Friday, 6 September 2019

No deal might well be self-defeating for the Brexiters


British politics is stagnant. It is stagnant because we are locked into an economic settlement where everything from trade through to labour rights is regulated by an external body. National politics cannot meaningfully influence those policies so a change of domestic government does not bring about meaningful change. even if our governing class could initiate change they wouldn't because they are all essentially locked into the same groupthink.

Being that the fundamental questions are already answered by way of EU membership, our politics tends to address only those subject matters commonly in the public eye - schools, hospitals and welfare. Consequently politics becomes a bidding war, with parties buying off their respective voterbases with either tax cuts or handouts. Retail politics.

This is the subtle but profound influence EU membership has on our politics and subsequently our economy. We have lost touch with the art of statecraft and we've forgotten how to do politics of consequence. Politics has become a profession for ambitious social climbers who basically like telling other people how to live.

The status quo is sufficiently adequate so that the middle class have no real use for politics save for entertainment. Brexit has only reanimated them from their perpetual slumber because they don't want change. EU membership suits both their lifestyle and their narcissism.

To my mind, Brexit and the subsequent political shake up is overwhelmingly in the national interest. We are long overdue a deep clear out and a reappraisal of who we are as a country and the direction of travel. I voted to leave without hesitation and with a smile on my face - and would do so again.

That, though, raises the question of what comes next. The problem for Brexiters has always been one of how the UK operates in a post-Brexit world where the EU is the dominant regional political power and one of three global regulatory superpowers with enormous clout.

It is not possible to go from a fully integrated member to independent state without serious consequence for just about every major areas of governance. And with so much having an international dimension, it is inconceivable that we could move forward without formal cooperation agreements with our closest and largest trade partner. Trade is more than moving trucks through Dover. It's investment deals and data transactions and much else - all of which is governed by an intricate web of regional and international agreements. The WTO system governs only a fraction of it.

This is why nobody who works within the discipline of trade can be found to lend any weight to the Brexiter claims that leaving without a deal is business as usual. The UK becomes a third country overnight and subject to a barrage of third country controls and our rights to participate in EU markets are substantially curtailed. When much of our trade has evolved inside the EU regulatory ecosystem it is foolish to believe the impact is minimal. A quick glance at the EU's own Notices to Stakeholders gives you an outline of just how much of our technical governance is affected.

Leaving the EU without a deal, without replacement arrangements can only be described as a failure of politics. A failure that requires immediate rectification. This is why "no deal" is no solution except to break the immediate political impasse. We then face the herculean task of negotiating a whole new relationship from a weakened economic position with the balance of leverage massively in the EU's favour.

Brexiters envisioned a far looser relationship with the EU, but even a best in class FTA with the EU falls far short of what is required for modern trade to function at anywhere like the levels we currently enjoy. Frictionless trade is not something we simply agree to have. It is the product of regulatory integration.

What underscores the importance of such a relationship is the absence of viable alternatives. Even if a US trade deal were to double the volumes of trade the UK does with the US (which no FTA has ever done), it still comes nowhere close to mitigating the loss of the single market. This, of course, would be supplemented with FTAs with other important economies but such FTAs would only replace the ones we lose the day we leave the EU. More than likely they will be on inferior terms - especially if the Tories execute their unilateral trade liberalisation policies.

Instead of confronting these realities, Brexiters have sought to downplay the difficulties we face, dreaming up all manner of wild suppositions to support their case, urging us to believe harder in the potential of Brexit. As a leaver I do not for a moment think the UK is necessarily down and out, but if we are going to cut it as a minnow in a shark pool then we need to hit the ground running and to do that we cannot hide from the cold realities we face.

In respect of that, opposition to the withdrawal agreement is largely a tantrum on the part of Brexiters who did not anticipate the kinds of demands made by the EU, failing to understand that the EU is the power in this equation and only too capable of wielding that power. No deal Brexit, therefore, is Brexiter escapism; a denial of that reality in the expectation that leaving without a deal will soften the EU's stance and see them coming running after us.

But then leaving without a deal, thereby leaving a gaping hole in the Irish section of the EU customs frontier, creates the sort of untidy legal limbo that the EU cannot tolerate in that it threatens the entire basis of the single market. After citizen's rights, this will be the first thing on their list of issues to resolve and resolving it will be part of the price tag for even opening new trade negotiations. The British government is not going to like it but the EU is in a position to wait us out. EU member states can use the time to cannibalise UK market share as UK exporters are subject to all manner of tariffs and red tape. Those German car makers are not going to ride to the rescue.

No deal, therefore, is a non-solution. From a weakened position it is more than likely that the Tory government is replaced and future negotiations are conducted by a party far less hostile to the EU and one that will not hesitate to ratify virtually anything put in front of them. If Brexiters hated the withdrawal agreement, they're going to hit the roof when they see what the no deal Brexit deal looks like. And there'll be nothing they can do about it. Politically they will be a spent force - especially when there is an avalanche of negative economic metrics and the regions are hemorrhaging manufacturing jobs.

Brexiters will rightly argue that the economic must always be subordinate to the political in that you cannot hope for long term peace and prosperity without a sound political settlement, but to totally disregard the realities of trade and write off all legitimate concerns as "project fear" is not only negligent but also a strategic blunder in that the initiative is then handed to remainers and the leverage handed to the EU thus ensuring the objectives of Brexit are thwarted. This tug of war between leave and remain forces does not end on Brexit day. The remainers might well have lost the battle over membership but they can very easily move in to define the post Brexit relationship.

Though no deal certainly ends this achingly tedious round of bickering, it opens up a new round of similar issues which will turn stale just as rapidly. I have previously argued that no deal would move the debate on but only to a new phase which could well consume politics for more than a decade and still not reach a satisfactory conclusion.

I am still of the view that if MPs engineer a situation so that the only way to leave is without a deal then leave we must, but if there is still a chance at a managed, negotiated departure - and I believe there is, albeit slender, then MPs must grasp it with both hands. We should not be an any hurry to put ourselves in the position where our exports are less competitive and jobs are less secure and harder to find - and certainly not when such a move destroys what little leverage we have. If the withdrawal agreement comes up for another vote then Brexiters should support it.

Of course the withdrawal agreement is far from what any of us hoped for - but the residual powers retained by the EU become less relevant over time. The WA must be viewed as scaffolding from a gradual dismantling of EU membership as opposed to the dynamite demolition of no deal. Our relations with the EU are a continuum and the relationship will evolve. We stand a better chance of shaping it to our mutual advantage if we retain our relatively strong economic position.

Ultimately the puritanical approach not only ignores the reality of modern trade and the inherent dilution of sovereignty that globalisation brings, trashing our own economy, handing the moral advantage to the opposition, means that leavers will not have a chance to shape Britain after Brexit. Politically, economically and strategically, no deal is unsound. The relief from the tedium is only temporary and despite the issue illiterate ranting of the puritans, the WTO is no solution to anything - especially when the WTO is in the midst of its own existential crisis.

The desire to be out of the EU and have it done with is understandable but this was never going to be a quick or easy process. If we take a short cut now, we will end up taking the longer way around and perhaps never achieve the objectives of Brexit. Through impatience, petulance and intransigence Brexiters risk throwing away all that they have strived for.

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