David Martin MEP speaking at Glasgow University, 20 November 2017
The case I want to put to you tonight is that whether through hubris, arrogance or ignorance before, during and since the referendum, Brexiteers have lived in a fantasy-land about the UK’s negotiating power in relation to the EU. And have consistently overestimated the importance of the UK in the new global order. As a result, we are heading for a divorce that will be messy for both the EU and the UK and a disaster for the UK economy. In these circumstances, the only sensible approach for a responsible government would be to withdraw the Article 50 application and give time for an orderly departure is that is what they are intent on doing.
The British government started the talks in the naïve belief that because ‘Europe’ sells more to us than we sell to them, the EU would have more interest in free trade talks than the UK. This is of course completely ignoring the fact that the EU is 48% of our market, but we are a much smaller 10 – 15% of EU member states’ total exports.
Sadly, a lot of the British public has been prepared to swallow this message and still don’t realise that we have gone from the bravado of ‘cake and eat it’ to humble pie. Which is not to blame the public; they have to decades been told that Brussels was banning bent bananas, prawn crisps, overtime and bagpipes. They were assured that money presently sent to Brussels would be spend on their priorities only to discover that bodies like the Institute for Fiscal Studies have concluded it will cost us more to do on our own what we currently do with our neighbours. Just as the 1990s ‘peace dividend’ sadly proved mythical, so will the ‘leavers dividend’.
There were of course other reasons for voting to leave. British business sees the benefit of barrier free trade in its day-to-day activity. For the British public the benefits are not a obvious. Take travel in Europe as an example. Having opted out the Schengen and the Euro, unlike, say, a German who can take a train to France without a passport or changing currency, we still enter the EU like we enter any other country in the world.
On the other side of the coin, an opt-out we didn’t take could be argued to have contributed to negative views. The UK decided not to take advantage of the seven-year restrictive period of free movement in 2004 when the seven central and eastern states joined. Had we done so, perhaps we could have better managed the perception that immigration was out of control.
Whatever the case, the combination of a hubristic government and an impatient mood from a section of the public has led Britain down a path that far from take back control has left us floundering, isolated and close to impotent.
The first mistake was to trigger Article 50 unilaterally. As our former Ambassador to the EU, Ivan Rodgers pointed out to the House of Commons, to trigger Article 50 before you had agreed a Modus Vivendi with the EU allowed the EU to set the rules to suit them.
The sequencing of Northern Ireland, citizenship and money before moving on to trade talks ahs left the UK weak because its key objective “the benefits of the single market without membership cannot be attained without concessions on the first three”. So much for taking back control, and hence the clumsy attempt to badge abject failure as a strategy with the mantra ‘no deal is better than a bad deal’.
If you are in negotiations, a ‘no deal’ threat can work if the breakdown of talks simple retains the status quo. If it is not significantly better than what we have, we will walk away can be a good ploy. But in Brexit negotiations there is no status quo unless we stay.
There is no ‘no deal’ option, because even if talks break down, we still need individual deals to keep aircrafts flying between here and the EU. We sill still want security cooperation and so will still need a deal on the transfer of data. We will need a deal on customs facilitation and so on.
‘No deal’ threats don’t work because the 27 look across the channel and see our investment, consumption and trade all suffering in the UK (despite a much weaker pound) while the economy of the 27 is growing. They know that without a deal the UK economy would jump into a void. As a senior German finance minister said last week, a ‘no deal’ outcome would be an irrational systemic failure of colossal proportions but (and this tells you much about their assessment f our government) we are working to minimize the cost and disruptions should it happen.
With the failure of the ‘no deal’ strategy to take back control the Government moved on to two other approaches – pleading and delaying.
