Reflections on the Political Declaration

The road to Brexit is littered with numerous false claims, some the result of ignorance and others that were just lies. One example, which is a mixture of both, is suddenly in the spotlight as it has become generally understood that Brexit is a two stage process, one relating to withdrawal terms and one to future relationship terms.

How did we get here?

Of course anyone with even the most basic understanding already knew this, but from the outset it was obscured by leading Brexiters. Let’s not forget that before the referendum the Vote Leave campaign actually promised that the terms of a new deal would be negotiated before the legal process to leave was even begun. Subsequently, in December 2016, Boris Johnson opined that two years was more than enough time to complete “a great deal” and that in fact 18 months would be “ample”, a view endorsed by the ERG’s Bernard Jenkin.

As recently as January 2017 David Davis, the then Brexit Secretary, stated “I believe we can get a free trade and customs agreement concluded before March 2019”. This wasn’t just over-optimistic, it was plainly false by definition given the staging of the process. It was also Davis who said in November 2016 that “we’re not really interested in a transition period, but we’ll consider one to be kind to the EU”. Again, the implication was that it would all be wrapped up by March 2019.

This false claim lingers on in Theresa May’s insistence that the transition period always be called an “implementation period”, implying that there would be something to implement. But she certainly understood by April 2017 – although she appears not to have done so before – that the future trade deal would come after withdrawal, and would take a considerable period of time.

The Phase 2 failure

It’s important to disentangle this from the different, albeit related, issue of the sequencing of the Article 50 talks. The UK had always wanted to conduct talks about withdrawal and talks about future terms in parallel. It was to have been the ‘row of the summer’ of 2017 because the EU insisted that phase 2 talks on future terms could only start if there was ‘sufficient progress’ on the phase 1 withdrawal issues.

In fact, the UK accepted sequencing on day one of the negotiations (even though it was true to say that the Irish border issue straddles the two phases, and in that sense the EU’s position on sequencing was overly rigid and artificial). But even had the talks been in parallel rather than in sequence, it still wouldn’t have meant the trade and future terms deal could have been completed within the Article 50 envelope. It was always going to come afterwards.

Nevertheless, more of the groundwork for future terms could have been done as part of the phase two talks had it not been for two crucial issues. The first was that as soon as the December 2017 phase 1 agreement had been made the UK immediately resiled from it, with Davis saying that it was non-binding and May saying no British PM could agree to the backstop terms which she had, it had seemed, just agreed to. The second was that the UK government could not agree what future terms it wanted to seek, and did not do so until the Chequers Proposal of July 2018, which promptly imploded anyway. Thus nothing of substance happened in the phase 2 negotiations at all.

Where now?

The result is the vague, ambiguous and aspirational text of the political declaration that is now in the headlines. Some people object to the term ‘Blind Brexit’ on the grounds that, indeed, the future terms were never going to be fully known. But that misses the point that there are degrees of blindness: had there been more substantive phase 2 talks then the political declaration could have been more precise than it is. On the other hand, it is certainly disingenuous of Jeremy Corbyn, and others, to lambast the government for the fact that the detail of the future terms are not fully known, since in no circumstances would they have been.

What could be said – although Corbyn isn’t doing so because he remains opposed to single market membership – is that had the UK opted for soft Brexit in the form of EFTA/ EEA then we would have had a very good idea of what the future would look like. In that respect, I think that one politically significant part of the political declaration is the reference to respecting the result of the 2016 Referendum in terms of an independent trade policy and end to freedom of movement of people. This bakes into the future terms the hard Brexit interpretation of the referendum result, and although it is not binding it will serve to frame Brexit that way in all the years of wrangling to come, assuming the deal goes ahead.

This matters in relation to the argument made recently by the influential Brexit commentator David Allen Green. His core claim is that the only way to rid the UK of the 2016 referendum mandate is to discharge it and leave the EU. At that point, it will have no further purchase, Brexiters should cease to refer to it and erstwhile remainers should work towards a “close association agreement”.

In a post at the time I argued against that, saying that I thought it highly unlikely that Brexiters will drop the idea that the Referendum result mandates their preferred form of Brexit, or that they will cease to get traction from it amongst their supporters. It seems clear to me that they will be strengthened in that respect by having explicit reference to the referendum mandate in the political declaration.

May’s three tactics

Of course it remains to be seen whether any of this matters, since May’s deal may be voted down. Her tactics to avoid this are interesting. One, of course, is to insist that the only alternatives are no deal or no Brexit, the former to frighten remainers and the latter to frighten leavers. That may backfire if each group takes seriously the message meant for the other.

As regards the message meant for remainers, this tactic can only be bolstered by reports today of how some leading Brexiters in the cabinet plan to respond if the deal is voted down. Apparently, their idea is to seek a ‘managed no deal’ in which the EU agree a one year transition period after which the UK goes to WTO trade terms. There are so many holes in this latest fantasy that it is hard to know where to begin. It requires EU agreement (as usual, we are loftily told that ‘this would be in their own interests’) whilst refusing to accept any of the other things the EU needs from a withdrawal treaty and getting none of the things the UK needs; it has nothing to say about non-trade issues; it repeats the ‘WTO terms’ myths (see previous posts ad nauseam). It’s not hard to imagine that some people will think it better to line up with May’s deal than risk this kind of insanity.

The second tactic is to get business support for the deal. This has been partially successful, although the CBI support is fairly lukewarm and, as a leaked email shows, scarcely heartfelt. It is working better in Northern Ireland, though, where she now seems to have driven a wedge between the DUP and the business community.

This tactic reveals the shift in alliances that Ian Dunt predicted would happen once the deal was ready. Remainers have been used to having business almost unanimously on their side, but the interests of the two groups do not completely coincide. Many businesses are more interested in stability and predictability than in Brexit per se, and the deal gives a degree of this because of the two year or more transition period. And, alas for jobs, investment and taxes in the UK, one thing that period will give is time for businesses to relocate.

The third tactic is likely to be the most potent, but it is also the most dishonest. May’s central message is that the British people ‘just want this settled’. In that, she is undoubtedly right. I suspect that many, possibly most, people are heartily sick of the whole thing, and not much interested in the details. But in making this the promise, she is reprising the false claim that Brexit ends with the withdrawal agreement, whereas in fact that will just begin a new and much longer phase of negotiation. Those who are bored to death with Brexit are certainly going to keep hearing about it for many years.

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.