William Norton was Legal Director of Vote Leave. Among numerous articles, papers and books, he is the author of Monument and Bank: Capitalism and the Anglo-Saxon Mind.
Welcome to the phoney war. In the spirit of the DFS January Sale, I offer two phoney wars for the price of one.
The first phoney war is the prelude to a contest of crucial geopolitical, cultural and historical importance: the UK’s negotiation of withdrawal from the EU. The process is like a poker game in which you never know whether or not the other side is bluffing. As its opening move, the EU will not discuss anything until the UK has served notice to withdraw under Article 50 (which is why Andrea Leadsom advocated serving notice immediately during her leadership campaign, and although she was much-mocked for doing so, you can see her point now).
So, at the moment, both sides are bluffing about bluffing, and nothing much is happening. Apart from Theresa May being snubbed at some EU summit dinners, and a few self-important foreigners you’ve never heard of sounding off about how the British have to fall into line and do as they’re told. No change there, then.
What are the Government’s key objectives, minimum demands and non-negotiable points? We don’t know. And quite ossibly, it doesn’t know, either. When things eventually get going, it will involve detailed argument about the pros and cons of the Single Market, the customs union, the EEA, passporting for financial institutions, regulatory equivalence, technical barriers to trade, etc. The welfare and livelihood of millions could, potentially, depend upon the outcome. Which makes it terribly boring, devoid of gossip and of interest only to nerds like me.
Far more interesting is the second phoney war – which is about how the Government is going to sell whatever it gets from the first contest. This is genuinely fascinating, because it amounts to a four-player chess game in which all the pieces have started on the wrong squares. And since chess only has two players, part of the fun is trying to work out what the rules are. Like previous British political disputes about Europe, it’s much more interesting than the EU.
Four players? First up: the Prime Minister, or White Queen. Unexpectedly promoted from a pawn, her game plan is to go forward and win. She isn’t quite sure where forward is, but that’s where she’s heading. She isn’t quite sure how many White pieces are following. But she’s going to win. Whatever winning means. Probably, whatever she tells us it does. Mainly, it involves beating Black.
Second: the Leave Campaigners. Since they weren’t expecting to win the previous game (June 2016 Referendum, a form of pin-the-tail-on-the-donkey), they haven’t worked out a plan yet. To their annoyance they have ended up being Black, moving second, and they’re not quite sure how many pieces they have. Some have turned Grey, co-operating with the White Queen. Black can’t control their pawns: half are going left; half right; none forward.
Third: the Remain Campaigners. They have some of the (very) superior White pieces (all the bishops, most of the knights) but since they weren’t expecting to lose the previous game, they don’t know what to do, either. Following their strategy during the referendum, they keep trying to take pieces on their own side.
Fourth: the civil service/establishment/Illuminati (delete according to taste). They didn’t want to play the previous game. In this one, they are the White pawns. They are refusing to move, and most would prefer to go backwards. Presently, they’re clogging up things in the middle.
Jeremy Corbyn is not playing this game. A keen student of history, he is preparing for the moment when he joins it.
The two contests intersect over whether the UK and the EU-27 can strike a Deal – that’s to say, a mutually acceptable free trade agreement. From the perspective of the little people (us), this involves mundane questions about how easy it will be to export to our closest neighbours, how secure are the jobs of the people that do so, what price has to be paid to obtain this, and so forth. From the perspective of the political class (of which no one claims to be a member), it turns on whether the Prime Minister can be said to have failed.
Let us be dull and lower middle class for a moment, and consider the facts.
A free trade agreement with the EU means (1) we pay no tariffs on goods we sell to the EU; and (2) the paperwork will be easier if we want something from the EU.
Of these, (1) is vastly overrated. A new study for Civitas, which I have written and which is published today, concludes that the UK is more than able to manage the tariff costs of being outside the EU. In the absence of any Deal, imports from the EU will raise £12.9 billion for HM Treasury in duties, whereas UK exporters will suffer £5.2 billion in tariffs on their exports to the EU.
The WTO rules on subsidies provide sufficient flexibility for the Government to implement “horizontal” programmes to mitigate the impact of tariffs – i.e. economy-wide measures which are not specific to any identifiable industry, and are not tied in principle or practice to compensating for the exact cost of tariffs on exports. A package of enhanced tax credits for research and development spending; regional aid (freed from EU-wide limitations); the abolition of the self-imposed UK carbon price floor which artificially increases electricity costs; and a sweeping-up Transitional Assistance Programme (to take advantage of de minimis exemptions in the WTO rules) would cost, allowing for leakages to non-exporting businesses and domestic consumers, about £8.8 billion. My paper is part of a series from Civitas which shadows and informs the ongoing Brexit debate.
The UK Government can run its mitigation programmes at a profit. The schemes in question are justifiable in their own right. The only question is whether such mitigation schemes should be designed on a standalone basis or (hint: the correct answer) as part of a wider post-Brexit industrial strategy to fit the UK for competing in a global market outside the EU. As a matter of fact, tariffs are irrelevant.
Which leaves us with the paperwork headache of (2). I freely admit that there are considerable red tape benefits in being inside a free trade deal with the EU. One can then only wonder how on earth the Americans, the Chinese, the Indians, the Japanese, the Russians, the Brazilians etc manage to sell a single widget in Europe – because none of their countries have a free trade deal with the EU. But maybe these damned foreigners cheat – or, to put it another way, make things that other people want to buy, at a price they’re prepared to pay? We used to be pretty good in this country at making Spinning Jennies and digging canals. What a shame that the world moved on.
So, a hard-headed, fact-obsessed answer to (2) is: if you’re good enough, it isn’t a problem; and if it’s a problem, what makes you think the taxpayer should bail out your failure? Once upon a time, we pushed through enclosure of the open fields. A lot of labourers may well have lost out temporarily, but it gave us enough grain to stop everyone else starving. Yes, there may well be cases where cheating foreigners are rigging the rules to do down Our Boys. Well, the good news is that, outside the EU, we can use our WTO membership to take “countervailing action”, without having to wait for a majority vote from 27 other colleagues.
A Deal would be preferable – on the right terms – but we could survive without one, and No Deal is better than a Bad Deal just for the sake of having one (which the Continuity Remain campaign can’t grasp). We can certainly afford to drive a very hard bargain with the EU. What does Brexit mean? It means having nobody else to blame.
But, as the man said, humankind cannot bear very much reality. And the political class particularly dislikes reality when it interrupts the serious business of gossip: who’s up; who’s down; whose round is it?
To date, the debate has been framed by the White pieces in our chess game and their Deal-at-any-cost agenda. The Prime Minister’s team aren’t very good at media management. But do not fret, gentle reader. The poker game will conclude with one of two possible outcomes, which even my grandmother (God rest her soul) could sell to the press:
- There is A Deal. And such a Deal – not even Moses himself could have brokered it.
- There is No Deal – a because the Prime Minister, respecting the referendum outcome, and as A Woman Of Great Integrity, would not surrender to The Foreigners over Immigration.
Either outcome could be spun to achieve the Prime Minister’s prime objective: to stay Prime Minister, and keep out the people who actually wanted to Leave the EU.
The welfare and livelihood of millions which could, potentially, depend upon the outcome? Oh, don’t be so boring.