defenders of the customs union idea suggest that it will keep frictionless trade and solve the Northern Ireland border, but even that is not so. Getting rid of tariffs does not in itself solve the problem of border checks because nil tariff customs declarations must still be filed and sanitary/phytosanitary and other regulatory checks are required. Only by remaining within the Single Market at least for goods can checks on trade be avoided.
The catch is that the EU will not allow the UK to have partial membership of the Single Market for goods as they believe this will distort trade. Staying in the Single Market would mean accepting freedom of movement and continued payment to the EU, effectively staying in the EU in all but name – giving away our money and losing even more control over our laws. It’s hardly the slogan that will endear Leave-voters to either of the main parties.
In reality, being outside the Customs Union and the Single Market need not involve significant delays at the border. The vast majority of checks and tariff payments are already made electronically or away from the border. Actual border checks tend to focus on smuggling and other illegal activity and are highly targeted and intelligence-led.
As soon as you look beyond the headline, it becomes clear that committing to a permanent customs union is a policy without any serious merit, unless of course you want to nullify Brexit completely. So what should MPs who want to respect the referendum result but are worried about the impact of No Deal on their local industries be looking to achieve?
Well, in the first place, they should remember the advantages that a clean break on 29th March will bring. First, it would end the uncertainty for business far sooner than would any version of Theresa May’s Withdrawal Agreement under which our future trading relationship with the EU would remain unresolved for many years.
Further, the Government would regain the ability and the cash to help affected industries through the transition. On current trade patterns, even if full tariffs were charged, UK firms exporting to the EU would be the liable for about £5 billion whilst EU firms would find their exports to the UK liable to about £13 billion of tariffs. This is money which the Government can use to provide agricultural assistance, more targeted regional policy, R&D credits and even some transitional payments – measures that are all legal under WTO rules but only become possible once we have left the EU.
The UK would not only be free to agree FTAs with non-EU countries, we also would have the option of immediately reducing or even abolishing tariffs on imports, starting with goods for which there is little UK production. This would help both consumers and firms importing intermediate goods as part of their manufacturing process. Despite the relentless coverage given to firms who say they may leave the UK, a clean break on 29th March would actually encourage firms to set up or increase manufacturing capacity in the UK, thereby ensuring good access to the strategically important UK market. Indeed, this process is already happening, although it is rarely reported. Look, for example, at Medstrom announcing a new manufacturing facility in the East Midlands because of Brexit, whilst Nissan have started the process of trying to source more parts from the UK.
Finally, it is likely – once out of the EU and freed of the time pressures of Article 50 – that we would find it easier to negotiate a Free Trade Agreement with the EU. Then, the leverage would be on our side of the table.
There is a strong case to be made that, far from hitting the economy, leaving without a formal trade deal on 29th March will actually provide a net boost to UK business.
Perhaps most importantly, MPs need to realise that, in practice, ‘No Deal’ has already been taken off the table due to the large number of side deals that have already been agreed with the EU and other countries. These cover areas such as citizens’ rights, cross-border transport within the EU, mutual recognition on standards with the US, a number of financial services and continued free trade with important partners such as Switzerland.
Putting pressure on the Government to prepare properly and fully for 29th March should be the main focus for MPs of all parties.
A key step in that process should be to rule out once-and-for-all damaging policies such as another referendum, delaying Brexit or a permanent customs union. A clean break on 29th March is nothing to be afraid of; but only when the EU understands that the UK will be taking back control of its laws and trade policy, come what may, will there be a real prospect of achieving a Withdrawal Agreement that is acceptable to both sides.
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Lost amongst all the drama and excitement expressed in the coverage over the last fortnight of defections from Labour and the Conservatives to The Independent Group (TIG), has been the voice of British business.
The overwhelming majority of British businesses just want the Government to get on with delivering Brexit, and finally get back some certainty as to what rules are going to apply to them. But unless the Government is able to provide this certainty, investment decisions for this country will be held back until the picture becomes clearer. That makes all of us poorer.
For the Prime Minister to now give MPs the opportunity to frustrate our exit should cause every real business in the country real alarm. Achieving certainty, clarity and finality must be the priority.
This is why the Alliance of British Entrepreneurs is making the case for exiting the EU on WTO terms, rather than signing up to the Prime Minister’s Withdrawal Agreement with its dangerous backstop. We now have over 450 businesses who have signed up to publicly support our various campaigns against the prevailing myths about where business stands on the deal. Despite operating purely on word of mouth, we represent more businesses (from more sectors and regions) than the CBI or Number 10 have been able to generate in all their joint letters seeking to push Project Fear on the British people. This gives an indication of the level of anger and frustration amongst the business community about political dithering.
