Friday 28 May 2021

A normal week in crazy Brexit Britain

It has been a pretty standard week for directly Brexit-related news – I put it that way because in many ways almost everything the government does, from demanding that the BBC project ‘British values', to badging the new rail system as ‘Great British Railways’, to giving British people the borders they ‘deserve' can be seen as framed by Brexiter sensibilities. And, of course, this week’s Dominic Cummings show grows organically out of the politics of Brexit, not least because but for Brexit neither he nor, possibly, Boris Johnson would ever have been in power. It can also be seen as the (final?) implosion of the elevation of the Vote Leave cabal to the centre of government in 2019.

More of Cummings below, but, these wider issues aside, what has been going on with Brexit this week is mainly a continuation of the issues discussed in my previous post, namely the row over the Northern Ireland Protocol (NIP) and the nature of Britain’s post-Brexit trading relationships.

The NIP: the calm before the next storm?

As regards the NIP, RTE’s Tony Connelly provided his usual excellent commentary of the current situation in his blog post last Saturday. It gives a wealth of detail on the issues at stake, which I won’t repeat. Nor will I repeat the points I made last week about the deeper roots of this current situation in Northern Ireland.

However, there is one aspect of those roots which I didn’t mention but which is an important part of what is happening now. From the beginning, it was an article of faith amongst Brexiters that a trade deal with the EU would be easy because the UK was already aligned with EU rules. This was stated by numerous leading Brexiters before the referendum, was the substantive rationale for Liam Fox’s much-mocked ‘easiest deal in history’ claim, and was re-stated in David Davis’s preface to the first Brexit White Paper in 2017:

“We approach these negotiations from a unique position. As things stand, we have the exact same rules, regulations and standards as the rest of the EU. Unlike most negotiations, these talks will not be about bringing together two divergent systems but about managing the continued cooperation of the UK and the EU.”

As I and many others pointed out whenever such claims were made, they were nonsense, precisely because this was a unique situation in which the aim was not to move towards alignment (in which case, of course, existing alignment would make that process effortless) but to move away from it; not to bring two divergent systems together, but to make two aligned systems diverge. This became all the more true under Boris Johnson and David Frost’s approach to Brexit, which made freedom to diverge from EU regulations the acid test of ‘sovereignty’.

The same basic confusion is now being played out in the NIP rows, especially with respect to sanitary and phyto-sanitary (SPS) rules and checks. Frost repeatedly, for example at last week’s Select Committee, makes the point that the EU should operate a lighter, ‘risk-based’ approach for the UK because of “the fact that we both operate the high food standards which are, in most areas, extremely similar”. Yet at the same time he is adamant that dynamic alignment with EU rules is unacceptable.  So he wants the benefit of being aligned … without making any commitment to being aligned. It is a specific version of the more general Brexiter proposition, discussed in last week’s post, that the UK has left but shouldn’t be treated as if it has left.

It is this which creates what Connelly describes as the current “dangerous stand-off” between the UK and the EU, and although there is seemingly a lull in hostilities at the moment it seems highly likely that there will be a further outbreak in the next few weeks. The European Commission President, at the EU leaders’ meeting this week, made it clear that the NIP must be fully implemented, whereas the UK continues to seek “common sense” solutions (translation: don’t hold us to what we agreed), and wants these in place in time for the mid-June ‘marching season’ in Northern Ireland.

Some believe that Frost will quietly cave in, via some face-saving formula, and that is quite possible. But my sense remains (for reasons discussed in detail in my post a couple of months ago) that he and the government are convinced that the ‘hardball’ tactics of flouting the NIP pay dividends. If so, then after this period of resumed negotiations there will be another explosion. That diagnosis is given extra weight by calls this week from International Trade Secretary Liz Truss to scrap Irish Sea border controls altogether.

Strange days indeed

In this, Truss is presumably burnishing her credentials with the party membership as a possible successor to Johnson (as, no doubt, with her hardline anti-immigration stance, is Priti Patel), in which she is aided by the Brexit tabloids’ adoration of her for delivering the UK’s new trade deals – or deal, really, since the only substantively new trade deal she has (almost) done is that with Australia. Yet the Brexiters’ reactions to that deal have been mixed. Some are breathlessly enthusiastic, such as Dominic Lawson (in a Sunday Times article demolished almost line-by-line by the NFU’s Director of Trade and Business Strategy). Others, notably the ‘journalist’ Isabel Oakeshott, are appalled that it marks “the death knell of the traditional British farm” (an outburst for which she was roundly mocked).

Certainly there is something strange in the Tory Party choosing to alienate what has always been a central part of its political constituency but, then, as its treatment of the City shows, the Brexit Tory Party is a very different beast to that of bygone years. That said, trade expert Sam Lowe argues that, in practice, the deal with Australia is unlikely to have a huge impact, whether that be on farmers or consumers, to the extent of it being “almost unobservable”. That is because, in brief, tariff abolition is no longer the central issue in terms of trade liberalization, and because nothing will change the fact that the UK and Australia are geographically remote – and, as the Brexiters never seem to understand, distance is a key determinant of trade volumes.

