Brexit; WTO rules Ok?

Poor Michel Barnier is getting a very bad press in Britain. The EU’s chief negotiator is variously depicted as an intransigent bully intent on delivering a punishment beating, a Gallic popinjay, and the sort of person who never loses an opportunity to admire his reflection in the mirror. But this is all most unfair. The charming Monsieur Barnier is, in fact, behaving impeccably. The EU has a clear negotiating position founded on the four freedoms of the single market. And Barnier, being a good French administrator, a rationalist, a system-builder, and a fervent believer in the EU creed, believes that there can be no departure, no deviation, from its fundamental principles. Yet he is confronted by the dithering British, who having voted to leave the club, now seek a special arrangement which will enable them to remain half in. Barnier made it perfectly clear from the start that there can be no cherry picking. What do the British want to do? – cherry pick. He has made it clear that the four freedoms are indivisible. What do the British want to do? – divide them. What deal do the British want? They won’t say. What are their principles? They don’t have any. What is their negotiating position? It is to compromise, engage in ‘give and take’, and arrive at a deal that will be ‘mutually beneficial’.

In these circumstances, and since the British under Mrs May are evidently desperate for a deal – has she not come cap in hand to plead her goodwill in the hope of breaking the deadlock? – it makes perfect sense for the principled Barnier to stand firm and wait for the unprincipled Mrs May to concede to his demands. A belated attempt to suggest that we might walk away fools nobody – not so long as May and Hammond are in charge and the consensus among their advisors is that a no deal scenario, a ‘hard’ Brexit, will be a disaster. We are, as Johnson and Gove remarked recently in their ‘confidential’ letter to Mrs May, ‘over a barrel’. And it is entirely our own fault.

Yet there is a principled position we could adopt that would resolve the deadlock at a stroke. There would be no divorce bill. The uncertainty would be ended. And it would be entirely up to the EU whether it chose to act pragmatically under the influence of the Germans and their car makers. Trade talks could then begin in good time and in earnest.

The case for making a clean Brexit and moving onto WTO rules has been argued in recent months by a succession of heavyweight economists, most notably by Roger Bootle (Making a Success of Brexit) and Liam Halligan and Gerard Lyons (Clean Brexit). Far from representing a cliff edge descent, it is a coherent position with significant economic benefits, constitutes a firm basis for engaging in future trade negotiations with the EU concerning a free trade agreement, and strengthens our bargaining position no end. The benefits of the single market are wildly exaggerated (consider the volume of goods sold into the single market by countries outside the EU); customs and non-tariff barriers are no more than a minor nuisance (Canada and the US, for example, enjoy ‘friction free trade’ across an electronic border); most WTO tariffs are minimal; in sectors where tariffs are higher (autos, for example), exporters can be indirectly compensated through tariff receipts; in sectors where price rises are likely to have an adverse impact on consumers (fresh fruit and vegetables, for example), import tariffs can be unilaterally removed; our huge trade deficit with the rest of the EU ensures that the balance of tariff receipts is in our favour to the tune of some £8 billion; and the depreciation of sterling brought about by our prospective departure from the EU gives us the opportunity to tackle our trade deficit and begin to rebalance the economy, which has been stuck for years in a vicious cycle of low productivity, low skills and low investment.

But this principled position only makes sense if the necessary preparations are made now. It needs to be prosecuted by committed leaders who have vision. It is curious that the case for a clean Brexit is scarcely heard in the mainstream media and the cliff edge nonsense goes unchallenged. I wonder why? We can only hope that May and Hammond are replaced soon by those who would prosecute the principled position of a clean Brexit – Boris Johnson and Jacob Rees Mogg – before it is too late.

 

3 Comments on Brexit; WTO rules Ok?

  1. Goodness; what a wonderfully crisp, clear headed explanation of what seems to be a very sensible way to proceed. Thank you Alistair.

  2. i. May can pull the plug, call an election and scupper Brexit once and for all – not necessarily a good time to set up a challenge to her at this time. Her very weakness in the Commons is ironically her greatest strength.

    ii. Mogg, absolutely. I am yet to be convinced that Boris is the true believer he claims to be.

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