The fateful decision about whether the UK should leave the EU with or without a withdrawal agreement has to be informed by evidence comparing the UK’s past experience of trading within the EU Customs Union and Single Market, with its trade under World Trade Organisation (WTO) rules.
The data released by the ONS in March 2019 provides the best available comparative evidence of this kind since it distinguishes UK trade in goods and services with the EU over the twenty years 1999-2018 from that with ‘non-EU’ markets. The latter are not, of course, identical with those trading under WTO rules. Just over 25% of their total value arises from trade with European Free Trade Association (EFTA) members and countries that have trade agreements with the EU, which might inflate their overall value. However, comparative analyses of Switzerland, Norway and Turkey with the UK’s WTO-rules trade partners show they do not do so. On the contrary, they fractionally lower the growth rates of the UK’s non-EU goods exports. The ONS data therefore enable us to make a fair comparison between the UK’s trade performance within the EU and with partners under WTO rules from 1999 to 2018. No better data is available.
It provides a grim warning about the costs of continuing to trade with EU under any form of agreement that continues the existing trade relationship.
- Despite the benefits of the Customs Union and Single Market, UK goods exports to EU markets have grown by just 0.3% per annum in real terms over the past 20 years. They cannot therefore have contributed significantly to the growth of employment in the UK. The number of EU members increased over these years of course, so the 0.3% per annum might fractionally overstate or mis-state real growth. The Compound Annual Growth Rate (CAGR) of the EU15 alone was still lower at 0.08% per annum.
- UK goods exports to non-EU countries, by contrast, have grown over ten times faster – by 3.2% per annum. Worth just 64% of EU exports in 1999, they overtook exports to the EU in value in 2015, and have plainly therefore contributed far more than the EU trade to the growth of employment in the UK over the past two decades.
- Imports from the EU meanwhile have surged. Consequently, the UK’s goods trade deficit with the EU has grown from just £7.9bn in 1999 to £93.5bn in 2018. If that rate of growth were to continue for the next 20 years, its exponential trend line indicates that it would reach £246bn by 2030. By contrast, the higher value UK exports to non-EU countries produced a deficit in 2018 of £44.6bn. This is less than half the size of deficit with the EU, and almost half of that (£21 billion) is due to trade in crude oil and natural gas, not manufacturing.
This combination of virtually static exports to the EU, and surging imports from it, seems to be peculiar to the UK. Earlier analyses have shown that the growth of goods exports to the EU of almost all developed economies – including the US, Canada, Singapore, Hong Kong, Brazil, Korea, and South Africa – out-performed the UK from 1993 to 2015. Trading without an agreement, the US decisively overtook the UK as a goods exporter to the EU in 2008. Rising 1.9% faster per year, they are now worth 37% more than those of the UK.
One may delve further into the distinctive trade relationship that the UK has established with the EU by analysing its ten most-valuable manufacturing export sectors in 2018, manufacturing being 88% of all UK goods exports. In every single sector, from motor vehicles and parts with its 14.4% share of the total, to beverages with a 2.7% share, exports to non-EU countries have outpaced exports to EU countries – by an overall average of 2.9% per annum. In only two major sectors have UK exports to EU countries grown moderately well since 1999 – aerospace and pharmaceuticals – and they happen to be the two sectors where, with zero or near-zero global tariffs, the UK gains little or no market advantage from membership of the Customs Union.
In nine sectors out of the ten there was a trade deficit in 2018 with the EU, ‘aerospace & transport’ vehicles being the sole exception, while in trade with the non-EU countries there is a deficit in only four sectors, with motor vehicles earning the largest surplus of the other six, at £16bn and pharmaceuticals the second largest at £8.3bn.
Goods deficits are offset, of course, by surpluses of services exports. In 2018 services exports to the EU totalled £117bn, and over the previous 20 years have grown at a healthy 5.1% per year. Currently, the surplus in the UK’s EU trade in services, worth £29bn, covers about a third of the UK’s EU goods deficit, but by 2030, if rates of growth of goods and services remained the same till then, it wouldn’t even cover a quarter. The UK’s EU deficit in goods would swallow the UK’s entire projected surplus in services – that of the EU plus the far more valuable non-EU surplus – and still leave the UK with an overall net deficit of £136bn.
Her Majesty’s Treasury (HMT) and the Bank of England have warned about the costs of leaving the EU, but they have overlooked the risk of an unsustainable trade deficit – and the mother of all balance of payments crises – and its extremely unpleasant consequences for the public finances if the UK were to agree to continue its existing trade relationship with the EU for a transition period and an indeterminate period beyond. This oversight is especially surprising in the case of HMT, since Denis Healey, the Chancellor at the time of the unsustainable balance of payments crisis in 1976 which lead to a massive IMF bailout, later discovered that it was due in large part to figures provided by the Treasury being ‘grossly overstated.’ One would therefore expect them to be super-cautious on this score.
Why have these risks been overlooked, and the failure of the Single Market from the point of view of British exports or productivity remained unanalysed? Every UK government since 1973 has fondly hoped, of course, that the EEC and the EU would generate economic benefits for the UK. However, they have all preferred to assume that the UK was enjoying the economic benefits they had hoped for, and resolutely declined to measure and monitor them, apart from a small classified one-off HMT study in 2005, which only became public in 2010 because of a Freedom of Information request.
When preparing the case for Remain prior to the 2016 referendum, HMT ‘forgot’ its own 2005 analysis, which showed UK goods exports to the EU rising by just 16% over the 30 years from 1973 to 2004. Instead, its long-term predictions, were based on the idea that ‘EU membership boosts intra-EU trade by 115% relative to a position of WTO membership’, (p.163, para A47), so that if the UK decided to Remain, the trade losses would necessarily be catastrophic, the symmetric equivalent of a 115% increase in trade ‘is a fall in trade of 53% from leaving the EU.’
Many of those who oppose No Deal today still rely on the dire predictions based on such assumptions. A later analysis using the same model and evidence, but focusing exclusively on UK experience rather than making inferences from the experiences of the EU as a whole, estimated the likely increase in UK goods exports by 2030 ‘in the range 20-25%’. Back in the real world, the ONS data we now have shows that UK goods exports to the EU over the past 20 years actually grew by just 5.4%.
As a result of the reluctance of the government, and of the CBI and other trade associations, to regularly collect, analyse and report data about UK trade with the EEC/EU over the 46 years of membership, they have both been unable to recognise the distinctive characteristics – and distinctive problems – of the trading relationship that has evolved over these years. Neither governments nor trade associations have therefore ever asked critical policy questions.
Why has membership done nothing to raise UK GDP, or productivity, or exports and employment? Why has this failure remained unexamined and unnoticed for so long? Why has the UK never identified the deficiencies of most EU trade agreements for its own exporters? Why has the growth of goods exports of countries trading with the EU under WTO rules commonly exceeded that of countries trading with them under a Free Trade Agreement (FTA), and even that of members’ exports to each other? Why have UK exports grown fastest in markets where the Customs Union delivers no advantage? Why are the UK’s exports under WTO a picture of health, while those to the EU a record of failure across the board over two decades and more?
Further critical policy questions arise from the records of particular sectors which their own trade associations have singularly failed to ask. Is UK’s luxury vehicle manufacturing now moving to the EU because of competitive advantage or because of EU-compliant state subsidies? Is the pharmaceutical industry decamping to Ireland as has been claimed, and if so, is it also because of competitive advantage, or Ireland’s low corporation tax rates? Will these moves adversely affect the UK’s non-EU exports over the long term? And looking at trade from the consumer’s perspective: what’s the likely future cost to UK’s food consumers as the EU’s grip on UK imports of food products and agriculture passes 70%, which it did last year.
Economists have years ahead of them to answer these and other questions. Unfortunately, the new UK Government, Parliament and the electorate have only weeks to decide on the key question of whether to continue the existing EU trade relationship into a transition period and beyond or to leave without an agreement.
The ONS data strongly indicate that the UK should make every effort to avoid the risks of doing so, and that it should try to bring two and more decades of disappointing failure to an end. If the EU decides that they cannot agree to a joint application to the WTO for a temporary tariff standstill while negotiating a new trade agreement, the Article XXIV option, then leaving without a deal must be the best option.
Those who argue against it continue to rely on HMT’s fantastical long-term predictions or, when they offer any evidence at all, on various sequels prepared before the scheduled meaningful vote in late 2018. These adopted, without explanation or apology, a new economic model, but made similar far-fetched assumptions and estimates to make sure trading under WTO rules always appeared to be the worst option.
Some of these are worth mentioning since they are the basis of the only ‘evidence’ that the current campaign against no deal can muster. In the EU Exit Analysis: Cross Whitehall Briefing published in various forms between January and July 2018, it was estimated that UK goods trading with the EU under WTO rules would immediately incur tariff, non-tariff and customs charges with a total tariff equivalent value (TTE) of 30%, which accounted for nearly 90% of the GDP loss of 7.7% that no deal would supposedly incur. Patrick Minford pointed out that, since the UK’s product standards are identical to those of the EU, it is difficult to see why the TTE would be higher than the 20% TTE value known to be incurred by such barriers on Japanese and American goods exports to the EU. Once this and other more realistic estimates were incorporated into the analysis, the predicted GDP loss after No Deal simply disappears.
In the EU Exit Long-term Economic Analysis of November 2018, it was estimated (p.49, Figure 4.1) that the total value of FTAs that the UK might conclude with the US, Australia, Canada, India, China and 12 other non-members would be a 0.2% gain to UK GDP, even though, as Andrew Lilico observed, the European Commission had previously estimated that the gain to EU GDP of concluding agreements with a similar set of countries would be 1.9%. Negotiating exclusively in its own interest, the UK would apparently only realise about one tenth of the value that it might gain from EU template agreements, even though research shows that the vast majority of past EU FTAs have not helped UK exports in the least. This analysis also decided that the UK could not expect any GDP gain at all from any other trade policy or from taking back control of immigration or regulation.
