Brexit: Time to prepare for a raw deal

Not a bad metaphor, in fact, for Johnson’s position as the hapless Gavin Williamson came close to drowning last week. It must have been comforting to watch that A levels storm engulfing his education secretary from dry land, the prime ministerial sense of personal safety enhanced by the knowledge that whoever else Williamson blames for a SNAFU extreme even by the standards of this government’s serially self-inflicted troubles, it won’t be him.

For Williamson’s main claim to his job – like that of the other third raters in Johnson’s cabinet – was the loyalty he pledged to his boss. But then Williamson, who rose to prominence as David Cameron’s parliamentary private secretary, by, if memory serves, sitting in the Commons gangway yelling abuse at Ed Miliband with all the gusto of a delinquent fourth form bully, must know that his floundering career still depends on his overseeing a successful return to school next week despite the (for him) convenient resignation of Ofqual’s chief exam regulator Sally Collier on Tuesday. Unless, of course, as some scurrilous observers have speculated, ‘Gav’s’ position is partly bolstered by knowing more than most about the PM’s foibles from his time as Theresa May’s chief whip.

But faced with mounting backbench pressure on him to get directly involved, Johnson could not remain Lucretius’ spectator-from-safety for ever. And sure enough by the end of Tuesday he was obliged to perform yet another U-turn, once again following in Scotland’s wake, by pulling rank and announcing that English pupils could – and in lockdown areas should – after all wear masks from next week. (Even if in shifting the policy, Johnson characteristically left it up to most head teachers, already reeling from ever-changing government guidance, to make their own decisions.)

Something rather similar surely applies to the talks on Brexit, rapidly approaching a crunch point. Johnson can’t hide forever behind his trusted negotiator Lord (David) Frost, who is neither an elected politician nor a civil servant (the two categories the country used to rely on to do its business with the outside world) but like Dominic Cummings an extraordinarily powerful political adviser. For ‘getting Brexit done’ has proved to be a game of two halves; and the second half is proving every bit as troubled as the first.

If Frost and the European Commission’s Michel Barnier were agreed about anything when the talks broke up in Brussels last week, it was that they weren’t going well. The spectre of no-deal is rearing its ugly head again. And it would rash to rule out that still happening. That said, it’s as hard to evaluate the warnings and mutual recriminations that are inevitable at this stage of a negotiation as it is to speculate with any certainty on their outcome.

So let’s assume for the sake of argument what still seems on balance more likely – that some form of deal will actually emerge, if the remaining hurdles can be cleared. It’s in the EU’s interests to limit the disruption to its own economies. And Britain can hardly want to add to the economic chaos triggered by Covid-19 by divorcing without any trade agreement at all. Johnson was helped to victory in the 2019 general election, after negotiating a withdrawal agreement – ‘against all the odds’ – which was actually worse (for the UK) than the ones both he and Theresa May had earlier rejected. (Which is one reason why hardline Brexiteers like Iain Duncan Smith are now trying to unpick it.) It’s hard to see the prime minister passing up the chance of another negotiating ‘victory’ if possible, however hollow it turns out to be in practice.

So what sort of deal might that be? The 2019 political declaration envisaged ‘a level playing field’ in which the UK would maintain in common with the EU the standards – environmental and in labour relations, for example – needed to ensure that UK companies can’t undercut their European competition by applying lower ones. The Brits, hell bent on ‘taking back our country’ certainly aren’t going to put up with disputes on these issues being still subject to the dreaded European Court. But nor is the EU going to allow them to get away with vague declarations of intent which they have no reason to trust, because, as Anand Menon – director of the UK in a Changing Europe think tank – puts it in a brilliant London Review of Books summary, ‘Brexiters have spent 30 years insisting that deregulation was the prize to be gained from leaving [the EU]’.

So the two sides may now be edging towards a ‘no tariffs, no quotas’ trade deal of a pretty minimal kind. Britain would no longer have to answer to the European Court on whether it is adhering to agreed standards. But if the EU thinks that Britain is in breach of those standards – ones that Whitehall would no longer have any say in shaping – Brussels would have the the right to impose tariffs and/or quotas on imports from Britain in retaliation.

While this may be the best the UK can do, it isn’t great for the ability of British business to plan for the future since it can’t be sure of how long the post-Brexit ‘no tariffs’ regime will actually last. Nor is it going to solve many of the problems caused by leaving the EU. True Michael Gove has sought to reduce the pain by deferring checks on EU imports to the UK for six months. But that doesn’t remove – or even postpone – what are now likely to be myriad EU checks on its imports from the UK.

