Wednesday 11 December 2019

Colm McCarthy: 'Brexit chaos - they think it's all over but it's not, far from it'

The serious business will begin when the UK has left the EU and has to arrange trade deals, writes Colm McCarthy

Tortuous journey: Boris Johnson at the unveiling of the Conservative Party general election campaign bus in Manchester, but it remains far from clear what the ultimate destination will be after the UK exits the EU. Photo: Frank Augstein/AFP
Tortuous journey: Boris Johnson at the unveiling of the Conservative Party general election campaign bus in Manchester, but it remains far from clear what the ultimate destination will be after the UK exits the EU. Photo: Frank Augstein/AFP

The UK's withdrawal terms were settled with the EU a month ago, for the second time, but ratification has again been deferred, on this occasion for a trip to the polls. Even with a decisive election outcome, there is no guarantee of an early end to the Brexit nightmare, for the UK or its European neighbours.

A Conservative victory in the election three weeks from Thursday looks more likely as the Brexit Party stands down candidates in favour of the Tories. But there could still be another hung parliament and even a clear win for Boris Johnson will not bring the closure he trumpeted last Sunday evening: "The great new deal we've done with our European friends takes us out of the EU in January. Let's build a new relationship based on free trade not political alignment."

The promise to exit on January 31 means the UK finally becomes a third country, an ex-member of the EU, but Johnson followed with a commitment to forgo any extension to the no-change transition period beyond the end of 2020. This assurance persuaded Nigel Farage to stand down more than half the Brexit Party candidates, enhancing Johnson's prospects at the cost of denying the UK a possible prolongation of transition beyond the end of 2020.

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Jeremy Corbyn. Photo: Jane Barlow/PA Wire
Jeremy Corbyn. Photo: Jane Barlow/PA Wire

This looks like the unrequited sacrifice of a potentially valuable option, risking a new cliff edge later next year, abrupt departure from the no-change transition and thus from both the customs union and the single market. Johnson has threatened another form of crash-out just over a year from now, an orderly withdrawal but with no more formal trading link to Europe than an island in the South Pacific.

All that has been negotiated is a withdrawal agreement - the serious business starts after the UK has departed at the end of January and the transition period is designed to provide time for the negotiation of a long-term free trade agreement between the EU and the United Kingdom. That agreement will have to be ratified by all 27 parliaments, a lengthy process.

As these parliaments resume after the summer only in September, the free-trade deal would need to be finalised by July next year to provide time for ratification. If Johnson does not have a trade deal by the summer, he will have missed the mid-year deadline for signalling a longer transition period (up to two further years is possible) and ensured another autumn of Brexit crisis. Without a free trade deal, there would be instant application of tariffs, including steep levies on agricultural exports from Ireland, and the full enforcement by the EU of the non-tariff barriers which apply to all third countries.

When Johnson assumed the premiership, he was happy to contemplate a disorderly crash-out with not even a withdrawal agreement. He is now threatening an orderly crash-out, since there will be far too little time for the trade negotiations.

According to Trade Commissioner-designate Phil Hogan, the EU will have prepared its negotiating mandate and assembled its team by March, so the discussions could begin in April, with three or four months available to wrap up a long-term deal. Trade experts believe this timetable is utterly impossible - negotiations with the Faroe Islands (population 50,000) took 18 months and the recent deal with Canada eight years. The deal with the UK will be more ambitious than the Canada deal and will have some unique features.

Hogan told RTE's Tony Connelly that he hoped to have a negotiating mandate from the European Council, and his team ready for the fray, within a few months, and expressed confidence that a trade agreement could be done. He then rather spoiled the upbeat message by insisting: "The UK would have to decide which EU regulations the UK wanted to be part of, and which they would diverge from."

The UK expects to "take back control" through ending freedom of movement, which means exit from the single market, and to initiate free trade talks with the USA and countries around the world, which means exit from the customs union. It could still be possible to achieve a deal with Europe which avoids tariffs and quotas on manufactured goods, but the EU does not extend generous deals to third countries unless they agree to play ball about labour and product standards and environmental policies.

It is difficult to see how there can be free trade in services at all outside the single market structure - none of the free trade deals already negotiated by the EU with countries such as Canada, South Korea and Japan provide for anything close to the access which the UK's sizeable export services sector currently enjoys.

Johnson cannot be accused of inconsistency on Brexit - campaigning for Leave in the referendum and later as foreign secretary in Theresa May's government, he insisted the UK could have its cake and eat it, leave the EU and retain the same trade access as members. He cannot possibly believe this, no matter how short his attention span. Liam Fox, the trade secretary in the May government, announced in July 2017 that the UK's post-Brexit trade deal with the EU would be "the easiest in human history". The current incumbent, Liz Truss, declared pre-referendum for self-sufficiency in food production. "We import two-thirds of our cheese - that is a disgrace," she told a cheering audience in 2015.

A succession of civil service advisers in Whitehall, and the EU negotiators, have outlined the choices available and the UK's political leadership has simply declined to choose. If Johnson is defeated and Labour leader Jeremy Corbyn leads the next government, the refusal to choose will take a new form: Corbyn will seek yet another iteration on the Withdrawal Agreement and a second referendum. He has declined to indicate what recommendation he would then offer voters, since that would depend on the attractions of his imagined withdrawal agreement.

This reluctance to choose has a straightforward source. None of the choices available is attractive and the narrow referendum victory for Leave did not indicate a voter preference for any of the real-world alternatives. Every sector of British business, including business in Northern Ireland, when quizzed about the future relationship with Europe, is inclined to a continuation of current arrangements, fearful of disruption and sceptical of the prospects for salvation in new trade deals with the USA or anybody else. Trade-offs will have to be faced unless the real world requires none, and a free trade agreement, as a third country, is a very different proposition from membership of the European Union.

The negotiations, whenever they commence and whoever conducts them from the British side, will be crippled from the beginning by unrealistic expectations about what can be achieved. Before and since the 2016 referendum, the British public has been led to believe that the UK, as a third country, can achieve 'frictionless trade' with its European partners from outside the EU. The European Union would cease to exist as a functioning trade bloc if every country in the world enjoyed the privileges of membership, as the UK government's advisers are fully aware. The stage has been set for an unsuccessful trade negotiation and more Brexit chaos.

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