Brexit: Fishing for Reality

By Richard Carden

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Boris has done Brexit. We are out of the EU.

It is long past the time for discussing whether we would be better to Remain or Leave. We are at the start of a new chapter of British history, we are all in this together, and we have to see what we can make of it.

We are where we are. We need to be realistic. But seeing the reality of where we are is made quite difficult by the stream of exaggerated claims made by Boris Johnson and some of his ministers and supporters. This note is one person’s attempt to get us to firm ground.

Economics

The last phase of negotiations between the EU27 and the UK was about trade. Boris Johnson is making bombastic claims as to the value of the deal he secured. So there is some sense in starting this appraisal with trade.

To trade experts the Christmas Eve deal is a Free Trade Agreement (FTA): trade in goods between the UK and EU will not be subject to any tariffs or quotas, in either direction. On the other hand, UK exports to the EU will be subject to checks at the border which were not applicable before: checks for conformity with EU standards, checks which will be particularly stringent on manufactured food products (a valuable strand of UK exports) and on agricultural commodities; animal and plant health checks will weigh in on those too. The process of carrying out all these checks will require drivers to produce at customs posts many different kinds of forms, and checking those will take time. The office costs to exporters of preparing the forms, and the cost in extra time at the frontier, have been well-publicised (not by ministers) and will be significant. Exporters will have either to absorb the costs (in reduced profits) or pass them on in their prices (risking reduced sales).

So ‘free trade’ has to be understood as including new handicaps. It would be more accurate to describe it as handicapped trade than free trade.

The impact of the changes on volumes of exports and the value of trade is not immediately obvious. Some of the new obstructions, like a minimum level which individual businesses have to reach in order to qualify as exporters to the EU at all, are only coming to light as people study the small print of the deal rushed through on Christmas Eve. Exporters will, as ministers reassure us, get used to the new procedures. But the additional costs will be with them for the long term.

The full formal title of the Christmas Eve deal is ‘Trade and Cooperation Agreement’. Access for EU fishermen to UK territorial waters must then fall under  the heading of ‘Cooperation’. The tone of the negotiations did not suggest that. Argument was intense and acrimonious. In economic terms it was a storm in a teacup but it was a struggle to redress a historic injury – inflicted on the UK by France in the late stages of our negotiations to join the EC. France, in 1970, having for some years resisted proposals to create a common fisheries policy for the Six, suddenly saw things differently with the UK poised to join, bringing with it massive new areas of sea from which a common fisheries policy would license French fishermen to gain. A Common Fisheries Policy was accordingly rushed through by the Six in autumn 1970 and the UK, by then heavily committed to conclude the talks on Accession, was bounced into accepting this. At the expense of UK fishermen.

So there was a historic necessity about fighting to redress that rapacious ambush. The deal just done, the government tells us, puts us back in control of our waters. The reality won’t feel much like that. UK fishermen win back a small amount of their share of fish caught in UK waters, increasing by very small steps over five and a half years. After that there will be the possibility in theory of increasing UK shares further. Recognizing, perhaps, that this is well short of what was promised at the outset, the government is going to pay a package of subsidies to modernise the industry; according to some reports as much as £100 million – at UK taxpayers’ expense. If, after five and a half years, the UK does succeed in further pushing up the share for UK fishermen of fish caught in UK waters, in annual negotiations with the EU, the deal gives the EU permission to offset that by imposing tariffs on imports of either fish or some other products from the UK – to the cost of UK exporters. All in all the deal done on fisheries falls well short of redressing the raid we had suffered on Accession; honours far from even.

The Free Trade (and Cooperation) Agreement covers most of the goods traded between us. The experts will give it high marks on the scale of FTAs. But it does not cover services. This is a very large omission indeed, of which rather little has been said by ministers in their proclaiming the value of the deal.

