When so much of the Brexit debate has consisted of slogans and unexamined assertions (‘cliff edges’, ‘crashing out’ and the rest), it is welcome that a more substantial argument has been made by Sir Ivan Rogers, former UK ambassador to the EU. He has been making a series of well-received speeches, some of which have been so popular that they have been published as a book (and recently, on The Spectator’s website). He has long been pessimistic about the chances of reaching a Brexit settlement any time soon, and resigned in January 2017 when his concerns became public.
He deplores the referendum decision but regards it as necessary for it to be carried out. But he is deeply pessimistic about the outcome. His only suggestion for palliating what he sees as economic and political disaster is Brexit in Name Only (not a phrase he uses), of which the only available version is Theresa May’s withdrawal agreement, including the Irish backstop. All other suggestions are ‘delusion mongering’ or ‘absurd fantasies’. He believes we can only ever trade with the EU on terms advantageous to them, and that a no deal would be an ‘abyss’.
Sir Ivan’s view is a vehement expression of the ‘official mind’ that has done so much to get us into the situation from which we are now trying to escape. There are several surprising elements to his argument. One is its fatalism: Britain has little or no freedom of choice. Another is its essentially static view. He seems to see a mighty EU, ‘our behemoth neighbour’, going from strength to strength, compared with an enfeebled and failing UK, doomed to be a supplicant. This was certainly the ‘official mind’ in the 1960s and 1970s, when, as Foreign Office archives show, the ‘Europeanists’ got the upper hand over the ‘Atlanticists’, but it is strange to find it still being held today.
Not only has Britain been one of the most successful European countries economically since the 1980s — which it remains, despite the bungling of Brexit — but our trading relations with the EU have been shifting. When we first entered the Common Market in the 1970s, much of our foreign trade was indeed diverted towards Europe. But the opposite has been happening since the beginning of this century. A constantly diminishing proportion of our exports and investments go to the slowly growing EU, and we trade less within the EU than any other large member country. The single market has had limited success in increasing trade, especially for Britain, given our large export of services, where the single market is poorly developed. Our resulting trade deficit with the EU shows that the system works badly for us.
But our trade with the non-EU, mostly on WTO terms, has been rising three times faster. Our largest single economic partner is the US, with which we have a surplus without any general preferential ‘deal’. Many of the ‘add-on’ agreements between the EU and some other countries, which at present affect us, are on technical and procedural matters, and the most important have already been replicated for Brexit — for example between the UK and US.
Our dynamically changing trading pattern underlies the vote for Brexit, and points to our global commercial future. On present trends (even without Brexit) our trade with the EU is heading back to the proportion it was before we joined. Sir Ivan is scornful of those he sees as wanting ‘a complete rupture’ and embarking on what he denounces as ‘autarky’. I have never heard anyone suggest either. But by the myriad everyday transactions of our economy, we are nevertheless moving away from the EU.
The other area in which Rogers’s picture is strangely static is the EU itself. Remainers rarely have much to say about the EU, but it is surprising that this should also be so for our former ambassador. He refers in passing to ‘the eurozone’s major challenges’. Yet realisation that the eurozone is a dangerous failure, to which no solution has emerged, is again both a cause of the Brexit vote and an inescapable element in deciding our future relationship. The EU seems to have two choices. Either it becomes more centralised, as Emmanuel Macron has urged, taking control of its members’ taxation, finances, defence and welfare systems. Or else (certainly in Macron’s view) it does nothing and suffers an uncontrolled dilapidation of the whole system. In either case, it is hard to see why Britain’s destiny must or should consist of being kept as close to the EU as diplomatic ingenuity can contrive.
