The case for no deal

January 16, 2019

Conventional opinion amongst Britain’s political elite has expeditiously dismissed the outcome of no deal with the EU as too catastrophic for contemplation. Terminological vacuities like “frictionless trade” or “access to single market” are cleverly deployed by Remainers to cultivate an impression of unchallengeable economic high-ground. In truth, withdrawing from the EU on a reversion to WTO rules would be both politically and economically sensible, leaving open the possibility of a future trade agreement with the EU but allowing the government to freely shape the kind of Brexit which the electorate voted for without predetermined external constraints.

 

No deal automatically satisfies major objectives of withdrawal. Britain would no longer be subject to the jurisdiction of the European Court of Justice and British law would once again be constitutionally supreme. Free movement would end, allowing us to properly control our borders and reduce the absurd and historically unprecedented inflows into the country. British industry would no longer be forced to comply with the regulatory beast of Brussels because where appropriate parliament would have the authority to re-legislate in accordance with our competitive interests. The state could, free from the single market’s competition provisions, utilise the necessary levers of action to promote the expansion of British manufacturing and thus combat the gaping balance of payments defecit. Trade policy would fall under the purview of British officials, setting our own tariffs and trade agreements. A straightforward repeal of the European Communities Act could accomplish all of the above without the hassle of negotiating with the EU to come to some impossible mutually acceptable understanding of Brexit for which it is not for the EU27 to define anyway, but the British people.

 

Critics exaggeratedly argue that this is unconscionably economically disruptive. If WTO rules were applied at current tariff rates, the additional cost to exporters would only range between £5-6bn, less than half of our net contribution to the EU budget. A no deal scenario could easily see the government using its Brexit fiscal dividend to compensate the cost of these tariffs, assuming that we did not selectively and unilaterally amend some of them anyway. The notion of impenetrable customs is another bloated inaccuracy. The EU’s two largest trading partners in goods are the United States and China, neither of which have any trade agreement with one another. Yet goods flow back and forth seamlessly thanks to sophisticated modern technology and systems which allow supply chains to declare their imports before they even arrive at port. To make it easy for business to transport goods through EU customs easily, it offers firms the opportunity to register in an Economic Operators Identification and Registration System or become Authorised Economic Operators and thus bypass several checks. The idea that EU customs could hold up British goods is faintly ridiculous as well as impractical. Many millions of shipments pass into the EU’s market annually, a negligible fraction will actually be physically searched. Britain and Ireland already have a soft border on currency, excise duties, VAT and cooperate to prevent illegal immigration. Through maximum facilitation border technology and intelligent exemptions for local businesses on the border there is no reason why the present harmony on the Irish Sea could not remain. If well-planned and executed timely, market jitters would fade out quickly.

 

In the meantime, the EU would have to approach any codified future relationship with the UK from an apolitical angle. Domestic disunion on Brexit would no longer be a point of exploitation for the EU27 and the two could work towards a bilateral free trade agreement. Britain would after all, become the eurozone’s second largest export market after the USA. Countries of lower geopolitical and economic significance to the EU than the UK have secured free trade agreements with it, if negotiations were to finally occur on rational mutual benefit rather than political grandstanding then it goes without saying that a deal could be reached.

 

After a year of concessionary retreat by the Prime Minister, it is clear that we are getting a bad deal. It would be wise for the Prime Minister to listen her earlier proclamations on what to do if this were the case.

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