Friday 5 May 2017

A no deal Brexit would be the worst option for Brexiteers

There are still those who believe we can trade with the EU on WTO terms alone. There is nothing anybody can say that will dissuade them of it. It is an article of faith. Volumes have been written on the subject and there is not one single trade analyst who thinks it's a good idea. The best Brexiteers can muster is Patrick Minford who is not actually a trade analyst and doesn't know a solitary thing about it.

If you know anything at all about trade then you know that it mostly hinges on the nature and compatibility of regulation and in the modern age tariffs are a secondary consideration. In this respect, the EU as a regulatory union is able to lawfully exclude and discriminate and regulatory equivalence is not enough to qualify for market participation on the same basis as now.

It should also be noted that a collapse of the legal order of the last forty years most certainly will bring just about everything grinding to a halt. Porting EU law on to our own statute book is not so easily done in that it gives effect to a number of EU bodies and institutions.

There is an oft repeated claim that the USA and the rest of the world trades with the EU on WTO terms but this s absolutely untrue. There are fifty agreements between the EU and the USA alone. A quick scan of the EU treaties office database tells you that much.

In this I actually wish the ultra-Brexiteers were right because if they were right I wouldn't hesitate in giving Brussels the two fingered salute but unfortunately the world is not as simple as any of us would wish it.

There are some though who think that Armageddon Brexit is actually more desirable than a negotiated settlement. The theory is that it would be a complete reset of British politics where absolutely everything is up for reform. I am almost tempted by the prospect when put in those terms but it would come at the cost of nearly all of our European trade and a substantial chunk of our international trade which is presently facilitated by EU trade deals.

There is also one other fact that ultra-Brexiteers have not given any thought to. It would not take very long for basic commodity prices to start soaring. I expect we would start seeing emergency tax hikes and serious cuts to public services. Far from being an orgy of free trade it more likely sees us in a deep recession demanding major economic remodelling. Whenever that happens our cowardly politicians will always circle the wagons around the NHS and then cut our defence forces to the bone. I expect reduced orders for F35s and probably the mothballing of several new ships (along with one of the QE carriers) - and with that goes a number of very decent jobs.

I rather suspect that the Tory ultras would like a Ragnarok Brexit simply because they believe that their libertarian fantasy is the only possible outcome. We would be forced to drop all of our defensive barriers, wave goodbye to any kind of manufacturing and become a European Singapore.

The problem with this is that Singapore is not quite what the Toryboys think it is. Far from being light tough regulation, its financial services comply with the exact same rules as everyone else. As to the jobs miracle from intensive financial services, well, that's what we're about to give up by driving a lot of business on to mainland Europe. The BBA have called it wrong. The City will take a pruning by leaving the single market. More to the point, the EU can and will make it difficult for us if we become the tax haven of the northern hemisphere.

The short of it is, right wing Brexit ideology is pure fantasy and it is a view held largely by people completely oblivious to the realities of trade. There is Somerset roadkill with a better grasp of trade issues than most Tory MPs.

But it's not really that which brothers me the most. What troubles me, as a lifelong leave campaigner, is that the moment the hard realities of WTO Brexit kick in, the Tories will be thrown out on their ear. By then it would be impossible to predict what happens because we don't know what shape UK politics will be in by then - but what we do know is that it will be a remain inclined government that follows an ultra hard Brexit and they will go out to Brussels with the begging bowl.

In this instance we would be the far weaker party with absolutely zero leverage in a state of political turmoil. Any deal they would offer would come with a number of stings attached and a few very bitter pills to swallow. It could be something along the lines of associate membership where we basically do as we are told but have zero influence. It could even be worse where we end up rejoining but with none of the previous opt outs and about half as wealthy. Our self-immolation Brexit would have got us nowhere at an unimaginable cost.

In that respect, anyone who is serious about a prosperous post-EU Britain should be extremely cautious of the Tories. A hostile and belligerent negotiating strategy could very well see talks fail and we could end up with a future that nobody wanted. Least of all the Brexiteers. The irony would be delicious but it would leave a very bitter aftertaste.

No comments:

Post a Comment