Services make up around 80% of the UK economy (and a similarly large % of other advanced economies). UK manufacture of goods is by contrast these days quite small. Not all services  are tradeable; haircuts, take-aways, Deliveroo and Uber – not. But some are: most obviously financial services but also professional services in for example law, accountancy, management consultancy. These are areas of skilled professional work in which the UK excels – it truly is world-beating. The deal done so far leaves entirely unclear what access the UK will have for exports of these high-value services. It is for negotiation down the track. For several EU countries Brexit is seen as a heaven-sent opportunity to seize part of this ‘trade’ for themselves. France, Germany, but also the Netherlands, and Ireland. They have made some gains already at the City’s expense. They are not going to settle for the position as before. They have every incentive to consolidate their gains at the expense of the UK, and will do so.

We have so far been looking at trade between the UK and EU. What about trade with the rest of the world?

As a member state of the EU, the UK has been enjoying preferential terms of trade with a large number of non-EU countries, all those with whom the EU had over time negotiated trade agreements of one kind and another. That stops now. The UK has to negotiate the best terms it can with all of those non-EU countries; and we can set out to negotiate for ourselves agreements with the countries where there was no EU deal.

The world is our oyster – an oyster which may not be altogether easy to open. Boris Johnson and his ministers put a high value on this new freedom we have. They exaggerate the potential value. Economists and analysts have been unanimous in pointing out that it is not even in theory possible for the UK to do additional trade with non-EU countries that matches the value of our existing trade with the EU.

Ministers are making claims for the value of agreements that they have signed over the past year which are demonstrably exaggerated, and presented in a false light. This is where the gap between the Johnson government’s claims and the reality is at its widest.

Take the Daily Express (“Campaigning Newspaper of the Year”) for Tuesday 29 December 2020. Front page headline: £900 bn.

• Staggering value of 62 global trade deals.
• UK heads for boom as we ‘seize opportunities’.

The article which follows argues that Britain is heading for a post-Brexit boom after securing new trade deals worth nearly £900 billion. The most recent of these is a deal signed off just before Christmas by Liz Truss (Secretary of State for Trade) with Turkey. What is not explained but needs to be is that all these 62 deals will do little or nothing more than recreate for the UK the terms of trade which had been open to us as members of the EU. These, therefore, are not new opportunities for trade but restoration of the damage we were about to do ourselves by leaving the EU. One exception may be the deal signed off with Japan. That includes a few variations on the Japan-EU deal, some in favour of UK exports of food products to Japan, some in favour of Japanese exports of manufactured goods to the UK. First commentaries said it looks as though Japan will gain more than the UK, but time will tell.

This is necessary background to understanding the claim made by Andrea Leadsom (former minister) in the Daily Express article referred to: ‘sunlit  uplands are on the horizon thanks to Britain’s ability to secure its own agreements free from EU interference’. Insiders report that it has been far from easy to obtain the 62 agreements done so far even though they give us only what had already been available to us had we stayed on in the EU. Each of our trading partners will see what price they can extract for conceding that to us. It is in the nature of trade negotiators not to agree something for nothing. On present evidence it may require time and hard effort to clamber to those sunlit uplands.

So the situation as of now is that we have succeeded only in recreating for ourselves the trade opportunities we were about to lose by leaving the EU. To claim these are new opportunities, as ministers have repeatedly done – what is that if not conscious and wilful deception of the uninformed public?

There certainly will be new deals that we should be able to do going beyond those areas and countries covered by EU deals in the past: with the US, Canada, Australia, with India and China. (The limited EU-China deal just signed puts the EU a step ahead of us.) The Anglo-Saxons and Commonwealth countries may be quite keen. They will, as one, want better access to the UK market for their farm products. The EU being particularly resistant on that front, they will sniff new opportunities with an independent UK. The UK will most likely make concessions to their demands in return for gains on services and manufactured goods. A cold wind for UK farmers in prospect there.

