08.02.2018

21st century global reality

Eddie Ford looks at the growing Tory infighting over Brexit

This week saw the 11-strong Brexit cabinet sub-committee (or ‘war cabinet’) get together to draw up the UK’s negotiating position on its “future relationship” with the European Union, in preparation for four days of intensive talks from February 13 with their European counterparts. Sub-committee members include Boris Johnson, the improbable foreign secretary, and the even more improbable environment secretary, Michael ‘Brutus’ Gove - both leading figures in the ‘leave’ campaign. And from the solidly ‘remain’ camp there is chancellor Philip Hammond and home secretary Amber Rudd.

Of course, many people find it incredible that the British government has not sat down and formally discussed this matter of vital importance before - yet again giving the impression that UK officials are bumbling around like amateurs in the Brexit dark 19 months after the referendum, unclear as to what it wants or what is possible.

The sub-committee’s main focus is on Northern Ireland, immigration and trade, but Theresa May is facing increasing calls to “clarify” her position on Brexit - with businesses, big and small alike, becoming increasingly unhappy about what they see as constant dithering. The British Chambers of Commerce has written to the prime minister asking for a “clear, unequivocal statement of intent”, as the “perception” is one of “continued division” - even “amongst the many optimistic, future-oriented” firms “patience is wearing thin”. The BCC also warns that “directly affected companies” are “poised to activate contingency plans” if the confusion continues: indeed, “worryingly”, some companies “have simply disengaged”. The EU too, unsurprisingly, stated this week that there was “not a moment to lose” in finding a deal. Senior government sources, however, have played down the likelihood that any agreement will be reached this week.

Reports last week had suggested that Downing Street was willing to remain in a customs union with the EU for goods, but not services - though the chances of European leaders accepting such a proposition is near zero. Naturally, the Brexiteers sensed betrayal. Liam Fox, the semi-invisible international trade secretary, and the deeply weird Jacob Rees-Mogg, chair of the European Research Group of Tory backbenchers, both retorted that any move in such a direction would stymie effort by the UK to make new trade deals with other countries.

In what was presumably an attempt to show resolve and stave off leadership challenges, an official Downing Street source issued a statement late on February 4: “To put this to rest, we are categorically leaving the customs union.” It added: “It is not our policy to be in the customs union. It is not our policy to be in a customs union” (my emphasis). But this just begged more questions than it answered, with government ministers contradicting each other left, right and centre.

Only a few days earlier when questioned in China, Theresa May refused to rule out involvement in a customs union. Hardly bringing clarity to the situation, the same Downing Street source said a customs union was entirely different from a “customs arrangement” or partnership - which would supposedly allow the British government to strike trade deals with countries outside the EU. The source also claimed that there had been no change in government policy - merely a “reiteration” of policy outlined in a paper published in August. Everything clear now?

Unavoidable

Obviously not. Former attorney general Dominic Grieve said he found Downing Street’s intervention “rather strange”, since the UK would have to maintain some form of “customs union or alignment” with the EU if it was to honour the terms of its agreement to prevent any hard border on the island of Ireland. Nor can this writer comprehend how you can leave the single market and customs union and still have a “frictionless” Irish border. Amber Rudd, appearing on the BBC’s Andrew Marr show, claimed the prime minister has an “open mind” about a customs arrangement or customs partnership with the EU - further remarking she has “a surprise for the Brexiteers,” which is that the sub-committee is “more united than they think”.

But moments later on Sunday with Paterson on Sky TV, Dominic Raab, the housing minister and Brexit true believer, said he did not think that “we will be in any form … of customs union, because ... we would have our hands tied while negotiating trade deals with other parts of the world”. Rudd and Raab appear to have a different understanding of what is meant by a customs union.

Showing the immense difficulties confronting the British government, at the beginning of the week the EU’s chief negotiator, Michel Barnier reminded May that the UK will face “unavoidable” barriers to trade if it leaves the customs union and single market - therefore the “time had come” for the UK to choose what it wanted after its 2019 exit. He went on to say that there was “some divergence” between the two sides, when it came to issues relating to transition and how the exit deal would be enforced. Whilst, of course, he “respected” the UK’s decision to rule out any form of long-term customs union and other so-called “red lines”, he emphasised how it was a prerequisite for any possible future deal that “everyone plays by the same rules” during the transition period - when the UK would have to comply with existing EU laws and regulations.

Barnier sought greater clarity from the UK about what “ultimate partnership” it wanted with the EU after its departure, expressing his hope that an “official position” would be put forward soon. Replying, Davis said the UK’s position was “perfectly clear” - that it wanted a “free trade deal” with the EU, but also the freedom to strike deals with other countries throughout the world, where “trade opportunities” were apparently growing. Needless to say, the Brexit secretary’s response clarified nothing.

Meanwhile, the orchestrated leaking by various factions and leadership hopefuls within the Tory Party - as well as other forces - continues apace. According to a legal document splashed across the media on February 7 - revealed in a draft section of the UK-EU withdrawal agreement which has yet to be finalised - Europe wants to be able to restrict the UK’s access to the single market if there is a dispute after Brexit. As mentioned in the final footnote of papers leaked to journalists in Brussels, if referring a dispute to the European Court of Justice would take too long, the withdrawal agreement “should provide for a mechanism allowing the Union to suspend certain benefits deriving for the United Kingdom from participation in the internal market” - though it does not go into detail about what disputes could trigger the powers being used or which parts of the single market could or might be suspended. The document also says the UK would be “consulted” about fishing quotas, and would have to pledge not to act against the EU in international organisations. Sanctions the EU could feasibly impose include tariffs on goods, the enforcement of customs checks or the suspension of the aviation agreement giving UK carriers the right to fly between Britain and the continent.

