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The Brexit Logjam Finally Breaks

The Impossibility of an All Weather Backstop
Written by Robert Lee

The dissolution of the shambolic and paralysed 2017-2019 Parliament finally provides a clear way forward to secure Brexit. A clear majority for Boris Johnson in the forthcoming election will not only enable the quick passage of his Brexit deal – a deal that is far better than Mrs May’s deal – but also strengthen the UK’s bargaining position in the negotiations on the future UK-EU relationship. Predicting elections is hazardous, but a national desire to move on should secure that majority.

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I have felt unable to write on Brexit for more than two months, paralysed by the seemingly endless Parliamentary logjam. That logjam has now mercifully broken. Logjams can of course breakup, only to re-form further downriver, but I think this one has broken up so close to the sea that it will not re-form. The key change is the deal with the EU secured by Boris Johnson and his team. It is not the Brexit in Name Only (BRINO) deal agreed by Mrs May, and has thus secured the support of every Brexit supporting MP, plus many key Brexiteers outside Parliament. It does so because it is a proper Brexit: we leave the single market and customs union; secure primacy of UK law over EU law; recover control of our farming and fishing, our taxes and revenues, social and regional policy, our immigration rules and justice system; and we will have an independent trade policy able to set our own tariffs and secure free trade deals around the world. So when Nigel Farage declares that this is still a BRINO deal he is talking through his hat, while simultaneously – if that is possible! – talking his book.

The deal has at the same time secured the support of nearly all Remain-voting Tory MP’s plus a number of Labour and Independent MP’s. Mr Johnson won over this camp by proving he was sincere in his desire to get a deal, and  developing a good relationship with key EU leaders, most notably the French President and Irish Taoiseach. It is apparent that the PM is far from the xenophobic nationalist portrayed by some in the anti-Brexit camp, and that if he comes back as PM he will pursue a genuinely internationalist outward looking agenda.

The Brexit deal was of course not achieved without difficult compromises, most notably concerning N. Ireland (NI) and resulting in the loss of DUP’s support for the deal. The PM saw that a deal would not be possible without preventing customs checks between NI and the Republic, given the threat that such checks are perceived to pose to the Good Friday Agreement. NI therefore is to remain in alignment with the single market for agri-foods and industrial goods, a concession agreed to by the DUP. In order to protect the integrity of the single market this therefore requires some physical checks on goods moving from GB to NI as well as new documentation, plus new documentation for goods moving from NI to GB (though no physical checks). In the event of no FTA being agreed between the EU and UK, EU tariffs will also be paid on goods going from GB to NI, though these will be rebated if the goods are sold in NI and not moved on to the Republic (and thus the EU).  It is understandable that a unionist party would be uncomfortable with different customs arrangements for NI and GB.  The DUP may however be making a grave strategic mistake by being so intransigently opposed to these arrangements. The following mitigating factors are relevant:

*The NI Assembly can vote to terminate or continue these arrangements after four years through a simple majority vote. Lord Trimble, key unionist architect of the Good Friday Agreement, has confirmed that this consent arrangement is consistent with that agreement. It is not reasonable for the DUP to demand a veto over customs arrangements within the UK, as this is not an issue of national sovereignty.

*In the event of an EU-UK FTA a lot of these potential problems fall away. NI will also benefit in the same way as the rest of the UK from any FTA’s the UK does with other countries.

*The UK government has indicated that SME’s in NI will be compensated for additional costs to business of these arrangements.

*The physical checks between GB and NI are unlikely to affect more than a very small proportion of goods moving. Some physical checks already take place.

*NI businesses and farmers have largely welcomed the deal, as it removes their concerns about no deal and the negative consequences of any changes to current border arrangements with the Republic.

*NI businesses also see opportunities arising from the fact that NI will uniquely have full access to both the UK market and the EU market. Businesses could well decide to re-locate to NI to take advantage.

The DUP’s intransigence risks severing its long standing relationship with the Tory Party in the future. No other UK party has any natural sympathy with the DUP. The DUP is also wide open to accusations of hypocrisy, as NI is already different from the rest of the UK in many respects and in ways strongly supported by the DUP. Would the DUP support state spending per head in NI – it is currently much higher than in the rest of the UK – being reduced to average UK levels? A DUP veto has until recently prevented NI from allowing gay marriage or liberalising abortion. This only fell away because of the persistent failure of the NI assembly to agree to work together – a good example of a policy of total intransigence having counter-productive consequences for the party concerned? If the PM obtains his desired majority the DUP’s opposition will not in any case prevent the deal going ahead. A more pragmatic position from the DUP may prove the wiser course for them.

A sustainable majority for the PM is also crucial if the UK and EU are to successfully conclude negotiations on the future relationship. Free trade negotiations are fraught at the best of times, but it is difficult to see how a minority or weak majority government could achieve consensus in any reasonable time frame. We can be sure that the EU will do everything it can to stop the UK from being able to adopt policies that make us more competitive. This does not mean lower standards, but better standards and regulations designed by UK legislators for UK conditions and not by EU bureaucrats. Assuming a sustainable majority Tory government however, there are grounds for optimism that such a deal can be reached within two years:

*The EU and UK start from a position of complete regulatory alignment, and with no existing tariffs or quotas.

*The EU already seems to be slipping into recession, and has little room for policy manoeuvre to combat any economic slowdown. The weakness of the EU financial system means it is highly vulnerable to a renewed banking crisis.

*The EU has a very large trade surplus with the UK, and failure to secure an FTA with the UK threatens the very quick erosion of that surplus.

*A strong UK government under convinced free trader Johnson will not hesitate to start trade negotiations with the many non-EU nations keen to do trade deals with us. No better way could be found to put pressure on the EU to negotiate constructively.

So, all hinges on the election result. Opinion polls and bookmakers currently suggest a comfortable win for the PM, but we are in uncharted waters and the voting map is much more complex than it used to be. Yet the answer might be quite a simple one, summed up by the opening lines of G K Chesterton’s poem “The Secret People”:

Smile at us, pay us, pass us; but do not quite forget

For we are the people of England, that have never spoken yet

Well, the people (of the whole UK of course, not only England) are soon to speak and I think they will say “this thing must now be done”.

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About the author

Robert Lee

Robert Lee is an economic consultant and private investor.