Wednesday, 21 November 2018

Brexit redux

Beneath the headline drama of possible leadership challenges, and whether May’s deal will make it through the House of Commons, the Brexit Ultras are making a concerted fightback against what Dominic Raab calls the “dictated terms” of the Withdrawal Agreement (WA).

That diagnosis conceals the uncomfortable truth that those terms were indeed dictated – by the government’s own red lines about the single market and customs union which the Ultras enthusiastically support, and about the Northern Ireland border having to be free of any physical infrastructure, which the Ultras have never been able convincingly to rebut, and having no customs border in the Irish Sea, which they share. It also arises from the consequences of the timing of the Article 50 notice, which the Ultras absolutely insisted upon.

Return of the zombies

Thus the Ultras are now engaged in the pretence that a different outcome could derive from those same preconditions. One version is the familiar one of needing no exit deal and just reverting to trading on WTO terms ‘as we do with the rest of the world’. This zombie claim refuses to die, despite the fact that the UK does not trade with any country on WTO terms alone and that, in any case, there are numerous non-trade issues, such as aviation, which have nothing whatsoever to do with the WTO.

The other version, at its most general, is that what is needed is a Canada +++ Free Trade Agreement (FTA). But that idea, apart from the limitations it has in its own terms, confuses the eventual agreement on future terms with the WA. An FTA cannot substitute for, and requires as a pre-condition, a WA.

The most peculiar twisting together of these two arguments came from David Davis, who wrote on the Conservative Home website this week that “if we need to leave with no deal and negotiate a free trade agreement during the transition period, then so be it”. But self-evidently the transition period only exists as part of the WA. If there’s no deal, there is no transition period. This is hardly some abstruse, technical detail and it is truly extraordinary that someone who was for two years the Brexit Secretary apparently doesn’t understand it.

That a lack of understanding abounds amongst the Ultras was shown by another very bizarre episode this week in which Owen Paterson (of ‘only a madman would leave the single market’ fame) bemoaned the fact that UK-Oklahoma trade deals were precluded by the WA. Perhaps he just meant commercial deals – in which case he is wrong because neither EU membership nor the WA prevent that. But if he meant an FTA it is nonsense since of course it is the USA, not individual states like Oklahoma, which makes FTAs.

Or perhaps, to be charitable, he was referring to the UK-USA FTA dream so beloved by Brexiters. If so, it is a rather unexciting dream: the estimated long-term benefit of such a deal is 0.1-0.3% GDP compared with a Brexit cost of 1-12% GDP. There’s never been a ‘trade’ justification for an independent trade policy, only the symbolic justification of its being ‘independent’.

Friction about facts

Meanwhile, the ERG produced two documents this week. One was a direct response to the WA in which the strangest in a litany of complaints is that it means the UK “will become a ‘rule-taker’ and will have surrendered our sovereignty”. But the central Brexiter criticism of EU membership is that we have already lost our sovereignty. If so, how can the WA surrender it? To lose sovereignty once might be regarded as misfortune; to do so twice looks like illogic.

Mixed in with this was the predictable moan about having to pay the financial settlement without getting anything back in terms of a trade deal. This, another of the lexicon of zombie Brexiter ‘facts’, again shows the failure to understand the difference between the WA and the future terms agreement.

Perhaps most tellingly, the document makes repeated references to the WA not honouring “the spirit of the 2016 Referendum”. This is significant as it acknowledges, by implication, that the letter of the vote could be met in numerous different ways – including the form it has taken – but arrogating to the ERG the high priest’s role of interpreting the votes of 17.4 Million as a mysterious ‘spirit’ which – amazingly – turns out to be their own interpretation of it.

The second ERG report, fronted by Peter Lilley (he of ‘a deal can be done in 10 minutes’ fame, a line he shamelessly repeated this week) and launched by a veritable ‘Manel’ of ageing Brexiters sought to ‘explode the myths’ of what leaving the Customs Union means. The document was entitled ‘Fact – NOT friction’ (even in the Brexit high command there appears to be a belief that writing something in capital letters makes it extra true) and contained still more confusions.