‘Sling out’

Theresa May has so far avoided a full discussion of these issues on the Brexit subcommittee, it is claimed, because of the “sensitivities” involved. MPs from both sides of the Tories’ Brexit divide have told the press that the prime minister is at least partly to blame for the internal crisis by failing to spell out what she wants from this week’s crucial meetings, which means that everyone thinks there is still “all to play for”.

TheSunday Times reported that Boris Johnson had said “the cavalry” was coming to block any customs union scheme when the sub-committee meets. It is understood that he plans to argue against a customs union in Downing Street this week but will still publicly back the prime minister for the time being. The paper also claimed that Johnson, Gove and Rees-Mogg have been urged to form a “dream team” of Brexiters to take over from May’s failing administration.

Tensions rising high, leading pro-Europe backbencher Anna Soubry urged Theresa May on BBC’s Newsnight to “sling out” arch-Brexiteers from the party altogether, as they are “not proper Conservatives” (February 5). In her opinion, “something is going to have to give”, because otherwise “not only will we get Jacob Rees-Mogg as our prime minister: we will get a devastating hard Brexit, which will cause huge damage to our economy for generations to come”.

But if someone like Jacob Rees-Mogg deposed Theresa May then she “couldn’t stay in a party led by somebody like him” - with “his views on things like abortion … somebody who says that even if you were to be raped by your father you wouldn’t have a right to choose to have a termination”. Finally, she slammed the “undue influence” exerted by Rees-Mogg’s European Research Group - which in her view was “forcing” Theresa May to rule out staying in some form of customs union: effectively meaning that the prime minister is “in hock” to 35 hard Brexiteers who “don’t represent my party” - or those “who voted ‘leave’”.

At the end of last week, Rees-Mogg upset the civil service, and general establishment opinion, by accusing treasury officials of “fiddling the figures” over Brexit in a document that was leaked to BuzzFeed on January 29. This analysis showed that over a 15-year period national income would be 8% lower under a ‘no deal’ scenario, around 5% lower with a free-trade agreement with the EU, and about 2% lower with a soft Brexit option of single-market membership. But for Rees-Mogg this evaluation was “politically influenced”: treasury forecasts were “rigged”, because the department was “determined” to keep the UK in the customs union.

He also repeated his assertion that he had heard Charles Grant, the head of a pro-EU think-tank, the Centre for European Reform, saying treasury officials had created an economic model to show that all options other than remaining in the customs union were bad. He claimed on BBC Radio 4’s Today programme that Grant is getting “private briefings from the treasury against government policy”.

In turn, Andrew Turnball, who led the civil service under Tony Blair, said that Whitehall officials had become the victims of “pre-emptive scapegoating” by Brexiteers in a manner akin to pre-war Nazi Germany - when it was argued that “our great army was never defeated, but it was stabbed in the back by the civilians, liberals, communists, socialists and Jews”. This, believes Turnball, is what “these critics are trying to do” - they are “losing the argument, in the sense that they are unable to make their extravagant promises stack up” - so they need “someone to blame” for their own failures.

Fantasy

Rees-Mogg may complain about officials “fiddling” the statistics and running Britain down, but he is indulging in a wilful fantasy of his own. It is surely a statement of fact that the UK will take some sort of negative economic hit from pulling out of the EU. Virtually all economists say there can be no substitute (such as a deal with China or India) that would make up for what Britain will lose by doing so.

Cars, for example, require multiple imports/exports as part of the production process - a near ceaseless toing-and-froing of parts and components. If you suddenly throw up trade barriers or tariffs, then it is only to be expected that car manufacturing companies will seriously consider moving production out of Britain. Nor would it be a surprise if financial institutions were to move staff out of the City to Paris or Frankfurt, with the intention of opening up parallel headquarters in order to continue trading freely in Europe. That is just sound business sense. And many companies are putting investments plans on hold until things become clearer - or maybe not investing in Britain at all. Why bother with the hassle? Just go elsewhere.

With regards to the BuzzFeed leaked document and forecasting, it is important to note that we are not talking about an actual 5% drop in gross domestic product, but 5% less than it would have been 15 years from now if Britain had stayed in the EU and single market. In other words, we are talking about relative, not absolute, decline, not the apocalypse - though you might well think so given some of the heated rhetoric used by establishment ‘remainers’.

Liam Fox’s comment last July about how a free trade deal with the EU “should be one of the easiest in human history” was obviously being stupid. As we are seeing, the EU will not give Britain an easy break - quite the opposite. It is not in the interests of European leaders, or the wider EU project, for Britain to come out economically better off from Brexit - even if that was possible, which is clearly not the case.

The idea that Britain can leave the EU and strike so many lucrative trade deals so as to put the ‘Great’ back into Great Britain is just post-imperial fantasy, though delusions of this nature partly explain the reason for the Brexit vote in the first place: it is hard to imagine any other country behaving so stupidly.

May’s recent trip to China is instructive on this score. Her hosts were pressuring her over its Belt and Road Initiative to build infrastructural development across Asia and into Europe: the new Silk Road. If May were to sign up to the $900 billion scheme against US wishes, then Washington would punish Britain in some way or another. Similarly, if Britain were to throw all its efforts into striking deals with the US, then it would lose out on a deal with China. After all Donald Trump and his administration have been talking the dollar downwards and are all but promising a trade war with China. Welcome to the global realities of the 21st century.

Britain - no matter how much Jacob Rees-Mogg might lament - is no longer a top dog: its current position as a permanent member of the UN security council is owed purely to its imperial past. When the UN was founded, in 1945, Britain still had a global empire and counted as one of the ‘big four’ (the US, the Soviet Union, Britain and China). Today, at least in terms of economics, it is the US, China, Japan and Germany, who are the ‘big’ four. The Soviet Union is history, so is the British empire