By such tendentious estimates and assumptions, the Treasury constructed its case against a no-deal exit which appears to have convinced many MPs, though some no doubt have found arguing against a no-deal exit a politically convenient cover of arguing for Remain. Our analysis, by contrast, rests firmly on how UK trade has actually performed inside and outside the Customs Union over the past 20–40 years, and the findings are virtually uniform across all major manufacturing sectors. They demonstrate beyond any doubt that a no-deal exit is now the best option.
Leaving with no trade deal would provide an opportunity – and the strongest possible incentive – for the new Government to devise and implement trade and fiscal policies that build on the UK’s remarkable success when trading under WTO rules. It would also encourage policy-makers to understand and address the UK’s chronic failure in EU goods markets before resuming EU trade negotiations. And it would provide an opportunity to re-negotiate trade agreements with other countries that have been designed to serve the common interests of EU member countries which the UK plainly has not shared. Above all, it would require policy-makers to discover exactly where UK’s comparative advantage in trade lies and to tailor future UK trade agreements to build on demonstrated success.
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It’s become a mantra, endlessly repeated by Remainer unions: “Workers must not pay the price of Brexit.” What price would that be? And how about acknowledging the price of staying in the EU?
On 6th July 2017, Michel Barnier, the EU Brexit negotiator, addressed the EU’s Economic and Social Committee. His words were noted and passed on to unions in Britain by the TUC delegate to the committee under a title saying that Barnier ‘spells out the truth’ about Brexit.
Barnier’s address, wrote Unite’s Martin Mayer with doe-eyed devotion, was ‘clinical in its analysis’ and ‘impressive in its clarity’. And he dubbed as ‘fatuous’ Theresa May’s statement that “Brexit means Brexit”. The TUC’s love affair with the EU was still going strong, despite the referendum.
At the meeting Judy McKnight, ex-TUC General Council and ex-General Secretary of the prison officers’ union – described as ‘Leader of UK Workers Group members’ although she is and was actually retired – repeated the worn old refrain that “workers must not pay the price of Brexit”.
The TUC was campaigning back then for Britain to stay in the Single Market for as long as possible, under a transitional agreement, to ‘keep workers’ rights safe’. Now it has hardened its stance, calling for Britain to remain in both the Single Market and the Customs Union.
The Fire Brigades Union, for example, which in June suspended executive member Paul Embery for two years for speaking out in favour of Brexit, parrots every Project Fear statement put out by the Treasury. The union attacks the World Trade Organisation for being ‘neoliberal’ – but of course fails to say that the EU and the USA were trying to negotiate the TTIP treaty because the WTO isn’t neoliberal enough.
Nowhere do these euro-enthusiasts talk about the fact that the EU constitution sets all the key principles of neoliberalism in stone, effectively unchangeable – the free movement of goods, services, capital and ‘persons’ (this includes companies). That’s something that the bankers and transnational capitalists haven’t managed to get into a single national constitution outside the EU, not even the USA. In particular, they see the European Court of Justice as the guardian of workers’ rights. Yet it is anything but that.
Successive ECJ judgements have made it perfectly clear that the rights to free movement – of goods, labour, services and capital – come first. The right to strike in pursuance of what it calls social policy (jobs, pay, conditions, pensions) cannot, according to the Viking judgement, ‘automatically override’ these fundamental rights.
More fundamentally, said ECJ Advocate General Poiares Maduro on 23rd May 2007, “the possibility for a company to relocate to a Member State where its operating costs will be lower is pivotal to the pursuit of effective intra Community trade.” There’s the EU, in a nutshell: it’s a fundamental right for a company to move from country to country in search of lower and lower labour costs.
The EU’s fundamental rights are all about the market. It’s a far cry from ‘Life, liberty and the pursuit of happiness’ or ‘Liberty, equality, fraternity’. In effect, the EU acts as a superstate whose constitution embodies the freedom of capital and capitalists in a way unheard of in any other.
The first price that workers pay is that they must allow outsourcing and privatisation of national industries and services.
The second is that they cannot strike to stop work being outsourced to a cheaper country. The ECJ made the reasons for that very clear: “Without the rules on freedom of movement and competition it would be impossible to achieve the Community’s fundamental aim of having a functioning common market.”
And of course, there is the cost of the free movement of labour. It’s beyond doubt that it has hit unskilled workers in Britain particularly hard. It has lowered pay rates, and according even to the official Migration Advisory Committee, damaged the job prospects of lower skilled workers when the labour market is slack.
It’s not just the unskilled. Without free movement how could the government have erected the massive tuition fees barrier to the training of nurses, midwives and other health professionals while understaffing runs through hospitals like a plague? And the laws of supply and demand are clearly operating in other areas too, such as academic pay.
The TUC not only backs this free movement but, astonishingly, thinks that Britain’s migration policy should be handled on our behalf by Brussels. “It is… more effective for migration flows to be managed through EU legislation rather than member states creating patch-work laws to deal with the issue”, it told a government inquiry into EU powers in 2013.
The odd thing about the TUC’s blather on ‘workers’ rights’ is that you might expect trade unions, of all bodies, to know that it is first and foremost through the existence and activity of unions that workers can establish and defend any rights that they have.
There is nothing – not a single sentence – in the draconian Trade Union Act 2016 that runs counter to EU law, nor in the even worse bits that David Cameron’s Government was forced to drop as the Bill made its way through Parliament.
Items that would not have bothered the EU included the proposed requirement for pickets to give their names to the police – an idea that Conservative MP David Davis objected to violently. “What is this? This isn’t Franco’s Britain”, he said, referring to the 40-year fascist dictatorship in Spain.
Yet the EU is supposed to guarantee ‘workers’ rights’!
And when collective action fails or is absent, the only recourse is often to an employment tribunal. Yet when the Government introduced huge fees for employment tribunals in 2013, and Unison brought a legal challenge, it was primarily to English law based on Magna Carta and enshrined in 1297 that the Supreme Court turned in 2017 to rule the fees unlawful.
Back in 2015, Unite published a particularly biased leaflet called What has Europe ever done for us? (incorrectly equating Europe, a geographical fact, with the EU, a political construction). Among its outrageous claims was the oft-repeated notion that the EU ‘is also responsible for 3.5 million jobs in the UK’. The implication is that we would lose these jobs with Brexit. This is utter nonsense, though some politicians have said the same thing, and keep on saying it.
Claims that three million or more jobs depend on Britain being in the EU appeared following the publication of a report by Dr Martin Weale in 2000 for the National Institute for Economic and Social Research.
But the report did not say that these jobs would be lost if we left the EU. Far from it. It suggested that withdrawal may actually be good for us. It was the fault of politicians like Nick Clegg, John Prescott and Stephen Byers that the findings of this academic report were twisted.
Weale was furious at this distortion, describing it as ‘pure Goebbels’ and saying, “in many years of academic research I cannot recall such a wilful distortion of the facts.”
What, then, does the EU offer workers in the way of rights? Its defenders talk admiringly about working hours legislation – but what’s to admire?
It is true that the EU brought in its Working Time Directive in the 1990s, incorporated into British law in 1998. But look closer. Brussels mandated a minimum holiday of 20 days – including public holidays. British law states that the minimum is 20 days excluding public holidays, making our minimum 28 days.
So, any government could cut statutory holidays by a full eight days without contravening any EU law. Not that you would hear this from the TUC, which continues to push out stories talking about, for example, 7 million people’s holiday pay being at risk.
“There is no guarantee that [the government after Brexit] would keep paid holiday entitlements at their current level, or at all,” claimed the TUC in a typical act of gratuitous scaremongering, turning a blind eye to the lower holiday pay rights in most of the EU.
British maternity leave is another area where TUC alarmists have been trying to sow suspicion. Yet British law mandates up to 52 weeks of maternity leave, with Statutory Maternity Pay for up to 39 weeks. EU law? Pay and leave of up to 14 weeks.
And then there is health and safety. The TUC acknowledges that the government says it will transfer all existing health and safety protections from EU law to British law. But it adds, “there are no guarantees for what happens afterwards” – as if permanent future guarantees were possible.
“It should be written into the [Brexit] deal that the UK and EU will meet the same standards, for both existing rights and future improvements,” said Frances O’Grady, TUC general secretary.
This really is fatuous. It would leave Britain unable to improve its health and safety legislation unless the EU agreed to do the same, necessitating a negotiation with 27 member states. It would give Brussels sovereignty over workplace legislation in Britain, which is no kind of Brexit at all.
Back in 1988 the TUC waved the white flag and assumed that the only improvements in legislative protection for workers would come from Brussels. It’s still waving that flag, even though the EU itself acknowledges on its own website that “Responsibility for employment and social policy lies primarily with national governments.”
The truth is that our rights as workers have always existed only so far as workers have been prepared to fight for them and defend them. As long as we tolerate the employing class and the capitalist system, any rights we have will always be ‘at risk’.
But for now, the urgent risk is that we fail to finish the job of the 2016 referendum. Nothing is so imminently threatening to the wellbeing of workers in Britain than allowing the independence process to be derailed.
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The failure (thus far) to implement the people’s wishes on Brexit must be the greatest cock-up in British history. It has created a political mess in which we wallow while the world laughs. So it’s worthwhile to ask what went wrong and learn the lessons. We wasn’t just robbed. We failed incompetently.
Brexiteers assumed that it would be easy. In fact the obstacles were enormous. We faced an intransigent and inflexible opponent in a devious, cunning EU. A determined and articulate middle-class reaction in Britain colluded with Brussels to undermine our case. The Cabinet was divided, a wittering Chancellor poured on cold water and the Treasury organised a chorus of fear. Theresa May’s weakness meant she could be treated and foiled in shameful fashion. All this doomed her.
Instead of implementing the referendum result as his Government had said it would, Cocksure Cameron sulked off. In came Theresa May, too nice to fight, too inflexible to be devious and too stupid to understand. She naively assumed that all she had to do was talk nicely to other heads of state who would understand the politics. Instead she was forced to deal only with the Commission – that had everything to lose. Its role and its money were threatened by Brexit. So it grabbed control of the negotiations to punish us and protect itself.
