We must not approach the EU as a supplicant which would allow them to fob us off. We should rather state how we wish to proceed and see what the reaction is. We should divide the issues into three categories : those under our own control ; those they control ; and those which we wish to discuss.
In the first category we will tell them that, for example : we will control our own borders; we will take on responsibility for our farmers on our own terms; we will reclaim our fishing grounds out to the median line or 200 miles under international law; we will withdraw from the jurisdiction of the European Court (except for matters we may agree in the third category, below); we will reclaim our seat at the WTO and negotiate our own third party trade agreements; we will cancel our ‘block grant’ but will discuss, in category three, some ongoing payments for specific items and projects ; etc.
Secondly, we will not intervene in their affairs with respect to the Euro, the European Central Bank, the Schengen agreements, EU membership, their negotiations with third parties in respect of trade or anything else.
Brexit does not mean no more joint projects
Then we would like to talk to them about a number of shared interests and concerns. For example, we would like to continue with the exchange of students under the Erasmus Programme et alia, but need to re-negotiate the financial arrangements; we would like to discuss arrangements for shared research, much as currently exists; we will continue to contribute to a number of joint and shared programmes, eg Gallileo, CERN, JET, Airbus (many of which are European rather than EU projects anyway) and some development projects in the poorer member states (but will not continue to subsidise companies switching factories and offices from UK to other countries) ; we will continue to co-operate on security matters including sharing intelligence and a modified EAW (but we will not continue with European Investigation Orders). Most of this could be agreed in principle in a month with discussions on the details of specific concrete issues and programmes to continue within ‘framework agreements’.
Then there is the one remaining issue, the question of trade ! ! ! We will state that we wish to trade freely with them (an offer they cannot accept since it violates their Customs Union) and we will await their response. There are three subsidiary parts to this : tariffs ; non-tariff barriers ; and ‘passporting rights’.
The average tariff at the Customs Union border is 5.3% which is not significant (being largely compensated by a 6% devaluation) and the upside is that we can remove the tariff we currently have to charge other countries. There are two main exceptions : motor cars and components which is 9.8% ; and agricultural products (without these two the average tariff is 1.6%). On motor cars we will say that we will agree whatever they want, but it will be reciprocal, and leave the Germans to argue our case for us. On agriculture we will exit the customs union and buy our sugar, butter, wine etc cheaper elsewhere.
Apart from our general (and unacceptable) request for free trade, we will ask specifically for a free market in vegetables (for example a large proportion of European peppers are grown around Chichester whereas we import others from specialist suppliers in, particularly, Holland). Phase 2 of the negotiations will be that if they impose tariffs on cars, we will impose tariffs on wine and cheese, or something along those lines.
Non-tariff barriers will be a problem, but it largely exists already. There is the increased bureaucracy and paperwork involved in selling across borders, which is inevitable, but in part it already exists. VAT used to be a pan EU tax but now (since 2014 I think) every exporter must register separately in each country to which they export so that the VAT claimed back in one country can be charged in the other, so much of the old bureaucracy is re-instated. Also, my Best Man was (and is) in the wine trade and was delighted when we joined the Common Market but a few years later was complaining that the bureaucracy had actually increased. In theory there is a single market in services, eg insurance, but in practice this is not so and any UK company selling insurance into the EU will find it must register a separate subsidiary in each country (I think Ireland may be an exception).
Finally, there is ‘passporting rights’. This is complex and I don’t really know enough about the detail, but I think it is less of a threat than The City, and the EU, make out. The City’s long term future depends, among other things, on being free and flexible enough to compete in world markets and must not allow itself to be tied up in EU red-tape for all its business in order to protect the 20% of its business which comes from the EU. The EU may well refuse passporting rights to ‘The City’, partly out of spite and partly in the hopes of developing Paris or Frankfurt as financial centres.
However, there are approx 5,000 entities in London requiring passporting rights to the EU but about 8,000 EU entities needing passporting rights to trade in London and anyway, any business lost to London will not go to EU centres but to New York or to the Far East. Finally, London has many interlocking advantages : the use of English (which is the world’s ‘lingua franca’); the legal system (the Anglo-Saxon system is incompatible with the ‘Napoleonic Code’ EU systems); the proximity of the currency and commodity exchanges, the derivatives markets, the insurance markets, the ship-broking and freight markets, etc. Most large international contracts between any two random countries will be written in English, adjudicated under English Law, settled in Dollars and hedged in London or New York. If the EU wish to alienate themselves from that system, they will be the losers.
Finally, when we joined the Common market (9 countries, I think), it constituted 36% of the world’s economy, and tariffs of 100% were not uncommon, but the much expanded EU is now 16%, and that percentage continues to fall and high tariff barriers are, generally, thanks to the WTO, no longer a problem so belonging to a trading bloc is no longer important.
Scotland & Northern Ireland
There are of course two other issues, which started this discussion : Scotland and Northern Ireland. My attitude to Scotland is simply to suggest they make their own decision. I am a committed Unionist but I think the best way to keep the Scots inside is to call their bluff. The Scottish witch thinks she can continue to blackmail us indefinitely with threats of independence. One should never pay blackmailers. If we told her that we hoped they would stay but she could take Scotland out if she had a mandate to, then the issue would become less important – there is nothing like facing the consequences of one’s actions to concentrate the mind.
On Northern Ireland, I have, as I said, no solution. If we wish to control our borders and the tax systems are different, then a ‘soft’ border is untenable. If we try to re-create a ‘hard’ border, we know it cannot be policed. It is too long, too ill-defined, too obsolete – and anyway the IRA and other assorted smugglers, gangsters and protection racketeers would have a ‘field day’. The only possible solution would be that the Eurozone, and then the EU, continue to disintegrate (likely ?) and Ireland can be re-united (very unlikely?). I can’t see Ulster agreeing to leave the UK, and I can’t see Eire joining it. When the re-unification of Ireland is one’s best hope, one really is clutching at straws (although eventually, a Catholic majority in Ulster might choose to leave the UK and join Eire, but I assume that is a good few years away).
Andrew Moncreiff – June 2017 (originally written in August 2016)