2020 IN REVIEW

Brexit: the year-end review

British and EU flags flying
Dave Kellam / CC BY-SA

Well, they certainly cut it fine but we got there in the end. A deal was finally agreed against the odds mid-afternoon on Christmas Eve after nine months of often tense, high-stakes negotiations and seven days before the ultimate deadline.

Unfortunately, the new EU-UK trade and cooperation agreement looks like exchanging what Brexiters think of as the prison of the EU, for early release on license while tagged, wearing leg irons and a strait jacket. Questions are already being raised about what it means in practice.

If a similar agreement had been reached with another third country it would be seen as a prelude to becoming a full member of the EU – and in truth this is perhaps what it is.

2020 began with the expectation that the trade negotiations would dominate the news. Boris ‘Brexit’ Johnson kicked things off with his Greenwich speech on 3 February from the old naval college, calling for the nation to join him by “embarking on this great voyage”.

He talked of Britain as the “supercharged champion of the right of the populations of the earth to buy and sell freely among each other” but omitted to mention that didn’t include our neighbours across the Channel, with whom he has now erected multiple trade barriers.

But even as he played down the pandemic, coronavirus was creeping into every corner of British life. By the end of March, we were locked down and Brexit was fading into the background. The great charlatan mishandled the pandemic, stumbling from one bad decision to another, in a textbook demonstration of how not to manage a crisis.

Meanwhile Brexit rumbled quietly on, with both chief negotiators suffering from Covid-19 at one time or another. Deadlines came and went with tiresome regularity and with Johnson constantly threatening to walk away, a strategy that made him look weaker every time he didn’t carry it out.

But eventually a deal has finally been reached, with the UK said to have made a lot of concessions in the final few hours – as was always going to happen.

I suspect it was all long planned. Johnson learned from Theresa May’s mistake of giving MPs plenty of time to examine a deal and decide they didn’t like it. He never intended either to give them that chance, or to leave without a deal. Pretending to stand up for British interests while running down the clock was a good political strategy, but the next few days will show how successful it has been.

The strategy itself reveals a certain nervousness in government circles about what the deal actually contains. If it’s so good, why not allow MPs plenty of time to debate it?

Clearly, by any standard it will be worse that what we have now. This is a fact. Sovereignty costs, and the bill will begin to be reckoned from next year.  It will be substantial, probably close to a £1tn by 2030.

Time will tell if the people think the price in lost competitiveness, higher prices and fewer jobs is too much to pay for nothing, since sovereignty is a chimera – an unachievable illusion – as I wrote in early December. I note it’s a view taken up by Phillip Stephens at the Financial Times, where he talks of Johnson’s government “about to exchange real power for a chimera” . Martin Wolf similarly argues, that sovereignty is not the same as power. In fact, we are giving away real power for nothing and paying a king’s ransom for a chimera.

Neither is sovereignty the same as national interest, regardless of how much Brexiters think it is.

Having had a hand on the tiller for 45 years, we will now relinquish all that, as the EU determines the future course of the continent to which, the prime minister has said, “this country will remain culturally, emotionally, historically, strategically, geologically attached”. We are to be towed behind in the wake of a regulatory superpower.

A measure of how bad the deal is can be seen in the furious spin operation launched on Thursday morning to persuade the nation that erecting trade barriers with your largest partner is a ‘good’ outcome. This government pdf is an indication of just how much effort has gone into trying to show how Lord Frost has “won” 2.5 times “more victories than the EU”.

This somewhat misses the point of trade deal negotiations, which aren’t supposed to be about winning and losing. Still, expect much more of this over the coming days.  

David Henig, UK director of the European Centre for International Political Economy, gave his first reaction to the deal, including this:

“Ultimately the EU achieved their main goals from Brexit, and the UK arguably did not. The EU successfully avoided a border on the island of Ireland and protected the single market from significant cherry picking. The UK succeeded in the headline goal of leaving the EU, but failed as proponents had expected to retain the benefits of membership without incurring the costs, and more recently in overturning any of the Withdrawal Agreement as the staunch Brexiteers had hoped”.

Henig says the UK’s ability to escape ‘the Brussels effect’ of following EU regulations is going to be tested in the future, with many businesses already wanting to re-join some European regulatory agencies.

Faisal Islam, the BBC’s economics editor, has drawn attention to the tough dispute resolution mechanism if one side tries to gain an advantage over the other. Coupled with provisions for cross retaliation (tariffs or quotas being applied in areas separate to the one where the transgression occurred), this creates a permanent instability in UK-EU trade for potential foreign investors in Britain.

Jill Rutter, from the Institute for Government, tweeted:

A non-regression clause prevents us cutting standards in labour, social protection and environmental rules and the “rebalancing mechanism” means potential sanctions in our largest export market if we think about diverging too much in the future.

David Blake, an avid Brexiter and a member of Economists for Brexit along with Patrick Minford, seems to agree with Henig that the EU has had the better of it. He wrote an article in The Telegraph last week with the headline, ‘The EU has outsmarted the UK at every turn – We are in danger of getting virtually nothing, while the EU walks away with everything it asked for’.

It is not surprising we have been outsmarted. In his press conference on Thursday, Johnson said the deal would mean there would be “no non-tariff barriers” (NTBs). Faisal Islam said one business chief almost fell off his chair in surprise.

Islam points out that NTBs (such as customs declarations and SPS checks) will be introduced overnight and even internally inside the UK market on 1 January.

What Islam didn’t add is that it is precisely these NTBs which will cripple British industry with cumbersome paperwork and compliance costs, all of which seemed beyond Johnson’s understanding.

Commission president Ursula von der Leyen’s statement was interesting for some phrases she used:

“Competition in our Single Market will be fair and remain so. The EU’s rules and standards will be respected. We have effective tools to react if fair competition is distorted and impacts our trade”.

We have secured five and a half years of full predictability for our fishing communities and strong tools to incentivise it to remain so”.

The accompanying press release said that under the agreement, both parties can engage in cross-sector retaliation in case of violations of the agreement. This cross-sector retaliation applies to all areas of the economic partnership. It will in practice prevent the UK charting a course that is very different to the one taken by Brussels.

Eurosceptics are nowadays even more sceptical of the prime minister and are queuing up to obtain the detailed text of the treaty to check for themselves there has been no revisionism to contaminate the pure Brexit orthodoxy. They are likely to find a lot to dislike.

Johnson’s immediate problem is getting the necessary legislation through parliament. MPs are being recalled for Wednesday next week to debate and scrutinise the near 1,300-page agreement. With Labour planning to whip their MPs to support it, the PM’s difficulty may be in keeping the Tory party together and himself as leader.

Mark Francois, MP for Rayleigh and Wickford and shop steward for the ERG, has already said Johnson would regret trying to “bounce parliament into a deal” so his reaction to having just one day to go through the dense legal text, and not even the final version, will be fascinating.

Barrie Deas, head of the National Federation of Fishermen’s Organisations, greeted the news with something short of enthusiasm:

“I think what I would say is that there’s a gap between the rhetoric and the delivery … I think the industry will be bitterly disappointed. I think there will be fury about the failure to secure an exclusive 12-mile zone”.

The prime minister’s next problem will come in the New Year, as the new rules begin to apply.

UK to EU exports had already started to collapse, as this recent article from the FT shows. In November, far more UK exporters were reporting deteriorating competitive positions in both the EU and markets outside the bloc, compared to other EU economies. Germany’s position actually improved.

Whatever happens, Brexit will apply a tourniquet to Britain’s vital artery and the complex web of supply chains that keep industry supplied with intermediate goods and UK supermarket shelves well stocked

Exports are likely to fall further in 2021, as British industry struggles to come to terms with a massive increase in customs declarations and all the extra burden of paperwork. Some EU customers will prefer to source inside the friction-free single market, making a bad situation even worse. The slow migration of jobs to the EU that started in 2016, will continue and even accelerate next year.

EU hauliers’ reluctance to deliver to the UK because of potential disruption can only have been reinforced by the chaotic scenes in Kent and around Dover, when France closed the border for 48 hours at the beginning of last week. This will almost certainly result in shortages and/or rising prices in the first quarter of 2021.

Government borrowing since April is already at a record £240bn and set to hit about £400bn over the full financial year. Debt is touching £2.1tn – about 100 percent of GDP. These are absolutely astronomical numbers. If you had a choice of the best time to disrupt half your external trade, now would not be it.

Johnson’s oft-repeated assertion that Britain would “prosper mightily” without a deal will come back to haunt him. Leave voters might be baffled when we fail to prosper WITH a deal and wonder why he ever agreed to it. Many Eurosceptics will be quick to remind him, and claim Britain would have been better off with a clean break.

To the many well-intentioned leave voters, the coming years may be either an eye-opener or infuriating. They will discover, as Switzerland has, that living next to a regulatory superpower and the world’s largest single market means you enter the Hotel California of negotiations, from which you can never check out.

Next May, the Scottish parliament elections will be held. Nicola Sturgeon’s SNP are all but certain to campaign on holding #indyref2 and are likely to sweep the board. It’s hard to see how Johnson can resist another referendum. He is despised north of the border and is the last man to persuade them not to back independence.

The United Kingdom will then be on the path to breaking up. It will pay the ultimate price for sovereignty, by ceasing to exist as a nation.

As a backdrop to Johnson’s triumphalism by the way, polling shows a continuing fall in support for Brexit. A significant majority believe the vote to leave was a mistake – and have done for the last two years. 2021 is likely to prove them right.

The policy being pursued by the Conservative Party will destroy jobs, make us poorer, weaker, less influential and less secure, and remove many rights that have a real benefit to British citizens – and a majority think it’s a mistake.

How long can Brexit survive? We may begin to learn the answer next year.

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