Niceness was out. Middle-class Europhiles and the Establishment in Britain felt their right to rule was threatened by the hairy armpits of uneducated, ill-informed plebs who’d voted in a way they should never have been allowed to. This encouraged EU determination to punish a nation impertinent enough to question its EU destiny. So while Brexiteers celebrated, the Commission plotted and decided immediately that the 27 would stand together. Then the conditions of departure would be settled before any talks about trade. They’d come only after Britain left. In effect “no deal departure” started as an EU policy.
That put May in a trap. The Lisbon Treaty says once notification is given “a withdrawal agreement is negotiated setting out the arrangements for withdrawal and outlining the country’s future relationship with the union”, two processes to go on concurrently. May’s notification letter of 29th March 2017 asked for this:
“We believe it is necessary to agree the terms of our future partnership alongside those of our withdrawal.”
Legally correct. But EU law is observed only if it furthers ever closer union. This didn’t. A conglomerate of 27 nations can’t negotiate. So EU bureaucrats insisted on one negotiator who would not discuss future cooperation until tough terms for divorce were agreed. Their executioner was Michel Barnier, a man with a Gallic dislike of Britain who announced:
“My mission will have been a success when the terms are so brutal for the British that they prefer to stay in the union.”
He made certain of this by adding a veto for Ireland to the two initial demands about money and protection for EU citizens. There would be no customs border, thus ensuring that Northern Ireland must be treated separately, or the whole of the UK kept in the Single Market. This was the backstop. It threatened to keep the UK a vassal state, but was justified as protection for the Good Friday Agreement. The two were totally unrelated but it was an implicit threat that the old violence would be unleashed unless May caved.
She did. David Davis announced that simultaneous negotiations would be “the fight of the summer” but by the autumn May had decided to grovel, not fight. She erased her red lines, walked into the trap and agreed everything the Commission wanted – only then to suffer humiliation at the EU summit and more in Parliament, which refused to pass her bedraggled agreement.
Her demise leaves a deadlock. A new government determined on Brexit confronts an EU which won’t budge from an agreement which can’t pass, while deliberately inflated fears of “no deal” intimidate the nation. A new government should mean new negotiations but that opens up the whole can of worms of legality, unity, and skullduggery. So the EU is loath to do it, meaning a confrontation which deadlocks everything. Except hysteria.
My conclusion is that whoever negotiates with the EU must carry a big stick. Others invoke the analogy of Dunkirk with Churchill snatching victory out of defeat. That’s daft. We were a nation then, Churchill had a huge majority, there was neither a bourgeois fifth column, nor vested interests generating fear and no media to damn Churchill for dirty underpants. How fortunate that the consequences of either side winning are more marginal than 1940, whatever their long-term impact on the kind of nation we want to be.
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‘When, in the course of human events,’ Jefferson wrote in the preamble of the American Declaration of Independence, ‘it becomes necessary for one people to dissolve the political bands which have connected them with another… a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.’
The causes which impelled the campaign and the vote for separation from the EU have been documented in great detail over many years and on numerous occasions: 500 pages on the decades of deceit by UK prime ministers and ministers about the political goals of the European Union; more than 1,000 pages on the regulatory constraints imposed by the EU on UK industry and the progressive surrender of UK sovereignty analyses of international databases showing that the benefits of EU membership for UK exports were largely imaginary, with no discernible impact on GDP growth and comprehensive updates by sector showing the sharp contrast between rapid growth of exports to the rest of the world versus their dismal near-stagnation over the years of the Single Market.
This literature on the causes which ‘impelled separation’ far exceeds in rigour and depth, that making a case for continued membership, though since the government and the greater part of the traditional opinion-forming apparatus of the UK, both Houses of Parliament, the press, BBC and other broadcasters, the CBI and other business groups, universities, charities and quangos, even the Church of England have preferred Remain, it has often not seemed that way. The case for remaining in the European Union, however, has not been based on the historical record, and has rested, probably to its own disadvantage, almost exclusively on speculative predictions about the adverse consequences of leaving by HM Treasury. Other Remain arguments, such as the EU contribution to the maintenance of peace in Europe, or as a support for fledgling European democracies, or any other inherent merits of the EU project, have barely been mentioned.
Leavers have not, however, been nearly as forthcoming in making the case against the 584–page draft Withdrawal Agreement negotiated by Theresa May and Michel Barnier, partly because its legal terminology and its seeming jumble of cross-referenced parts, chapters, titles, articles, annexes and protocols is not easily understood by lay readers, but also because parliamentary criticisms of it came from widely differing angles, some more concerned with toppling the Prime Minister that negotiated it, rather than the merits or demerits of the draft agreement itself. The objection to the backstop was clear enough, as was the Attorney General’s lethal blow against it in the House of Commons, that it could not be escaped without EU permission, but evaluation of the draft agreement as a whole requires informed and extensive commentaries by lawyers, and help from accountants would intermittently be useful.
Not everyone can be expected to have such commentaries to hand or to read them, and hence argument about its substance has been limited. Its opponents have sometimes been dismissed as ‘purists’, who failed to see that the perfect may be the enemy of the good, as ‘ideologues’unwilling to make compromises, or as the ‘extreme right’ of the Conservative Party engaged in an intra-party squabble.
Anyone who makes such arguments has first to read and respond to the most authoritative commentary to date written by Martin Howe QC, Sir Richard Aikens, former Lord Justice of Appeal, and now visiting professor at KCL and QMC, and Thomas Grant, a practising international lawyer and Fellow of the Lauterpracht Centre for International Law in Cambridge.
Once they do, they will know that the labels ‘ideological’and ‘purist’ and ‘right wing’ provide little insight into the numerous objectionable features of the draft agreement. Despite the claim made at its outset that ‘this Agreement is founded on an overall balance of benefits, rights and obligations for the Union and the United Kingdom’, their detailed analysis found numerous articles that were clearly not in the interests of the UK and entailed no counter-balancing obligations on the EU. UK courts will be obliged, for instance, to apply EU law and even to strike down Acts of Parliament if they are found to contradict EU law passed after the UK has left the EU, and the ECJ can impose ‘uniquely stringent financial and trade penalties’ on the UK for any breach of the agreement for many years into the future.
Even the seemingly neutral parts of the draft agreement, such as the reciprocal rights of UK and EU citizens, are heavily tilted so that the treaty may be used to uphold the rights of EU citizens in the UK as defined by the ECJ for many generations into the future. There are no such rights for UK courts on behalf of UK nationals. And the seemingly neutral arbitration clauses have a back-door mechanism whereby questions of law must be ‘interpreted’ by the ECJ long after the end of the transition period, while the UK is prohibited from recourse to truly impartial dispute settlement procedures, such as those of the WTO. The backstop attracted most attention, but it was merely one objectionable element in the draft agreement alongside many others.
‘A decent respect for the opinions of humankind’ therefore now requires that the objections to this draft agreement be stated, clearly and succinctly. Mr Barnier and other representatives of the European Union have repeatedly declared that they will not renegotiate the present agreement. If that proves to be the case, and the UK is obliged, as a result, to leave without ratifying this draft agreement, a statement of the objections to it will be doubly important since supporters of it have threatened that they will do their best to bring down the Government, and provoke a general election.
In that election the new government would be obliged to say why it has rejected the draft agreement and to declare the principles on which it would act towards the EU in the absence of any written agreement, and the principles which would inform its negotiators when the EU is willing to re-open negotiations on trade, and on the matters left unsettled by the rejection of this draft withdrawal agreement. In a sense, the new Prime Minister will have to embark on a general election campaign on his first day in office. After months of confusing parliamentary debate, it will therefore serve a useful purpose if the principles that separate those who find this draft Withdrawal Agreement acceptable from those who think that it does not honour the referendum become known well in advance of any actual election campaign.
It also important to explain to the electorates of the EU27 countries, who might otherwise depend entirely on the Commission version of events, the reasons why this draft Withdrawal Agreement was rejected, so that they too can decide whether the objections of the UK were based on principles they find acceptable, and whether the Commission was right to rule out amendment of the draft agreement and make ratification of it a precondition of further negotiations with the UK.
The first ten of the principles given below are written as if to inform a new withdrawal agreement, though the complaints against Mrs May’s draft may be readily inferred from them. The numbers that follow each entry in brackets identify the articles or protocols in the Withdrawal Agreement which ignore or contradict these principles, or raise doubts about their application under its terms. Four more principles which refer to matters which are covered only incidentally in the draft Withdrawal Agreement have been added to the list. They confirm that the UK would continue to give voluntary support and co-operation for EU policies that it has supported as a member, and which formed no part of the case for its withdrawal.
- Expatriates of the EU27 seeking rights of residency in, or nationality of, the UK will be treated in the same manner as UK expatriates seeking rights of residency in, or citizenship of, EU member countries. Thereafter they will be subject to the law and courts of the UK, with rights and obligations no different from those of other UK residents and nationals. (127, 159)
- UK nationals who are former or retired EU officials will enjoy no special immunities or privileges that distinguish them from their compatriots. They will be taxed in exactly the same manner as other UK nationals who have spent part of their working lives abroad. (111, 113, 116, 117)
- From the day of its withdrawal, courts of the UK will no longer be subject to the rulings and jurisdiction of the CJEU. The rights and obligations of residents in, and nationals of, the UK will be those established in UK law not those of the TFEU. (4, 7, 24, 25, 31, 110, 127, 131, 158, 162, 163 Protocol on I&NI:14, Annex 4)
- The UK will meet all financial commitments to the EU that it made before the day it invoked Article 50 of the Lisbon Treaty, March 29, 2017. (137, 140-6, 156)
- To resolve disputes on the UK’s remaining financial or other obligations, both the EU and the UK agree to be bound by the decisions of independent arbitration panels from which there will be no appeal. (160, 161, 164, 168, 174)
- The UK will not be incur any future financial liabilities that result from decisions of the EU or any of its agencies in which it has not participated. (127, 132, 142, 143, 150-154)
- The UK is committed to as much free trade with the EU as can be agreed between the parties, but will not sign any trade agreement to that end which contains special preconditions, clauses, provisions and penalties that are not replicated in other EU trade agreements. (54-61, 170-180 Protocol on I&NI: 14, 15, 16, 17 Annex 2, 4)
- HM Government will not repeal or ignore the Act of Union of 1801 (Article VI) which is the legal basis of the present customs union and common market of Great Britain and Northern Ireland. (Protocol on I&NI passim)
- As a co-signatory of the Belfast or Good Friday Agreement of 1998, the government of the United Kingdom will not allow any of its provisions to be altered or disturbed by any subsequent agreements. (Protocol on I&NI passim)
- The United Kingdom will not be bound by any agreement negotiated by its representatives until it has been ratified, in accordance with its normal practice, by both Houses of Parliament, received Royal assent, and the instruments of ratification have been exchanged. The provisions of any agreement not ratified in this manner are void. (184-5)
- HM Customs will immediately cooperate full-heartedly with Irish Tax and Customs to prevent EU Single Market rules being undermined by the trade of Northern Ireland with the rest of the world, whether directly or indirectly via Great Britain, and expects the full-hearted cooperation in return to prevent the UK’s Single Market rules being undermined by the Republic of Ireland’s trade with the rest of the world.
