Wednesday 11 July 2018
Tomorrow, the government will publish its long-awaited white paper on Britain’s future trading relationship with the EU, here Leave.EU picks through what we know so far from the disastrous ‘Chequers proposal’.
Friday’s airwaves and social media feeds were saturated with execration over the three-page statement made by the government in the aftermath of the day-long summit at Chequers.
Alarmingly, the proposal rolls back on the red lines laid down by Theresa May at the beginning of 2017, before Article 50 was triggered when Britain looked on course for an authentic withdrawal from the European Union. How times have changed.
More worryingly however, the document is only the opening salvo in what should prove to be another arduous negotiation with Brussels. Although, yesterday, the EU’s chief Brexit negotiator, Michel Barnier appeared to have radically changed his position, saying the talks were now 80% completed.
The massive olive branch of freedom of movement extended by the prime minister may have something to do with that. Tellingly, he did not accuse the Brits of cherry picking as he so often loves to, even though the proposal is characterized by a clumsy compromise over staying in the single market for goods, but not services. This is just the first major disappointment. More are to follow, that we can be sure of, and services are not out of the woods yet.
Goods vs. services
If any part of the UK economy deserves a deal with Brussels it is services, accounting for 80% of the nation’s economy. In the aftermath of the referendum, the City of London made a worryingly compelling case for holding onto a higher level of Single Market access so that London’s gigantic financial sector could still sell cross-border services.
The square mile has since given up, with its spokesperson in the Cabinet, Philip Hammond looking to forge a third way based on the EU’s existing equivalence regime – access is granted so long as standards are “equivalent”. For Brussels to agree to expand this system may not entail making concessions over free movement. Services, like people make up two of the of the EU’s indivisible freedoms, which brings us onto goods, the third of the pack.
Some freedoms are more indivisible than others however. Having committed to a border in Ireland without controls as part of her equally disastrous withdrawal agreement, Theresa May was forced to keep Britain’s trade in goods, including “agri-food” which are excluded from both the Customs Union and the EEA, inside the EU Single Market.
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As for the EU, it had already hinted it would drop its red lines – i.e. some freedoms could be cherry picked if the UK softened its position – this has duly occurred with the prime minister’s team inserting a clause towards the end of the Chequers conclusions for “a mobility framework so that UK and EU citizens can continue to travel to each other’s territories, and apply for study and work.”
The EU27 desperately need access to the UK’s goods market to sustain its whopping £135bn surplus. This was supposed to be one of our major bargaining chips. May wiped it out in one fell swoop with her Ireland pledge, and is now giving up additional concessions over free movement. This catastrophe encapsulates how misguided our negotiation has been from the very beginning.
Britain’s surplus is in services. If we are going to get a trade deal with the EU, it should be predicated on the City, multimedia, telecoms etc. getting preferential access to the Single Market with the offer of goods access to the UK dangled in front of Brussels. Instead, it has been the other way around, with the Chequers document boasting about how we will be able to re-regulate the sector. This is a vacuous argument. Of course we will be re-regulating services, it was a key pillar behind our decision to vote to leave in the first place – see excerpt below.
The UK would of course continue to play a strong role in shaping the international standards that underpin them, and Parliament would have oversight of the incorporation of these rules into the UK’s legal order – with the ability to choose not to do so, recognising that this would have consequences. We would strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and the EU will not have current levels of access to each other’s.
This pathetic attempt to assuage fears reveals why the plea to say in the Single Market for goods is so contentious. Britain must continue to adhere to a “common rulebook” of EU laws, which means we will continue to copy every line and letter of the EU’s acquis communitaire governing physical products into our statute books.
Where the limits lie are unclear. Part of the reason why the EU’s regulatory machine is so prolific is that it has immersed itself in all sorts of social and environmental crusades carrying negative implications for economic competitiveness. Emissions ceilings will have no bearing on a product’s physical characteristics, but they have a huge impact on whether or not the manufacturer will be able to sell them at a margin.
Brussels will insist these “horizontal” regulations governing working hours, emissions and so forth are also applied to the UK. Whether directly or indirectly, all of these restraints affect the services industry – additional burdens to hiring and firing new workers, the cost of heating and illuminating office space and powering machines. Mark our words, the common rulebook will not make for quick and light reading, it will burden every corner of the British economy.
