Productivity | Strategy | Profitability
Productivity | Strategy | Profitability
The EU’s rejection last week of the our proposed solution to the Irish border issue only confirms how delusional the Government’s continued attempts to negotiate a mutually beneficial agreement with the European Union really are. Instead, we should abandon the stalled negotiations and fall back upon our WTO ‘next favoured nation’ status.
The EU’s disdain toward those members not at its central core only reinforces the importance for us leaving. Despite calls from Denmark, Hungary, The Netherlands, Poland and others, for a close trading relationship favourable to both sides, the powers that be at the heart of the European Union have ridden roughshod over this sensible idea. Instead, they have pursued their own selfish agenda to ensure their dreams of a completely federalised Europe go unimpeded.
A PUSH FOR GREATER CENTRALISATION
What the negotiations have shown above all else is that the Commission, together with the German and French governments, wants to maintain its undemocratic control over the continent. All the hullabaloo about a ‘reformed Europe’ is complete nonsense. There’s only one game in town in Brussels, and the French and Germans have all the cards. If there was ever any doubt about the dynamics of the European Union, the events of the passed 12 months couldn’t have spelt it out more clearly. The Commission has shown its total disregard for negotiating a deal that is in the interests of the people of Europe. Nor have they even acknowledged the views of other member states. It’s become even more apparent, as the likes of David Cameron and others are now conceding, that the European project is a one way street to ever greater centralisation. Their narrow minded political goal is to ‘punish’ the United Kingdom for having the tenacity to question their vision. Their approach is motivated in part by their fear that other member states may question the quest for unity and, with it, their grand vision for the suppression of national sovereignty across Europe.
We should have recognised from the start that Barnier’s appointment as the European Union’s lead negotiator spelt doom for any chance of a mutually beneficial trade deal. At our meeting in January, he was at pains to stress what a proud ‘Gaullist’ he is. As any student of history can tell you De Gaulle opposed Anglo-Saxon influence, wanted out of NATO and harboured no desire for greater exchanges in trade between the UK and Europe. Instead, France was to be Western Europe’s torch bearer. Now, like then, the UK is nothing more than a threat to this ideal. It was obvious to me then that Mr. Barnier still harbour’s that view.
As I made clear straight after our meeting, it was obvious that we aren’t going to succeed in striking a deal that would include services, particularly financial services, with the EU. Instead, we should fall back on our WTO ‘most favoured nation status’ and divert more time and energy into drawing up bilateral agreements with countries beyond Europe’s shores. The UK will only secure a decent, long-term free trade agreement if we’re willing and able to trade under WTO rules.
Opponents of Brexit are correct; the EU would be within its rights to impose tariffs on imports from the UK. However, the EU’s choices of tariff policy are limited by WTO rules. In particular, the Most Favoured Nation status stops any WTO member imposing punitive tariffs intended to discriminate against any other member: the only choices available to the EU on tariffs are to impose zero tariffs on imports from the UK or to impose tariffs based on the same tariff schedules that it imposes on imports from other countries with which it does not have an free trade agreement.
WTO RULES BIND PARTIES FROM IMPOSING HARSH TARIFFS
So, if the EU did put harsh tariffs on the UK, it would also have to impose those same tariffs the other countries it trades with, too. Such a protectionist lurch would then run into all sorts of problems, not least from disaffected trading partners, some of whom (e.g. the US) would be minded to retaliate. The EU would then have a major trade war on its hands. The idea of the EU imposing harsh trade tariffs on British goods is a non-starter.
Beyond March 2019, WTO rules can be used as a fall-back position from which we can agree trade deals with other countries, at the same time we can also continue to negotiate with the EU under less time pressure, making a better deal more likely. Some UK firms are worried that WTO rules will hurt ‘complex supply chains’ that span right across the EU. In actual fact, under WTO rules the overwhelming majority of manufacturing components are exempt from any tariffs. Meanwhile, our EU deficit also means that under WTO rules we’ll pay less in export tariffs than we receive. As a result, the Government will get billions of pounds in net revenues each year. This surplus can be used to compensate sectors, such as car manufacturing and agriculture, which may see tariffs imposed on their exports.
Free from the constraints of the single market and its mandatory tariffs on goods coming from countries outside the EU we will be able to pursue free trade, which will reap considerable benefits for our economy. British consumers will enjoy cheaper goods, while our economy will see greater productivity and higher wages. Most importantly, free trade will see the poorest in our society benefit disproportionately than those who are better off.
We shouldn’t forget how ridiculous real-world tariffs actually are. The reality is that most tariffs don’t really make any sense at all. We currently pay over £3 billion a year in import tariffs on over 12,000 different categories of goods. The tariff schedules themselves are laughable in their complexity, but what isn’t funny is the huge compliance and administration costs imposed on British business and in turn British consumers. There are 36 different categories of tariff, and most of these are not straightforward percentages but are based on complex formulas. It’s mind boggling some of this stuff is dreamt up!
It is in the interests of both consumers and businesses to buy as cheaply as possible. Tariffs, by definition are counter-productive: they take money out of the pockets of British consumers and put it in the hands of big business. The UK should therefore commit to a policy of free trade with the rest of the world. The priority should be to seek deals with the United States, Canada, China, Australia, New Zealand and India, but also with smaller economies enjoying high rates of growth. Opponents of Brexit point to the EU as the be all and end all of British trade. Yet, in reality, the single market binds us to trading exclusively with the world’s slowest growing block of nations. As Lord Lawson eloquently put it last week in defiance of pro-Remain peers, the economic opposition to leaving the single market and customs union ignores the reality of where economic growth is taking place around the world.
REMAINING IN THE EU WOULD MEAN CORPUS JURIS USURPS HABEAS CORPUS
The virtues of the leaving the single market extend beyond basic trade and economics. They touch on the very foundations of our society, too. Corpus Juris is a phrase used in the European Union to describe the vision of a European Legal Area, a European Public Prosecutor and a European Criminal Code. Such a justice system would see our Anglo-Saxon common law system, which has been developed and improved over hundreds of years, usurped. Instead, it would be displaced by a much more rigid and cumbersome Corpus Juris or Roman law model prevalent on the continent. The move would undermine the criminal law traditions we have crafted over centuries, such as jury trials by independent juries, habeas corpus, and prohibitions against double jeopardy. They would upend a fundamental component upon which our society has been based.
So, ignore the nay-sayers, a ‘No deal’ is a completely coherent position. It’s different from just ‘walking away’, which means failing to settle administrative issues such as mutual recognition agreements (MRA) on exports. Nobody’s suggesting we go down that road. The idea that existing and uncontroversial EU protocols granted to countless other non-EU members would not apply to Britain is barmy. For Brussels to deny such rights would breach WTO and EU treaties, while infuriating EU businesses and voters by threatening to pour billions of euros of profit and countless EU jobs down the drain.
THE NEUTRALITY OF WTO RULES IS FAR MORE FAVOURABLE FOR THE UK
No deal, then, really is better than a bad deal, as the Government has said previously and should be saying again: ‘No deal’ is not ‘unthinkable’. We need to think about it, and soon. No trade agreement looks likely now, so the Government’s strategy must be on preparing for WTO rules. Only then will the bully boys in Brussels stop insulting us and put a UK-EU trade deal firmly back on the negotiating table. EG