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Sean Rickard - Independent Economic Analysis
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Listening to the false optimism of the likes of Boris Johnson and Jacob Rees-Mogg on Brexit, I am struck by the similarity to the behaviour and mind-set of our political leaders in the run-up to the Iraq war.   We know now that deception and delusion were widespread at the top of government and, few if any of our leaders had any appreciation of what they were getting into.   I fear the government is in an analogous position with Brexit.  

 

The EU referendum was an unmitigated disaster, for both democracy and the UK’s economy.   It was an affront to democracy to ask people to give a simple yes or no vote to an extremely complex issue.   And extremely cynical of Leave campaigners to seek an outcome that they had no realistic idea how to deliver or its cost.   Mr Cameron’s hubristic referendum was a tragic failure of leadership but his successor is transforming it into a debacle.   Mrs May’s setting down ideological red lines – leaving the customs union and single market and no future role for the European court of justice – in advance of the Article 50 negotiations was inexplicable.   Why, having been elected unopposed did she make such a crass mistake?   Was she cowed by the zealots or just ignorant as to the problems she was creating for herself?   What is beyond dispute is that Theresa May’s idea of a ‘customs arrangement’ with the EU has no substance and has been rejected by business, EU negotiators and even, apparently the zealots.  

 

Disingenuously, the zealots claim that the referendum was a vote to leave both the customs union and the single market.   Any reasonably objective person knows that in any random sample of the population only a very small proportion could explain the single market and customs union, let alone the implications of leaving them.   In any event the referendum asked about leaving, not the manner of leaving.   The House of Lords’ convincing vote will now ensure a future House of Commons vote on the UK remaining in the customs union.   This is important, as evidence of the large economic cost of leaving the customs union mounts by the day.  

 

Outside the customs union, even with a UK-EU Canada type tariff-free, trade agreement, customs checks and costs would be incurred.   Exports to the continent would have to prove alignment with EU regulations, compliance with its rules of origin and the manufacturing sector’s sophisticated just-in-time cross-channel supply chains would be rendered uneconomic.   As long as Mrs May sticks to her red lines she cannot fulfil her promises of frictionless trade with the EU and an open Northern-Ireland border.  

 

The hysterical claim by the Svengali, Jacob Rees-Mogg, that remaining in the customs union would be a betrayal is absurd.   Mrs May failed to achieve a mandate for a ‘hard’ Brexit and she has not advanced a credible argument for leaving the customs union.   Hence, the zealots resort to duplicitous claims about voters’ intentions.   Their assertion that a, hypothetical, IT systems could avoid the need for physical border infrastructure has been found wanting.   Parliament’s Northern Ireland Affairs Committee, concluded that proponents had been unable to present any solutions ‘beyond the aspirational’.   Sure, membership of the customs union would prevent the UK negotiating bilateral FTAs with third countries, but these are not as valuable as claimed by the zealots.   All expert opinion – including the government’s own experts – has concluded that FTAs with third countries could a best, and only in the longer-term, replace a fraction of the trade lost with the EU let alone 56 FTAs the EU has with third countries including Canada, Japan and South Korea.  

 

The government’s surreal position on Brexit is brought into sharp focus by the tasking of Liam Fox’s Department for International Trade to strike new FTAs with third countries.   But leaving the EU means that in addition to negotiating an inferior, replacement FTA with the EU, Liam Fox and his team will be embroiled, for many years, seeking to grandfather the EU’s existing agreements with third countries.   My guess is that many of those who voted for Brexit will not live to see FTAs with the US, China and India concluded and it is a fantasy to believe a go-it-alone UK could get the better of these countries in a trade deal.

 

Mrs May is surely aware of her vulnerability once she has to admit to the people that her ‘solutions’  regarding future EU trade and the Northern Ireland Border amount to a chimera.   Brexit policy is now to delay making any kind of decision eg, David Davis recent evidence to a parliamentary committee that a solution for the Northern Ireland border can be worked out during the transition period.   So much for giving business greater certainty.   Meanwhile, the geopolitical environment has taken a turn for the worst, with an ‘America first’ Donald Trump and a resurgent, menacing Russia.   And President Macron's successful state visit to the US has surely raised questions concerning the UK global influence outside the EU.  

 

If Mrs May has any political courage she should summon it and allow MPs a free vote on her red lines, thereby consigning them to history.   As our leaders come to accept that continued membership of the customs union and probably the single market are the only viable post Brexit options, so the case for leaving the EU is rendered irrational.   Voters should then be given the opportunity to deliver a verdict on whether to remain a full member of the EU or become effectively a non-voting member.   I’m sure in these circumstances, the EU27, would extend the Article 50 period to accommodate the vote.   The referendum has divided the country and ironically only another referendum offers the chance of healing.   Theresa May’s minority government’s persistence in seeking to frustrate Parliamentary sovereignty in this matter is a betrayal that is very likely to split the country asunder.    

I D E O L O G I C A L  R E D  L I N E S  A R E  A  B E T R A Y A L

28th April 2018

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