Past performance is not a guide to the future. A caveat plastered all over investment products which might usefully be remembered by those anxiously scanning polls or those politicians explaining why the PM’s success in getting a revised Withdrawal Agreement means that he can reach an FTA with the EU before the transition period ends in 385 days time.
The steps needed to reach an FTA have not featured much in the election campaign, despite this being meant (once again!) to be the Brexit election. Politicians – whether through calculation, weariness or a desire to talk about subjects they are actually interested in – persist in the fiction that getting the WA through Parliament means Getting Brexit Done. Even Leave Actually cleverly confuses (in the 1st 4 cards Boris pleadingly shows a voter) the WA with the transition end date. Only Jo Swinson has accurately categorised it as “episode 1 of a 10 season box set“; little good has this done her.
The reality is a simple one but bears repeating.
- The WA only governs the terms of Britain’s departure from the EU not the future relationship with it.
- The Political Declaration outlines a general set of principles for the negotiation of this relationship. It is not, however, a legal agreement let alone an FTA.
- The transition period ends on 31 December 2020.
- If by then, no FTA has been agreed with the EU, then Britain reverts to being a third country, trading with the EU and 168 other countries it had trade deals with via the EU, on WTO terms. A No Deal Brexit, in other words.
- If the transition period is to be extended, a decision needs to be made by July 2020, 6 months after Britain formally leaves on 31 January 2020 (assuming the Tories win with a majority large enough to get the WA approved by Parliament).
- That is a challengingly short timetable in which to agree an FTA or be confident that one can be agreed and approved by all those needing to give their approval by December 2020.
It is true that the PM did manage to agree a revised WA, something many of his critics thought impossible or unlikely. But even giving him credit for that (ignoring the fact that his renegotiation largely – though not entirely – involved a rehash of a previous version) the matters covered by the WA are very different and far fewer in number than those normally covered by an FTA. A look at the topics listed in the Political Declaration gives an indication of the very many areas which an FTA normally covers – and usually in quite mind-numbing detail. FTAs are the work of years not months.
Ah – but there is perfect regulatory alignment now so this will make it easier and quicker say the Brexiteers. Er, yes: this is the starting point. But it is the destination which matters. The EU will not agree an FTA identical to EU membership and, anyway, the point of Brexit is for Britain to do things differently (Taking Back Control, as it is usually described). This has been confirmed by no less a figure than the PM himself. How different, in what areas, at what cost and to whom is still a bit of a mystery though.
Even if an agreement is not reached in time, WTO terms are nothing to be scared of is another argument heard when concerns are raised about a 2020 No Deal exit. Those saying this imply that WTO terms are a sort of the shelf basic FTA, a bit like those DIY will packs available in newsagents for those too mean or too poor to afford lawyers. It is a bit more complicated than that (and, yes, that applies to wills too!) Mrs May’s government did indeed publish a temporary tariff regime on 13 March 2019. Will this apply in December 2020 if no FTA is agreed? Again, who knows.
So let’s assume there will be negotiations once Britain is out. What’s needed? Let’s see:-
- A negotiating mandate for the British government, requiring input from all the relevant Ministries involved and the Scottish, Welsh and Northern Irish administrations. Boris – if it is he – will need all his cat herding skills and more.
- Some sort of consultation mechanism – with experts, NGO’s, unions, all the very many parties affected, even Parliament, for surely, post-election it will represent the Will of the People, no?
- An understanding of the process on the EU side, what they and the national governments will be looking for and how they will approach it. A guide to this can be found here. A summary: it’s a little more complicated than a walk in a garden and a friendly chat with Mr Barnier.
And that’s before you get onto the actual negotiations themselves and the astonishing level of detail they go into. The EU-Canada FTA, for instance, is 1,589 pages long. (Something to read in the longueurs waiting for the election results perhaps.) Of course, it is possible to go for the bare minimum that can be done in the time available. But that only results in combining the disadvantages of WTO tariffs in some areas, prolonged uncertainty in others and negotiations continuing in yet more areas. What was that again about avoiding dither and delay?
All these concerns – and there are plenty more not touched on (including the lack of preparedness and experience Britain has in trade negotiations against an entity with decades of both) can – and no doubt will – be hand waved away by those who deplore such an Eeyore-ish approach to Brexit’s opportunities.
So let’s look at a very recent example of a trade deal concluded by Britain to see what light it might shed. Earlier this year, International Trade Secretary, Liz Truss, trumpeted an FTA with Korea as the “new gold standard of trade deals with our existing allies and like-minded countries”. This deal was reviewed by a specialist House of Lords Committee which was distinctly unimpressed with the claims made.
The critical point is that, if the terms of the Korea deal are indeed the template for future trade deals, they show that the UK, being a much smaller market, will be unlikely to get better deals on its own than it did through the EU. Bizarrely, despite feeling strongly about cheese, Ms Truss agreed 27% tariffs for Cheddar exporters to Korea rather than the zero tariffs currently enjoyed via the EU and by Britain’s competitors. What a disgrace! Of such details are FTAs made. Exporters’ hopes may be in the hands of a Minister who shows every sign of being the new Chris Grayling.
Whoever wins the election, Brexit will not go away for a long time. If Corbyn becomes PM we will, if Corbyn’s promises to renegotiate the WA and have another referendum are to be believed, be reliving the past 3½ years but crammed into 6 months. Believe that and you’ll believe anything. If Leave wins again, all the same issues arise. If Remain wins – but with fewer votes than Leave in 2016 – imagine what arguments about legitimacy and democracy there will be then. And if the Tories win, years of negotiations and/or a no Deal departure and/or the dramas of “will he/won’t he” extend the transition period await.
Get Brexit Done? If only.