The destination for the Brexit deal
By Tom Kibasi
With the publication of the European Council’s negotiating guidelines we are once again able to discover more about the likely shape of final Brexit deal from Brussels than from Westminster. The irony that a vote that demanded sovereignty has produced the reverse should not be lost on us: it is a democratic disgrace that European bureaucrats operate with greater transparency than our own government. Here’s where things currently stand.
In her Mansion House speech, the Prime Minister set out a blueprint for a ‘Canada plus’ hard Brexit. This means Britain will have no customs union with the EU and will have a distant relationship to the single market, free to set its own regulatory framework but subject to new barriers to trade. The EU has responded in kind by agreeing negotiating guidelines for a traditional interests-based trade agreement. This is wholly inadequate proposal for our economy which is deeply integrated with the continent.
The Council’s negotiating guidelines reveal tough choices for the UK. The EU is willing to agree to zero tariffs on goods – but only in return for reciprocal access to fishing waters and, inevitably, the application of costly rules of origin checks necessitated by the absence of a customs union. The guidelines say the UK-EU agreement will include chapters on Technical Barriers to Trade and Sanitary and Phytosanitary measures – but these are normal for FTAs and are unlikely to come close to the kind of mutual recognition that the UK is seeking.
The UK will be offered market access to provide services “under host state rules”. This means we will be out of the single market in services and so will face new regulatory barriers such as national licenses and authorisation checks, and there will be no passporting. Ominously, the two areas that May explicitly highlighted in the Mansion House speech as important for our trade – financial services and broadcasting – get no mention in the guidelines at all. We are heading for a much harder Brexit than most of the political class and commentariat currently appreciate.
Bizarrely, it has been our own Government that has taken us to a position that runs counter to our national interest. Historians will puzzle at the politics of the Conservative Party that could only reach a truce on the basis of an arrangement that was precisely the inverse of what should be expected. Senior European officials express exasperation and resignation: in their view, the UK will end up aligning to European regulations in order to trade with the single market, but with no say nor framework to influence them. ‘So be it’ is the typical response.
The decision to head down this path has a further political implication. Precisely because of the complexity of an interests-based trade negotiation, it must be negotiated ‘bottom up’ – that is, sector-by-sector, detail-by-detail. That takes time. As a result, we will leave the EU without a concrete agreement on the future partnership. All that will be on offer is an outline of the future deal, most likely as a protocol or annex to the legal text of the Withdrawal Agreement.
At the end of last year, the Government reluctantly conceded to a “meaningful vote” on the final Brexit deal. Yet a vote on a firm withdrawal agreement and a flimsy future partnership is by definition meaningless. It would simply be a vote to endorse a hard Brexit – no customs union, distant from the single market – with no firm basis for the future. It is a dangerous approach for Britain that deserves to be resisted by Leave supporters and Remain supporters alike.
Once Britain leaves in March 2019, the EU will hold most of the cards: we will go naked into the negotiating room for the future partnership. The UK will have traded one of its most significant negotiating cards – the financial settlement of nearly £40 billion – for the standstill transition. We will have lost the ability to change our minds and withdraw article 50 notification. By insisting on a time-limited transition – rather than a formulation such as ‘as short as possible, as long as necessary’ – we will not be able to play for time.
Moreover, the single market is much more important to us than the UK market is to any of the 27 remaining member states. While the single market accounts for nearly 50% of total UK trade in goods and services, the UK accounts for less than 8% of total trade for most individual EU states. Only for Ireland, Luxembourg, Malta and Cyprus is UK trade more significant, and even then, it is 16% or less. In short, we need them more than they need us. That’s why scale always trumps agility in trade negotiations.
Both Leavers and Remainers should hold the Government’s proposal to the test of national interest. On the existing trajectory, the Government will ask Parliament and the country to take a leap in the dark: exiting the EU with no firm agreement for the future partnership in place. It is the consequence of a negotiating strategy that has by necessity optimised for consent in the governing party.
That’s why pressing for a second referendum is a fool’s endeavour. It is pointless to have a referendum after we have left the EU and it is not possible to have a referendum on a non-existent deal. The focus should therefore be on whether the Government’s proposed approach is good enough for the country or whether they should be sent back to the negotiating room. The Government is set on a hazardous path. Time is running out. A new negotiating strategy and Brexit proposal are urgently needed. Britain needs a plan B.
