Boris Johnson set out the path to leaving the EU with no deal in his speech at JCB on Friday. He dismissed warnings about the impact of a no-deal Brexit, and said it was “overwhelmingly likely” that Brussels will offer better terms, ie the UK to have the right to decide unilaterally to leave the backstop. Finally, he proposed that we up the ante by threatening to withhold half of the £39billion agreed as the divorce payment until the terms of a deal are met to our satisfaction.
MPs that represent manufacturers know how worried these companies are about the possibility of no-deal. With complex supply chains involving components manufactured across Europe and “just in time” manufacturing meaning that some manufacturers have as little as two hours worth of components on site at any one time, companies large and small are united in condemning the prospect of leaving the EU without a deal. They are supported in their view by all the bodies that represent both businesses and workers.
Most of the attention being paid to the prospect of leaving without a deal has been on the short-term consequences; I am equally concerned about the long term. Global companies, with manufacturing facilities across Europe and beyond, will look less favourably on the UK as the destination for the manufacture of their next model – or a new model altogether – if we leave the EU without access to the single market having been negotiated. The effects of these decisions will not be felt for a few years; but they are likely to have a significant and damaging effect on our economy for years to come.
Boris’s statement that it is “overwhelmingly likely” that Brussels will offer better terms is a gross exaggeration. A change as significant as the right of the UK to come out of the backstop (assuming we had to enter it in the first place) unilaterally, would require the re-opening of the Withdrawal Agreement (WA) that has been signed off by all 27 member states. The EU have been very clear that they are not prepared to do this. Even if they were to change their mind would we want to take the risk that re-opening of that negotiation would give to those member states who think the terms of that WA are too favourable to us to demand changes (eg. Spain and France with reference to Gibraltar and fishing rights, respectively)?
I support the PM in her efforts to get improvements, or clarifications at least, to the operation of the backstop in a bid to make her deal more palatable to some of the more than 200 MPs who voted against it, but whatever she is able to achieve it might not be enough to satisfy Boris and some of his followers. So the time is fast approaching for the government to consider alternative options, which might include measures that complement the PM’s deal.
A ‘common market’ trading relationship, control of our borders, an end to payments in to the EU budget (apart from subscriptions to give us affiliate status to the many bodies that oversea EU wide initiatives and regulations), an end to the jurisdiction of the European Court of Justice and exit from the common agricultural and fishing policies - all underpinned by our leaving the EU institutions would constitute a real Brexit while protecting our trade, jobs and the wider economy.
The impact of a common market solution on an independent trade policy is an obstacle which I accept might be too much for a number of those who voted the PM’s deal down last week. However it is worth assessing the need for an independent trade policy objectively. Trade agreements are important and none more so than the one we already have, effectively, with the EU. (The single market being a lot more than a trade agreement).
Between 45% and 50% of all British exports are still destined for Europe; and a further 11% go to third countries with whom the EU has a Free Trade Agreement (FTA).
Trade deals are very difficult to negotiate and the negotiations usually take many years. Most countries, and all the big markets without exception, set challenging conditions. Countries like Brazil insist on a complex system of tariffs, quotas and the employment of local labour as part of any trade arrangement.
Britain’s largest single export market is the USA, with whom we have no trade deal but a good trading relationship. No doubt a good trade deal with the USA would grow the potential for exporters but it is likely to take many years to negotiate. A few years ago when the abortive negotiations between the EU and the US were underway, MPs received vast amounts of mail from constituents concerned about the negotiations. Some of it was misinformed – for example there was never any threat to the NHS – however, much of it was genuine and centred on America’s very different regulations governing processed food and intensive farming methods, many of which fall below Britain’s animal welfare standards. It will not be easy to conclude an agreement, which would be acceptable to the British public, involving these sort of issues.
Britain has had a negative trade balance for manufactured goods for many years and for many reasons. The fact that we sell less to so many of the growth markets in the world than do Germany, France and even Italy cannot be explained by a lack of trade deals. The success of German exports to China alone attests to the importance of factors, other than trade deals, in the winning of international business. Hence the negotiation of trade deals by the UK as part of an independent trade policy will not be a panacea. The fact is that global competition among exporters to the high growth markets of the world is very intense indeed, and no trade deal can mask the extent of that challenge to UK exporters.
There is also a mountain of evidence that most companies export more to markets close to home, and indeed global trade is growing faster between countries in the same region than average growth in trade across the world. So it is all the more important to protect our access to the EU single market at all costs.
Finally, I know the threat to withhold half the monies we have agreed if we don’t like the terms of the deal would be popular among some colleagues and parts of the electorate. However, it is worth remembering that the figure we accepted was based on spending commitments that were agreed by EU member states including the UK. The principles that underpinned the amount were that no EU member state should have to pay more or receive less because of the UK’s withdrawal from the EU; that the UK should pay its share of the commitments made during the period of its membership and that the UK should neither pay more, nor earlier, than if it had remained a member state. It would be wholly dishonourable to renege on a negotiated settlement to which we agreed over a year ago because we haven’t got all we want out of the negotiations to date.
Margot James is the Conservative MP for Stourbridge and minister for digital and creative industries