In a recent blog on Prospect, Peter Lilley, the former Conservative MP for Hitchin and Harpenden, explained his support for Theresa May’s statement that “no deal is better than a bad deal”. Although a ‘bad deal’ would be more disastrous than no deal at all, the ‘no deal’ scenario should not be viewed through rose-tinted glasses. It is worryingly implied that a Conservative majority would already accepted that it will not be possible for the UK and the EU to come to an agreement in time, and have lost interest in serious negotiations.
The flaw in Peter Lilley’s argument is the belief that in a ‘no deal’ or ‘Hard Brexit’ scenario, that the UK will be able to export to the EU on WTO ‘most favoured nation’ terms. This is improbable for the first argument that the UK is not currently a member of the World Trade Organisation, so there is no legal basis for an expectation to trade on any WTO terms; and for the second argument that it won’t be in the political interests of the EU to consider the UK a ‘most favoured nation’. Peter Lilley himself concedes that for the EU, “politics trumps economics”.
The realities of failed negotiations
A ‘bad deal’ for the UK is one where the UK remains within the single market but without compromise from the EU; so that the freedom of movement of EU nationals remains unrestricted, and the UK pays the 100 billion euros demanded by Juncker. UK goods and services will still need to comply with regulations required by EU laws and directives, yet will have no influence over them. Are cheaper imports from EU really worth the cost?
However, if no agreement can be reached between the UK and EU member countries, the growing animosity between the two will hardly likely be conducive to ‘most favoured nation’ status. Punitive trade tariffs on both sides and economical sanctions would restrict trade, limiting UK imports and exports to countries outside of the EU. The costs of consumer goods would go up and multi-national companies like car manufacturers would face considerable challenges to retain industry in the UK. Directors would undoubtedly investigate whether the cost of overcoming the trade barriers would be greater than simply relocating to the EU.
Challenges of achieving a good relationship with the EU
Any negotiations with the EU must be to achieve the objective of finding an optimal scenario that is mutually fair to both the UK and EU members; such an arrangement would require compromises from both. Ideally, the UK will remain in the single market but it must not be at such a high price. Similarly, although unrestricted immigration into the UK is untenable; the UK’s current immigration policies are equally untenable to the EU. There can be no freedom of movement, but there can be a better system to protect the rights of migrants to live and work in the UK, yet simultaneously protect the UK’s right to remove and bar entry as necessary to control population numbers.
Of more interest to the EU is the financial ‘settling of accounts’. Any thought of free access to the single market without any further contributions to the EU budget must be disbanded as ludicrous. As of yet, the EU have not stated a figure; but are willing to discuss a methodology for calculating what the UK’s financial commitments to the EU budget are. This will be a key part of the agreement that both the UK and EU have to be willing to work together on, because striking a fair deal will be the only way that the UK and EU can forge an enduring, good relationship.
* John Hefford was the Liberal Democrat candidate for District Councillor in the Hitchin Priory by-election on 4th May.
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20 Comments
WTO Membership
We are full members of the WTO but currently allow the EU to negotiate on our behalf.
https://www.wto.org/english/thewto_e/countries_e/united_kingdom_e.htm
Very limited chance to avoid “most favoured nation” it’s probably misnamed…
https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm
It is not clear what is meant by a “bad deal”. If it would be bad, why would the government agree to it?
Unless, that is, it is better than no deal would be. In which case it would be bad but the best on offer.
So “no deal is better than a bad deal” is yet again just meaningless May rhetoric.
This has the makings of a very good deal. http://bruegel.org/2016/08/europe-after-brexit-a-proposal-for-a-continental-partnership/
Why aren’t we trying to shape the best deal?
This is almost an argument for hard Brexit. Perhaps a better question would be: How high an economic price are the Tories prepared to pay, in order to satisfy those worried by immigration, to keep some low wage, East European workers out?
“unrestricted immigration into the UK is untenable” & “necessary to control population numbers”
Some further points:
* The two above quotes are assertions, not facts.
*The immigration issue is an emotional issue and is linked to sense of identity and ability to manage change.
*About half of immigration the UK is non EU. The government has complete control of this figure.
*An ageing population combined with 4 decades of below replacement female fertility means immigration is neccesary or have declining standards of living and related political tensions. It also implies increased population numbers.
*As an aside, the immigration argument, in successful, industrialized countries on the continent is different: here they worry about where they will find enough skilled labour. Although the they-are-taking-our-jobs argument is sometimes heard. Some social nervousness.