Corbyn counted out
May’s advisors are aware Brussels will push for a very broad common rulebook, correctly anticipating the EU will want control over state aid:
The UK would commit to apply a common rulebook on state aid, and establish cooperative arrangements between regulators on competition.
Brexiteers are presented with an opportunity. Of Jeremy Corbyn’s known anxieties about European integration, the only one he likes to repeat are restrictions on state aid. He now has ample reason to call a three-line whip against a deal negotiated along these lines. That would empower only a minority of Brexiteer Tory MPs to scupper the deal when it reaches Parliament forcing Britain out of the EU completely.
A WTO-based economic relationship is now by far and away the best option. In the event a Chequers-based agreement is rejected, any renegotiation would amount to window dressing, there will simply not be enough time to go back over the withdrawal agreement and redraw the lines over Ireland thereby permitting a Canada-style conventional free trade arrangement. There is still room for optimism, so long as Corbyn holds to his word.
ECJ or no ECJ?
The UK and the EU would establish a joint institutional framework to provide for the consistent interpretation and application of UK-EU agreements by both parties This would be done in the UK by UK courts, and in the EU by EU courts – with due regard paid to EU case law in areas where the UK continued to apply a common rulebook.
This framework would also include robust and appropriate means for the resolution of disputes, including through a Joint Committee and in many areas through binding independent arbitration – accommodating through a joint reference procedure the role of the Court
The above extract confirms rumours May is looking for an ISDS-type independent court to arbitrate over disagreements between British courts and the European Court of Justice to avoid ECJ oversight. Adherence to EU case law was already expected, but largely limited to EU citizens rights. Keeping Britain in the Single Market for goods tightens this stranglehold exponentially. Quite simply, our courts would cease to be sovereign.
Phased introduction of a new Facilitated Customs Arrangement that would remove the need for customs checks and controls between the UK and the EU as if a combined customs territory. The UK would apply the UK’s tariffs and trade policy for goods intended for the UK, and the EU’s tariffs and trade policy for goods intended for the EU – becoming operational in stages as both sides complete the necessary preparations.
This is where it gets even messier. The white paper will hopefully shed more light, but the government has stuck here with the daft “new customs partnership” concept already rejected by the inner war cabinet at the previous Chequers summit – on Friday May brought the whole Cabinet back to her grace and favour residence to avoid another defeat.
The new customs partnership will only work if goods crossing any part of the EU’s external border destined for the UK, or arriving first in Britain but only as a transit destination, are tracked and their final point of distribution to consumers determined so that the EU can notify British authorities of refunds on tariffs it may owe to businesses from countries with whom the UK has signed trade deals. British authorities will have to do the same so that it knows how much duty it owes to Brussels for goods bound only for the EU27 market that arrived first in the UK. Needless to say, the technology, let alone the infrastructure does not yet exist.
This is no secret, which explains the emphasis on a “phased” approach. In other words, Britain will remain in the Customs Union (plus agri-food) until the technology becomes available. The EU will have no incentive to sign up to the plan at a later date which means Britain will remain in the CU until we get a government with some Common Sense to take us out entirely.
Northern Ireland and Ireland through the overall future relationship: preserving the constitutional and economic integrity of the UK; honouring the letter and the spirit of the Belfast Agreement; and ensuring that the operational legal text the UK will nonetheless agree on the ‘backstop’ solution as part of the Withdrawal Agreement would not need to be brought into effect.
This paragraph sums up this shameful renaming exercise (how stupid do they think the public are?). As with the “common rulebook”, new phrasing for age-old submission to the EU’s punishing acquis of regulations, the prime minister here is pretending she has found a third way when she has not. The “backstop” is only avoided in the sense that Britain will not officially remain in the Customs Union (plus agri), but of course, if the Chequers plan is agreed with the EU, it will for the reasons outlined above.
The document rounds off with a list of putative benefits to this approach – it is here that the spectre of free movement is unleashed – before finally affirming that a “no deal” remains another possibility. The ploy could not be more blatant.
A Brexiteer however will reflect a little deeper. The political momentum towards real independence is now, the chance for clean separation has to be taken. We face the very real risk of becoming a Norway, nominally out of the EU but to all intents and purposes a colony of Brussels. That cannot happen.