Wednesday, 1 January 2020

Brexit: An eye to the future

In the run up to the referendum it was The Leave Alliance view that the EEA Efta option was the best vehicle for our departure owing to the fact that much of our trade is established within a dominant regulatory framework. We saw little advantage in divergence since the trend is toward global harmonisation converging on the EU model.

We took the view that before we turn an eye to trading with the rest of the world it was important to safeguard our economic position and our relations with our largest and closest trading partner. From there we could survey the landscape and make our way accordingly. We took the view that a major economy such as ours added to Efta would give Efta sufficient clout to shift the balance of power in the single market and make it more of a joint endeavour.

For various reasons this eminently sensible approach failed to win a consensus, especially with Brexiters hoping for a more radical departure. The single market is not without its problems and requires compromises even I struggle with. Primarily though, we saw it as a means to leave without the economic harm we shall no doubt endure now that any moderate approach is off the table.

Since we are now to inflict enormous damage on our economy by way of an overnight departure from the single market next year, it begs the question of whether the EEA Efta option is still a workable or indeed desirable destination.

This administration has taken a hard line in its opening remarks in respect of the future relationship. If we are to take the rhetoric at face value then we're looking at a not-even-Canada FTA, which will certainly placate Brexiters in the interim but in the longer term will prove to be insufficient. We will have to rebuild and develop any new relationship which will almost certainly end up with a high level of regulatory and customs alignment. It's an inevitability.

The missed opportunity here is that we have lost an opportunity to modernise and reshape the EEA, perhaps even pulling in Switzerland to become a leading role in a non-EU tier of a European free trade area. Having a separate relationship creates a power imbalance that hands a great deal of leverage to the EU. The shortsightedness and arrogance of the Tories will come back to bite us.

There is, though, little point in wondering how things might have been. We have to confront what we are faced with. The Tories have ownership of Brexit and we'll have to watch them fumble in the dark for a time before we take a more consensual approach. In the interim we'll see them attempt a deal with the USA which in my view will fail to deliver if it even happens at all. Supposing such a deal does happen, all it does is complicate the evolution of our EU relationship which will still require further development.

Though the Tories are sure to deliver a pig's ear of a Brexit, in a way that's good news in that it buys time and creates the conditions to popularise a more appropriate destination. Even standalone Efta membership is worth exploring without the EEA, which could very well gain popularity when the real world consequences of a hard Brexit are felt in the wider economy. Even a best case scenario deal with the USA comes nowhere close to mitigating the loss of the single market and the USA is not going to do us any favours.

As much as ratifying the withdrawal agreement does not "get Brexit done", nor does the completion of an EU FTA. Our relations with the EU are a continuum and we are going from one suboptimal relationship to another and within a year or two into the new trade relationship, the realities the Tories have thus far successfully glossed over will become harder to avoid - and with a house majority, there are no remainer blockers to blame. The December election terminated the last of their leverage.

Though the new year (and indeed the new decade) brings a fresh sense of energy and optimism for some, it won't take long before the Tories have to start breaking promises. Brexit leaning fishing campaigns have been promised a great deal, but no fish can be landed in EU territory without detailed agreements between the UK and the EU. Eventually, much like Norway, we'll have an EU agreement in close alignment with the CFP. The climbdown may not come in the first round of Brexit negotiations but within a decade we'll be back to following EU rules if we want our fishing industry to survive.

More to the point, though fishing is not especially significant as far as the national balance sheet goes, it's as politically significant for the EU as it is Brexiteers. The EU will almost certainly have fishing as a political priority and if the UK wants enhanced services access, fishing will definitely be on the agenda. Soon Boris Johnson will go from being the hero of the hour to a Brexit betrayer. Each new concession potentially destabilises the fragile unity in the Tory party. Meanwhile it's an open goal to anyone who wants to contrast what we're getting with what was promised by Johnson himself.

In all likelihood, the final destination of Brexit (or at least the next long term settlement) will not be defined by the Tories. That task will fall to whoever has to clear up their mess and rebuild - at which point there will be a market for coherent and credible ideas. If we can keep the Efta pilot light burning, there is no reason why it can't be part of the solution. Sadly we just have to let the Tories do their worst for the time being - but then watching the Tories getting a kick in the complacency might well be another hidden benefit of Brexit. Only when all of our national delusions are shattered can we rebuild a new politics befitting the new century. It's already twenty years late.

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