By David Campbell Bannerman, Chairman of The Freedom Association
Very soon a choice will have to be made: whether to continue negotiating a trade deal with the EU or to end negotiations and to prepare for ‘no deal’/Australia deal/WTO rules.
The way the EU has behaved has made no deal much more attractive. What they have done is to narrow the gap between the advantages of a free trade deal, with zero tariffs and quotas, and that of working under WTO Rules, to such an extent that having such a thin deal laden with all sorts of restrictions and continued ties is the greater risk. This is encapsulated in what they call cheekily ‘Level Playing Field’ rules, but what are in effect the EU forcing us as an independent sovereign nation to follow the rules they set, including new ones we have no say or voice on.
Now, if we had opted for an ‘EEA’ type solution such as Norway’s then we would be signing up to such an arrangement. Norway has to follow all EU Single Market legislation with no voice and little influence. It kicked up a fuss on one Directive – on Postal Services, but even that rare challenge was overturned. EEA also means no control of immigration, which is a no-no post our Referendum.
This is why we went, after much debate, for a free trade agreement relationship with the EU because it is looser, more arm’s length, less prescriptive, and means we are out of the Single Market and Customs Union, with its rules.
I say this as someone who has pushed for an excellent free trade agreement – what I have called ‘SuperCanada’, that is bigger, better and wider than the EU-Canada deal CETA – for years now. It is what Boris Johnson has called for – he used my term ‘SuperCanada’, as did Jacob Rees Mogg, after I presented to the ERG on the proposals in September 2018. I wanted a SuperCanada deal not just for our benefit, but for that of our EU colleagues and friendly nations.
This is basically what the EU concluded was the only deal possible right from the start post-Brexit, and has been offered three times – by the previous President of the EU Council Donald Tusk and by Mr Barnier himself.
On 7th March 2018, after coming to Number 10, Tusk said: “I propose that we aim for a trade agreement covering all sectors and with zero tariffs on goods. Like other free trade agreements, it should address services. I hope that it will be ambitious and advanced.” Ambitious means wide and with as few tariffs or barriers as possible.
And Barnier himself said, “It is possible to respect EU principles and create a new and ambitious partnership. That is what the European Council has already proposed in March [as above, 2018]. The EU has offered a Free Trade Agreement with zero tariffs and no quantitative restrictions for goods. It proposed close customs and regulatory cooperation and access to public procurement markets, to name but a few examples.
"On security, the EU wants very close cooperation to protect our citizens and democratic societies. We should organise effective exchanges of intelligence and information and make sure our law enforcement bodies work together. We should cooperate to fight crime, money laundering and terrorist financing. We can cooperate on the exchange of DNA, fingerprints, or Passenger Name Records in aviation to better track and identify terrorists and criminals. We are also ready to discuss mechanisms for swift and effective extradition, guaranteeing procedural rights for suspects.
"If the UK understands this, and if we quickly find solutions to the outstanding withdrawal issues, including the backstop for Ireland and Northern Ireland, I am sure we can build a future partnership between the EU and the United Kingdom that is unprecedented in scope and depth.”
Yet on 18th February 2020, the same Mr Barnier suddenly declared “we remain ready to offer the UK an ambitious partnership” (partnership in EU terms normally means embracing non-trade affairs such as defence, security, judicial cooperation or foreign policy). The EU has suddenly noticed the UK is geographically close to the EU after 47 years and has reduced the partnership “unprecedented in scope and depth” to “a trade agreement that includes in particular fishing and includes a level playing field, with a country that has a very particular proximity – a unique territorial and economic closeness – which is why it can’t be compared to Canada or South Korea or Japan.”
So just after we had left the EU on 31st January 2020, the EU moved the goalposts and took away a comprehensive free trade agreement, instead offering a partnership agreement which was not comparable to the kind of FTAs the EU had concluded, and which Lord (David) Frost has cleverly kept the UK’s requests very closely aligned to. The EU weren’t willing to offer the FTA they offered 3 times before because we were now considered geographically close! No wonder several of our top Brexiteer lawyers, including Bill Cash in the Commons recently, regard this as ‘bad faith’ in legal terms, which could in theory invalidate the Withdrawal Agreement itself, as our payments and approach were grounded on receiving an FTA.