Nevertheless, the strangeness of the situation can be seen by imagining what would have happened if, whilst a member of the EU, the EU had struck a deal with Australia on similar terms (something highly unlikely precisely because of the possible effects on farmers). Almost certainly the Brexit press would be denouncing it as a ‘Brussels Betrayal of British Beef’ and, again almost certainly, the UK government would have vetoed any such deal. Yet when made by Britain, it is hailed as a triumph. (It’s worth noting that this point was raised by Emily Thornberry, Labour’s Shadow Trade Secretary this week, a further welcome sign that Labour are now becoming bolder in challenging the government’s post-Brexit policy).

Nor does the strangeness end there. Within the Brexiters’ central argument that what was crucial was the restoration of the sovereignty of the British parliament, a specific sub-theme was that with Britain making its own trade deals, these would be subject to debate and scrutiny by the British people’s elected representatives. Yet, in fact, as the Department for International Trade oxymoronically stated this week “we have always been clear parliament will be able to scrutinise Free Trade Agreements following signature rather than at the stage where agreement in principle is reached”. It need hardly be said that this renders scrutiny totally meaningless and represents, in microcosm, the ‘war is peace, freedom is slavery, ignorance is strength’ doublethink of Brexit as a whole.

An incoherent strategy …

What lies behind all this is, as James Kane of the Institute for Government explains, the lack of a coherent post-Brexit trade strategy. To the extent that there is any strategy at all it seems to simply be that ‘signing trade deals’ is a good thing because, as a member of the EU, Britain was not able to do so. Supposedly, the ‘big prize’ now in sight is accession to the Comprehensive and Progressive for Trans-Pacific Partnership (CPTPP). Barely mentioned, if at all, prior to the Referendum, this emerged under Liam Fox as being a key post-Brexit aspiration. It has become all the more so since the prospects of a UK-US trade deal have receded, and to some extent it is seen as a substitute for such a deal (if the US were to revert to the pre-Trump aspiration of also joining what is now CPTPP, which is not clear).

Thus Truss, and the government, are explicitly claiming that the US-Australia deal paves the way for CPTPP membership. This is not, as they sometimes imply, because it is a pre-requisite of membership but because it arguably smooths the way to it since what would have been Australia’s key ask during CPTPP negotiations (tariff-free access for, especially, agricultural products) will already have been satisfied. The interplay between the UK’s CPTPP accession negotiations and those with Australia (and the same, presumably, applies to New Zealand other CPTPP members) is a fascinating issue, as a discussion last week between trade experts Dmitry Grozoubinski, Sam Lowe and Anna Isaacs showed.

The general takeaway from that discussion might be that international trade negotiations comprise a series of complex interrelated trade-offs between multiple parties. For example, the most important practical consequence of what the UK has agreed with Australia about beef tariffs may be what that leads to in terms of what is demanded of it by the US or Brazil. These complexities require a strategy which goes beyond simply assuming that any deal is a good deal and the more deals the better. Or, at least, it does if the aim is maximizing the UK’s economic interest rather than the performative one of generating good headlines for domestic political reasons.

… derived from an incoherent project …

However, that brings us back to the basic incoherence of Brexit as an economic project. Since distance does matter so much, fiddling around making trade deals with remote countries is fairly pointless. Given that Brexit has happened, it’s worth doing, so far as it goes, but it isn’t a benefit, still less a triumph, for Brexit; it’s just some fairly minor damage limitation.

A new ONS trade report is a sharp reminder of this. To try (although it’s not completely possible) to disentangle Brexit and Covid effects they compare the first quarter of 2021 with the first quarter of 2018, and report that trade with the EU decreased by 23.1% (whereas trade with non-EU countries decreased by just 0.8%, suggesting that the Brexit negotiating process and its outcome, rather than the pandemic, was a key driver). The report also shows that, since the end of the transition, post-Brexit trade arrangements have become a far bigger challenge for businesses than the pandemic. The nature of those challenges, especially for small businesses, was spelt out in minute detail in testimony given to the UK Trade and Business Commission yesterday. It is also clear from a new survey showing that 56% of UK businesses think Brexit has had a negative effect on them and just 5% that it has been positive.

Given that, prior to Brexit, the EU-27 accounted for about 50% of UK trade, it’s obvious that to compensate for such massive decreases in trade with the EU, that with non-EU countries would have to be revolutionised and the constraints of distance make that virtually impossible, no matter how many, or even how good, the trade deals the UK strikes. In short, far from the promise that “Brexit will cement our status as a great trading nation” (£), it is causing Britain to become a less great trading nation. No doubt Brexiters and the government will try to spin these latest figures as showing that the UK is ‘re-balancing’ away from its dependence on the EU for trade to being a ‘truly Global Britain’, because of course it (already) means that trade with the EU is less than 50% of UK trade. But it will be nonsense – it just means that the trade pie as a whole has shrunk.

