Last week I wrote an article on behalf of Economists for Free Trade entitled, From Brexit to Brino: The 10 Capitulations of Theresa May. The purpose of the article was to set out the potentially alarming consequences of the Withdrawal Agreement and associated Political Declaration.
The 10 capitulations could have been more than 10. I just stopped at that figure because it was a nice round number. 24 hours after the article was published, Number 10 communications launched a new press blog seemingly established to pump out propaganda relating to the Withdrawal Agreement. The second feature on the blog was a point-by-point rebuttal of my article.
What ensued was at best grossly misleading. Over more than 2 decades of analysing economic policy, I’ve never seen a more mischievous document relating to the EU emerge from Whitehall (and that’s saying something).
Anybody unfamiliar with the twists and turns in the economics and politics of Brexit would be sorely misled. The full response to the Number 10 blog is over 4,000 words long. It shows that Number 10 either doesn’t understand its own agreement or is trying to misrepresent it. Judge for yourself.
Here are just a few examples of Number 10’s shenanigans as it seems unable to distinguish fact from fiction. My article opened with what I assumed was the non-controversial assertion that the terms of the Withdrawal Agreement meant that the UK would remain in the customs union (or something very much like it), unless and until the EU agrees a free-trade agreement with us or gives us permission to leave. Either way, we would not be in control.
The Withdrawal Agreement states that “a Single Customs Territory between the European Union and the United Kingdom” will apply from the end of the transition period, “unless and until a subsequent agreement becomes applicable”. The until could be forever. The Withdrawal Agreement is so explicit on this, why would Number 10 put up a fight?
Quite simply because they are being slippery. The UK is leaving the Customs Union to be part of a Single Customs Territory between the EU and the UK. So to be absolutely precise, the Number 10 rebuttal is correct, whilst being totally incorrect. They’re playing with words in true Yes, Prime Minister fashion (from the 1980s BBC television comedy series). Sir Humphrey would have been proud.
The best analogy would be to say that we’re moving out of one house into almost exactly the same property next door. A customs union imposes a common external tariff on imports from outside its protectionist wall and that is exactly what we will be part of in a Single Customs Territory for goods. If it walks like a customs union, and it quacks like one, it is one. Number 10 also asserts that the backstop could be terminated even in the absence of a trade agreement, because there is “an explicit review clause built into the agreement, enabling the backstop to be terminated where we agree it is not necessary to meet its objectives”. This language in the blog strongly suggests that the backstop could be ended easily, when it can’t.
The Prime Minister herself has stated that “the [exit] mechanism does require mutual consent”. Imagine a prisoner with a life sentence claiming he will be getting out of jail soon because of reports that his prison term is under review. His claim ignores the fact that he has no control over the process and his future is completely in the hands of the parole board. The parole board might be making the right noises about an early release, but they have no legal obligation whatsoever and could be far more influenced by political considerations when the decision comes to be made.
When the government says, “the UK is leaving the Customs Union” it misses out the rest of the sentence, “if the EU lets us”. Number 10 talks in blasé fashion about negotiating, signing and ratifying free trade agreements with countries across the globe. What it doesn’t highlight is that these negotiations will be fundamentally undermined because under the backstop any trade deal would apply only to “all elements not covered”.
In non-legal jargon, that means no trade deals on goods with the US, Japan, China, anybody. Number 10 says that the agreement ensures “the UK can develop our independent trade policy”. That independent trade policy will not include any trade agreements, with any countries, related to goods. Some independent policy.
It gets worse. As last week’s Sunday Telegraph editorial pointed out, “The Government insists that the deal makes a Canada style free-trade agreement (FTA) with the EU possible. This is false. An FTA is ruled out by the Declaration, which promises zero tariffs between the UK and the EU but also says that it will build on the single customs territory provided for in the agreement.
In other words it aims to embed a customs union, which means that we will be forced to operate by the EU’s high tariffs when it comes to trading with other countries. Britain’s ability to lower prices for consumers will be limited and our opportunities for real trade agreements with, say, the United States, will be dead in the water”.
The original article also pointed out that the UK would be surrendering sovereignty in fundamental areas of economic policy by being legally bound to “ensuring a level playing field” and an “alignment of rules”.
Number 10 nonchalantly waves this away stating that “open and fair competition are fundamental to all trading relationships”. This is a monstrous misrepresentation. In just a few words the UK’s ability to pursue a sovereign economic policy with regard to competitiveness, in areas such as employment law and environmental policy, tax even, has been given away.
In the Political Declaration the UK and the EU have agreed not to reduce high levels of social and employment protection. Whilst not legally binding – yet – this severely restricts the Government’s room for manoeuvre post-Brexit.
You can’t sell UK Plc as a dynamic competitive economy post-Brexit if it remains wedded to pre-Brexit regulatory policies. Number 10 says that the UK will have “the freedom to set its own rules”. Sadly, this is like driving up to a road junction where you are told there are only 2 routes and that as long as you don’t turn right you can go whichever way you want. Both the Withdrawal Agreement and the Political Declaration rip the heart out of Brexit means Brexit.
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