Iain Mansfield is a former senior civil servant and winner of the Institute of Economic Affairs’ Brexit prize. He writes in a personal capacity.
Nearly two years ago, the UK voted to leave the European Union. As we approach the end-point of negotiations, it’s worth taking stock of progress to date and considering what would make an acceptable final deal.
Making a successful exit from the EU has to involve a sincere effort to maximise the opportunities, not simply – as some Remainers would have it – attempting to mitigate the risks. As the Government’s policy emerged, I was delighted to see that the position set out in the Prime Minister’s Lancaster House speech of January 2017, and in subsequent policy documents, reflected many of the principles I had recommended in my 2014 IEA paper, Openness not Isolation. The necessity of leaving the Single Market and Customs Union; an ambitious free trade agreement with the EU; a drive for new trade agreements; the intent to continue collaboration in science and innovation; and maintaining sustainable funding for areas such as farming – all of these were core fundamentals on which to build a deal.
Of course, the EU immediately began to play hardball, as it continues to do to this day, including with its stance on Galileo. This was no surprise: it has always been ruthlessly single-minded in pursuit of its own objectives. Perhaps the greatest fallacy of the post-Maastricht era was the belief by europhiles that, if the UK was sufficiently cooperative, the European Commission would be motivated to be ‘nice’ and overlook its own self-interest – a delusion that reached its nadir in 2005, when Tony Blair gave up £10 billion of our rebate in exchange for precisely nothing of substance.
I should emphasise that I do not criticise the EU for negotiating robustly. More disappointing is the way elements of the Remain-supporting media persist on taking the Commission’s public statements at face value. It is entirely logical, from the perspective of negotiation theory, that Michel Barnier should announce that there will ‘no deal on financial services’, but a modicum of research will find that Chapter 13 of the EU-Canada FTA is entirely devoted to financial services, and that the EU’s own impact assessment of that agreement states that “the services sector has the potential to generate the greatest economic gains for both Canada and the EU.”
Accordingly, the Government must approach these negotiations as a hard-nosed business deal, rather than just with a gentlemanly handshake, including being ready to employ brinksmanship where appropriate. The Prime Minister’s perspicacity in insisting that a deal on UK and EU citizens’ rights needed to be reciprocal, rather than making the unilateral declaration she was urged to, now looks farsighted.
Indeed, Theresa May and David Davis have played a difficult hand well. The EU’s artificial phasing of the negotiations was designed purely to strengthen their own hand – and getting to phase two was essential. The deal struck in December was an acceptable price to pay for that – always remembering, of course, that nothing is agreed until everything is agreed. The deal on citizens’ rights is a good one; £39 billion over 40 years is an acceptable sum provided we secure a good deal (clearly, not a penny should be paid if we don’t); and it was only ever sensible to discuss the Irish border in the context of our future trading arrangement – so dependent is one on the other.
The transition period is not ideal, but it is time-limited, and therefore focusing on the eventual terms of exit is more important. What, then, should the Government be aiming to secure in a final deal?
Firstly, the Conservative manifesto position that “No deal is better than a bad deal” is clearly correct. Although a good deal is clearly the best outcome for both sides, the false trade-off between prosperity and sovereignty have been set out clearly on this site innumerable times, most recently the excellent article on ConservativeHome this week by Peter Lilley. We must distinguish between short-term market jitters and the UK’s long-term economic success, the latter of which depends on our strong fundamentals rather than on the existence of otherwise of any single trade agreement. The UK was notably not plunged into an immediate recession following the vote to leave, and future predictions of doom should be treated with corresponding scepticism.
Secondly, the attempt by some Remainers to frame the negotiation as ‘how can we achieve the closest possible relationship with the EU?’ is disingenuous, and should be strongly rebutted. An attempt to negotiate a good deal on this principle is destined to fail: the closest possible relationship with the EU is to be an EU member, which the British public have rejected.
Successful Brexit has always meant accepting slightly increased barriers to trade with the EU, but netting this off against the positive economic benefits of a significantly reduced contribution, a more appropriate regulatory regime and ambitious agreements with third parties. Furthermore, if the result of the referendum taught us anything, it was that Brexit was about more than GDP. A final deal should balance the priorities of the British people in the areas of sovereignty, economics, migration and collaboration, amongst others. In her recent speech at Mansion House, the Prime Minister clearly set out the broad principles that should govern any future agreement with the EU. Within these parameters, I would suggest five more specific tests to assess whether the eventual deal is a good one. These are:
- Leaving the Single Market and Customs Union. This includes staying outside ‘a’ customs union or customs partnership. The ability to strike our own trade deals is an essential benefits of Brexit which must not be compromised. An ambitious free trade agreement, along the lines of the EU-Canada FTA, should form the basis of a future trading relationship.
- No further role for the European Court of Justice following the transition period. Whatever agreements are reached should be overseen by a bespoke court or tribunal, as is standard practice for trade agreements between two sovereign nations, including the EU-Canada and EU-South Korea free trade agreements.
- An end to Freedom of Movement. I personally favour a relatively open policy, welcoming to students and high skilled individuals, that treats EU citizens and those of the rest of the world on a level playing field – but the crucial point is that it must be under Parliamentary control.
- Control of our own laws. The British people voted to take back control, which means the freedom to make our own regulations in the vast majority of areas covered by the European acquis. Of course, businesses that wish to export to the EU may need to voluntarily comply with those regulations, just as they comply with the relevant regulations to export to the US or China, but similar red-tape should not be imposed on high-street businesses and voluntary organisations.
- A significant reduction in our financial contribution. Some level of further contribution would be acceptable, particularly for continued participation in specific programmes such as the scientific Framework Programme 9. However, as an absolute maximum our future net contribution should be no more than half the current level.
A deal along these lines would allow the UK to maximise the opportunities of Brexit – anything else risks leaving us worse off than no deal at all.