Thursday 19 September 2019

Colm McCarthy: Big Brexit blunders see another one bite the dust

As another British minister resigns, the betting must still be on Brexit-flavoured fudge, writes Colm McCarthy

A RETREAT INTO ECONOMIC NATIONALISM: A Brexit-themed billboard depicting Russian President Vladimir Putin that reads ‘Let’s celebrate a red, white and blue Brexit’ in north London. Photo: Daniel Sorabji/Getty
A RETREAT INTO ECONOMIC NATIONALISM: A Brexit-themed billboard depicting Russian President Vladimir Putin that reads ‘Let’s celebrate a red, white and blue Brexit’ in north London. Photo: Daniel Sorabji/Getty
Colm McCarthy

Colm McCarthy

A special European Council to consider the draft withdrawal agreement could be announced in the next few days if there is a decent prospect of success.

If there is insufficient progress in talks at official level, or if the UK cabinet cannot agree to whatever compromises officials have designed, the timetable begins to look tight and some form of political crisis in London becomes more likely.

Last Friday's resignation of the pro-Remain transport minister Jo Johnson was the sixth over Brexit and the DUP weighed in with a threat to vote down a deal from their very different perspective.

The betting must still be on some fudge designed to disguise the necessary concessions from the UK side, but a no-deal crash-out remains possible until the withdrawal deal is done. It must get through the cabinet and then be approved by the European Council, as well as the European and UK parliaments.

The available negotiating time has been spent unproductively. The main reason has been the UK's willingness to believe that the negative consequences of non-membership in the European Union can somehow be negotiated away, the illusion summarised in Mrs May's initial insistence that "no deal is better than a bad deal".

If there is optimism that an orderly withdrawal can still be found, it is because of the growing realisation in London that no deal is the worst possible outcome, and not just because of the immediate implications for the Border in Ireland.

There is no significant business federation or trade union which has failed to express alarm at the no-deal prospect and it is no longer credible as a negotiating threat. If it happens it will happen even though nobody wants it. The government's creation of expectations, in the immediate aftermath of the June 2016 referendum, that this would be a doddle with no downside has bedevilled negotiations ever since.

Whatever the ultimate outcome, the damage-limiting option of remaining in the EU's single market, the best route to borderless trade, is still identified on the Tory right with surrender, even treason, and failure to implement the referendum result. Ruling out the single market ensures that any deal to bridge into the 21-month transition period offered by the EU-27 will leave the UK exposed to border controls and avoidable economic costs. Non-tariff barriers are the most troublesome and a deal to stay in some form of customs union is not enough to avoid border controls, in Ireland or elsewhere. Leaving these fundamental matters to the transition period promises the UK an ongoing fractious relationship with its European neighbours.

The European Union is more than an economic trading bloc. It is indeed the political project that British Eurosceptics have always alleged and withdrawal will have grave political consequences, exacerbated if the economic damage is not minimised.

The least damaging deal, staying inside both single market and allied to the customs union, is so close to remaining fully in the European Union that it raises the taboo question: why bother?

A leaked Whitehall assessment of the long-term economic cost puts the damage at 2pc of GDP with the type of close trading arrangement (virtually staying in both single market and customs union) Mrs May has ruled out, and a 5pc hit with a plain vanilla third-country deal, the so-called Canada option favoured by Brexiteers.

Given that economic performance in the UK is unlikely to be spectacular in any scenario (growth rates no better than 2pc per annum), any hit will be noticed and blamed on European Union negotiators rather than on British decisions.

World leaders, gathered in France this weekend to mark the centenary of the end of World War I, will be mindful that Brexit is a manifestation of the retreat into economic nationalism that has become the dominant feature of international politics since the 2008 crash.

The United States, the principal architect of the global economic order established 70 years ago after World War II, is already embarked on the dismantling of that system. Trump's America has unilaterally imposed tariffs on imports from allies as well as rivals, has weakened international agencies such as the World Trade Organisation, resisted climate change agreements and even revoked existing arms limitation treaties. Trade sanctions threatened on Canada were justified on grounds of national security!

The post-WWII reforms created, through the United Nations and its sister organisations such as the International Monetary Fund, an international order that facilitated relative peace and widening prosperity in the non-communist world.

The lessons of the 1920s and 1930s were learned - World War I was followed by American isolationism, trade wars, the resurgence of economic nationalism and a new conflagration just 20 years later. In this centenary month, the international press has been reflecting on the parallels with the inter-war period and its horrific outcome.

The ingredients are visibly in place, including rising powers willing to challenge an isolationist America, a lurch towards protectionism in trade policy and electoral support for national populism in many European countries. In Britain, the national populist party (UKIP) has faded only because the traditional centre-right party has adopted its principal policy plank, namely Brexit.

In France this weekend, Donald Trump will meet with far more like-minded office-holders than liberal democrats might like to acknowledge, including the leaders of rather a long list of European states and European neighbours - not just Austria, Hungary and Poland and the new leaders of Italy, but Russia and Turkey on the EU's flanks.

Three weeks ago in Madrid, 9,000 turned out at a rally for a new right-populist party called Vox which is planning to contest next May's European Parliament elections. The traditional centre-right Partido Popular, in a country which has thus far resisted the rightward drift, responded by hinting, Tory-like, that it would meet the challenge.

In his resignation letter, Jo Johnson pulled no punches. "To present the nation with a choice between two deeply unattractive outcomes, vassalage and chaos, is a failure of British statecraft on a scale unseen since the Suez crisis."

He went on: "Hopes for 'the easiest trade deal in history' have proved to be delusions. Contrary to promises, there is in fact no deal at all on our future trading relationship with the EU which the government can present to the country.

"Still less anything that offers the 'exact same benefits' as the single market, as David Davis promised, or the 'precise guarantees of frictionless trade' that the prime minister assured us would be available."

On a lighter note, the UK minister responsible for the Brexit negotiations, Dominic Raab, revealed to a conference in London last Thursday that Britain is actually an island.

"I hadn't quite understood the full extent of this, but if you look at the UK and look at how we trade in goods, we are particularly reliant on the Dover-Calais crossing," he said.

Mr Raab is an Oxford law graduate - his boss, Theresa May, has a geography degree from the same university, and could well have been the source of the minister's insight.

But Raab's blundering is best seen as a measure of the retreat from reality in UK politics 28 months after the referendum, as the clock ticks down. Jo Johnson excepted.

Sunday Independent

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