Saturday, 6 October 2018

Going to war with reality

It is now generally understood that no deal cannot stay no deal. The day after a disorderly exit begins a long and costly road to building a new normal which absolutely will require formal relations with the EU. Being that we will have considerably soured relations and be in the greatest need, we can expect that any sequence of agreements is going to be entirely on EU terms where we will be forced to submit to EU demands on everything.

As it now stands most people are now aware that a WTO Brexit would be an unmitigated disaster. We have gone from virtually no debate to saturation warnings. I think now even the Brexit ultras know they have lost that particular argument which is why they have shifted their rhetoric to support a Canada+++ deal.

What is not yet fully understood is that a Canada deal is just an FTA and there is a gulf between the EU and the Brexiters as to what the "+++" will actually entail. The EU is not about to roll over and grant the UK exemptions to their system of rules. More likely the "+++" will be a series of bitter pills that the Brexiters are not going to like.

But then assuming we do secure a withdrawal agreement and a Canada style FTA, as much as do deal cannot stay no deal, Canda cannot remain Canada. Should we exit to a base FTA, even maximising the concessions the EU is likely to make, the UK would still be frozen out of a number of key markets and subject to standard third country controls which is likely to seriously impact British exports. There is still a cliff edge even with a Canada deal.

What has plagued the Brexit debate on all sides from the beginning is the assumption that whatever deal we get is the end of the matter and then the UK is free to do as it pleases. An FTA though, in the modern context, is the establishment of formal and ongoing relations which evolve over time. Not for nothing does Article 50 refer to the future relationship.

What the Tories will find once we have formally left the EU is that the relationship is wholly inadequate to the needs of the UK and we will spend the next ten years or more looking to restore market participation which will more than likely end up with the UK adopting huge tracts of EU regulation and product controls in the same way that Switzerland does now.

If the media was at all on top of its game it would now be running similar warnings to "no deal" in respect of a Canada deal simply because those plusses are not going to bridge the massive gulf between an FTA and the single market. If the EU is not going to go for Chequers or anything close to it they are in effect reinforcing the distinction between an FTA and the EEA. The former is a relationship of a particular class and it won't go much above and beyond the most comprehensive FTA.

Meanwhile, if rumours are to be believed and that Mrs May is considering a customs union (having misunderstood its function), it still doesn't address the major headaches for exporters and in terms of what it does solve we are giving up an awful lot to solve very little. It really is the worst of all worlds where the longer term destination is subordination to the EU in matters of trade and technical governance. The EU then has the UK where it wants us.

This is why, strategically, it always made more sense to join Efta, not least since Switzerland is looking for a new mode of relations with the EU. The combined power of Efta with the UK could have ensured a far more equitable relationship, bringing about an outer ring of the European free trade area with the UK in a far stronger position. Moreover, had we committed to the EEA, being that it is an adaptive framework, there would be considerable opportunities to either reform it or use the mechanisms therein to block further integration.

At no point has there been any longer term strategising. Brexit is all about satisfying fleeting political obligations, some of which exist only in Theresa May's imagination. It is that shortsightedness and lack of vision that will ultimately ensure Britain pays a higher price for Brexit than it should ever have cost while squandering a major opportunity to reform the functioning of European trade.

Theresa May, though, is simply not capable of the kind of thinking. She is only working to her brief to leave the EU. She has taken the job as an interim administrator and is treating Brexit as a bureaucratic chore.

All the warnings have been disregarded by the Ultras. They believe the harder the Brexit the more liberty we will have in terms of future trade. They don't believe we will end up grovelling back to Brussels because the power of "free trade" will save us despite a mountain of evidence to the contrary.

This was always the Achilles heel of Brexit. There is a singular lack of vision and informed planning. They believe they have a vision. They can waffle about free trade, self determination and sovereignty with the best of them, but without acknowledging the limitations of sovereignty and our strategic positioning then we are acting on blind faith alone. A vision without plan is just a pipe-dream.

Consequently what could have been a win win for the EU and the UK turns into a lose-lose proposition. Brexit will harm the EU but will especially harm the UK while not actually improving out position. Having elected to take us out of the European economic ecosystem entirely, the Tories have gone to war with reality. The next ten years should be about renewal and forging a new role for Britain in the world. Instead we'll be in disaster recover mode as we limp back to Brussels begging for whatever scraps they can spare us.

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