As some of you know, I was scheduled to be on LBC radio this morning talking about this week’s developments in the Brexit saga. I was axed in short order, but not before I had had to work out what I would say. Here is a summary of my thoughts now regarding the most likely path of the exit negotiations.
In short: we will be a lot like Switzerland or Norway, by a different route.
The transitional implications of the EU’s draft negotiating position, and the implications of David Davis’ statements on European migration, add up to very substantial migration between the EU and UK for the foreseeable future. This will not legally be “free movement” or part of the single market, but it will be substantial movement rights. For individual migrants this is not all that reassuring, since their rights to housing, healthcare, schooling et cetera may change, but the big picture is that very liberal migration will continue, including for low skilled industries.
We can also expect continued budget contributions way beyond 2020. These will not be as high as the budget contributions we pay now as a full member, but they will be in the billions.
I’m very happy that there’s been such goodwill on both sides over the question of the Irish border. The determination with which the Theresa May government says the common travel area will continue implies that there are no plans to impose a hard border in the island of Ireland. What this means is, probably, Northern Ireland will have a very strict regime for checking work eligibility, and landlords will be required to check people’s nationality, forcing the state and private individuals to act as a border force. This is an inelegant solution, but much preferable to putting guard posts, soldiers and sniffer dogs on the historically sensitive border.
The EU’s positions on a trade deal with Britain heavily suggest we will not be free to use state aid to support ailing industries that are uncompetitive, nor will we be able to jettison environmental standards, social standards or progressive taxation measures. There are also hints that consumer and safety standards will need to be upheld for us to have a free trade agreement with the EU. This is what many of us predicted: if we want a comprehensive free trade agreement with our closest trading partner, they will not allow us to undercut their high standards.
I am not sure yet what happens to fisheries, agriculture, banking. The last of these is probably a big question but I would be wary of too much doom mongering: recent news reports that banks and insurance brokers and moving their operations out of London are quite exaggerated.
To moderate Remainers and to mainstream levers, this should be very good news. It means the government will have to do keep a lot of the stuff about the EU that we liked, and will find hard to do anything too radical or right-wing if it doesn’t want to be seen to tank the economy. The position set out by Donald Tusk effectively takes the “WTO cliff” of the table. We can continue to be within the single market for an indefinite negotiating period, so long as we keep paying budget contributions and keep abiding by the four freedoms. The only way we would get the full horror of tariffs and customs breakdown, the WTO option, as if our government very deliberately walks away from the negotiating table. This is not impossible but I think it is no longer likely.
There is now debate over whether Britain can negotiate free trade agreements with other countries before the exit deal is agreed. This is a big red herring. Free trade agreements with countries that are far away, that do not have particularly large economies, or that already trade fairly freely with us on the EU’s terms, will not deliver great boosts in exports, imports, or favourable pricing. Not only do trade agreements take many years to negotiate, but once signed, are phased in very gradually which means that their impact on industries is usually minimal and difficult to detect. It would be nice to have comprehensive trade deals with other countries, but these should not be the focus of any discussions in the next few months.