High summer marks ‘the silly season’ in journalistic parlance. Amidst a dearth of news stories, hacks scramble around for material – and much speculative nonsense finds its way into print.
We’ve seen important and, indeed, disturbing news this summer. Media attention over the last week has rightly focused on Charlottesville, Virginia. And what looks like another terrorist attack in Europe – this time Barcelona – now leads the bulletins.
During the first half of August, though, the headlines were hogged by the return of Project Fear – as various attention-seeking former government insiders repeatedly warned us, again, that Brexit will be disastrous. The silly season also brought endless reports of ‘cabinet infighting’, as ministers debated a ‘transition phase’ between EU membership and leaving completely once the Article 50 talks end in March 2019.
I backed Brexit but never said leaving would be easy. And while I maintain the UK’s economic prospects are enhanced outside the EU, we still need to grab the opportunities Brexit provides. Implementing pro-growth policies and striking trade deals with the fast-growing, populous economies that will dominate the 21st century, will take courage and leadership. Brexit gives no guarantees.
I have to say, though, even though I’m a Brexit realist, and despite the forecasts of woe, I’d say the UK’s negotiations are going quite well. The main reason is that, while there are inevitably disagreements across government, the main thrust of the British position is coherent and has been for some time.
Ever since the Prime Minister’s Lancaster House speech in January, it’s been clear the government wants to leave the single market. That makes sense. Inside the single market, Britain remains liable for multi-billion pound annual EU pay¬ments, while being forced to accept European Court of Justice jurisdic¬tion and freedom of movement rules. That isn’t Brexit.
The benefits of the single market, meanwhile, are grossly exaggerated. Leading non-EU economies like the US and China sell hundreds of billions of dollars’ worth of exports to the EU each year, without meeting onerous ‘membership’ conditions – the UK can do the same. Also, the single market in services barely exists, which penalizes Britain, the world’s second-largest services exporter.
The government has also been clear the UK is leaving the customs union – which, again, makes sense. Inside the customs union, we cannot cut free trade agreements with the fourth fifths of the world economy beyond the EU. The EU’s Common External Tariff also makes UK imports dearer, in-cluding food – and results in us sending additional millions of pounds to Brussels.
Despite decades of trying, the EU has no trade deal with the US, China or any other top-10 world economy – given the difficulties of negotiating as a bloc of nations, each with conflicting objectives. The EU’s trade deals are with nations that, between them, account for less than a tenth of global GDP.
Switzerland, which isn’t in the EU, cut a trade deal with China in 2013, after two years of talks. Why not Britain too? And far from being ‘at the back of the queue’, a UK–US trade deal looks feasible. Striking agreements with China and the US would cover 40pc of the world economy, blowing the EU’s trade deals out the water. And if we can get an agreement with the EU itself, after March 2019 if necessary, Britain would have preferential trading rights with nations covering three fifths of global GDP.
Some Brexit supporters view a ‘transition’ as some kind of sell-out. I’m happy with such an arrangement, if it helps businesses shift from one trading regime to another and is strictly time-limited. The idea of an implementation phase isn’t controversial – again, it was outlined in the Lancaster House speech seven months ago. The transition is also about providing support for domestic UK sectors – such as agriculture and some parts of manufacturing – as they move off EU subsidies and potentially face tariffs, if striking an EU free trade agreement takes longer than expected.
Despite this summer of skirmishes, there is now broad agreement across both the Conservative and Labour leadership that a transition is needed. This addresses ‘cliff edge’ concerns, limiting damage to trade and jobs. Large EU exporters, with much to gain from on-going tariff-free UK trade, are also now pushing for a transition deal.
Some Labour MPs, defying their leader, have spent the summer advocating Soft Brexit – with the UK remaining in the single market, while avoiding freedom of movement. This would betray the referendum result and is anyway unavailable. There is no way the EU will let us ‘cherry-pick’ – as Chief Negotiator Michel Barnier has repeatedly said.
Attempting to negotiate Soft Brexit would cause an almighty rift with the EU, possibly sparking a systemic crisis that could tear the bloc apart – what EU insiders call ‘the Pandora’s box of disintegration’. Those pushing for Soft Brexit because it suits their domestic political interests don’t understand how the EU works.
It also became clear over the summer that, a year on from the June 2016 referendum, the Treasury’s garish forecast of ‘an immediate and profound economic shock’ following a vote to leave was alarmist nonsense – as some of us said at the time.
The UK economy has performed quite well since the referendum, growing by around 2pc, while attracting record foreign direct investment and with unemployment now at a 42-year low. The only forecasters who predicted this outcome were Economists for Brexit – a group of non-aligned academics and industry analysts who re-launch this weekend as Economists for Free Trade. The same group now predicts that trade deals and other Brexit-related reforms could boost UK GDP by 6.8pc over the coming decade. A welcome antidote to Project Fear.