In a related development, and following from the recent failure of the UK and Norway to reach a deal on fishing, it now seems likely that the UK-Norway trade deal will collapse. This was a temporary rollover deal, agreed last December, to be superseded by a permanent and possibly more extensive agreement. But Norwegian politicians are concerned about the impact on their farmers of tariff-free British beef and cheese imports. Note that although Australia’s economy (USD 1.4 trillion, 2019) is much larger than Norway’s (USD 403 billion, 2019), Norway is a more significant trading partner for the UK (£27,436 million, 2019) than is Australia (£16,041 million, 2019).

It’s instructive to see the reactions of leave voters to the news that the Norway deal may fall through. These included rage that this is punishment for leaving the EU (apparently oblivious to the fact that Norway isn’t in the EU) and suggestions that Norway should realise that, being the smaller economy, it needs a deal more than the UK (a strange inversion of what they used to say about the UK-EU negotiations). As always, bellicose victimhood is the guiding theme.

… rooted in an inherent contradiction

The issue of protecting farmers, whether Norwegian or British, goes to the heart of the trade dilemmas Brexit poses for the UK. Whilst Brexiters deride the EU as a ‘protectionist racket’ (an accusation based more on a bad pun than a serious analysis), the protection of agriculture is, globally, almost invariably the most contentious of trade policy issues. In part, as Brexiters should appreciate, that is because of the complex interactions of national identity, soil, and foodstuffs. As regards Brexit, it is also because of the peculiar contradiction of nationalism and globalism. Many who voted leave believed that it would mean not just good news for farmers but the restoration of the heavy industries which have declined in the years since Britain joined the EEC (though of course that wasn’t the cause).

Those votes were immediately taken by the Brexit global free traders as permission to pursue their own agenda – most notably in Fox’s ‘Manchester speech’, made in September 2016 before the hard Brexit of leaving the single market and customs union had even been announced. And, as the deal with Australia suggests, the UK is going to concede tariff-free access to British markets whilst getting almost nothing in return. The gamble Johnson’s government is making is that leave voters will swallow this on politically nationalistic grounds (‘Britain is a global trading nation once more’) and ignore, or be unaware of, its consequences for economic nationalism.

In this gamble, the government may be assisted by one of the strangest features of the way that Brexiters are framing post-Brexit trade deals, and trade more generally. Rather than thinking of these issues in terms of economic rationality or the economics of competitive advantage, they seem to imagine them in terms of ‘cultural affinity’. That imagination (which is what it is, since it involves a hopelessly outdated and sentimental apprehension) is most obvious in the still thriving CANZUK fantasy, but also applies to an Australia-only deal.

The politics of “gormlessness”

It is a gamble that is quite likely to succeed. And everyone knows why, even though it is deemed unsayable in what in 2017 I called the new political correctness of Brexit: the coalition of voters which chose Brexit and which now supports Johnson’s government is largely ignorant of the realities of contemporary trade, business, and international relations. It’s this which unites the Home Counties golf club bore, pontificating about how he ran his import-export business just fine before the EEC, with the coastal town pensioner lamenting that ‘I just want my country back’. Despite the overlap between leading Brexiters and free speech union libertarians that obvious fact – far more than anything proscribed by ‘woke’ activists – is something that cannot be said because to do so is, supposedly, ‘elitist’.

It is this electoral base which chose to endorse what, as Cummings has so eloquently told us, is the “completely crazy” situation of him and Boris Johnson being in positions of power. Almost all attention has focussed, understandably, on what Cummings’ testimony revealed about the dysfunctional government and woefully inadequate leadership during the coronavirus crisis. But it is crucial to remember that at the same time this same government and this same leadership were engaged in the highly complex trade and cooperation negotiations with the EU.

More specifically, it was in this period that Johnson refused to extend the transition, despite the chaos that was going on. It was in this period that he – apparently with the support of both Cummings and Frost – threatened to break international law with the Internal Market Bill. It was throughout this period that he was constantly threatening to end the transition with no trade deal in place and claiming that the UK was fully prepared to cope with the disruption that would have ensued. And it was from the decisions taken in this period that many of the present consequences of Brexit arise.

Not only that but, whilst Cummings may have gone, Johnson and his Brexit government remain in place. And just as, vaccines notwithstanding, the government continues to bodge the management of the pandemic so too does it continue, as Fintan O’Toole put it this week (£), to “strategise gormlessness” in its approach to Brexit, especially in continuing to ascribe its malign effects to others. It remains to be seen whether the Cummings revelations about coronavirus policy dent Johnson’s support within his electoral base, but it’s unlikely that his ‘gormless’ Brexit strategy will do so. After all, it is a strategy designed precisely to appeal to that base.

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