At a dinner on 19 October the Prime Minister apparently pleaded with other EU heads of state and government to help her get a deal. Reportedly hinting that the alternative might be having to deal with the likes of Boris and Gove. The Times at that point reported:
“Those who have seen Mrs May privately in recent weeks describe her as stricken and stunned. On one occasion she sat in silence for almost ten minutes while the visitor she had invited to see waited for her to lead the conversation. He left the meeting deciding she no longer wanted to be Prime Minister. The internal contradiction of their position must be taking an emotional as well as a political toll. According to reports in the German press, she appeared “tormented” at her dinner with Jean-Claude Juncker las week.
Nevertheless, out here in the Brexiteers’ world of make-believe she is doing fine. Apparently, the Prime Minister is ‘taking back control’ and ‘making Britain great again’ by pleading for sympathy.
The second prong of this second phase of British floundering is to suggest a delay of two years after we leave before we really leave. This is a smoke and mirrors attempt to keep hardliners on board while recognizing that we don’t have enough time left to leave in an orderly manner. This transition period as foreseen by the Government involves leaving at 11pm on 28 March 2019, but accepting all EU rules and regulations for a further two years. Meaning that for years we would be a rule taker from the EU without any representation in the ECJ, the Commission, The Council or the Parliament. A strange version of taking back control.
The present British approach is to try and divide and conquer. Seemingly unaware that Mr Barnier and the Commission take their mandate from the 27 and not the other way around, the Government seems to believe that going directly to national capitals will get them a better hearing. Of course, until recently, David Davis thought the UK would negotiate separate trade deals with the individual EU member states; such was the level of basic EU knowledge upon which the Brexit case was made. So last week we had the PM in Sweden and David Davis in Germany. This is having the opposite impact of what a charm offensive should do. With the UK viewed as already creating a significant cleavage in the EU, its attempts to divide the 27 are going down like a lead balloon. The message is also going down badly. David Davis actually warned the EU not to put politics ahead of economic prosperity, which may be an irony too far even for the jovial Brexit secretary. The UK is trying to persuade the individual countries with a trade surplus with the UK, that they have more than others to lose from a hard Brexit and therefore should help the UK move on to the trade talks before completing the three prerequisites of Northern Ireland, the budget and citizens’ rights. This for many goes to the heart of the British problem. For the majority of the 27 the EU is much more than a financial transaction and they know that the present British administration just does not get it.
So much for the inept approach to negotiations. They would have been damaging but possibly not fatal if the UK government had a clear view of what it wanted at the end of this process. It does not! The line of course is access to the single market while taking back control Every member of the Cabinet seems to have a different view of what these two phrases mean in practice. Assuming the Prime Minister is in ultimate control of the process (admittedly a bold assumption). Based on her Lancaster House and Florence speeches as well as other comments, she has ruled out EEA membership, single market membership and a customs union. So whatever deal we seek it is not as close as Norway, Switzerland or Turkey. She has talked about a bespoke deal for the UK, but the EU shows no sign of wishing to negotiate such a deal and the clock is ticking fast towards March 2019. The best we can hope for is a CETA type deal. A good deal for Canada, thousands of miles away, is not so good for UK businesses used to tariff free, quota free and barrier free access to the giant market on its doorstep. Studies have shown that geography remains one of the most important factors to trade; good deals with countries halfway around the world can boost your trade, but they cannot replicate what you do with your immediate neighbours.
True, CETA removes tariffs on 99% of goods, but some sensitive agricultural products are excluded. It liberalises services, but some key sectors for the UK, like banking and other financial services, telecoms, energy and transport are only partly liberalised. It has a mechanism for voluntary cooperation on regulatory standards but no mechanism to agree common standards. One of the issues that most worries industrialists I speak to is the divergence of standards between the EU and the UK taking us back to the time when products required different contents, different packaging and different labelling for different markets. They also fear this will weaken UK industries’ ability to be part of certain global supply chains without the seamless flow of components across borders. It is staggering how many products presently seamlessly cross internal EU borders multiple times during their manufacturing, which is of course exactly what the single market is all about. Components of planes manufactured by airbus cross between the four EU locations in the UK, France, Germany and Spain during production. There are no tariffs, no paperwork, no checkpoints, no rules of origin to catalogue, no immigration bureaucracy or staff. As a consequence there is a vast European aeronautical industry across all four countries allowing the EU to be the only competitor in the world to Boeing in the United States.
