Theresa May has long refused to give a running commentary on her negotiations with the European Union. Last week, in a moment of high Parliamentary drama, the Prime Minister conceded her government will now publish a “Brexit plan” before triggering Article 50 by March next year.
Having backed Brexit, I’ve always recognized it may be unwise for the government to disclose its desired negotiating outcome. These two statements aren’t linked. However you voted in June, everyone should acknowledge the potential downsides of the UK showing its hand ahead of what could be some extremely hard bargaining.
That hasn’t stopped numerous Remainers from insisting ministers “have no plan” and “are clueless”, as they demand full disclosure. Many of doing so, of course, to spread Brexit-related alarm – trying to whip up a panic and somehow stymie or even reverse the clear referendum result.
The complexity of any negotiation involving 27 countries, each with their own commercial lobbies and electorates, means any detailed Brexit roadmap would be obsolete before it was written. So the government, having just secured a Commons majority to invoke Article 50 in return for “a plan”, could justifiable produce something vague.
I’d argue, though, there’s now a strong case for the government, quite soon, to make a very clear and statement with regard to the outcome it wants – and then to stick to its political guns. So long as that desired outcome is “Clean Brexit”.
I’d identify three basic Brexit models. The first is joining the European Economic Area – the “Norwegian option” – involving continued multi-billion pound annual payments to Brussels, while accepting numerous EU rules and regulations – including “freedom of movement”. This isn’t Brexit and, in my view, would be a betrayal of the referendum result.
The second, and most widely-envisaged option is a bespoke UK deal. We’d invoke Article 50 as the government has indicated, using the subsequent 2-year negotiating period to bend EU rules to our will – trying, in particular, to maximize control over our borders while minimizing the constraints placed on our EU trade.
This might be possible. As the world’s fifth-largest economy, with a £60bn trade deficit with the EU, the UK can surely get a better deal than Norway. A “bespoke UK” option, though, would involve a drawn-out and acrimonious negotiation. The outcome of any deal, almost by definition, wouldn’t be known until the moment before the two-year deal-making window expired – prolonging business uncertainty and hindering both domestic and foreign investment.
It must also be recognized, given the UK would be going head-to-head with the EU, attempting to weaken links between the various “pillars” which hold the entire European project together, that a very real possibility is an extremely bad-tempered “no deal”. With the UK seeking to dismantle EU rules, and Franco-German EU lifers fighting back, a multi-year UK-EU negotiation could easily end in stalemate.
Uncertainty would then become semi-permanent, seriously harming all of Western Europe as a place to do business. Voters on both sides of the Channel would despair at the rank incompetence of their leaders. The UK, in particular, would be in a terrible state. We’d have torn incurable fissures across the British electorate and wrecked our relationship with the EU, making future cooperation all but impossible – and for what?
So I strongly favour the third option – “Clean Brexit”. Parliament passes the “Great Repeal” bill that May has already outlined, carrying over relevant EU statute into domestic law. We then send our Article 50 letter and leave – quitting both the single market and the customs union.
Under Clean Brexit, the UK trades with the EU under World Trade Organization rules. That won’t be denied – as we’d take the EU to WTO arbitration and win. WTO rules are in no way a disaster for Britain. They currently govern our trade with countries including the US and China that make up the 85pc of the world economy that’s outside the EU.
The non-EU accounts for almost 60pc of our trade and rising. While we have a huge EU deficit, with the non-EU we run a £30bn surplus – all under WTO rules, outside the single market. The non-EU, then, generates the bulk of our trade, the part that is growing and where we register a surplus.
The single market – despite its appealing name – is a deeply imperfect set of rules that discriminate against the services in which Britain excels. The maximum EU tariffs we’d face are well within single digits. On manufactured goods, the average is 2.4pc – far less than the recent fall in sterling. And that’s a worse case scenario. The importance of the UK to German carmakers, French food producers and the rest of them means we can expect to negotiate tariffs down much further.
There’s lots of alarm about preserving the “passporting” of financial services. Such concerns, trumpeted by big City companies that don’t like change, are massively overdone. Yes, the UK’s financial services industry is important. But
the EU accounted for just 33pc of our financial services exports last year, while the country which took most was America – where we have no free trade deal. Passporting would be good, but we can live without it. Many non-EU members anyway trade financial services using EU “equivalence” rules – which would apply to a Brexited UK.
“Leaving the customs union” is also often presented as a mortal sin. Once out, though, many imports – including food – would be cheaper, as shoppers would avoid the related tariff on non-EU goods. And, free of the customs union, we could finally strike trade deals with the populous, fast-growing emerging markets, beyond the EU, which will soon be the most important economies in the world.
Clean Brexit is democratic. The Great Repeal means that, in the short term, nothing changes. Then, in our own time, over several electoral cycles, UK ministers and our Parliament decides which EU laws and regulations we retain and which we alter. That’s how it should be. Our annual contribution ends and, leaving the single market and customs union, we strike UK trade deals and take control of our borders.
The government should state all this in March, on invoking Article 50. That’s ahead of upcoming French and German elections, next spring and late-summer respectively – which is vital. We tell the EU we want to trade under WTO rules, we don’t want kind of drawn-out negotiation over borders or the single market, but we’re happy to consider UK-EU sector-specific trade deals of mutual benefit.
During the upcoming continental elections, then, the French and German car-making, pharmaceutical and food-processing giants will know the EU needs to cut a deal with Britain to retain tariff-free access to the UK market. These powerful industrial lobbies will try to extract pro-UK concessions from the various candidates, doing our lobbying for us. Remote politicians, perhaps looking to bash Britain on the election stump, will be reminded by their own people that the EU’s free trade with Britain underpins millions of jobs and billions of euros of profit.
I reject the term “Hard Brexit”. It’s used by those who lost the referendum and want to make leaving the EU seem extreme. Quitting the single market and customs union voluntarily, avoiding a tortured “single market-free movement” negotiation and using WTO rules isn’t ideological. It’s a practical, transparent position that limits uncertainty while minimizing damage to the UK, the EU and our on-going relationship. Clean Brexit is the way to go. Forced to disclose her plans, Theresa May should go the whole hog.