- The UK remains firmly committed to the collective defence of Europe via NATO. If invited, it will participate in any EU defence and security programmes that it decides are compatible with its NATO and other commitments.
- The UK has strongly supported the EU programmes that promote the exchange of students and scientific researchers. If invited, it will continue to participate in them enthusiastically on the same terms as other non-member countries.
- The UK also strongly supported EU efforts to protect and improve the marine and terrestrial environment, and will continue to collaborate with the EU to that end.
Only a credible non-cooperative strategy that cannot be blocked by either the EU or Parliament will get us out of the EU by 31st October 2019. And that strategy needs to be executed with ruthless conviction and commitment by the new Prime Minister. To demonstrate his support for Global Britain, his first trip abroad should be to the US to kick-start the UK-US Free Trade Agreement.
As the largest ever list of candidates to offer themselves as the next British Prime Minister has been whittled down to the final two, it is clear that we are in grave danger of validating Einstein’s definition of insanity – doing the same thing over and over and expecting a different result.
Between them, Boris Johnson and Jeremy Hunt have said that they will: renegotiate the Withdrawal Agreement (WA) and the backstop; leave the EU with a ‘deal’ on 31st October; and get parliamentary approval for their new improved deal. They both claim to be skilled negotiators, implying that this makes them ideally suited for the most important job in their career. There are differences, however: Johnson recognises that the WA as a whole is dead and just wants to lift some of its acceptable features, such as on citizens’ rights; while Hunt is prepared to delay leaving the EU for ‘a short while’ to achieve a ‘better deal’.
The naivety of the candidates’ positions is breath taking. Have they not observed how easily the EU has run rings around our current ‘skilled negotiators’? Are they like the Bourbons and learned nothing and forgotten nothing?
The new Prime Minister needs a credible negotiation strategy
It is going to be déjà vu all over again, unless the new PM has a clear strategy to leave the EU on the basis of what game theorists call a non-cooperative solution. That is one that the EU cannot block if it is not willing to cooperate in producing a solution that makes both sides better off.
This means that the starting point for any negotiations with the EU cannot be the WA. The EU says that it will not renegotiate this and it remains completely unacceptable to the vast majority of the British people. As Chairman of Lawyers for Britain, Martin Howe QC, says:
‘I can’t think of any clause in the WA end-to-end which is actually in the interests of the UK. The only neutral part of the agreement is the reciprocal rights of UK and EU citizens, in which the clauses on substantive rights are acceptable. However, even those are surrounded by completely unacceptable requirements that the treaty must perpetually have direct effect and must (as interpreted by the courts) override future UK Acts of Parliament in our own courts, and must be “interpreted” by the European Court of Justice for about 10 years by direct references and thereafter via a back-door mechanism in an international arbitration clause’.
His devastating criticism of the WA is here: Avoiding the Trap – How to Move on from the Withdrawal Agreement. How a British Prime Minister could collaborate with the EU to produce this document and how so many MPs could subsequently vote for it is beyond me. The WA is nothing less than a venus flytrap. It therefore needs to be avoided at all costs.
In any case, the WA does not offer a ‘deal’ about a future relationship in any meaningful sense. For example, there is nothing on services which account for 80% of UK GDP. Trade in services will be negotiated after the UK leaves the EU. It is completely bizarre for MPs to object to leaving the EU without a deal, when the WA itself involves leaving the EU without a deal.
A non-cooperative solution requires the UK to specify both the terms under which it will leave the EU and the terms under which it will trade with the EU in the future. And to do so in a way that the EU cannot block.
Theresa May specified the leaving terms very clearly in the Lancaster House speech in 2017. They were to leave the Customs Union, Single Market and the jurisdiction of the ECJ. In other words, a clean Brexit. This was a clear deliverable strategy that did not require EU cooperation. But then Remainer Philip Hammond stepped in and said there needed to be a transition period which would require EU cooperation and this was the beginning of the backtracking that led to the toxic WA and the equally toxic Political Declaration (PD).
The non-cooperative solution involves three steps. And each one has to be credible to the EU
The first step is for the new PM to restate that the clean Brexit set out in the Lancaster House speech will be implemented by 31st October 2019. This is credible and does not require EU consent.
In parallel with this, the new PM should immediately inform the US President that the UK will enthusiastically take up his long-standing offer to negotiate rapidly a US-UK Free Trade Agreement (FTA). This also is credible and does not require EU consent once we leave. During the few weeks that remain before 31st October, the UK can make much progress in setting the stage for post-Brexit negotiations – a task that the International Trade Secretary, Liam Fox, has consistently dragged his feet in doing. This will send an electric shock to the EU that will tilt every aspect of subsequent negotiations with the EU in our favour. The prospect of us concluding an FTA with the US when the EU has been struggling for years to achieve this will motivate the EU to conclude an FTA with us. They will fear the fact that the UK would be able to import virtually all of its requirements from the US and at lower world market prices. This would signal to the EU that we can leave them behind if necessary.
The second step is to set out in a new Departure Statement (DS) how the principal issues involved in departing from the EU will be implemented: citizens’ rights, the financial settlement and the border between Northern Ireland and the Republic. The PM can guarantee the rights of EU citizens living in the UK without granting them the special status of the WA. He can agree to pay our financial obligations up to the point of departure. Any additional money is not a strict legal requirement but can be used as a bargaining tool in negotiations about the future trade deal – as the EU is fond of saying, ‘nothing is agreed, until everything is agreed’. Let the EU take the UK to international arbitration if they want. Finally, he can restate that the UK will not impose a hard border. All these are credible and do not require EU consent.
The big advantage of being absolutely clear on the border is that it will force the EU and, in particular, the Irish Taoiseach Leo Varadkar to agree a workable solution that allows the UK to leave the Customs Union and Single Market at the end of October. Solutions exist to protect the integrity of both the UK and EU internal markets without any physical infrastructure on the border or any need for new technology. The Smart Border 2.0 report commissioned by the European Union Parliament from customs expert Lars Karlsson confirms this – as does the more recent report of the Alternative Arrangements Commission. Annegret Kramp-Karrenbauer, Angela Merkel’s successor as leader of the Christian Democratic Union, has said that a workable solution could be agreed in five days of discussions. There were discussions between British and Irish customs officials on creating an invisible border, but Varadkar stopped these when he came to power. In doing so, he politicised the border issue and turned it from being the EU’s Achilles’ heel into the UK’s – ably abetted by collaborating British ‘negotiators’.
It was this single issue that was then exploited in order to propose the backstop comprising a ‘single customs territory between the (European) Union and the United Kingdom’, without rules of origin. Northern Ireland, in addition, would have to abide by the rules and regulations of the EU Single Market. So long as the backstop is in operation, the UK would have to meet ‘level playing field conditions’ that prevented the UK competing against the EU. The UK would not be able to leave the backstop without the consent of the EU.
This, of course, is completely unacceptable. By making it clear that the UK will leave the EU on 31st October, the positions are immediately reversed. Both the EU and Varadkar have said that there will be no hard border. Varadkar would be forced to restart the discussions between British and Irish customs officials. He knows full well how devastating for the Republic’s economy a ‘no deal’ Brexit would be: the Irish Central Bank predicts a 4% cut in GDP and 100,000 job losses. And there are plenty of five-day periods between now and the end of October to agree a workable solution. But it requires the UK side to make it absolutely clear that we are leaving on Halloween, come hell or high water. This too is credible and again does not require EU consent.
The third step is to make a Future Relationship Statement (FRS), setting out the terms on which the UK will agree to trade and cooperate with the EU. Again, this has to be done in a way that cannot be blocked.
There is only one set of trading terms that the EU cannot block. Under WTO (World Trade Organisation) rules – which almost all international trading arrangements follow – we are free to set the tariffs and product standards for trade with the EU, so long as these are the same as for all members of the WTO under MFN (Most Favoured Nation) rules, unless we have a FTA with any country or group of countries. This is the default position, so is also credible and does not require EU consent.
We can actually do better than that and offer the EU to continue trading in goods on current zero-tariff terms under Article XXIV of GATT (General Agreement on Tariffs and Trade) and in services under Article V of GATS (General Agreement on Trade in Services) – while a full FTA is negotiated. But if they refuse, we can temporarily revert to the MFN rules under Article I of GATT.
The EU will ultimately agree to a FTA. In the meantime, we need to exploit the fact that the UK has a huge trade deficit with the EU – we are net buyers of goods of around £100 billion, equivalent to 5% of our GDP. Since the customer is king – and we are the customers – it should be us who decides the quality and prices of the goods and services we purchase from not only the EU but from the rest of the world. But what the WA and PD do is to allow the EU to determine these things. The audacity is astonishing. Did the EU and our ‘negotiators’ seriously believe that they could get away with this – and not just in the short term but indefinitely?
Since we will no longer be bound by the EU’s Common External Tariff, we can lower the tariffs we set on goods that we do not produce domestically. But whatever tariffs we set, the EU will be worse off given that they sell us mostly high-tariff goods like cars and agricultural products. We would pay tariffs to the EU of around £5 billion and they would pay tariffs of £13 billion. In addition, we would save the £11 billion net contribution to the EU.