The UK will want to make gains on services wherever it can, but where the potential markets are largest, with the large emerging economies like India and China, it will be tough going. Those countries have a track record in negotiations with the EU of being very resistant to opening up their markets for professional services; legal, financial, management consultancy etc. They want to protect and build up their own skilled professions, not have them snuffed out in their infancy by world-class Europeans. This will not change for us. It may get harder. As a member of the EU the UK has for years put strong pressure on our side to fight for advantages in the services sector, with quite limited success. Will our chances be better when we are negotiating alone? We can only so many times sell concessions on food and agriculture.

Across this whole area of trade with non-EU countries, has UK trade been held back by EU rules and procedures? The evidence is not apparent. How is it that the exporters of Germany, and France, Netherlands and Denmark have all managed to do more trade with India and China than has the UK?

Sovereignty, it may be

So much for economics. The UK joined the EC in the 1970s with economic motives. The clearest economic gains, the clearest uptick in the value of UK trade, came with the creation of the single market, between 1986 and 1992. A creation driven by Thatcher at the political level and carried through by Lord Cockfield as one of the British Commissioners. The creation of uniform EU standards replacing a variety of national standards, product by product, was an enormous simplification of manufacturing costs and paperwork for our exporters. They profited from it. Over time, in what seems like a severe loss of collective memory, these uniform EU standards have come to be seen as a constraint and an imposition, whereas to start with they were exactly the opposite.

EU single market legislation as an unwanted burden – EU freedom of movement as an unwanted source of immigration – decisions taken in Brussels by obscure processes and by ‘foreigners’ – all against the background of a basso continuo of talk of a federal EU superstate: these diverse strands of discontent fused latterly into a sense that our loss of sovereignty had gone too far. The call to recover our sovereignty and ‘take back control’ gathered strength.

We have left the EU because of this political discontent, in the face of much economic analysis in favour of staying in. The strategy of exerting influence from the inside, which was the guiding political principle, and the operating instruction for officials over the 47 years of our membership, has been set aside.

Our negotiators during the Brexit talks made sovereignty their battle cry. This was played back to us by Commission President Ursula von der Leyen in her restrained and dignified press conference announcing the deal done on Christmas Eve. What sovereignty meant to her, she said, was freedom as an individual to move around, live and work anywhere within the EU, and countries working together for mutual advancement and support for those in difficulty. That contrasts sharply with the view of sovereignty held by the Brexiteers (she meant it to) – and hints at some of what we are losing as individuals.

There will be some costs to our newfound sovereignty; economic costs already traced out here, and political costs in establishing impact on the international scene. An authoritative assessment of that is not for me. Here are some suggestions as to other pluses and minuses we may find:

Control of our borders. Migration from within the EU will be relatively easy to control. Pressure of migrants from outside the EU will be as before, and given the disturbed state of the world the outlook is for massive and unremitting pressure in future on the EU and on the newly independent UK alike. We control that as best we can.

Our money. The UK will cease to pay annual contributions to the EU budget, not all at once because our Divorce Agreement commits us to paying over diminishing amounts for several more years. The amounts we contributed as a member state were always exaggerated by critics inside government (including Boris Johnson) and in the press (we include Boris Johnson here too, from his time as a journalist in Brussels – he could reasonably claim founder’s rights to the furore). It has been running at about the same level as Treasury transfers to Northern Ireland – a feature not unnoticed in Dublin, causing concern there not to have to take over life-support for the North.

Rigidity of EU regulation. One school of thought, of which Matt Ridley is a leading exponent, holds that EU regulation has been a brake on innovation and progress in the manufacturing sector. There is some truth in this. Single market legislation was painfully difficult to agree in the first place, and changing it is painfully slow. The battery of single market legislation has grown and grown, and where it was – rightly – seen as creating new freedom to trade back in 1992 it can now have an inhibiting effect. Time after time UK governments have led campaigns for deregulation, both at home and at EU level. Every time the harvest has been thin. Every time one of the findings is that quite a proportion of regulation both of UK and EU origin has been prompted by the UK itself: concerns over food safety and animal health and welfare being significant drivers. Our new sovereignty may help here but we shall very quickly be reminded that our sovereign control over regulation in the field of technical standards and human and environmental safety is very tightly limited, under the terms of the Trade and Cooperation Agreement. Deviate far from existing EU standards and the EU will be able to impose tariffs, charges on our exports to them.

