Tuesday, 23 August 2016

Brexit: a storm brewing on the right

While all eyes are fixed on a possible Labour split, what isn't being taken into account is an imminent row between Tory backbenchers and the government. Bernard Jenkin, John Redwood, Philip Davies and all of the usual suspects on the Tory right insist on ending freedom of movement and leaving the single market. There are about twenty such MPs which is a handful more than Mrs May's majority. They could if they wanted bring the government down.

These are men of no knowledge. They pretend the single market is easier to leave than it is and believe that we do not need to use Article 50. They believe that we do not need a preferential agreement with the EU and can trade using only WTO rules. Right now they are drafting in just about any crank they can find to confirm this world view - and there is a small army of supporters who believe it because they want to believe it.

You can point out that you would at the very least need a mutual recognition agreement on standards and conformity assessments along with a number of other bridging agreements in order to transition out. They then call this WTO+. Except that WTO+ is actually its own concept at the WTO and is nothing to do with Brexit. More to the point, a string bag of bilateral agreements with the EU is then by definition not the WTO option. The WTO option is the baseline where no agreements exist. If you then introduce agreements with the EU then you are in fact talking about the Swiss option where you have over a hundred such agreements that took many years to hammer out.

But then if you are not intending on using Article 50 and intend to unilaterally break off from the EU then there is no legal compulsion on the EU to even enter negotiations. And having done so, we would have voided all of our existing agreements having conceded already on things we could have fought to retain. But then if we were to use Article 50 then there is only two years in which to construct this ill defined concept of bilateral agreements.

These Tories take no account of decentralised agencies and peripheral agreements or any of the binding contracts we have within them. As far as they are concerned we can just rip contracts in two without any consequence. They then tell us that the rest of the world would be keen to enter new agreements with us. They are not on this planet.

Moreover their concept of a free trade agreement is an agreement on tariffs which you all know by now is neither here nor there in terms of global trade. They claim that if the EU maintains its common external tariff then we can reciprocate. We can't. As a third country with no preferential status we are ironically bound by WTO rules that say we cannot discriminate. If we put up tariffs for the EU then they must apply to everyone. So in fact the EU very much can have tariffs - but we can't.

While I am no fan of consensus politics it is the near universal view of trade economists and political analysts that the WTO option is a non starter - something I had concluded long before they'd ever given it a nanosecond's thought. The only people who think it will fly are fools. But there's really nothing you can tell these people. They have constructed their own reality and keep it tightly sealed so that critics may not intrude.

Worse still, David Davies, the minister in charge of Brexit, along with Liam Fox also believe in these fictional scenarios and are using time we cannot afford to waste trying to construct a justification for something that categorically will not work and will probably result in the EU taking us to court while absolutely destroying our credit rating.

And to those who say it's really not that big a deal, it really is. To those people I ask on day one of walking away from the EU what happens when a lorry rolls off the ferry at Calais? They never have an answer. I can tell you want the answer isn't. The lorry does not go on its merry way through to its destination. It is sent to a compound for goods inspection. The driver must then supply proof of conformity to EU standards. And since we don't have a mutual recognition agreement on conformity of standards assessment, the paperwork supplied is simply not recognised. In short, road freight to the continent grinds to a halt literally overnight. That's what happens when you don't negotiate an agreement.

Almost certainly we could then secure an emergency agreement to get goods rolling again but this would be as a favour to the UK and we would have no leverage in securing any preferential terms or exemptions. But this is all complicated you see. And nobody wants to hear that things they think are simple are complicated. Especially Toryboys imbued with Randain ideological dogma. You can't tell such people anything at all.

I don't know how this is going to play out in parliament. It will result in a political stand-off. There is certainly no way we can invoke Article 50 until this matter is resolved and both parties will take it to the brink. In the end I believe the Tory right will blink first but they will go down fighting and force a completely pointless concession from the government than means our terms of exit will be worse. It may even result in Davis and Fox being sacked or forced to resign. What it will mean is that those spearheading the Brexit efforts will be utterly discredited and politically defeated.

Parliament at this point could well put the brakes on the process. And I wouldn't blame them. That is when Brexit will be held in question and we will see renewed calls by parliament for a second vote. The only thing on the table by that point will be an EEA style agreement whereby we pay in the same, maintain the same rules and to a large extent maintain freedom of movement. I actually have no problem with the EEA agreement in that it gives us a great deal more influence over the rules - though the media will ignore those points because it is incapable of comprehending the globalisation aspect.

By this point you can expect multiple bitter rows inside the Conservative party and a great deal of cross party conflict. It is at that point where the real uncertainties start to bite and that's when we will see market jitters. There is the possibility that such an intractable conflict could seriously distort Brexit talks. I can't predict the future but I know this mother of all rows has got to be resolved sooner or later. We have been fighting these Tories for two years now and they are quite determined that cats can bark and fish can walk. They will take their delusions right up to the wire. It was never going to be any other way.

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