*This is all before the trade and international political consequences of Brexit are taken into account.
The world is changing and there are some hard decisions to be made. Some honesty would help. I don’t expect it from the UK press.
I would recommend all read the link Bill Le Breton included. I believe it is a better basis for a solution than any I have yet read. The sticking point would be the amount of contribution and the ECJ if it is not limited to trade / compliance issues and expanded to take CP Justices…
Good stuff I woud love a UK party to be pushing such an idea…
A ‘bad deal’ for the UK is one where the UK remains within the single market but without compromise from the EU;
Disagree, that is only a bad deal for the hardline Brexiteers. For UK businesses who export to the single market this will be a good deal.
so that the freedom of movement of EU nationals remains unrestricted,
Err no, freedom of movement within the Single Market is of workers, freedom of movement within the EU is of people. But I suspect the distinction will be lost on some Brexiteer’s.
and the UK pays the 100 billion euros demanded by Juncker.
Juncker in this instance is the messenger and is not demanding anything, the figure will, like all other parts of Brexit, need to be examined and understood as to how it was arrived at. Given we already know that the majority is simply the remaining balance on the UK’s pre-existing commitments, the only real question is whether it is acceptable for the UK to pay, as currently, by instalments, or to make a single final payment.
The challenge is dressing up the final settlement in a way that is acceptable to the hardline Brexiteer’s who think we can pay nothing and still have “most favoured nation” trading status.
UK goods and services will still need to comply with regulations required by EU laws and directives, yet will have no influence over them.
Well that is why Margaret Thatcher took the UK into the EU, to ensure UK interests were represented and protected at the EU level…
Are cheaper imports from EU really worth the cost?
Wrong question. Right question: are cheaper exports to the EU worth the cost? Remember for Brexit to be a success the UK will need to substantially increase the value of its exports in relation to imports; with the costs of imports largely being in the hands of the UK.
Ideally, the UK will remain in the single market but it must not be at such a high price.
In the run up to the referendum this was covered, with the EEA/Single Market membership fee being estimated to be approximately 2/3 of our current EU membership fee, but without the benefits of having a seat in the EU. So “high price” has two components: firstly the visible membership premium and secondly the hidden costs that dropping out of the Single Market will place on individual businesses exporting to the EU.
@b-le-b/steveway-what a good paper by the bruegal think tank. It recognises the core euro zone countries require further political integration to make the single currency work.
Other countries that do not wish political integration can orbit around this central core enjoying the current advantages of EU membership without the free movement of labour as I understand it.
Another key aspect not considered either by Peter Lilley or the article’s author is the UK’s non-EU trade.
Firstly, there is the rather obvious consideration: if we leave the EU with no deal or a bad deal, it doesn’t look good for the outcome of any of those all important trade deal negotiations that will naturally follow Brexit as the UK scrambles to recreate the raft of deals it currently benefits from as an EU member…
Secondly, ALL the UK’s non-EU trade is effectively mediated through the EU’s trade deals. A fundamental assumption being made by Brexiteer’s is that post-Brexit the UK will be able to negotiate individual non-EU trade deals on terms at least as good as the current EU-Rest of the World trade deals and have them upheld/honoured to the same extent as the EU deals. Because post-Brexit the UK will need export markets that actually buy our goods and services, not simply have a large pile of signed trade deals that have resulted in no meaningful trade.
Even if our workers are well-trained, freedom of movement is needed as our population is aging, and it is clear that EU migrants are net contributors, unlike the non-EU group, which can be controlled by the HMG.
Roland – A trade deal with China is a death warrant for our steel industry and maybe many others. Libdem must support EU anti-dumping tariffs, we must make our policies as un-Tory as possible.
I hope after all this time that people are clear. Without freedom of movement of workers, there is no membership of the Single Market any more than there is membership of the Single Market without free movement of goods.
There is no discussion: one might as well try to negotiate for a derogation of the off-side rule in football or for a forward pass in rugby.
For a different agreement, especially one that does not use the ECJ, there would need to be years and years of negotiation.
Hats off to Roland, he gets it.
