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19 January 2019

Uncharted Waters

Tag(s): Foreign Affairs, Politics & Economics
In December the Prime Minister warned that if her Withdrawal Agreement was rejected by Parliament the country would be in “uncharted waters.” She then delayed the “meaningful vote “on the subject in an attempt to gain reassurances from the EU that would allay some of the concerns of individual members, particularly over the “backstop.” These reassurances were not effectively forthcoming and on Tuesday the 15th of January the House of Commons voted overwhelmingly to reject the agreement by a record majority of 230. Unsurprisingly the Leader of the Opposition called for a vote of No Confidence immediately. The Government won that but only by a majority of 19. They have the support of the Democratic Unionist Party and its ten members, so without that support they would have lost.

These are indeed uncharted waters because there does not seem to be a majority in the House of Commons for any of the options on offer. Some argue that therefore a General Election is needed as a way of breaking the deadlock. This is the Labour Party view. However, it is not easy to call a General Election under current legislation. The Fixed Term Parliament Act, brought in by the Coalition Government of 2010 as a way of ensuring that the Coalition did indeed endure, means that a two thirds majority of the House of Commons is required before a General Election can be called earlier than the end of the fixed term of five years. This is one of the reasons why our constitution is coming under so much pressure. Under the former convention a government facing this much difficulty and unable to carry its major legislative programme through the House would no doubt have had to go to the country by now.

Others argue that in order to break the deadlock there should be a second referendum. Virtually all those making this argument are people who voted to Remain. They are calling this second referendum a “People’s Vote” presumably claiming that the 17.4 million people who voted to Leave in 2016 are not themselves people. Others are making the truly horrible point that many of those who voted to Leave have since died while the younger people now entitled to vote are more likely to vote Remain. Even if this were true, which is impossible to prove, it would be in denial of all democratic principles but it shows the lengths that the European Union establishment will go to get the people to vote the “Right” way.

On several occasions, notably in Denmark, Ireland, France and Holland, referenda have rejected closer EU integration only for the EU authorities to contrive to get the member state to rerun the referendum and get a favourable result.  The Danes rejected the Maastricht Treaty in 1992 but the EU persuaded the Danish government to rerun the vote by using a mixture of propaganda and false concessions. In 2001 Ireland voted against the Nice treaty but just over a year later was told by the EU to rerun the vote. This time the EU gave massive political assistance to the Irish government and turned the vote round. In 2005 the French and the Dutch voted against the European constitution in their respective referenda.  The EU simply rebranded this constitution the Lisbon Treaty with a few minor changes and this was ratified by national governments even where referenda had voted against its terms

I have argued on these pages before that few member states in the EU have the kind of democratic heritage that the British enjoy. They are far more used to authoritative governments and ruling by unelected bureaucrats. All over Europe there is public concern about the current direction of travel and in most countries the majority of people want reform of the EU and its institutions. But the EU constantly demonstrates that it is incapable of reform.

We can see the growing argument for a second referendum using all the tactics that the EU has successfully used before. But we can also see that the Transition Agreement effectively gives Britain its nominal exit from the EU while continuing to be tied into and paying into its institutions indefinitely.

At present the default position is for the UK to leave the European Union without a withdrawal agreement in place. Some are arguing that the British Government should request an extension to Article 50. This is possible only with the agreement of all the other 27 member states. They are unlikely to give this agreement unless they can see that something useful could be achieved within the time frame. They are certainly unlikely to extend the period beyond the European Parliament elections.  These are expected to be held between 23rd and 26th May, so less than two months after the deadline. It is effectively even  less because candidates must file for election some time before and at present the legal position is that the UK will not participate in these elections.

Others argue for different types of Brexit than that negotiated by the Government. Three options are often cited: the so-called Canada + option, the so-called Norway deal and the Labour party idea of a customs union with access to the single market. Canada + means the kind of free-trade deal recently concluded between the EU and Canada. But this deal took seven years to negotiate and a further two years for all 28 Member states parliaments, including regional parliaments, to ratify. If we think the present level of uncertainty is too much then how do nine years of uncertainty sound? The Norway deal is what was concluded between the EU and Norway after Norway bucked the trend and voted twice in referenda not to join the EU. The result is a deal where Norway is not an EU member but receives access to most of the bloc’s internal market through membership of the European Economic Area (EEA). That means goods, services and labour flow freely between Norway and the EU. In return Norway has to adopt a large number of EU laws without having a formal say in how they are shaped. It also means they pay into the EU budget, a similar level to the UK on a per capita basis, and again have no say in how that money is spent. It is difficult to see that this has any advantage to our present position or how it squares with what people voted for, that is to get control of our laws, our borders and our money.

The Labour Party idea is simply nonsense. It is based on a fundamental misunderstanding of what a customs union is. I blogged on this extensively in The Customs Union 26th May 2017[i] I won’t repeat all my arguments here but suffice it to say that inside a customs union we would still have all the obligations of the single market, still be subject to its laws and regulations, still pay in a huge contribution and still be totally unable to negotiate any independent trade deals whatsoever.

What is left is what is about to happen unless Parliament can reach agreement on some other course of action however impractical that seems. What is left is to leave the EU on 29th March with no withdrawal agreement in place. That would have consequences both negative and positive. The negative consequences will not be as bad as some of the architects of Project Fear Mark II have tried to say, but there will be negative consequences. Industries that are highly integrated with the EU such as the car industry will have several challenges, but this will cut both ways. Since we have a negative balance of payments on cars including their components then you would expect EU exporters, notably the German car manufacturers, to put pressure on their government to make a new deal. Further, when the UK negotiates free trade agreements with third countries not in such deals with the EU then the UK becomes an attractive place to manufacture and export under such deals.[ii]

Further, we will not have to pay the £39 billion that is in the Withdrawal Agreement and mostly consists of a gift in return for a trade deal that has not yet been negotiated! Part of this money is no doubt a contractual commitment from the past such as a share of pension payments for EU staff. But most will become available to the UK government to use to encourage and help industry. We will also no longer be bound by EU rules on state expenditure and so will be free to help our industries adjust to the new regime.

[ii] In fact over the past twelve months Foreign Direct Investment in the UK has increased at more than double the rate of anywhere else in the EU.

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