This provides a strong incentive for the EU to agree a FTA, unless they want to continue punishing us for leaving the EU, and in doing so damage the EU economy even more. Given that we have a services trade surplus with the EU of around £30 billion, it is essential that this is secured in a future trading relationship. This means a SuperCanada deal, already offered to us by the EU in March 2018.
But although there is a strong economic incentive to agree a FTA, we cannot force the EU into accepting any deal that works for us in terms of services, and, in particular, financial services. Still this does not prevent us leaving the EU on the basis of the above DS and FRS. There are enough ‘mini deals’ in place – covering visa-free travel, aircraft landing, rail and shipping agreements, road haulage licences, student exchanges, defence and security etc – for the citizens and businesses of both the UK and EU to continue visiting and trading with each other. In addition, a sufficient number of the international trade deals negotiated by the EU have been novated that we can continue trading on the same terms with most of these countries as we do now. A key example is Switzerland which accounts for more than a quarter of our trade under these EU-negotiated deals.
A number of proposals have fleshed out the details of a future relationship along the lines outlined above: A Clean Managed Brexit from Steve Baker MP, The EU, The UK and Global Trade: A New Roadmap from Professor David Collins, A Better Deal from Shanker Singham, Robert MacLean and Hans Maessen, A World Trade Deal from Economists for Free Trade, and the Howe et al report cited above. For example, Baker suggests that we should send a draft UK-EU FTA to the EU – such as the ones proposed by Shanker Singham, Victoria Hewson, Hans Maessen and Barnabas Reynolds or Dr Lorand Bartels of the University of Cambridge – rather than wait until they do the drafting – which was such a disastrous error with the WA and PD. The EU could agree such a FTA under Article 207 of the TFEU (Treaty on Functioning of the European Union) on the Common Commercial Policy on the basis of qualified majority voting.
But unless the strategy is clear about what is needed to deliver these outcomes, we will soon be back wading through the same treacle of compromise and capitulation that have been the hallmark of our negotiations over the last two years. The only strategy that is guaranteed to work by 31st October is the non-cooperative one outlined above.
The new Prime Minister also needs to demonstrate conviction and commitment – and that involves putting Parliament in its place
A credible negotiating strategy is necessary, but this will not be sufficient. The new Prime Minister also needs to have ‘conviction and commitment’, as Dominic Raab has pointed out. But Boris Johnson – the front runner to be PM – has already wavered by first stating categorically that the UK will leave the EU by 31st October and subsequently saying that this is merely ‘eminently feasible’. This change was immediately picked up by EU negotiators, one of whom told The Times: ‘Even the boldest Prime Minister for a no-deal will have to demonstrate that he has had one serious try and that means an extension [beyond 31 October]’. Another told the Daily Mail that the EU believes Johnson will end up trying to sell an amended version of the WA: ‘If people really brief Boris and talk him through the implications of ‘no deal’, I think he will really think twice’. The first view is perfectly plausible and, unless further wavering is prevented, then we are very likely to end up with the second. After all, Johnson supported the Withdrawal Agreement on the third vote. Hunt voted for it three times. Johnson’s declared position, however, is that he is seeking a FTA with the EU and clarified that he will leave the EU by the end of October ‘do or die’.
The new PM also needs to demonstrate conviction and commitment with the other group trying to block Brexit: the British Parliament. It too needs a lesson in democracy. Read our lips: we voted to leave the EU in June 2016 by a bigger majority than any vote that any individual MP has ever received. We understood the decision we made. We understood why we made it. No amount of scaremongering by the majority of MPs who oppose this decision or their friends in the civil service and CBI etc will change this.
So if MPs are still determined to block the deal that the next PM sets or try to insist that the deal is put to a ‘confirmatory vote’ – weasel words for a second referendum to try and get Brexit reversed – then they also need to be blocked. They need to be made to understand that it is the people who are sovereign not MPs. And the people are here for ever, they are not.
If this, in turn, means that Parliament is prorogued until after 31 October 2019, then so be it. Constitutional historians like Professor Jonathan Clark argue that this would not be ‘“unconstitutional”:
‘[It] would be in accord with statute law, but applied in a situation that legislators could not foresee. [Nor] would [it] be “undemocratic”, for the point at issue is the clash between two sorts of democracy, representative and direct. Whatever the merits of these two, Parliament recognised the priority of the People in legislating for the referendum of 2016. Parliament’s claim to control prerogative depends also on public opinion, and support has ebbed away as Brexit has not been delivered’.
However, prorogation might not be necessary since, in June 2019, Parliament voted down a Labour motion to block a no-deal Brexit. Indeed, Maddy Thimont Jack from the Institute of Government argues that MPs have no decisive route – such as legally binding backbench motions, emergency debates, amendments to the Queen’s Speech, or ‘no confidence’ votes – to stop a PM determined from leaving the EU on 31st October.
Only a credible non-cooperative strategy executed with ruthless conviction and commitment by the new Prime Minister will get us out of the EU by 31st October
The message needs to be clear, simple, with no compromises. Theresa May said in her resignation speech outside No. 10 that the next Prime Minister must compromise. Well just look where that got her. Time’s up for doing the same thing over and over and expecting a different result. Only a credible non-cooperative strategy that cannot be blocked by either the EU or Parliament will get us out of the EU by 31st October. And that strategy needs to be executed with ruthless conviction and commitment by the new Prime Minister. Given that both Johnson and Hunt have voted for the WA, the new PM would need to signal his conviction and commitment by appointing a Brexit Secretary who refused to vote for the WA on all three occasions. To demonstrate his support for Global Britain, his first trip abroad should be to the US to kick-start the UK-US Free Trade Agreement. There is no need to make another round of humiliating visits to Brussels or to Europe’s capitals – as Theresa May repeatedly did.
This is an extended version of a blog originally posted on Briefings for Brexit
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The Prosperity UK Alternative Arrangements Commission, which launched earlier this week, is a serious attempt to address the complexities of the Irish border and break the Brexit logjam. Co-Chair Nicky Morgan and I have decided to take an entrepreneurial approach to solving the conundrum of the Irish border, and ask the private sector for its help.
Our starting point is to find out what is possible by asking a panel of technical experts to develop credible Alternative Arrangements for the Irish border, which can be delivered in a timely fashion, and without the presence of physical infrastructure at the frontier.
The Commission will be made up of a broad spectrum of MPs and Lords, representing many different views on Brexit. The Commission is agnostic on the preferred future relationship between the UK and EU. Our work will be compatible with virtually all of the EU-UK end states currently under consideration and will ensure that the UK retains full flexibility in its future negotiations with the European Union.
There are three common misconceptions about Brexit which are relevant to the Commission.
The first is that Alternative Arrangements will not be necessary. But in every single scenario bar staying in both the EU Customs Union and the Single Market, for goods and agrifood, alternative arrangements of some kind will be necessary. And if we are in that scenario, we would have no ability to execute an independent trade policy or improve our domestic regulations, taking away all the potential economic gains of Brexit.
It is not well understood that free circulation of goods comes from both the Customs Union (CU) – and the rules of the Single Market. If the UK were a full member of the EU Customs Union, this would only address rules of origin. Checks would still be needed on animals, animal products (including processed food), plants and plant products. Technical regulations and standards that define specific characteristics of a product would also require checks. If the UK was in a CU, not the CU (like Turkey), the UK would need movement certificates for all relevant goods. For these very reasons, a customs union on its own does not solve the Irish border question.
Let us look at some of these potential scenarios:
- Membership of the EFTA/EEA? We will need to prove origin, and consequently, there will be customs checks.
- Membership of a Partial Customs Union? We will need movement certificates and there would need to be checks for standards, TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary) issues.
- A Customs Union and EEA? We would still need movement certificates and some customs checks.
- A comprehensive Free Trade Agreement between the UK and the EU? Yes, this will require the complexities of the Irish border to be addressed.
- But what about leaving on WTO terms, a so-called ‘no deal’ scenario? Leaving the EU without a deal doesn’t absolve us from finding a solution to the Irish border. If anything, it makes it more important.
The second misconception is that there is no majority in Parliament for any Brexit alternative. But as avid BrexitCentral readers will know, the Brady Amendment was the only amendment during the recent Brexit debates to gain a parliamentary majority. Central to the amendment was the need to come to an agreed path on alternative arrangements for the Irish border.
The Alternative Arrangements Commission is – and was designed to be – a broad church. We welcome any parliamentarian who is committed to finding a workable solution to the Irish border, which means the UK can leave the EU.
The third misconception is that Alternative Arrangements for the Irish border would be a hi-tech unicorn, dreamt up by some futurologist in Silicon Valley and which would take years to develop. To that, I say, no, absolutely not. We are seeking solutions based on existing, working technology and processes. There just has not been sufficient practical work done on this by the Government or anyone else. And whilst this lack of work is regrettable, it does no good to look backwards.
The Commission has engaged a Technical Panel comprising border and customs experts, practitioners and lawyers with detailed knowledge of Ireland as well as the EU, UK and international trade regulations in order to create draft processes and procedures to fulfil our goal. In addition, the Commission will engage with established technology providers in order to develop a comprehensive set of solutions and timelines for review.
The Technical Panel will address the most challenging aspects of the Irish border including small traders, tax issues, security and movement of people, trusted trader schemes, rules of origin, financial settlement and issues relating to Sanitary and Phytosanitary Measures (i.e. treatment of food and plant-based goods).
The Commission is seeking solutions that are both realistic and sustainable and recognises that their formulation and implementation will require the engagement of many stakeholders in the UK, the Republic of Ireland and Europe. Central to the proposals will be a commitment to protecting the Good Friday Agreement.
There are no easy answers with Brexit, but I hope this Commission into Alternative Arrangements is the impetus for finding both the technical solutions and the political consensus for a deal with the EU. We owe it to the country, and Northern Ireland in particular, to do everything we can to create a seamless border in Ireland. Just because it has not been done before, does not mean it is impossible.
Anyone wishing to offer their expertise or to make a submission to the Commission can do so by emailing Greg Hands.
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Another week and another piece of good news in the real world – not the parallel, unproductive world of Westminster. Last week the UK was acclaimed as the global number one for investment – displacing the US, an economy nine times our size. But surely it can’t be true – the UK is leaving the world, after all; are we not shutting down as a result of Brexit?!?