Take ‘rules of origin’. Inside the EU Britain can trade freely with its European partners in goods, no matter where their components (or, in the case of the UK’s £115 billion a year food processing industry, ingredients) come from. Just as the EU’s trade deal with, say, South Korea is designed to ensure that its cars are not largely reliant on Chinese – as opposed to its own or European – components, so the EU will be keen to ensure that Britain does not dump on it cheap goods assembled in Britain with parts from all over the world.

Nor will such a minimal agreement see off the phytosanitary regulations, covering everything from food safety to the use of pesticides and animal welfare, which the European Commission applies to imports from outside the Union. One former Commission official – a Brit – pointed out to me this week that while the UK has had little recent experience in negotiating trade deals with third countries, because that has for so long been the EU’s job, the Commission has built up a massive body of expertise, including, as he put it, ‘an army of phytosanitary standards ayatollahs’. If Britain does end up with a US trade deal which allows the import of chlorinated chicken, to take a single example, it can forget about trying to ship any of it on to the EU – or, probably, any chickens, without exhaustive checks on their status.

Even to get to such a minimal agreement, the two sides will have to overcome blockages like those on state aid to industry and business and fishing. On the first, the EU wants, again, to maintain ‘a level playing field’ – to prevent unfettered UK freedom to subsidise whatever industry it chooses. Dominic Cummings has been arguing against the UK even having any authority of its own – at least one with any teeth – to regulate the administration of state aid, let agree submit to EU rules. (Another wrinkle is that Nicola Sturgeon will want the power to grant state aid in Scotland, arguing that the fact that no such devolved power exists was predicated on state aid being regulated by the EU.)

On fishing, Barnier is complaining that while he has been prepared to compromise on EU access to British waters, Frost is not offering concessions in return. Regardless of how the tune is performed on the Last Night of the Proms, in the real world, Britannia will no longer rule the waves. At least not as much of them as she would like.

Downing Street argues that agreement will be reached when the EU finally grasps that the UK is now ‘an independent sovereign state’ like others with which it has trade deals – Canada, for instance. But this ignores several realities, including the intricate and complex links, economic, historic and geographical, which Britain has developed with the rest of Europe. More concretely, it overlooks that the UK is trying unilaterally to leave a single market which Margaret Thatcher, among others, did so much to consolidate precisely because it would enhance UK trade with its European partners, or at least to try and retain its benefits without adhering to its rules. There is a limit, for example, to how far the Brits can complain – to cite another current stumbling block ‘cabotage’ —that Barnier is currently refusing British hauliers the continued freedom to go on picking up and delivering loads inside EU countries (and vice versa). It would actually be more efficient and a good deal less expensive all round, if he conceded it. But Barnier is evidently prepared to pay that price to make the UK realise that to retain that right, she will have to make other concessions on other ‘level playing field’ issues.

Britain’s referendum decision to leave the EU is a done deal. (It wasn’t, as it happens, a decision to leave the internal market, let alone one against a comprehensive post-Brexit trade deal with the EU). Millions voted for Brexit for many reasons, including their highly justified disillusionment with mainstream politicians for failing to address the problems left by de-industrialisation since the 1980s. But Johnson’s own reasons were very different – a belief that becoming the most effective campaigner for a Leave vote was his path to power. He had no record of actually believing in it. In her fine book Twilight of Democracy, Anne Applebaum records London mayor Johnson saying in 2014: ‘Nobody serious wants to leave the EU. Business doesn’t want it. The City doesn’t want it. It won’t happen’. Applebaum doesn’t mention that, closer still to the referendum, Johnson’s sister Rachel told an acquaintance that he would almost certainly campaign for Remain if David Cameron gave him a big enough job. Cameron didn’t; Johnson went for Leave.

For that he is now compelled to pay the costs – including the increasingly likely break-up of the union with Scotland, which didn’t vote for Brexit. Not to mention a scenario in which, according to Menon’s institute, UK in a Changing Europe, Britain’s GDP would shrink by 6.4% over 10 years as a result of the minimal deal Johnson is trying to negotiate compared with to 4.9% for May’s deal and 8.1% for no-deal. While ministers will hope this can be disguised by the impact of Covid-19, Menon estimates that the worst effects will be on those ‘left behind’ areas in which so many voted for Brexit in the first place.

Faced with the alternatives economic catastrophe or slow burn decline, Johnson may become increasingly boxed in. He chose this course. The EU didn’t – though it still holds many of the cards. The only way he can begin to offset this risk is to start making real concessions in the talks with Brussels. On his Lucretius-reading sojourn he can hardly have missed probably the poet’s most famous line: ‘Nil posse creari de nilo.’ Nothing – or, if you prefer, no-deal – comes of nothing.