This brings me to the most paradoxical part of Sir Ivan’s argument. Accepting that Brexit is politically necessary, he sees the only future, whether we like it or not, as an EU satellite. He paints the gloomiest picture of a no deal of political helplessness and economic dependence on an EU which, he assures us, will play ‘hard ball’. The paradox is that helplessness and dependence are precisely what would be created by May’s ‘deal’. The withdrawal agreement and the political declaration place us at the disposal of the EU, which safeguards its privileged access to our market (which it can also offer to others without our consent), keeps us indefinitely under EU jurisdiction directly applicable through UK courts, gives the EU the right to impose fines and trade sanctions and explicitly denies any recourse to international arbitration. A no deal, he says, would give nothing to our service industry: but May’s deal gives it nothing either — it remains on the same basis as for non-EU countries. So the dreaded no deal as imagined by Sir Ivan is no worse than May’s deal, which he approves: ‘Major competitive advantages against the UK… prolonged uncertainty about the destination and an inability even to get to the start line of negotiation.’ Sooner or later he expects us to go crawling back to Brussels.
His assumption — the fatalism I have already referred to — is that our economic weakness in comparison to the EU’s strength will be decisive. He raises the spectre of tariffs and non-tariff barriers which he says would be certain in the case of no deal. But predictions are meaningless without figures. The average tariff that would be imposed on our exports if we were treated as a ‘third country’ is 3 to 4 per cent. Non–tariff barriers have been calculated as around the same amount. But since the referendum, sterling has depreciated by over 10 per cent, outweighing tariffs and non-tariff barriers and actually making our exports overall more competitive than before. Moreover, if the EU chose to impose tariffs, we could impose identical tariffs on their exports to us. Most of our EU imports come from six or seven countries, which would be seriously hit by tariffs, especially as they sell us goods bearing a high rate of tariff (such as agricultural produce, cars and textiles), whereas our exports to them are in areas with low or no tariffs. France’s export surplus with the UK (its largest) has already tumbled due to exchange rate changes.
If tariffs were applied, the total cost to UK firms would be far less than the revenue we would raise from tariffs on EU imports. The extra revenue would be more than enough for a British government to compensate British business for tariff costs, for example by reducing taxes or subsidising research and training costs, or protecting hill farmers whose lamb exports suffer. But EU exporters would find themselves far more disadvantaged, both by sterling depreciation and by tariffs, encouraging Britain to import more cheaply from other suppliers. Sir Ivan disparages such observations as ‘endless tedious fantasies’. Why?
The clinching element of his argument is the Irish border. He entirely accepts the EU’s argument that this is an insoluble problem for the foreseeable future, making the backstop protocol inevitable. But only last week, a report was published by the Alternative Arrangements Commission suggesting a combined system, including familiar administrative procedures (such as prior customs declarations, targeted checks away from the border and exemptions), and existing technology. The Department for Exiting the European Union has belatedly begun an equivalent inquiry and we might ask why the civil service has been so tardy. If all sides were wholly in good faith, they would be rejoicing at the solutions already identified. Are they? Perhaps I have missed something.
Whether one reads the border issue as a genuine problem or as a political pretext, what cannot be gainsaid is that the backstop gives the EU the sole right — no neutral arbitration is permitted — to judge what is a satisfactory solution. Until it gives consent, the UK would be required to continue EU jurisdiction at least for Northern Ireland — thus breaking the guarantees given in the Good Friday Agreement — and even for the whole of the UK.
One-sided jurisdiction is a feature running throughout the May deal, which too many politicians are now trying to resuscitate. If we were to ratify these accords, all disagreements between the UK and the EU would be resolved under EU law and ultimately by the European Court of Justice with no British representation. This would continue as long as the EU chose, and we are asked to trust that they would not abuse their position, despite their playing ‘hard ball’, in Sir Ivan’s phrase. Does he not, as a diplomat, find this astonishing? Which other democratic nations have signed, or would sign, such a treaty? Which other treaties give one side the sole jurisdiction and exclude international arbitration?
There is, however, an alternative. The Brady amendment and the Malthouse compromise have been moving towards it. It is to offer the EU a continuation of tariff–free trade while both sides negotiate a full free trade agreement. Admittedly, this would cause a lot of red faces in Whitehall and Brussels as the laborious and one–sided negotiations of the past three years were junked. But it would serve the legitimate interests of peoples and businesses throughout the EU. If the EU refuses, we shall at least know what we are dealing with. An exit on WTO terms, for which preparations have already been made on all sides, would then become the best and only coherent course.
Comments