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WESTMINSTER REFLECTIONS: Bernard Jenkin MP says the time to start EU-UK trade discussions is already overdue

westminster (Custom)

By the time you read this, the UK budget, seen as a crucial test for the government, will have been delivered, and the next big EU summit will be approaching.  It is unlikely the Budget will have been decisive, because it is the issue of leaving the EU which is dominating British politics.  This is causing huge political turbulence, but it would be a terrible error if other EU states were to believe that the UK can be forced onto the defensive by delaying discussions about trade any longer.

The European Union (Withdrawal) Bill (‘EUW Bill’) has started its committee stage.  It is besieged by some 500 amendments and new clauses, as every grievance against leaving the EU is expressed on the order paper.  This does reflect genuine concern about many matters, but the effect of many of the proposals – such as staying in the EU internal market and inside the customs union, complying with EU single market regulation, and under the jurisdiction of the EU Court of Justice – would negate the effect of leaving the EU.  The Remain campaign previously described the ‘Norway option’ as ‘the worst of all possible worlds:’ shackled to the EU and largely bound by its rules, but also outside the treaties and unable to participate in the legislative process.  Some die-hards dream of ‘Brexit in name only’ or even of reversing Brexit.  They are a tiny minority.

There is no possibility that the UK would accept this outcome.  The political backlash would be unpredictable.  The Conservative Party is more united than it looks around the principle of full independence, and less than that would divide both the main parties from their supporters.  Some 400 out of 650 constituencies voted Leave.  Many Labour MPs, like Blairite South Yorkshire MP, Caroline Flint, regularly stand up in the Commons to make clear that they recognise the obligation to respect the referendum result.  Ironically, the constituency of former EU Commissioner, Lord Mandelson, voted 70 per cent for Leave.   He would not be re-elected there today.

So the arguments about the EUW Bill are driven by a combination of genuine concern and opposition opportunism.  Many MPs are grief stricken by the Leave decision, and find it hard to accept.  The great British Establishment gives the impression it is still reeling from the shock and is having difficulty adjusting, including many large corporates that have benefitted from EU protectionism.  Some former civil servants and diplomats have become vociferous in their opposition to the government’s stated policy.  However, the EUW Bill will get through the Commons largely unscathed.  Even the House of Lords, whose older, more Establishment membership is ultra-pro-EU, will in the end comply with the will of the Commons.  The unelected House could not defy a referendum, endorsed by a general election, in which both the main parties stood for ‘Leave.’

The danger is that the EU overplays its hand.  A senior government figure from a large EU country recently insisted to me privately that the EU is in a very strong negotiating position.  This is premised on the assumption that the UK will be forced to make an agreement.  This is simply not the case.  Yes, there is strong pressure from some to do a deal at any cost.  However, the position so far adopted by the EU is considered by most voters to be highhanded, over demanding and even bullying.  The mood against the EU amongst voters, and most of business, is hardening.  Better to have a clean break than years of uncertainty.

There is outrage at the EU’s refusal to discuss ‘the future framework’ (i.e. trade), since this puts the EU in breach of Article 50.  Also, Article 3(5) of TEU obliges the EU ‘in its relations with the wider world’ to ‘contribute to … free and fair trade.’  And Article 8(1) demands, ‘The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness…’  We are seeing no evidence yet of such neighbourliness.

The present time wasting is perverse, given that UK business has less and less incentive to accept an expensive ‘transition’ unless it is assured well in advance of the exit date.  The UK also needs substantial assurances about the final trade deal to accept the cost.  Why should the UK offer tens of billions of euros if there is no guarantee of a decent trade deal at the end of it?  Why not go straight for WTO rules and spend that money on transforming the UK economy?  The EU seems blind to the reality that nearly every one of the individual 27 EU member states has far more jobs at risk from disruption of EU-UK trade, than the UK has at risk in respect of that one country.  Moreover, at the end of the Article 50 period, ‘The Treaties shall cease to apply to the State in question…’ so the UK has no ongoing financial obligation unless we choose to accept one.

A good deal is better than no deal.  Nobody wants an acrimonious separation.  The PM’s Florence Speech was an emollient and generous offer, for which most in the UK were expecting generosity in return. Patience is wearing thin.  Continuing to demand money with menaces, and refusing to talk trade, will just drive the process towards ‘no deal.’

 

Gervase@aumitpartners.co.uk

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