The expectation of a large, unused (or suppressed) export potential to the non-EU- and non EU-deal-worlds is the biggest leave-lie of them all. With respect to these markets, the UK has two groups of offers:
1. Things the ROW buys already as much of as they want: asset management, money laundering, tax avoidance, financing, securities trading, financial advice, prime real estate, London entertainment and nightlife, Rolls Royce, Bentley, Range Rover, Sunseeker, Adele, Harry Potter, salmon, lobster, weapons, whiskey, Airbus-wings, aero-engines, Tweed, insurance, jurisdiction, non-dom residency, premier-league football clubs, patented drugs, and a few others
2. Things they don’t want: steel, Ford, Vauxhall, Nissan, Honda, ale, agricultural products, haircuts, haddock, social services, public healthcare, deliveries, groceries, Next, Primark, Poundland, social housing, chemicals, coal, and many more
All manufacturing with single-market supplychain integration wil be lost, labour for basic local services will become scarce, and nothing will be gained from the rest of the globe. Liam Fox’ intellectual capabilities are perfectly matched by the prospects of his endeavours.
Conclusion: single-market membership at any price is better than no deal.
Does “no deal” mean keeping the open border for Ireland and Gibraltar?
Can someone please explain the legal argument for maintaining the status quo on this delicate situation?
No deal means total chaos at any border with respect to goods and people, unless the UK manages to devise and implement 3rd country customs and border procedures between the breakup of negotiations and March 19, 2019. It is estimated that just upholding physical flows (disregarding the duty-question) would require a 1000% increase of current capacities.
Keeping Northern Ireland and Gibraltar open would be an exception from the hard Brexit so much desired by the British government and its supporters. From the beginning of the referendum campaign until today, no thought was ever given to these issues by the leave-side. In the chaos-scenario, joint sovereignty over Gibraltar can be imposed by Spain, simply by cutting off people and supplies, e.g. electricity.
For Ireland, I have a simple solution: all construction firms refuse to participate in the border-construction tender, no Irishman works in wall- or fence-construction, the border force or customs, no work permits for English construction workers, no Irish port unloads British ships with construction materials.
I thought Mrs May had made it clear the UK will no longer be a member of the single market or the customs union. I thought her position was clear – we are leaving the EU, but would like to have a trade deal with them. It’s in both parties interest to have free trade, my guess is if the UK pays a “divorce settlement” – nowhere near £100 billion – we will get the deal.
No deal is indeed better than a bad deal… for the rest of the EU. The sort of arrangement our Brexiteers seem open to, in which Britain would trade much the same as now but be free to obstruct EU migration, would fatally unbalance the Common Market by giving the other member states a precedent for demanding their own bespoke concessions. Most people everywhere would like to have their cake and eat it, after all.
I think the best realistic outcome is a range of smaller deals on side issues, some of which like Euratom are very important in their own right, permanent residence for existing expats on both sides, a smaller but still quite large “divorce bill”, and an extension of the Article 50 notice period to let everyone adapt to separation. Hard to see a permanent deal covering any of the “four freedoms” winning support on both sides, at least until we find out the hard way what the alternative looks like.
We are indebted to Bill le Breton for giving us the link to the remarkable article which I see was published only 2 months after the brexit vote but has escaped me up to now. It is remarkable not only in its understanding of the British position but also its far-sightedness in seeking a way forward for Turkey and others. I am not competent to judge the practicality of its recommendations but they should certainly be taken into consideration in negotiations. While the authors are at pains to say they are writing as individuals it is worth noting that the first-named is none other than Jean Pisani-Ferry who is the chief economic adviser of President-elect Emmanuel Macron.
@Arnold Kiel
The Gibraltar border would need little change as it already outside of the customs union and the border is in place. As for Ireland the Tories wouldn’t want a wall so wouldn’t try to build one. It would be Ireland that would be obliged under EU rules to police the outer border of the EU. From the UK perspective the Common Travel Area pre-dates the EU and would remain in force.
The problem would be at both sides.
http://ec.europa.eu/immigration/what-should-i-avoid/how-to-enter-the-eu/crossing-the-eu-borders_en#EUbordercontrol
Simple question: if an allowance is made for one country (the UK in this case) for restricted freedom of movement for employment, why not a similar allowance for other countries to allow restrictions on the movement of goods or services?
I am sure a case can be made for many vulnerable sectors of manufacturing or agriculture. For example, I could easily see farmers of one region campaigning for restrictions on the import of milk.
@malc “I thought Mrs May had made it clear the UK will no longer be a member of the single market or the customs union. I thought her position was clear – we are leaving the EU, but would like to have a trade deal with them.”
The trouble is, given T.May’s track record of saying one thing then doing something else, I’m not so sure that what she and her colleagues really want is what she is currently saying… It does look like we will have to wait until we see the final deal before we know if we really are leaving or just saying that we’re leaving but the terms of the trade deal mean we are actually staying…