Throughout it, features of the Single Market and Customs Union are conflated, and whilst some of the points about customs checks are valid, a series of cherry-picked assertions and half-truths simplified and distorted the deeply technical issues involved. The overall problem, as trade expert David Henig identified, is that whilst identifying ways that customs costs and checked can be reduced, these do not amount to their entire removal, which is what is at stake as regards the Northern Ireland border in particular.

When some of these problems were put to Peter Lilley during a BBC interview he reacted with anger, accusing Chris Morris, the BBC’s Brexit fact-checker, of arguing for remain. But whilst there is plenty of room for opinion in the Brexit debate there are plenty of facts too, and dismissing them because they are inconvenient is the kind of confirmation bias which has made that debate so intractable. It is evident in the Ultras’ dismissal of the Treasury, and of the civil service in general, as remainer propagandists.

Of course this creates the difficulty that Brexiters like Bernard Jenkin promptly decried the fact-checker’s facts as being no more than remainer opinion. Our opinions are facts, your facts are just opinions is a logic doomed to infinite circularity. And whilst it proved very successful for the Brexit campaign, it is hopeless when it comes to delivering policy.

The only way out of this impasse is to go outside the very tiny coterie of economists and lawyers upon whom the Ultras rely for advice, mostly affiliated with the Institute for Economic Affairs. For within the wider world of economists, business people and trade experts there is broad agreement on the core facts of how trade and supply chains actually work. Ignoring that is a bit like basing policies on smoking only on the advice of the tobacco industry, on the basis that the medical profession has an anti-smoking bias.

What if the Brexiters were in charge?

How can we explain the rehearsal of all of these, to be charitable, misunderstandings? Given that there is nothing new in them, it’s unlikely that the Ultras really expect the government to change policy. More likely, they are setting the stage for years of culture wars to come in which they will disown the problems caused by Brexit by saying – rather as diehard Marxists say of actually existing communism - that all would have been well if only it been done ‘properly’.

Which leads to a thought experiment, for which a rather strong stomach is needed. Imagine for a moment that the Ultras had been given their head, and we play the whole of the last 2 years again, redux. Rees-Mogg would be PM and, say, Peter Bone the Chancellor, with Nadine Dorries as Foreign Secretary. For Brexit Secretary – why not? - David Davis could bring valuable energy and diligence to the role. And every other ministerial position would be filled with true believers – Bridgen, Rosindell, Jenkyns – truly a government of all the talents. The civil service would have had to be cleared out, of course, to give the dream team a clear run, but they could be replaced with, say, Patrick Minford, Melanie Phillips, John Longworth and Tim Martin. After all, they all appear convinced that the perfect Brexit would be easily delivered.

This is an extension of an idea in Robert Shrimsley’s recent FT column (£) where he considers the complaint that ‘it would all have been different if a leaver was in charge’ – this, of course, arising from the persistent refrain that May is a closet remainer. Shrimsley’s excoriating view is that we know how that would work out because we’ve seen in the last two years that the record of the Brexit hardliners is “an uninterrupted litany of cowardice, incompetence and blame shifting”. And, indeed, it is hard to resist the conclusion that a government of the sort I’ve described would be an unmitigated, catastrophic disaster.

And yet it is at least plausible that such a government would actually end up delivering something remarkably similar to the Withdrawal Agreement that May has come up with, and which they so despise. For, as I said at the beginning of this post, it is from the decisions that May took with the full approval of the Ultras that the present situation has arisen.

I don’t think that she was being dishonest in embracing their hard Brexit, always intending to backtrack somewhat. At the time of the Lancaster House speech, which they were so happy with, I am quite certain that she had believed it to be workable.

It was the ineluctable logic of the negotiations, of the Good Friday Agreement, and of the concerted business lobbying that spelt out the economic consequences of her approach that led her away from that position, whilst stubbornly retaining many of its core features. Whoever was in charge would have faced that same logic had they made the same initial decisions. Which is another way of saying that although Brexiters can shout down the fact-checkers, they can’t shout down the facts.

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