No deal? No problem
First published in The Spectator Australia, 1 March 2019
Britain, we’re led to be believe, is heading for the worst catastrophe in its history. Officialdom is warning that a no-deal Brexit would mean trucks backed up for miles at Dover, chaos at airports, a special poverty fund to cope with the fallout and — horror! — a shortage of Guinness. So apparently the country that saw off Hitler, the Kaiser, Napoleon and the Spanish Armada is now paralysed with fear at the very thought of leaving the EU.
Here in Australia, this story just doesn’t fit with the Britain that we know. A disorderly Brexit would mean, at most, a few months of inconvenience. Perhaps some modest transition costs. But these difficulties would quickly pass. By far the more serious threat comes from Britain caving in and agreeing to a bad deal that imposes most of the burdens of EU membership but with few of the benefits. Or, almost as bad, a Brexit delay that would keep the UK as a tethered goat — while the EU shows how it will humiliate any country with the temerity to leave. For Britain to lose its nerve now would represent failure on an epic scale.
Theresa May was quite correct two years ago when she said that no deal was better than a bad deal. What she should have known, even then, was that a bad deal was all that Britain was ever going to get from an EU with a vested interest in ensuring that no country ever leaves. The error all along has been not explaining the terms on which Britain wanted to leave. And not preparing to implement those terms unilaterally, given the near certainty that no satisfactory deal would be negotiated in advance.
As a former prime minister of a country that has a perfectly satisfactory ‘no deal’ relationship with the EU, let me assure you: no deal would be no problem. Or at least no problem that Britain couldn’t quickly take in its stride. Especially if Britain is ready to keep tariff- and quota-free entry of European goods, and recognise their standards. That’s what you need for easy trade and Britain has the power to do this unilaterally. You don’t need Michel Barnier’s permission.
Might there be queues at Calais? Perhaps, if a vengeful EU imposed one-sided tariff and regulatory burdens on Britain. But there need be no queues at Dover. If there were, it would be the EU and not the United Kingdom that would be responsible for any hard border, including one with Ireland. (Which, of course, would never be erected: it’s a bluff.) If Britain did its best — and even if the EU did its worst — the problems would be on the EU side of the border. In the longer run, the EU would clearly be the loser from spitefully jacking up the cost of the British goods and British services that its citizens currently enjoy. Just in time for the EU elections.
A no-deal relationship with the EU has not stopped Australia doing about US$70 billion worth of trade with the EU in goods and services. This is about 15 per cent of our total trade, and it makes the EU our second biggest overall trade partner. Of this, about $20 billion is with Britain — on your own, you are our fifth biggest trade partner. And this is without any special trade deal, just bonds of history and affection. It must baffle the pundits, but Australia trades with the EU (and with Britain) without being part of any customs union.
Yes, our exports to the EU do face tariffs. But the World Trade Organisation rules impose strict caps on these tariffs: the same rules that would protect Britain. Under these terms, Australian trade with the EU has grown by about 1.4 per cent a year over the past decade.
Hard borders are an inconvenience, but they’re hardly insurmountable. Think of Oakridge chardonnay or Hill of Grace shiraz, shipped to you halfway around the globe for a better price (and taste) than rivals from France. How? Why? It’s the miracle of trade. People overcome barriers.
If Britain unilaterally declared that post-Brexit trade with the EU would be tariff-free and quota-free — and that there would be full mutual recognition of standards and credentials — there’s every chance that the EU would swiftly do likewise. Because that’s exactly what happens now; it would involve no damage or disruption to anyone. Throw in provisions for routine movement of people for well-paid work, not welfare, and you’d have a good clean Brexit. Britain would still be economically integrated with the countries of Europe, but also entirely free to chart its own course in its dealings with the wider world.
All along, the real difficulty has not been negotiating Brexit. It has been the neurotic anxiety of the official political class about leaving the European project, which they see somehow as a civilising force. The Brexit vote was possibly the greatest ever vote of confidence in the project of the United Kingdom. It was a reminder of the global leadership that Britain has historically provided. The risk you face now isn’t no-deal Brexit, but rather the official class losing its nerve and proving incapable of quickly resolving this muddle. If that happens, it would be hard to take Britain seriously again.