We operate in parallel universes. While much of Westminster, our civil service and media spout daily tales of woe as Brexit is alleged to put up walls (Chancellor Hammond used that very phrase just the other week in a speech in the US), destroy opportunity and economic prosperity in the real world – the opposite has happened.
A central plank of the Remain case was that to leave the Single Market would make Britain irrelevant to the rest of the world and destroy inward investment. It really was that simple. Why would anyone invest in little Britain when they could go to the mighty France or Germany, as part of the EU?
This claim was repeated time and time again using the simplistic logic that we needed to be part of something big to trade with other countries. This logic is both defeatist and deeply flawed.
Trade and investment is about rule of law; stable governance; transparent, relatively low and stable tax; defendable property rights; educational, scientific and cultural excellence – and of course hard work, a good idea and strategic advantage – amongst many other variables. Trade deals were of pretty minor tier 2 importance in our view and as the UK trades at a surplus with the world – but has a £96bn deficit with the EU – under any sensible negotiations, a zero tariff mutual regulatory respect deal should easily have been possible. If Canada – which trades less than 10% as much to the EU as the UK does – can achieve it, why not the UK?
We only have to see how the EU prevaricates and quakes at the very thought of a so-called ‘no deal’ to know this to be true. Sadly the defeatists in our Government and Parliament don’t see it that way.
Global Britain argued, rather modestly, that Brexit in itself was no big economic deal. Brexit is not a panacea. It is a process, but one that gives an opportunity for the UK to do so much better than the dull, under-performing conformity of the EU.
Like a tool used properly, Brexit could enhance Britain’s global position and prosperity, but only if reasonably open, stable and non-arbitrary policies were adopted. There was much to go for, over time, as the EU’s regulatory regime doubled down by stifling innovation, choice and prosperity. You can already see that is the trend the EU is taking. Misunderstanding the EU’s direction of travel is why we were one of a small number of commentators to argue a vote to leave would enhance prosperity not detract from it.
It is now over two and a half years since the UK voted to leave and the evidence is increasingly overwhelming. The Jeremiahs of Remain were completely and totally wrong on almost every front: on growth, on City jobs, on total employment, on wage growth and now on investment.
Indeed, the polar opposite to their projections has happened. The global consultancy EY’s annual survey of investment trends, now it its tenth year, for the first time ever has put the UK as the world’s top investment destination – extraordinarily topping even the US, an economy far, far bigger than ours. Foreign Direct Investment (FDI) increased 6% in 2017 (the latest available figures) over the previous year, creating an estimated 50,196 new jobs. There were 1,205 new projects against 1,138 in 2016 and only 700 in 2012. Growth was strongest outside London, especially in the South East, East and South West. The UK is the clear European market leader in attracting FDI with 18% market share. FDI created 50,000 jobs in the UK, 31,000 in Germany, 26,000 in Russia, 24,000 in France and 23,000 in Poland. When surveyed about Brexit, 6% of investors said it decreased their attraction to the UK, while 7% said it increased their attraction.
The UK is the market leader in attracting US investment (24%) against second-placed France (16%) – with the level of investment going up from the US, Germany, China, India, Japan, Australia, Canada, the Netherlands, Switzerland and Spain. Only investment from France and Ireland saw declines. Key areas for investment, again perhaps counter-intuitively, were consumer products, industrials and financial services.
In short, global investors have flocked to the UK since we voted for Brexit – contrary to the Treasury and Bank of England claim that there would be an immediate lurch into recession.
The vote to leave has, if anything, encouraged investment into the UK. Doubtless our opponents will argue ‘well we haven’t left yet, so it is no surprise’. That argument simply will not wash. Investment decisions are not made on a whim, but on long-term analysis of opportunity. One does not invest tens of millions of pounds in hard capital and plant on a short-term view. Investors have known the UK was leaving and have voted with their wallets. They are here for the long term and that is despite a pathetic response from our Government.
Ironically, some of the biggest investors in the UK have been companies from the EU. Siemens of Germany has invested £200m in its new rail factory in Goole, with 700 direct and a further 1,700 supply-chain jobs expected as a result. The Spanish company CAF has opened its £30m Newport factory, creating 300 jobs, Bombardier from Canada is increasing production, creating another 300 jobs and Talgo is committed to opening a new £40m factory in Fife and a hub in Chesterfield, creating 1,000 jobs.
Boeing opened its first European factory in Sheffield last year following £40m of investment. Boeing supports 74,000 jobs in the UK – a 33% increase in the last five years – and spends £1.8bn with UK suppliers. And now, despite all the supposed worries about Brexit being a threat to British car manufacturing, BMW is considering expanding its Goodwood production of Rolls Royce cars after record worldwide sales.
These stories are just a snapshot of real news being released every week. The reality of what is happening in British investment – and especially manufacturing – is completely at odds with what is being presented by the opponents of Brexit and much of the media. It is often said UK doesn’t make anything anymore but the statistics say different: manufacturing employs 2.7 million people, contributes 11% of GVA, accounts for 45% 0f total exports (£275bn), is responsible for 69% of business R&D – making the UK the ninth largest manufacturing nation in the world.
It is also instructive that one of the key areas of investment has been financial services. Of course, the consensual voices claimed Brexit would destroy the financial services industry as it moved to Frankfurt. They also claimed that when the single currency was born. How ironic that overseas investment in the financial services industry is one of the top three sectors for investment.
How often can these official forecasters, who are given so much media airplay, be wrong? Why are they given so much weight by the media? There are numerous independent forecasters with consistently better records. We at Global Britain like to think we are one of them!
Global Britain argued that with the right policies Brexit was an opportunity for the City in the long term and in the short term perhaps 10,000 jobs might be at risk. Others, including the Treasury, claimed 70,000 jobs would be lost, an absurd near-quarter of all City of London financial services employment. The reality is we were too pessimistic. The decision to leave has had almost no measurable impact at all on the City, which continues to enjoy almost total dominance in European financial services. As the EY survey shows, this is the case across the economy too.
Let us look at what has happened over the last two years:
- Inward investment – the UK for the first time ever is the global number 1, displacing the US;
- Investment is broadly based across numerous sectors including manufacturing, IT, financial services and business services;
- Unemployment is now the joint lowest since 1974;
- Total employment is now 32.7 million – the biggest ever, growing by 800,000 since the referendum – contrasting with the Treasury’s predicted 500,000 fall in employment immediately on a leave vote – a positive gain of 1.3 million jobs over what was predicted;
- Wage growth in February was 3.5% – the joint highest on record (with 2008) – ahead of inflation which was 1.9% in the same month;
- The UK minimum wage is the highest of any major country in the EU and twice that of Spain, three times that of Poland and six times that of Romania. No wonder the UK is a beacon for workers; and,
- GDP has grown each and every quarter, in contrast to the absurd Treasury forecast of a fall of 5%.
Contrast this with the EU:
- Unemployment is over twice the UK level;
- Germany and Italy flirt with recession;
- Monetary policy remains at an all-time extreme. 10-year German bunds yield 0.05%. Despite this, the German economy stagnates;
- Failure to stabilise the EU banking system: significant unresolved stress in Italy, forced banking mergers in Germany – and Greece on life support, with that economy 23% smaller than a decade ago; and,
- Continuing migration away from the EU’s south to the UK and the north – where the opportunity is.
Of course the UK should not be complacent; much needs to be done to strengthen the public finances and tackle regional variances, but our opponents’ theological attachment to the EU is creating a false reality. Their lens is based on a utopian vision of what the EU is not. As the Americans say, “look at the math”.
Leave has been right about economic outcomes on almost every front. The latest inward investment numbers are further proof, if it be needed. Bizarrely the Conservative Party is so in awe of its failing Brussels cousin that it has lost the confidence to demonstrate our own strengths. The Conservative Government is snatching defeat from the jaws of victory based on a false reality and shameful distortion of the facts.
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How vital is it for the UK to maintain the absolute right to exit the Customs Union? As pro-Brexit MPs have their political will tested to destruction, this question has become the fulcrum of the UK’s attempt to exit the EU.
The answer lies in a painstaking assessment of the UK’s trading performance within the EU. Using Office of National Statistics Data, Part 1 of my analysis showed how the Customs Union accounts for easily the worst-performing element of UK trade. Part 2 analysed the cost — in particular to the UK’s car producers and food consumers. Here I put the UK’s performance inside the Customs Union into global perspective. With multiple, 20-year comparisons — in US–EU trade, intra-EU trade, UK productivity and EU growth — this analysis reveals that the UK’s track record inside the Customs Union has been uniquely poor, by every reasonable measure or comparison. (All data used here is presented and sourced in: UK Trade: Goods & Services and UK’s Top 10 Sectors. Readers are invited to peruse both.)
The UK’s stagnant exports: What’s not to blame
The UK’s poor EU goods-export performance – a growth rate of just 0.22% per year since 1998 – is often attributed to the EU’s own flaccid economic growth. As a root cause, however, this is easy to eliminate by making two comparisons: first by measuring the UK’s performance inside the Customs Union against the exporting prowess of multiple non-EU countries; and second, by analysing how our EU partners have fared with each other over a similar period.
First, the track record of non-EU countries. In April 2017, Michael Burrage compared the growth rate of the UK’s goods exports into the EU with the growth rates achieved by multiple non-EU countries in It’s Quite OK to Walk Away. Using seven international trade databases, Burrage calculated that the growth rate of UK goods exports traded tariff-free into the EU’s Single Market from 1993–2015 was lower than for 35 other countries, many trading under Word Trade Organisation (WTO) terms. In no particular order, the countries that outperformed the UK included: Canada, the United States, Singapore, Brazil, Switzerland, India, Bangladesh, and – just– Australia.
Of the major global economies, only Japan has performed worse.
Second, the record of the UK’s own partners within the EU. What should deeply worry Customs Union supporters is that the UK’s performance inside the Customs Union is uniquely poor even by European standards. According to Eurostat data, the UK’s goods export/import ratio (expressed as a percentage) within the EU has plummeted from 80% in 2003 to just 63% in 2017, far below Germany (now at 124%), France (86%), Italy (112%), Netherlands (113%), and Spain (91%). Incidentally, Ireland’s export–import ration with the EU stands at an impressive 155%.