Unless the backstop is replaced, the deal won’t bring any sense of finality to Brexit. It will have the UK cascading through possible delays, possible extensions to implementation periods, possible participation in a customs union (via the backstop or otherwise) and possible reversal of the decision to leave, in its entirety, throughout the process. There will be no certainty about the direction of travel for the UK at any point ahead of the next general election in 2022, at least. That is not satisfactory for the British people or its business community.
The TIGger plan is even more troubling for business. To re-run the referendum and have a second vote now cannot be taken seriously as a suggestion for how to bring finality to the issue of our relationship with the EU. Even in the event of a Remain win (this time), there is little if any reason to believe that voters would buy that outcome as more legitimate than the result the first time round. Businesses don’t need more divisive debates. We need to move on, however hard that is for some to come to terms with at present.
The public seem to agree too. If you check out the polling when the public are asked about support for a second referendum, they have pretty consistently rejected it – it only gets supported where people aren’t sure whether that would be a referendum on Leave or Remain, or Leave or May’s Deal, or even all three. When those questions are asked instead, support for it falls away.
However, one thing the public are clear on is their desire for by-elections when MPs opt to resign from their manifesto commitments! Both Survation and YouGov ran polls last week, where a clear majority supported TIG MPs going back to their voters to see whether they agreed with their decision to defect. The polled support for this is far higher than has been achieved in any of the “People’s Vote” polls for supporting a second referendum.
The case for business certainty, and the ability to make long-term plans, would favour this too. If MPs want to walk away from their commitments – to honour the referendum and have the UK leave the EU – the people and the business community should be able to hold them accountable at the ballot box. Bizarrely, though, the TIGgers are arguing themselves that now is not the time for elections or by-elections – because of the uncertainty they think that would be thrown up by them! This while explicitly calling for a hugely divisive national plebiscite. The fact they can say this publicly without widespread ridicule shows we live in truly extraordinary times.
While all the attention last week was on the TIGgers, businesses are at least reassured to see other Members of Parliament, including one-time die-hard Remainers, reconciling with where we are, being prepared to do the hard work and make compromise across their party, including with those with whom they previously openly strongly disagreed. Sensible-minded business people are relieved to see MPs like Nicky Morgan embrace pragmatism, and genuinely act in the national interest. These MPs deserve our vocal support. They have accepted the result and are now seeking genuine, grown-up solutions alongside their eurosceptic colleagues. That is how good outcomes are achieved in the greater interests of the country, not through breakaway-party ego-trips.
The reality is that the typical British business is not represented by the CBI or the variety of pro-EU talking-heads constantly popping up on our TV screens. These are groups with a vested interest in remaining bound to Brussels rules, because it works in their favour. Multinationals spend millions upon millions lobbying that system to rig the rules so they can keep out competitors. Fortunes are spent on professional lobbying each year to prevent disruptive start-ups and SMEs from encroaching on established industry groupings, at the expense of the consumer. The policy-making machine in Brussels has been totally captured by these groups, with no real say or control for voters, or indeed British business. Want an example? There are two and a half times as many financial services lobbyists in Brussels alone as there are MEPs.
Only one in twenty UK businesses even trades with the EU – the idea that all business people want to keep everything up in the air to have their rules set by Brussels is for the birds. They certainly don’t want to do it at the cost of being able to get on doing business in the interim.
What’s needed now is certainty. Talk to any business, in any sector, and they will tell you the same. Nothing is more damaging to jobs, investment and innovation than this hopeless, endless malaise; this death by a thousand cuts as drip by drip confidence trickles away. Certainty can only be achieved by ditching any ideas of referendum re-runs or reversal or delay. We need to just get on with it, and take back control.
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- There are very few people who are willing to [...]
- Tying the UK to the EU’s single market and [...]
Brexit march: Former Conservative deputy prime minister calls Theresa May's No 10 speech an 'affront to parliamentary democracy''I may be naive, but if something is wrong, I look first for the person in charge,' Lord Heseltine told thousands of protestors in central London
Brexit march: Former Conservative deputy prime minister calls Theresa May's No 10 speech an 'affront to parliamentary democracy''I may be naive, but if something is wrong, I look first for the person in charge,' Lord Heseltine told thousands of protestors in central London
- Petition rejected by Theresa May has more than three times as many signatures as all pro-Brexit petitions combined