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Peter Young: Eu Standoff As Britain Needs A Trade Deal

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Peter Young

By PETER YOUNG

WHILE Britain’s departure from the European Union in March next year is fast approaching, Prime Minister Theresa May’s government is still embroiled in negotiations about the nation’s future economic relationship with the bloc after Brexit – a term now firmly in the modern lexicon.

In The Tribune last week, I described briefly the history of Britain’s involvement in Europe and looked at issues related to her EU membership and the decision to end it following the United Kingdom’s in/out referendum in 2016.

The arguments for and against leaving are finely balanced with a substantial body of opinion on both sides of the debate.

Against a background of so-called Project Fear and its gloomy predictions about Britain’s potential economic collapse with a weaker currency, job losses and a soaring cost of living, Remainers regard it as madness to withdraw from an EU of 500 million consumers which takes about 45 per cent of the UK’s exports with no tariff barrier, and they consider that the flow of immigrants fuels economic growth. Being outside the bloc would not only result in a loss of trade with the country’s neighbours but also make it less attractive to foreign investors no longer able to export tariff-free to the huge EU market from a manufacturing base in the UK. Britain would also lose the influence and power gained from EU membership.

By contrast, Leavers see the issue primarily as one of sovereignty. They want Britain to regain her independence by taking back control of her borders, laws and money. They maintain that the huge annual cost of EU membership outweighs the benefits in return, and any loss of trade from leaving the single market would be offset by managing her own trade and regulatory policy and being able to do new deals with the rest of the world. They say that businesses in the UK are hampered by the regulatory burden imposed by Brussels which affects all even though the vast majority of small and medium-sized businesses do not trade with the EU. The UK would no longer be subject to the European Court of Justice or to EU directives that have become part of UK law, but in all other areas it would continue to cooperate with European partners, not least in areas like security, policing, counter terrorism, the environment and transport.

Notwithstanding these differing views, the point in the withdrawal process has now been reached when it is in Britain’s interest to strike a trade deal with the remaining 27 EU countries rather than leave with no deal on World Trade Organization terms. But many believe that such an agreement cannot be reached in time for endorsement at the next EU summit meeting in October and they fear that the lack of a deal could potentially lead to economic chaos affecting both Britain and the EU even though Project Fear may have been exaggerated.

So, as negotiations intensify following Mrs May’s unpleasant confrontation with EU leaders at last week’s top level meeting in Salzburg -- when they roundly rejected her latest proposals for future trade cooperation -- it is worth looking at recent developments despite the situation changing almost daily.

To put these in context, some background is needed.

It has been argued that the outcome of the 2016 referendum was not legally binding because Parliament is sovereign. However, a small majority voted, in effect, not to be a part of the EU’s progression towards ever-closer union and a supranational federal state; and, since Mrs May’s government last year invoked Article 50 of the Lisbon Treaty that triggered the UK’s withdrawal within a negotiating period of two years, the process of its departure may now have become unstoppable.

At the 2017 UK General Election, both the Conservatives and the opposition Labour Party stood on manifesto commitments to respect the referendum vote and deliver Brexit. But, with the continuing controversy and time running out, there have been calls for another referendum in a bid to settle the issue. Mrs May has ruled this out on the grounds that to deny the legitimacy of what was the largest public democratic exercise the UK has ever undergone and to frustrate its result would threaten the nation’s democracy. Furthermore, she has also rejected any idea of a snap election.

At the outset of the Brexit negotiations, it was agreed that budgetary and citizenship matters should be settled before moving on to the details of a new trading relationship. But, after fruitless negotiations about the latter, in July Mrs May presented new proposals at a gathering of her ministerial colleagues at Chequers, the country retreat of British prime ministers.

These represented, in her view, the best way to deliver on the referendum result while respecting the fundamental political need to keep the border open between the Republic of Ireland and Northern Ireland as part of the UK.

The Chequers proposals were aimed at ensuring trade cooperation while allowing Britain to reach its own global deals and with no hard border for Northern Ireland because of a “facilitated customs arrangement” whereby the UK would collect tariffs at the border for the EU. But for many Tories, including government ministers who have resigned over the issue, this is unacceptable, as are the provisions to stay in the single market for goods and agricultural products though not for services, and to maintain a common rulebook for all goods as well as allowing some continuing involvement of the European Court of Justice.

Add to this an agreement to continue to pay annual contributions to the EU budget, and the critics of Chequers say the whole package does not reflect the outcome and the spirit of the referendum. They say the plan leaves Britain committed to extensive regulatory alignment and acceptance of a role for European courts in Britain’s domestic affairs so that the nation would remain half-in and half-out of the EU. Nor are Remainers happy since they believe that the plan does not go far enough to achieve a “soft Brexit” with the UK staying fully in the single market and customs union.

Not surprisingly, at the Salzburg summit EU leaders considered that the Chequers plan “will not work” and that key parts of it would undermine the integrity of the single market. The plan was therefore unacceptable to them as well, not least because the EU also does not want to make it too easy for Britain to leave in case others may be tempted to follow suit.

On return to London, Mrs May complained about her rough treatment at Salzburg by other leaders who did not put forward any ideas of their own.

But, while still maintaining that a bad deal was worse than no deal, she pledged to keep negotiating in good faith with Brussels on the basis of the Chequers plan and to stay focused on obtaining the most advantageous position for Britain that would do the least damage to the nation’s economy. However, this strategy looks to be doomed since none of the parties involved agrees to Chequers, and it will surely be a waste of time to try further to separate the EU from what have been termed its sacred dogmas.

As a major world economy seeking to restore its global competitiveness, and with a permanent seat on the UN Security Council as well as an independent nuclear deterrent, together with leadership of a rejuvenated Commonwealth, Britain is too big a player to be fobbed off with an inferior deal. Moreover, given her large trade deficit with the EU, it is in the latter’s interest to agree new trade arrangements that ensure access to the lucrative UK market.

The question now is why a choice has to be made between a disguised sell-out (Chequers) and a fear-laden pull-out from the EU with no deal, neither of which seems to be in Britain’s national interest. Thus, there is growing pressure on Mrs May to ditch Chequers and consider a Canada-style trade agreement that would eliminate tariffs and quotas for almost all products and ensure that Britain would have her own independent trade and regulatory policy and an ability to reach trade agreements with other countries.

In addition, there would be no budgetary contributions or free movement of people and special arrangements could be agreed for the Northern Ireland border. A leading free-market think tank in London, the Institute of Economic Affairs, has advocated such a deal and it has already been supported by leading Brexiteers.

The next step, domestically, is the upcoming annual Tory party conference where, given their split on Europe and with so many variables and different interests at stake, tensions will be high.

The hideously complicated Brexit saga rolls on. Only the brave or foolhardy would dare to predict the eventual outcome.

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