Friday 23 November 2018

NO FRICTIONLESS TRADE AFTER BREXIT

Watching and listening to the political commentators last night, I think it is now unanimously accepted that the deal is not going to pass through the House - on the first vote. Many seem to believe there will be a second vote, which some people find ironic considering the PM refuses to give the electorate another go. This will only happen if the vote is a close one. A big majority against will make that impossible I think. Size matters. 

But that is for another day.

I found a few articles and comments yesterday really interesting. It was an important day in the Brexit narrative.

There is an article (HERE) by Matthew Holehouse which concludes that the old 'Chequers' plan is absolutely dead. I think that's right. While noting the direction of travel towards a close relationship with the EU, it is not as close as Theresa May was aiming for. He says:

"[Chequers] was the only way of keeping faith with the Brexit referendum, May insisted, while protecting the supply chains in high-value industries and preventing the emergence of regulatory checks between Northern Ireland, the rest of the UK and the EU".

But Holehouse, the former Telegraph Brussels correspondent before being replaced by Peter Foster, says Brussels was having none of it and insisted on preserving the four "indivisible" freedoms, and he continues:

"In its place, the draft text produced today by UK and EU negotiators and circulated among national capitals bluntly reiterates a position first set out by the European Commission in January this year. This is that, outside the single market’s ecosystem, the only option available to the UK is essentially a conventional free-trade agreement, or FTA — often referred to as the "Canada" model.

The bizarre thing is that although Theresa May's original plan has patently failed she is still pursuing the idea that "aligning with Union rules in relevant areas" and a "single customs territory" will somehow deliver frictionless trade. Whether business and industry will fail to see through the illusion is another matter. Mrs May told an assembly of business leaders recently that getting frictionless trade was "non-negotiable" and so it has proved!  The EU won't negotiate it. I wonder if Honda, Toyota, BMW and especially Nissan have noticed that the word frictionless doesn't appear once.

The Week (HERE) make the same point and goes on to quote The Times:“While the document is long on ambition it puts off many of the most difficult issues until after Britain leaves the bloc on 29 March,”

UK negotiators tried to get the "frictionless trade" into the political declaration but the EU were apparently keen to make it clear that leaving the single market and the customs union have consequences. To expect them to do otherwise was naive to say the least.

In trying to meet the expectations of business and Brexiteers she has failed both. The ambitious partnership, along the lines of a Canada style FTA, but with a "single customs territory" and high regulatory alignment, will be far too close for Brexiteers but not close enough for remainers or industry. The proposed closeness will help but will not be enough to avoid all border checks and delays and therefore will damage just in time supply chains. We will be a "vassal state" or a rule taker but not actually enough of one to make the difference.

It will be a case of so near and yet so far.

We will be paying money to have membership of the Medicines, Banking, Aviation and probably plenty of other EU agencies and following rules made by the other 27, but not having frictionless trade. It will be the worst of all worlds - as Corbyn said.

I didn't see May's performance in parliament yesterday afternoon but news coverage afterwards and flicking through Hansard last night seemed to show the political declaration is just as dead as the Withdrawal Agreement. She was apparently criticised again from all sides. What a way to decide the future course of the nation.

Prospect Magazine have an interesting piece (HERE) by David Henig, Director of the UK Trade Policy Project. His argument is effectively that paradoxically we actually obtained the deal we ourselves designed - albeit unwittingly. Our red lines, drawn so long ago by the prime minister and her advisor, Nick Timothy, have directly resulted in the deal we managed to negotiate. Once they were laid down it was all quite inevitable according to Henig.

Finally, of all the contributions in Hansard on the PM's update yesterday this one caught my eye. It was from Dominic Grieve, former Attorney General, and always worth listening to on Brexit for his calm, clear analysis:


Mr Dominic Grieve (Beaconsfield) (Con)

"Is not the lesson of this long negotiation that, when you try to unravel yourself from an international rules-based system because you do not like the rules, unless you want chaos, you start creating a completely new set of rules, many of which are in fact as binding and onerous on this country as any that we had before? In that context, the backstop—I have to say this to my right hon. Friend—is a constitutional anomaly of the first order because it makes the EU the guarantor of a bilateral treaty between ourselves and Ireland on which the people have never been consulted. 

"I urge her in those circumstances, if she wants to go ahead with this, to put her deal to the people of this country and to offer them the alternative of remaining, because the one big eye-opener that one sees from all this is that, however hard she has tried, at the end of the day, we will be in an international rules-based system because that in fact is where our national interest lies".

Isn't this the sorry truth about Brexit?