A CETA-type deal is no panacea for our retreat from the single market, but even if it was, the time to negotiate it is not available. CETA took seven years to negotiate and ratify. Even on the most optimistic timetable it cannot be done before we are scheduled to leave. I would hazard that it will not even be possible to do it in March ’19 plus two. If we were only overestimating our ability to negotiate a deal with the rest of Europe, that would be bad enough given its importance to us, but we are also delusional on our ability to trade with the rest of the world.
The other side of the Brexiteers’ argument was of a ‘freed UK trading with the world’. The first obvious point to make here is that there is nothing to stop us trading with the rest of the world – we can, and we do. 50% of trade is with the rest of the world. The EU, far from being a barrier to this trade, is a facilitator. The 50-plus trade deals the EU has opens markets for British goods and services. The Korea/EU trade deal benefitted Britain more than any other member state.
Trade Minister Liam Fox has belatedly recognised this and has talked about “cutting and pasting” EU deals. The response from third countries has been less than encouraging. Most have made it clear they would want to negotiate fresh deals. Partly I suspect because they believe they can get a better deal from a country of 60 million, desperate to keep preferential access to their market, than they could from the EU negotiating on behalf of half a billion people.
One presumes our new freedom to negotiate trade deals is aimed at opening new markets but so far, these markets remain largely unidentified as does the price (in reciptrocal market access) we are will to pay and the standards we will adhere to. Will we stick to existing health, environmental and animal welfare standards? So, no chlorinated chicken or hormone-fed beef just to mention two examples. The EU and the US are the global rule-setters on standards. Virtually all countries in the world look to these two leading trading blocks to establish which rules they follow; industry assesses which market it will sell the most into and adapts its product lines accordingly. Quite simply, UK businesses will need to decide if they stick to EU rules or adapt to US ones. Given existing supply chains and geography, I would suspect most will be forced to stick exactly to EU standards as our immediate neighbours do. As we lost UK representation in the institutions which negotiate these standards, it is not at all clear what we are taking back control from.
One market the EU has been trying to open without success is India. The UK, with an almost neo-colonial view imagines that our historic relationship with India will enable the UK to succeed where Europe has failed. Yet two of the most intractable issues the EU negotiators have faced is the EU demand that India slashes duty on alcohol, which it is fighting in part to help the Scotch Whisky industry and the Indian demand for better access to the EU for its workers providing services. So called ‘Mode 4 access’. The UK is the member state most reluctant to make concessions to India on Mode 4.
Our other great hope of course is the USA. I leave you to ponder how easy it will be to improve our access to a market where the President proclaims very loudly his ‘America First’ approach.
On that theme the world trading environment is tough. We have a voracious China using every tool available to capture markets. The EU has recently been strengthening its Trade Defence Instruments to protect our industry against dumped products. Liam Fox’s draft trade bill is very vague on how the UK will deal with such threats. I regard this as very dangerous. Is is one thing to believe in an open global trading system, it is another naïve not to protect yourself against unfair competition. Whether that comes from exploited labour, government subsidy or environmental neglect.
The US, under President Trump, now has a prodigious appetite for using Trade Defence Instruments. Some of the cases they are working on look more like they are aimed at stopping competition than tackling unfair competition. The most obvious example is the action against Canadian plane manufacturer Bombardier. They have been competing in the US market with a plane whose wings are manufactured in Northern Ireland. Boeing filed a complaint and the company now faces a punitive 300% tariff on its C series jets. This would kill access to the US market and 4200 jobs in Northern Ireland. Both Canada and the UK have turned to the EU for help because only a market of the size of the EU has the clout to threaten effective retaliatory action. An illustration of how we will have the illusion of control after we leave but in effect be a small player being buffeted by the global trade whims.