As shown in Part 1, the UK’s services exports to the EU do not and cannot redress the UK’s resulting trade-in-goods deficit, so long as the UK stays in the Customs Union.
What these comparisons reveal is that the UK’s goods-export performance with the EU since 1998 is uniquely poor, even though the UK’s EU-bound goods exports is precisely the sector the Customs Union is supposed to promote. The UK’s failure cannot be attributed to the EU’s own poor economic performance, since virtually every other major economy in the world has performed better over the past 20 years whether they happen to have been a member of the Customs Union or not. Suppose, then, the UK has just been uniquely unlucky in the range of goods it exports to the EU? Suppose the types of goods the UK makes are flukishly unsuited to the terms of the Customs Union and the tastes of Europe’s consumers?
Uncle Sam thrashes the UK in Europe
Fortunately, we can test this assertion too, because the United States’ own trade with the EU presents an almost heaven-sent comparison. The reason is the near equivalence in the value of the UK’s and US’s goods exports to EU back in 1998, and a startlingly similar range of export products – from aerospace goods and motorbikes to construction-site diggers and whisky.
Back in 1998, US goods exports to the EU were fractionally lower than the UK’s: £91.7 bn to the UK’s £99.9 bn at the prevailing exchange rate (UK Trade: Goods & Services, Tab 3, Section 10). But since then – more precisely, since 2008 – US goods exports have grown far more quickly. Over the entire, two-decade period, US goods exports to the EU have grown at a compound annual growth rate (CAGR) of 2.11% per year — as opposed to the UK’s 0.22% per year (Section 9).
Analysts can never say how the UK’s EU trade would have evolved from 1998 to 2017 if the UK had been outside the Customs Union. But a few deft comparisons – with non-EU countries’ trade, with intra-EU trade, with US trade growth, with the UK’s productivity growth, and with the EU’s own growth rate – reveal that by any reasonable comparison, the Customs Union has failed to deliver value to UK exporters since 1998 (For calculations and sources see UK Trade: Goods & Services).
The result: after 20 years of not being in the Customs Union, nor having a bilateral trade agreement with the EU, nor participating in Single Market rules, the US has comprehensively outstripped the UK as a goods exporter to the EU, with exports worth £219.8 bn in 2017 as opposed to the UK’s £164 bn. From near parity in 1998, US goods exports to the EU have grown almost 2% faster per year than the UK’s and are now 35% more valuable. As far as any analysis ever can, this dramatic divergence in export performance proves that seamless, tariff-free trade with the EU is absolutely not vital to exporters.
So, what is going on? Economists may one day discover that the Customs Union has been positively deleterious to UK producers as opposed to plain unhelpful. For what it’s worth, this author observes that Customs Union confers no commercial advantage in sectors where the UK is highly competitive (aerospace, defence jet engines, pharmaceuticals), and gives EU companies preferential access where the UK typically isn’t (mass-market cars, food, agriculture, machinery). And where the Customs Union provides no advantage, EU customers often procure US goods: EU airlines’ general preference for US-made turbo-jet engines would be a good example (UK’s Top 10 Sectors, Tab 2 (Transport), Section 5).
Nevertheless, the immediate issue is practical: Is the UK’s experience inside the Customs Union sufficiently bad that the absolute right to exit is worth the risks of a unilateral exit from negotiations and trading with the EU on WTO terms? In the global scale of poor trade relationships, does the end result of the UK’s experience in the Customs Union – a steadily deteriorating £95 trade deficit – really matter?
The £95 billion warning sign
The most logical comparison is, again, with the United States. That country, too, runs huge trade deficits in goods, which are partly redressed by surpluses in services. It’s biggest is the (2017) US$337 billion trade deficit with China. Highlighting this deficit formed a major element in Mr Trump’s campaign for the White House. US trade policy aims to reduce it.
So how does the scale of the UK’s deficit with the EU stack up with the US deficit with China? Are they of equal import? Or, to fashion the question more bluntly: should MPs worry that at some point, the UK’s £95 bn deficit with the EU will become an incendiary political issue all of its own?
If you convert the UK’s overall 2017 EU deficit into US dollars (goods plus services) at an exchange rate of $1.35 to £1, the resulting UK–EU deficit is $78.7 billion. But then the US economy is approximately 6‒7 times larger than the UK economy. Taking that into account, the UK has a deficit in comparative terms approximately 47% bigger than the US’s (Tab 3, Section 8).
More generously, you can translate the dollar trade deficit into a deficit per head of population, which gives a UK‒EU deficit of $1,216 per head, as opposed to a US‒China deficit of $1,050 per head. Calculated this way, the UK has a headache that is 16% more painful than the one that helped get Mr Trump elected.
Regardless of how adeptly the UK uses this deficit in future trade negotiations, it will, since it is deteriorating, eventually transmute into a political debate about the impact the Customs Union has on jobs. At that point, proponents of a new UK‒EU customs union – or indeed, any form of apparently seamless trade – are likely to hit extremely choppy political waters.
No, the Customs Union doesn’t create jobs
The reason for caution is the glaring discrepancy between the growth rates of exports and the UK’s own productivity growth rate (UK Trade: Goods & Services, Tab 3, Section 9). Observing that hundreds of thousands of jobs currently depend on trade with the EU is a quite different proposition to saying that membership of the Customs Union and Single Market has created jobs that otherwise wouldn’t exist — or that it isn’t steadily removing them.
The difficulty here is that the UK’s annual goods-export growth rate to EU (0.22%) is far lower than those other metrics which economists would normally expect it to exceed. It is just one-tenth of the UK’s average 1998–2017 GDP growth rate (2%, according to ONS). It is also slower that the Eurozone’s own growth rate, of 1.56% per year (calculated from 1995 – 2018, Section 5).
But the UK’s goods-export growth to EU is also far slower than the UK’s productivity growth rate over the same period ‒ 1.19%, according to ONS ‒ which is the rate at which UK companies and organisations become more efficient each year. This means it is statistically impossible for there to be more people engaged in EU goods-export activities in 2017 than in 1998. Which means, in turn, that the Customs Union cannot – net – have added a single job to the UK economy since 1998. Statistically, there have to be fewer jobs (as measured in value) involved in exporting goods to the EU in 2017 as compared to 1998 — despite the Customs Union.
In contrast, the growth in the UK’s EU trade deficit from -£5.6 bn in 1998 to -£95 in 2017 denotes the creation of hundreds of thousands of jobs in other EU countries, to supply goods to UK markets. This author roughly estimates the number created in EU to supply the UK’s motor market alone since 1998 at just over 40,000 (see Part 2). It is clear that continental Europe benefits greatly from keeping the UK in the Customs Union. What the UK gets out of it is – statistically – a mystery.
Summary – The Customs Union fails to deliver
So: if the Customs Union and Single Market have gently throttled UK export growth over 20 years; if they deliver crushing deficits that the UK’s non-EU trade then has to pay for; if their quality of seamlessness lies principally in helping investment slide overseas; if they force-feed UK households on the most expensive food on earth while offering no reciprocal advantage to any sector of UK trade except financial services, and then only in a limited way; if the reason for stagnant exports can’t easily be attributed to anything other than the Customs Union and Single Market themselves; and if the end result is a deficit 16% worse than the one that helped gain the Presidency for Mr Trump, then the UK’s strategic interest should be crystal clear.
Whatever its theoretical benefits, it has proven to be the wrong customs union for the UK since 1998. It delivers no commercial benefit to the UK’s fastest-growing manufacturing sectors (pharmaceuticals and aerospace); and leaves all the UK’s other major goods-export sectors in a state of either stagnant growth, huge deficits, or both. By any reasonable comparative measure the UK’s performance inside the Customs Union since 1998 is the picture of a failed trading relationship. And yet clinging to that failed relationship may now prevent the UK from liberalising trade with export markets that have grown quickly during the past 20 years – markets that are receptive to UK goods; markets that actually create jobs.
If the price of the UK’s exit from the EU is remaining in the Customs Union, then the cost will be paid by the UK’s manufacturing industry. That’s the lesson of the past 20 years.
As we approach either 12th April or 22nd May 2019, it is worth recalling the chain of events which has led to where we are now.
The 2016 referendum produced a 52% to 48% majority in favour of Leave which the Prime Minister’s Lancaster House speech in January 2017 proposed should be implemented by the UK leaving the EU’s Single Market and the Customs Union and negotiating a free trade deal along the lines of the CETA negotiations between Canada and the EU.
With over two years to go between January 2017 and March 2019 and a model agreement between the EU and Canada on which to draw, a starting point of 100% alignment and indications from the EU that they thought that this was a viable way forward, the omens for a reasonable outcome being achieved looked relatively promising. The result of the 2017 general election, however, fatally undermined this relatively benign potential outcome.
This election was called by the Prime Minister with the intention of strengthening her majority in the House of Commons, to achieve the best chance of a smooth passage through the House of the necessary legislation to implement her Lancaster House proposals. Unfortunately, from her point of view, the outcome was the opposite to what she planned. The Conservative majority in Parliament disappeared, leaving the Tory Party dependent on DUP votes to provide it with a working majority.
Although all the Labour and Conservative Members of Parliament elected in 2017– over 80% of the total numbers of MPs returned – had stood on manifesto promises that they would implement the referendum result, there was a large majority – between 75% and 80% of MPs elected – who were of a Remain persuasion. They were not prepared to contemplate proposals along the Lancaster House lines. They were determined to keep the UK much more closely involved with the EU. Specifically, they wanted to remain at least partly in both the Single Market and the Customs Union.
It was trying to maintain free movement of goods within the Single Market framework and attempting to stay within the Customs Union, particularly to avoid a border problem between Northern and Southern Ireland, which led to the Withdrawal Agreement which Parliament rejected in January and again early in March. The EU were always uncomfortable with the UK being partial members of the Single Market and the Customs Union for understandable reasons. Maintaining the four freedoms – the movement of goods, services, capital and people – was a prime EU objective.
