Sunday, 19 November 2017

A Canada deal is not a Brexit solution


Not a lot was said about the Northern Ireland border during the referendum. It was broadly assumed that a solution would be found regardless simply because there was no political will to erect a border. That, though, was to underestimate the legal rigidity of EU and international legal systems. Even though this blog gave a great many issues a proper airing I have to confess that Northern Ireland was something of an afterthought.

As it now transpires, at the very least NI will have to stay a part of the single market with a bespoke customs agreement - and that is likely to dictate the trade settlement for the UK later down the line. With the EU now saying it's either a Canada or Norway solution, the NI issues further pushes the government toward the inescapable reality that leaving the single market is not really a viable option. How it actually pans out from here, though, is still anyone's guess.

Assuming the penny does eventually drop and things go well, the UK will probably end up retaining EEA membership, docking to Efta and forging a customs agreement. We should note that for a successful transition it will be necessary to have add-ons which include an agreement on fisheries and agriculture so that we can plan our divergence strategy. In that respect, our endpoint looks, on paper, a lot like continued membership. Or at least it will so far as most people are concerned. 

The technical distinctions however, will be considerable. There will not be the scope to diverge that many imagined but the potential will be there to seek out our own trade relationships and customise our third country relations. This will be a slow process and we cannot expect any meaningful progress for a number of years while we work out where we stand. 

If we can get this far then that to me is the hallmark of a successful Brexit. The fewer immediate changes the better. What matters is that our third country relations will be UK specific, the UK will be a distinct customs entity and it will have repatriated decisionmaking over several vital areas of policy. We should not expect that those decisions will necessarily be popular but the point is that they can be changed later down the line by an elected administration. Reform and reconfiguration of the relationship is more possible in this guise.

To my mind this is how our relationship with the EU always should have evolved - with the maximum level of economic cooperation, a high degree of integration but without irreversibly ceding direct control. Such a settlement would very probably be a major disappointment to the extreme Brexit fringe but that is a good sign. At the very least it is a worthwhile hedge against future EU disintegration.

So what are the chances of this happening? Well, I really don't know. My working assumption during the referendum was that eventually the government would be boxed in by reality and they would have to take the path of least resistance. Events have upset that applecart, not least because this is the most determinedly anti-reality government I have ever seen.

Howsoever, there are signs that the UK might finally cave in and pay what is required to move on to the next phase. If that concession is made then more concessions will follow. We might then get somewhere since the details of the rest of the exit agreement will be too arcane for the ultras to take an interest in. There is yet hope for us.

The ultras will only really assert themselves when it gets as far as what they consider to be their exclusive domain. Trade. They have their particular red lines and nostrums and that is when there will be a fight to the death.

This is where we need to have a serious debate about the Canada option. For many months now we have been battling against the ultras who push for the WTO option. As far as the Twitter debate goes, the ultras have lost that argument and I suspect they know it. We will soon know for sure when they start talking up the merits of a Canada deal.

Superficially, and to the uninitiated, the Canada option seems tolerable but in actuality it is only marginally better than a no deal scenario. It would avoid total obliteration by way of resolving the peripheral issues but in terms of trade in goods and services we can still expect to lose around a third of our overall trade by way of leaving the single market.

As an option it only really stand as as viable if we can demonstrate there are opportunities elsewhere to replace that trade, which in my view there is not. Over time we could develop the potential but not without major investment in African trade infrastructure. That is not going to happen without considerable investment which will not be available with such enormous hits to tax receipts. The intelligent strategy would be to set about buying ourselves the option to leave the single market in the future - but even then I still suspect it is a valueless pipe dream.

In short, anyone with a dog in the fight should be careful not to paint the Canada option as a half way house between the single market and oblivion because it's still a pretty dismal option. As imperfect as the single market is, it's better stick with the devil we know than gamble it all on the crackpot theories of the Tory right. The case was theirs to argue but they have failed to offer us a credible alternative. That's entirely for them to contend with. They are not owed their version of Brexit.

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