Change the Order of the Day
The reporting of British Politics for journalists has rarely been so onerous; dramatic landscape shifts in the form of U-turns, resignations, and unexpected elections, are so frequent that the life span of articles, previously measured in days, are now more accurately predicted in hours. Last week’s rapid-fire resignations of Brexit Secretary, David Davis, and Foreign Secretary, Boris Johnson, over their intransigence regarding Britain’s Brexit strategy, epitomised this difficulty. Following the double salvo, it looked, albeit briefly, as though anything was possible: a vote of no confidence; a leadership election; maybe even a general election. All bets seemed off. Then, just days later, when the dust had settled and the topography of the new cabinet revealed, it was suddenly the reverse that looked most likely - perhaps coherency in governmental policy was to be the result of the most recent tumult? Certainly, with Davis and Johnson gone, two prominent and highly-influential proponents of ‘hard-brexit’, a path had emerged - by no means free of obstacles, but visible nonetheless - for the hobbling government to stagger down in the direction of a ‘softer’, and judging by the polls, more popularly endorsed, brand of withdrawal.
These particular developments, triggered by the so-called ‘Chequers Agreement’, were fleetingly believed a breakthrough - finally, after two years the Prime Minister had formalised some kind of brexit strategy. Even though there was no guarantee how those on the continent would respond - commentators were quick to point out that much of the proposal stood at odds with key tenets of EU legislation - the agreement, nonetheless, represented a softening in position, a willingness for concession, and a concern for the mounting evidence suggesting disaster if negotiations were botched.
No Deal in Sight
Alas, rather predictably, the position held for little over a week before the government caved to the demands of the increasingly influential right-wing European Research Group. Most significantly, the compromise included an amendment to the ‘customs bill’, a part of the Chequers Agreement it was thought would lead to too close a relationship between Britain and the EU27, post-Brexit. Perceived a capitulation by many, these concessions have since been rounded on by all sides of the chamber. Peter Dowd, the shadow chief secretary to the Treasury, disdainfully summarised the collective mood to the Guardian: “It took two years for the prime minister to reach her Chequers deal, but only two days for it to fall apart”. With every passing day, as factions further divide and consolidate, it is becoming harder to see any Brexit plan carrying a parliamentary majority, whether it be the Norway model, Canada, Canada ++, or any of the other incarnations mooted.
WTO rules on the horizon?
For business, this uncertainty is worrisome, to say the least. With no coherent strategy in place, departing without a deal and trade reverting to World Trade Organisation (WTO) rules is now a real possibility. As reported by Reuters, in Germany business groups are already urging their members to prepare for the outcome, such is their fear of its potential disruption. WTO regulation, long an article of faith for hard brexiteers, is seen by many on the right as harmless, benevolent, and even, in some cases, an opportunity. The question often posed: given that it is the means by which the rest of the world trades with the EU, how bad could it really be?
Rhetorically, to an ill-informed ear, this may sound almost convincing. However, under scrutiny, it is exposed for what it really is. The first thing to point out is that Britain’s relationship with the EU is hugely different to other countries trading bilaterally with the bloc. Having been a member state for so long, Britain has naturally developed a far more intimate and complex relationship with the EU. As The Economist explains: ‘the EU accounts for 43% of Britain’s goods exports and half its imports’, and when also taking financial services into consideration - the sector making up 80% of the British economy - the reliance is shown to be even greater. With this in mind, it should be remembered that a Canada-model deal, mooted some months ago, was rejected on the premise that it imposed too great a restriction on mutual market access, thus making it economically dangerous. Shifting to WTO regulation, the Economist forecasts, would encourage similar hazards, only worse. And it is still celebrated?
To return to the resource, ‘well if everybody else is doing it, why can't we?’; well, on literal inspection this too quickly looks a duplicitous supposition. Most developed countries actually have trade agreements in place with the EU, encompassing customs co-operation and standards of goods, and are not on WTO regulation alone. Whilst looking into this, researcher James Hardy found that only handful of countries traded on solely a WTO footing, and they almost unifromly developing countries. Not only is this a relatively clear indication that many find its terms of trade unsatisfactory, it also undermines influential pro-Brexit group leave.EU which has been repeating, as almost their flagship mantra, that 'WTO rules are what most great countries trade under. If it’s good enough for Australia, America and Canada, it’s good enough for the UK”. As it turns out, this is at best misleading, and at worst downright untrue.
Closer to home, the Governor of the Bank of England, Mark Carney, joined the chorus of concern, warning of the ‘big economic consequences’ of a no deal and adoption of WTO regulation, confessing it would have to be considered a ‘material event’ when deliberating future interest rates. His cautionary remarks coincided with a fall in wage growth in Britain, increase slipping to 2.5% on Tuesday.
If Carney’s intervention felt ominous, big business has been even more explicit in its condemnation. Bosses of both Airbus and BMW could not even guarantee the retention of production on British soil if Britain were to leave the negotiation table empty handed. Airbus, who employs 14,000 people at 25 sites in the UK, declared only last week that just departing the Single Market could prompt it to up sticks.
Evidently, with jobs and livelihoods at stake it is imperative the no deal outcome is discussed, seriously and honestly. It is one of a number of Brexit scenarios whose comprehension is essential if Brits are to make the most informed decision as to their country's future. Much could still change, and at this point, Britain's future is anyone's guess.
We'll be covering more topics related to Brexit soon, so check back to INOMICS.com soon for more.
For lots more information for economics students and others, see these articles: