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Westminster Reflections: Bernard Jenkin MP says despite everything, ‘out’ of the EU is not in doubt Copy

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The UK government is gearing up, as reality dawns on the EU, Bernard Jenkin MP

Parliament is in the summer recess, but Whitehall has been gearing up. The UK civil and diplomatic services were hit by something of a strategic shock on 23 June last year, when the UK unexpectedly voted Leave. Business and government scattered in different directions, and although some are hoping for a ‘Brexit in name only,’ as one former Cabinet Secretary was heard whispering to a fellow peer, most are now reconciled — and many are even enthusiastic. At the same time, the reality of a ‘no deal’ is dawning on the EU.

The largely Remain media who feed the opinion-forming classes (The Times, The FT, BBC Radio 4) are constantly churning out a jaundiced view of Brexit and the government’s internal discussions. It’s easier to broadcast about so-called splits and rows than to explain the difference between a free trade agreement and a customs union. I heard one Brussels correspondent explain to their listeners that it was about trading tariff free or not. That may be one of the effects of being in a customs union, but the distinction is of course much more fundamental. It is about whether nations trade goods on the basis of ‘free movement’ (i.e. without internal frontiers) or according to the ‘rules of origin’ laid down by the World Trade Organisation (WTO). The EU trades with third countries according to the WTO rules, which treats it as a single state. The EU also regulates products and standards like a single nation state in order to create the so-called ‘level playing field’ (which has in fact proved to be an inexhaustible pretext for the constant transfer of law-making powers from the member states to the EU institutions.) A huge amount of anxiety about leaving the EU arises from ignorance of this fundamental distinction, exacerbated by forecasts of paralysis at the Channel Tunnel and on both sides of the English Channel, unless there is some huge and impossible deal.

It is of course perfectly possible to have zero tariff trade between two sovereign states under WTO rules without a trade deal. Under WTO procedures, the EU and the UK could jointly notify the WTO of their intention to establish a Comprehensive Trade Agreement (CTA) agreement, and under Article 28 of the WTO treaty, to which both the EU and the UK are signatories, we could agree zero-for-zero tarrifs pro tem from day one after 29 March 2019. Moreover, it is perverse and absurd that the EU and its supporters are doing nothing to undermine the assertion that all goods will have to be checked at the new customs frontier between the UK and the EU, causing massive queues of trucks and containers up the M2, and masses of paperwork. This is not how the EU trades with the rest of the world, so why should this chaos be inflicted on trade with the UK?

Sensibly, the EU has agreements on product recognition and standards, and mutual recognition of regulatory regimes with a whole host of countries with whom it does not have CTA. How else does the EU trade with the US, China or Japan? We all agree that a production car is a car. We don’t stop and search every new car being exported to the EU. At Felixstowe, part of Harwich International Port, 97 per cent of containers entering the UK from outside the EU are not checked.

The EU should be ready to agree under Article 50 that we intend to conclude a CTA to be implemented in a year or two after the UK leaves the EU; and that in the meantime, there will be tariff-free trade between the EU and the UK, with the very minimum of customs checks and procedures in accordance with WTO rules. It might take some time to set up the necessary systems, hence the need for an implementation period. The only reason this might not happen is because of EU intransigence. (Whenever I suggest that it is only the EU that is threatening some kind of ‘cliff edge,’ a torrent of abuse is hurled at me through social media – which rather suggests I have a point!)

There is the beginning of a consensus in the UK government and Whitehall about how to proceed. This is what lies behind the UK government’s recently published White Paper, Future Customs Relationships. This is both an olive branch and a challenge to the EU. The EU’s initial reaction, that this approach is ‘fantasy’, was all too predictable, but the EU dare not throw such a constructive and conciliatory approach back in our faces. Article 50 requires the EU and the UK to reach an exit agreement “taking account of the framework for its future relationship with the Union.” This is all about that future framework. Some in the EU already realise that if there is no deal (and that is a possibility), then the EU will get no money at all from the UK, which  contributes 16 per cent of the EU budget (8 per cent net). They will have a real internal crisis if we just stop paying on day one.

 

Gervase@aumitpartners.co.uk

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