Understandably, the new UK aspirations were regarded by the EU as a serious threat to their security and integrity. The situation was further muddied by the UK agreeing to discuss citizenship, the Irish border and money before trade. This led to the Government getting desperate by late 2017 to get the trade negotiations going, leading to the UK conceding the Irish backstop arrangements in December 2017 which eventually got into the Withdrawal Agreement. The overall result was an Agreement so unsatisfactory to the UK that when a vote was held on it in January 2019, it was voted down by an unprecedented majority of 230, with a lesser but still large majority of 149 against it in early March 2019.
The problem is that rejection of the Withdrawal Agreement has left the House of Commons with no majority for any of the various possible ways ahead – as we saw confirmed last night – and a very short amount of time to get anything settled. Support for the so-called Norwegian option – with the UK in the EEA and EFTA – seems to have melted away. No majority in Parliament exists for a second referendum, which has recently been voted down by a majority of 249. A large majority exists for avoiding “No Deal”, but this eventuality can only be stopped if there is some concrete alternative in place, and it is far from clear what this might be.
It is obviously far from an ideal outcome for the UK to be drifting towards “No Deal” – the default outcome if nothing else is agreed before 12th April 2019 – with far too little preparation for it having been arranged and with no longer-term plans for this type of outcome as a favoured option having been made. Much then turns on a realistic assessment as to how disruptive and difficult “No Deal” would be.
Among some people – including evidently a substantial number of MPs – there appears to be an assumption that “No Deal” would be so damaging that it is not worth even trying to make a detailed assessment as to how difficult the situation might be and whether “No Deal” might be better as an outcome than the Withdrawal Agreement. There is little doubt that there would be disruption at least for a while, with some sectors of the economy much more adversely affected than others. Overall, however, especially if mitigated by a significant number of mini-deals on such key issues as flows of traffic at Dover and Calais, aircraft rights of movement, supplies of medicines etc, it seems likely that the challenges to the economy would be manageable.
There are also a number of significant upsides to “No Deal”. We would not be committed to paying the EU £39bn with no clarity as to what we would receive in return. The Irish border problem would have to be resolved by allowing trade to take place electronically for large companies and with exemptions for small ones, assuming that no-one wants a physical border. There would be no restrictions on the UK negotiating free trade deals. The huge trade deficit we have with the EU should put us in a reasonably strong position to negotiate a free trade deal with the EU on satisfactory terms. At the moment, however, Parliament has voted by a large majority against “No Deal” as an option that it is prepared to accept, although it remains the default outcome if nothing else is agreed. Whether it was wise to relinquish at this stage such a vital negotiating card with the EU remains to be seen.
If there is not going to be a “No Deal” exit from the EU by the UK on 12th April 2019, a further extension of Article 50 now seems inevitable. Unlike repealing Article 50, which could be done unilaterally by the UK, extensions require the unanimous assent of all 27 EU Member States and the European Parliament, whose last sitting date before its forthcoming elections is 18th April 2019. If there is any kind of deal agreed before 12th April 2019, a short extension would be necessary to provide time for passing the necessary legislation to make the deal effective. If the Withdrawal Agreement is not agreed, however, the EU is likely to insist on a much longer extension, possibly for as long as two years or more. They are also likely to try to make any such a delay conditional on the UK either holding a general election or a second referendum, although it is difficult to see how Parliament could be bound to follow through on any such undertakings if it was minded not to do so. During this period, the UK would remain in the EU and we would very probably be obliged to take part in the European Elections taking place in May 2019.
Postponement of any final decision on the UK’s fundamental relationship with the EU for a period of years would deal with the immediate problems faced by companies trading between the UK and the EU. It would maintain the status quo on the wide range of arrangements we have in place with our European neighbours, but it would also have heavy downsides.
It would inevitably prolong the uncertainty hanging over our relationships with the EU. A further long period of potentially acrimonious negotiations would be in prospect, providing a continuing major distraction from other pressing priorities. It is not clear that a general election would produce a parliament any less split than the one we have already, and therefore in a better position to negotiate a deal more generally acceptable than the one enshrined in the Withdrawal Agreement.
Another referendum would also be fraught with all the problems which caused it to be voted down as a way ahead in March 2019. Apart from concerns about its democratic legitimacy, it looks like being foisted on a government which would not want a referendum, with all the difficulties that this would entail in terms of getting the necessary primary legislation onto the statute book. There are also obvious problems around delay, uncertainty, cost, what the choices to be put to the electorate would be, let alone the impact on the country which a highly contentious referendum would entail – and with no certainty about what the result might be.
Faced with all these difficulties, what should the country – and particularly the Labour Party do? There are essentially four options ahead of us, whatever processes and procedures we may have to go through to get there. We either:
- accept the Withdrawal Agreement or some close variant to it
- rescind Article 50 and remain in the EU
- leave the EU without an agreed way ahead
- accept a much longer extension to provide time for a new approach
The vast majority of Labour MPs would undoubtedly like to see the second of these options as the eventual outcome. So would most Labour Party members. Traditional Labour voters, however, would be much more evenly split and a lot of these people live in marginal seats in Wales, the Midlands and the North.
Few Labour MPs, party members or voters are happy with the Withdrawal Agreement. While the electorate as a whole now seems much more inclined to go for “No Deal” than they did before, this is not an outcome favoured by either the Labour Party leadership or by the majority of Labour MPs.
What do Labour sceptics grouped round Labour Leave think should be done? We think that accepting the Withdrawal Agreement is an even worse option than staying in the EU and that there is less to fear from “No Deal” than most people in Parliament seem to think. At the very least, therefore, we think that “No Deal” is an option which should be kept in play. We still believe, however, as we always have done, that as comprehensive as possible a Canada+++-style free-trade deal between the UK and the EU, with the UK out of the Single Market and the Customs Union and the Common Agricultural and Common Fisheries Policies, would be the best outcome. This is why we think that extending Article 50 to give us time to negotiate a comprehensive free-trade deal is now the best long-term way ahead, providing both Leavers and Remainers enough of what they want to lead to an acceptable and permanent settlement.
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On Monday, the Prime Minister said “no government could give a blank cheque to commit to an outcome without knowing what it is, so I cannot commit the Government to delivering the outcome of any votes held by the House, but I do commit to engaging constructively with the process.”
She went on to say that “no-one would want to support an option that contradicted the manifesto on which they stood for election to this House.”
There were a barrage of complaints, chiefly from Opposition MPs. But many others have said that it is not in Parliament’s right to overturn the decision of 17.4 million people voting in a referendum commissioned by Parliament itself. Are they right?
In my time as an MP, I have fought many battles to defend Parliament’s rights over the executive. I did this for one reason. Parliament’s legitimacy, its power and authority, is based on the fact that it represents the people of the United Kingdom. In this case, however, Parliament’s authority is trumped by the democratic decision of 17.4 million people. This is the first time in our history that this has happened, and it raises a serious constitutional question. When Parliament and people clash, to whom does the government owe its first duty?
Today, Parliament’s authority comes from its democratic mandate. MPs have a duty to do what they believe is best, but they also have a duty to represent the interests of their constituents. They are representatives, not delegates. However, in 2015 Parliament chose by a majority of 263 to outsource the decision on our membership of the EU to the people. They made their decision. It is incumbent on Parliament to deliver on that decision.
The 2016 referendum was the biggest democratic exercise in British history. Turnout was high, with 72% of the entire electorate – 33 million people – having their say. Well over a million more people voted to Leave than did to Remain. The turnout was higher than in any general election since 1992, and more people voted for Leave than any other issue – or party – in our long and distinguished democratic history. Had it been a general election, it would have been a landslide that dwarfed Tony Blair’s victories.
Political parties from across the spectrum recognised the power of this referendum in the 2017 General Election. Both the Conservative and Labour parties swore in their manifestos to leave the Single Market and the Customs Union. In total, over 85 per cent of people voted for parties committed to this course of action.
Despite this, those opposed to Brexit are still trying to argue, disingenuously, that the people did not know what they were voting for. They claim that the people did not understand the risks or the implications; that they did not have the full facts.
Well it is true that the Government of the day did not give them the full facts.
The gloomy predictions of the Government’s Project Fear simply have not come to pass. We were told that if the people voted to Leave, there would be an immediate economic shock of a 6 per cent drop in GDP. There were dark mutterings of over 800,000 jobs being lost.
What has really happened? The UK economy is now growing faster than Germany and the Eurozone average. We have more jobs than ever before. We attracted more foreign investment in 2018 than anywhere else in Europe. In the face of the bogus official projections, gainsaid by all of the facts and all of their own experience, who could blame a plumber from Peterborough or a bricklayer from Birmingham if they choose to trust their own judgement over the supposedly better-educated elite?
The Establishment likes to believe it knows better, but this is certainly not always true. It did not foresee the 2008 economic crash, they wanted us to join the ERM and many argued for us to join the euro. This is hardly a record of competence anybody should rely on.
It is often said “people did not vote to be poorer”. This is no more than a patronising dismissal of the electorate’s justified realism. The people understood that forecasts can be wrong and that Treasury forecasts almost always are.
The British people knew exactly what they were voting for – and they rightly expect Parliament to deliver it.
And the more that the people hear that they did not know what they voted for, the more their opinion crystallises. We need only look at yesterday’s ComRes poll, which shows the largest yet recorded support for a no-deal Brexit. Over 40% of people believe we should leave on WTO rules, a number that grows every week. The idea that Leave voters did not vote to leave the Customs Union or the Single Market has no grounding in fact. It is patronising, and dismissive of their views.
So the Prime Minister is right to listen to Parliament, but she is also right to rule out any options that do not meet the democratic decision of the British people. Yesterday’s ComRes poll showed that a clear majority of people believe that attempts by Remain-supporting MPs and other Establishment figures to block Brexit were undermining the UK’s negotiation position. More than half believe that if MPs go against the 2016 decision it will irreversibly damage democracy. So the Prime Minister’s first democratic duty is to the electorate directly, to deliver a proper Brexit as soon as practically possible.
In the final analysis, the Prime Minister is the servant, not of Party, nor of Parliament, but of the people, and that should be her guiding principle throughout the Brexit process. Otherwise the British people will lose faith in their democracy, and the United Kingdom will face its Trump moment.
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