So far I have discussed Brexit in terms of our control vis-à-vis the negotiations, the future relations with the EU and our role in the global economy. Brexit, we were told, was also about giving back control to our domestic institutions. I don’t think anyone in Westminster, apart from some Government Ministers and lackeys, believe they are regaining control over EU policies. No one in the devolved administrations, apart from the DUP, believes they have regained control over anything.
In Westminster the Withdrawal Bill - a monster piece of legislation with over 400 amendments - is already being compared to ‘Jarndyce and Jarndyce’ - the legal case which drags on forever in Charles Dickens’ Bleak House. No one I speak to is confident that a coherent outcome can emerge from the process. After much pressing the Government finally conceded that the House of Commons will have a vote at the end of the process. This concession will give MPs the choice between shooting themselves in the head or the foot. The Hobsons Choice is between voting for whatever deal the government comes back with or voting against and leaving with no deal. No chance of voting to remain or instructing the government to keep negotiating. So much for returning control to the Commons.
The situation for the devolved administrations is if anything worse. Under the Sewell Convention the UK should have consent from the devolved administrations to pass Bills which cover devolved competences. The Government has made it clear that it regards Sewell as a convention not a legal requirement. There was also the reasonable expectation from devolved administrations that areas that fell within their competence and were repatriated from the EU would come under their control. The Government has made some positive noise on this, but shows no sign of accepting the principle. This rather plays into the hands of those who argue that a power devolved is a power retained. This could have long-term consequences for the unity of the UK. But whatever the long-term consequences, Brexit will move control over matters like fishing and agriculture not back to Scotland, but to UK central government.
I make no pretence that I am anything other than a remainer. I have no doubt that the long-term economic interests of the UK will be severely damaged by being outside the single market. I believe outside the EU we will become more insular, diminishing the opportunities for our young people to work and study across Europe. We will no longer be part of what my good friend former MEP and Nobel Laureate John Hume calls the greatest peace process in history. In mentioning John, we should also remember we are putting in serious jeopardy the Northern Irish peace process and the Good Friday Agreement.
I accept though that the Government believes it has a duty to attempt to carry out the wishes expressed in the referendum campaign. If it must, it should do so in a way that does minimal damage to the UK economy, minimal damage to our long-term relations with Europe and with adequate time to plan and prepare for our future outside the EU as well as maximum time for both the EU and the UK to implement the outcome of the Brexit negotiations.
At best, a botched Brexit will sour relations with our closest neighbours and biggest market. It could leave EU citizens in the UK and UK citizens in the 27 not sure of their status. We could have miles of lorry queues in Kent, gridlock in Northern Ireland and food rotting in warehouses. In the hopefully unlikely worst-scenario we could have airlines not being able to fly from the UK to EU member states, no exchange of intelligence with our neighbours and a punitive tariffs on some vital exports.
Even with a small risk of such an outcome no responsible government should press on with its Mr Micawber strategy of hoping something will turn up. I firmly believe the Government should withdraw Article 50 to give itself time to work out what it wants. To put in place with proper Parliamentary scrutiny the vast number of new laws required. To reach agreement with the devolved administrations on future arrangements. To employ the hundreds of new customs officers we will need. To recruit people to do the jobs that Europe currently does for us like trade negotiations, competition policy and so on. To give EU citizens living in the UK and UK citizens living in the EU reasonable awareness of their future status and time to plan for it.
If we are to leave, it should be in a planned, civilized and dignified manner. Not in a lost-minute, ill-tempered rush to the door.
I believe we should plan to leave, if we must, in 2024, giving everyone time to make the best of a bad job. History will not look kindly on the performance of the UK since 2016, but there is still time to take back control of this driverless car hurtling towards the cliff edge.