The Confederation of British Industry is trying to nudge the government towards a saner Brexit. But its “softly, softly” approach doesn’t match the urgency of the crisis we face.
Carolyn Fairbairn seems afraid of rocking the boat by telling the government unpalatable truths in a speech she is making tomorrow. True, the CBI boss slams the Canada-style trade deal that hard Brexiters in the Cabinet advocate. This would be an “ocean away from what we need”. She is right that such a model would do almost nothing for our world-beating services industries, which account for 80% of our economy.
But the CBI boss avoids the obvious way to protect our services industries: stay in the EU’s single market. Fairbairn even criticises this option. On this point, the Trades Union Congress, is more robust. It is unequivocally advocating staying in the single market.
By contrast, Fairbairn suggests that we “start with rules we already share, and move on from there”. She then goes on to propose “a new independent court or joint committees” to handle disagreements when we decide to diverge from EU rules. The CBI – along with soft Brexiters in the Cabinet who also like this idea – don’t seem to have tested it on the other EU countries.
The other leaders are likely to say, as French president Emmanuel Macron did on his trip to Britain last week, that if we want to stay in the single market, “be my guest”. But they won’t be thrilled by Fairbairn’s idea, which will mean being stuck in complex negotiations on every aspect of the economy with the UK in perpetuity. They may think they have better things to do.
“A” or “the” customs union?
Fairbairn’s other big idea – that we should negotiate “a” customs union with the EU – is also sub-optimal. Why doesn’t she say we should stay in “the” EU’s customs union? As with the CBI’s softly, softly approach on the single market, it seems she doesn’t want to antagonise the government.
Fairbairn’s language closely mirrors that of David Lidington, the soft Brexiter who became Theresa May’s new right-hand man in the Cabinet after Damian Green was fired. Lidington told the Telegraph this weekend that the UK could stay in “a” customs union but not “the” customs union.
The distinction may sound minor and unimportant. But it masks the fact that nobody has found a way of keeping open our borders to the EU – which “a” customs union would do – without opening a back door that lets goods from other countries, with which the bloc has deals, flood into the UK.
We could of course try to copy the deals the EU has with the likes of Japan and South Korea – and, if it eventually signs pacts with them, China and America too. But if they refuse, our companies won’t have any reciprocal rights to export to these countries. The only sure way of securing our interests is to stay in the EU and remain a full member of its customs union.
Transition to a cliff
The other weakness in Fairbairn’s speech is that she avoids mentioning the most pressing issue: that the government is hoping to agree by the end of March a two-year transition deal to cushion the impact of Brexit. The economy is likely to fall off a cliff at the end of 2020 because two years isn’t nearly long enough to nail down a new trade deal.
The CBI ought to be sounding the alarm, but it isn’t – again because it seems worried about ruffling the prime minister’s feathers. The snag is that, if it doesn’t say something pretty quick, it could well miss the boat.
It could be said that the trade body’s softly, softly approach is politically smart. Maybe it wants to give the prime minister a chance to negotiate a deal where our rules can gradually diverge from the EU’s – and will come out decisively in favour of the single market if she can’t.
Maybe it wants to give May a chance to come up with a brand new customs union that doesn’t leave the back door open – and will back the existing customs union if she can’t.
Maybe it will eventually say that if we are going to stay in both the single market and customs union, we should then stay in the EU as well – because we will then keep our position as one of Europe’s most powerful countries rather than become a rule-taker.
Maybe, maybe, maybe. But, if not, the CBI will be selling industry’s interests short.