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Chequers. A Trap for the Left

Chequers House
Written by Richard Tuck

Richard Tuck argues that the key aspect of the Chequers deal is UK adherence to EU state aid rules and competition policy. It is not the Conservative Brexiteers who have been out-manoeuvred by this document: it is the Corbynite Left.

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A great deal of nonsense is already being talked about the document which emerged from Chequers yesterday, but its true significance has not yet been clearly recognised, largely because of a general confusion in the British media over what free trade areas, customs unions, and single markets are.  The document says that it wants a FTA with the EU, and that is something which almost every side in the Brexit debate has said at some point they wanted; it is a natural and on the whole desirable successor to our membership of the EU, and as FTAs around the world illustrate, they do not generally undermine national sovereignty (unless you think like Trump).  It also says it wants a customs “arrangement”, and many commentators (particularly on the BBC) immediately started talking as if this is a kind of customs “union”, and snidely making fun of the Cabinet Brexiteers for accepting it.  But it is actually nothing of the kind.  A customs union commits each member country to imposing the same tariffs as the other members of the union on goods coming from countries which are not members.  All that is proposed in the Chequers document is that goods entering an independent UK and intended for final use or consumption in the country will be charged whatever tariffs the UK thinks fit.  Goods entering the UK with a view to re-shipping into the EU will be charged the EU tariff at the UK border, and the money remitted to Brussels.

On the face of it this is something that an independent country can perfectly well live with.  To see this, we only need to ask what the implications would be were every country in the WTO to sign up to such a regime.  Who would care if it was a WTO rule that tariffs should be collected in this way?  Why should we worry if any time a shipper from the US sent a consignment of goods to the UK for onward shipping to Kenya, the Kenyan tariff was collected at Felixstowe and forwarded to Nairobi, so that the US shipper would pay no dues when it arrived in Mombasa?   It is not so different in principle from the bureaucracy surrounding “rules of origin” for goods moving between countries which have differing tariffs vis-a-vis one another, and that is a perfectly familiar feature of international trade.  Even if the arrangement was one-sided, in that the EU would not do the same for goods passing through to the UK (and this would be good to arrange), it is not something to be particularly disturbed by.  If something like this is what Labour also meant by “a” customs union (though it is really nothing of the kind), there is little for Brexiteers to worry about.

The real issue in the document is the proposal about regulatory alignment with the EU; but here we can see why a Conservative Cabinet, even with its Brexiteers, approved the document.  There is going to be some degree of regulatory alignment over goods, though even here there is an interesting proviso, “covering only those necessary to provide for frictionless trade at the border”, so that companies which do not export to the EU do not in theory have to abide by the regulations.  Since exporters into any country from anywhere in the world have to abide by the regulations of the importing country, this also may not be as significant as it seems.  But the key passage, with a great deal of significance for UK domestic politics, which leaps out from all this carefully qualified guff in the rest of the document, is the single sentence “The UK would commit to apply a common rulebook on state aid, and establish cooperative arrangements between regulators on competition.”  This is key because it is the one area where Conservative Brexiteers’ instincts are quite different from those of Brexiteers on the Left.  For the traditional Left, the Common Market and its successors was always seen as dangerous primarily because it enforced market competition, and made traditional socialist measures hard to introduce.  And it is this aspect of the EU, and actually this alone, which the Conservative government wishes to continue to set in stone.  When Teresa May trailed these proposals in her Mansion House speech in March, Jeremy Corbyn picked up on exactly this aspect, remarking in Parliament that “The Prime Minister’s only clear priority seems to be to tie the UK permanently to EU rules that have been used to enforce privatisation and block support for industry.”  But only the Left is likely to care about this: you have to be exceptionally far-sighted, and honourable, to object to this if your economic instincts are all on the Right, even if you otherwise want national independence.

So it is not the Conservative Brexiteers who have been out-manoeuvred by this document: it is the Corbynite Left.  But they are hamstrung by the vaguely pro-EU sentiment in the rest of the Labour Party, and will not be in any position to oppose this aspect of some future deal with the EU.  The original promise of membership of the Common Market in the eyes of Conservatives – the reason why (among other people) Margaret Thatcher was initially such a keen supporter of it – will have been kept.  Indeed, if these proposals are accepted by the EU, including the end of free movement, Thatcher’s dream of an independent UK which would never again suffer from socialist measures will have triumphed.  Seen from this perspective, it is not at all surprising that a Cabinet consisting of her children should have agreed to this document.

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Richard Tuck