Levelling up. The Johnson government intends to narrow the gap in prosperity between richer and poorer parts of the UK. Up till now the most visible and significant steps in that direction have been made (for us) by the EU, through its regional and structural funds. That will cease. We certainly ought to be able to make better judgments on levelling up, using our own initiative. Does the Treasury have the will or the money to match those past EU actions?

Farming and fisheries. Sovereignty frees us from the CAP and CFP, both targets for running criticism from the British and much of the criticism well-founded. We really ought to be able to devise better, more cost-effective policies for farming and the countryside, and for fisheries, than the policies we have left behind. Disappointingly, the Johnson government has been slow to put much detail on its new farm policy (for England), and as for fisheries nothing has been said about how we intend to use the freedom we are going to have over decisions on conserving and managing our fish stocks. All the talk has been of catching more fish. We live in hope, for land and sea. In the responsible government department (for England), Defra, ministers and officials at all levels will gain an enormous dividend from Brexit in terms of time released from all those days spent sitting in the Council of Ministers and in committees, listening or half-listening to other people’s problems. We are entitled to expect great things from the vast amount more time Defra will have to devote to British interests.

Robert Tombs, Cambridge history professor and a unique authority on relations between Britain and France, has written two fascinating pieces à propos Brexit in the last couple of weeks. One of these is by way of a hymn to sovereignty. In Tombs’ view all the talk of the UK still having sovereignty as a member state of the EU, Parliament having taken the decision in 1972 to ‘pool’ our sovereignty with that of our EC partners, and still being sovereign in participating in EU collective actions, was a hollow mockery. He has no time for the notional gains from pooling sovereignty. Sovereignty, Tombs argues, is only sovereignty when you actually exercise it by cutting free.  He describes it as supremely significant that with Brexit the UK has finally proved itself sovereign again by taking this step.

His other piece, again fascinating and to my mind the more penetrating and convincing, analyses the high political objectives of the French and British states as expressed in their respective membership of the EU. The British performance is diagnosed, unsurprisingly, as indecisive; too little, too late; joining but with limited economic objectives that never matched up to the objectives of our leading partners; until by a slow process of marginalisation we reached the point where the elastic snapped and we opted out. By contrast, the story on the French side is one of clear vision, consistency and determination; a determination to rebuild France’s standing in the world after the national disasters of WWII. France saw the European project as an opportunity to bind Germany close, and to profit from Germany’s even greater need to regain international respect. French politicians and top civil servants, a seamless élite, held to that course through thick and thin. France had no difficulty in ruling the roost when the EC was Six. They rightly saw a threat to their grand design if Britain joined, but swallowed hard and let us in. We made difficulties as expected and more, but French predominance did not take a serious knock until the 1990s when Sweden, Finland and Austria shifted the balance towards Anglo-Saxon attitudes; then was knocked further by  the accession in 2004 of eight former communist countries and two former British territories. The French language was knocked into fifth place. The ex communist countries having shaken off one tyranny were hyper-sensitive about submitting to another. But now, with Britain opting to self-isolate, the French élite can breathe a sigh of relief. Once again the balance at the top of the EU is between France and Germany. Consistency of purpose over 70 years rewarded. A triumph for French statecraft of historic proportions.

This is Tombs at his most convincing. He is on his home ground. As to whether his views on sovereignty can be made any more convincing, we must wait (trailer alert) for his forthcoming book ‘This Sovereign Isle’, due out at the end of January.

Regardless of how newly-independent Britain makes its way in the world, the EU without Britain will change from within. It is of direct interest for all of us to watch what happens on that front too.