So, it is bad faith and a huge misunderstanding by the EU of the realities of the balance of power in trading terms that has brought us to this impasse. As in the Referendum, the EU makes the cardinal mistake of believing its own propaganda: they think that because the EU nation economies put together are bigger than the UK’s, that they hold all the cards. This is supported by our mainstream media, such as the BBC.
But the reality is that the UK is just about to become the EU’s second largest trading partner after the USA. We are the world’s fifth largest economy, the same size currently as India; 20% larger than Russia. If tariffs are imposed in no deal, the EU will be paying £12-13bn a year and the UK only £5bn. Actually, although 43% of our exports go to the EU (57% to the Rest of the World notably), only 7.5% of GDP – of our economy – is exports of goods and vulnerable to EU tariffs.
The EU has a £95 billion goods surplus with the UK, mostly on tariff heavy agricultural and manufactured goods, and though the UK has a £13bn surplus in services, these don’t have tariffs on them, though are subject to licensing such as EU financial passporting, which UK institutions have already worked around.
So, the reality is that the EU needs a trade deal with us more than we do with them. Not something you hear very often.
If we go to no deal/Australia/WTO Rules, then it is worth remembering that two-thirds of the world trades under WTO Rules, and that the USA and China export more to the EU than we do. So much for geography! Also, most countries do Free Trade Agreements from a WTO Rules position – the recent EU-Japan FTA took Japan and the EU out of a WTO rules position.
If we are trading under WTO Rules, and the EU is hurting from £13bn a year tariffs, with job losses from these – remember the UK Market employs over a million Germans, half a million Dutch, 400,000 French people – then far from the UK rushing to do a deal, as the French arrogantly claimed, the EU would be under the cosh most.
By the time a UK-EU FTA is signed – perhaps even finally that SuperCanada style of deal – the EU could have lost a huge chunk of that £95 billion goods surplus from ‘reshoring’ within the UK, from returning manufacturing jobs in food, drink, car parts, steel, trains and from ‘import substitution’ to UK producers or non-EU suppliers from all round the world, such as our Commonwealth, driven by less red tape and the massive surge in UK Free Trade deals Liz Truss has rolled out.
Whilst we are not protectionist as an organisation, a resetting of the UK’s trading position with the EU, as President Trump reset relations with Mexico and Canada (replacing NAFTA with the USMCA FTA) might be in order, and allow us to redirect our trading markets and suppliers away from an EU focus.
In short, we shouldn’t be worried if no deal occurs at the end of the year. It will affect only 7.5% of our economy directly by tariffs, and where those are high (many are low or zero rated anyway), those sectors can obtain legal support under WTO rules: farming directly and manufacturing indirectly, such as through aid for Research & Development. The EU Single Market has not suited us at all well since 1992, and a short sharp shock of rebalancing the trading figures would be no bad thing.
So, let’s not allow the latest Project Fear hysteria to detract us. We should not be signing a deal that ties our hands on EU laws, keeps us in a regulatory straightjacket and seeks to seize our sovereign fishing waters under UN, not EU laws. Boris Johnson is holding firm on our sovereignty and we should stand right beside him and with those principles if we have to go to no deal.
WATCH a webinar we hosted in October: What‘s stopping a trade deal with the EU and is no deal better anyway?
Answering the questions were: David Campbell Bannerman, Chairman of The Freedom Association, a former MEP and international trade expert; Martin Howe QC, a leading barrister in the fields of intellectual property and EU law; Rt. Hon David Jones MP, Conservative MP for Clwyd West, and a former Minister of State at the now defunct Department for Exiting the European Union; Lee Rotherham, Director of think tank The Red Cell and a Common Fisheries Policy expert; and Barney Reynolds, a partner at Shearman & Sterling and the author of 'A Blueprint for Brexit: The Future of Global Financial Services and Markets in the UK' and many other publications.
The webinar was chaired by Alex Deane, a public affairs consultant and political commentator