The October draft Withdrawal Agreement (WA) will pass parliament and the UK will leave the EU on the 31 January 2020 if the Conservatives do win a working majority on the 12 December.
How hard – and thus economically damaging – his bad-Brexit turns out will then depend upon whether Boris Johnson, despite his campaign rhetoric to the contrary, extends the transition period beyond December of next year. Under the WA, he would need to make such an application next summer.
That crucial decision will overhang the UK’s entire political, economic, and social future.
Jeremy Corbyn was right therefore to tackle Brexit head-on as he did on Guy Fawkes Day at Harlow – the bellwether ‘Blue-collar Essex’ seat.
Much better to secure the best possible and least economically damaging deal with Brussels and offer that with Remain as a choice to the electorate with minimum fuss, than for the population to be stuck with a bad Johnson hard-Brexit that will sunder the UK, undermine peace in Northern Ireland (NI), and generate unnecessary economic costs, acting as a deadweight drag or worse on growth across the UK.
UK exit from the European Union (EU) Custom Union (CU) and the Single Market (SM) in economic and social consequence will bear disproportionately on the communities that voted to Leave, such as Harlow. Less well-connected places outside the South-east are likely to suffer the most: Sunderland and Dudley, to take two.
Labour must hammer home in an engaging way to the voters of those areas, often Labour marginal seat, the technical economic realities below.
The rules of origin requirements imposed as a result of the UK exiting the CU will progressively chip away the time and cost benefits of existing frictionless trade arrangements between the UK and the EU.
British exporters of goods to the EU post-transition will have to certify that a minimum proportion – varies with sector, but generally is around 50-55% – of value is attributable to domestic production.
This will prove a problem for industries now dependent on pan-EU integrated supply chains, namely motor vehicle, and some machine tools, food processing, and chemical sectors. The domestic -produced value of cars is less than 40%. A Johnson bad-Brexit will leave UK manufacturing to wither on the vine.
For the purposes of meeting rules of origin requirements included in pan-EU trade treaties with third countries, such as Korea and Japan, British manufacturing value-added no longer will contribute to the EU total they define, providing a disincentive for foreign direct investment in UK plant by companies wishing to benefit from tariff-free trade under such treaties.
Such countries are unlikely to prioritise FTA’s with the UK or Great Britain at the expense of their existing or future EU trading arrangements and a far larger potential market.
Crucially, the benefits of such FTA’s, even if realized, in any case, will prove puny, compared to the cumulative loss of GDP attributable to the loss of frictionless trade with our closest European neighbours.
In sum, export and export formalities, including customs and security declarations, risk-based inspections, tariffs (when goods are not covered by the FTA) and other taxes payable upon import such as VAT and excise duty, as well on physical border checks on products of animal origin: meat, fish and dairy products, will all impose additional cost and time barriers to trade in goods. Exiting the SM likewise will do to trade across services.
Johnson’s European Research Group (ERG) outriders bark back that is a price worth paying for taking back control of our borders (which ones?), money, trade policy, and laws.
But any future free trade agreement (FTA) with the US will inevitably involve loss of national sovereignty in practice to a government led by a president who avowedly ‘puts America first’.
Continuing EU membership will help the UK to stand up to Donald Trump, and, much more importantly, in the longer term, to address fundamental issues, such as climate change, the activities of increasingly monopolistic multi-nationals, tax evasion and money laundering, organized crime and terrorism, that transcend the UK border: the modern world, in short.
Besides it is doubtful that a wide-ranging trade deal with the US can ever be reached, given that freer access to American food imports will imperil the sustainability of British agriculture, a source of bedrock Tory support, while allowing access to American health corporations to the NHS and liberalising drug pricing controls is likely to prove too unpalatable on the wider domestic political front.
Trump is wedded not only to a neo-liberal and crassly unequal economic and social system, but to an odious and destructive political methodology driven by fake news, straightforward lies, media manipulation, and appeals to prejudice, seemingly copied and adopted by Johnson, at the behest of his main adviser, simply to secure power.
Something demonstrated in spades during this campaign. A case in point was Johnson’s statement on Twitter that a future Tory government would not extend the post-Brexit transition period and would pursue a “a super Canada-plus arrangement” with the EU not “based on any kind of political alignment.” subsequently reaffirmed, all in short order. That is simply hogwash, or in his own-speak ‘inverted piffle’.
The more comprehensive a FTA with the EU, the more time – years not months – that it will take to negotiate; and the greater the continuing alignment to EU rules, including labour, environmental and state aid rules entailed.
Such delay and alignment risks the ire of any enlarged hard-Brexiteer contingent within the new parliament and would provide oxygen to the Brexit party outside it; on the other hand, not extending the transition beyond December 2020 would simply create a new cliff-edge, and almost certainly induce recession.
A Johnson bad-Brexit may be done, but its consequences lurk in wait around the corner to bite, not least prolonged uncertaintylasting years, not six months or so, as with Labour.
Taken in the round, Corbyn on the Brexit front has played a difficult hand relatively well, with a sense of feeling for both sides, not always displayed when he pontificates on international issues, such as the Palestinian question.
His position, in many ways, makes more sense than the premature commitment to campaign for Remain displayed by prominent shadow cabinet colleagues. This puts the cart before the horse, insofar that Labour is committing to negotiating a soft Brexit with Brussels as an alternative to Remain in a second referendum.
Of course, the softer the Brexit, the stronger the relative case for Remain becomes: if continuing alignment with EU rules is accepted as economically necessary, why not then just stay and keep a say in their development?
Labour’s position is essentially thus a route to Remain while providing some semblance of respect for the result of the June 2016 referendum and ensuring whatever the result of any second referendum that economic damage is mitigated as far as possible: pretty sensible, really, in the circumstances, even if politically pragmatic more than strictly logical.
That will not be enough.
Labour’s Brexit and domestic policies have not been connected nor linked to an overarching vision and narrative.
The cumulative damage to growth of a hard Brexit will act as a deadweight not only on the personal incomes of ordinary working people, but on the public finances.
The increased investment in health, housing, education, social care, police, and other public services the country needs, the Brexit-leaning communities most of all, will become increasingly unaffordable.
Labour must make that inter-linkage in the minds of undecided and wavering voters.
A following post will focus on that shortly as Labour necessarily reframes its electoral strategy to at least prevent a Johnson working majority.