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Analysis

4 gaping holes in Brexiters’ latest trade fantasy

by Luke Lythgoe | 24.09.2018

The Brexiters have had another crack at how the post-Brexit economy should look. It’s essentially a free trade agreement (FTA) similar to what the EU has with Canada. The blueprint, from the Institute for Economic Affairs (IEA), has been backed by leading Brexiters including Boris Johnson, David Davis and Jacob Rees-Mogg.

The main problem with any Canada-style deal is that it would gum up the supply chains of our manufacturing industries and do nothing to protect our services industries either. But in addition to that huge flaw, there are four specific problems in the IEA’s proposal – all likely to make it unworkable on a practical level and/or deeply unpopular with the UK public.

1. Timing totally unrealistic

The IEA is proposing a two-stage process to negotiating an FTA with the EU. First, in the next six months, we’d agree a “basic” FTA for goods. This would take effect in the transition period post-Brexit instead of the prime minister’s plan to stay in the EU’s single market and customs union during that 21-month interim phase. The IEA then wants us to negotiate a full FTA like the one Canada has.

The problem is trade deals usually take the best part of a decade to agree. So our economy would end up falling off two cliffs: first next March when we move to the basic FTA; and then in January 2021 when the transition period ends and we have nothing to govern our trade with the EU.

The IEA also wants to roll over existing FTAs we already have thanks to our EU membership by March 2019 – and argues we should start negotiating FTAs with the US and other countries now, saying this would pressure the EU into striking an even better FTA with us. The idea we’ll make fast progress is hopelessly optimistic given that other countries will want to know our trading relationship with the huge EU market on our doorstep before they start offering us terms.

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2. Lowering food standards

Central to the IEA’s plan is to go full steam ahead with a US-UK trade deal. The UK wants access to the US for its services industries, and the IEA suggests the best “leverage” for this is giving the US agri-food industry access to our market.

Since the IEA advocates “maximum regulatory recognition” in all these deals, that would almost certainly mean letting food of a lower standard into our supermarkets: think chlorine-washed chicken and hormone-pumped beef. It’s all rather embarrassing for trade secretary and fellow Leave campaigner Liam Fox, who has denied several times recently that Brexit will mean lowering food standards.

3. Exposing our NHS

The IEA dismisses concerns about US pharma giants pushing up medicine prices, saying it’s not a problem because US firms have “not complained” about the NHS and it hasn’t featured in the US’ inventory of foreign country trade barriers.

In reality, American corporations are already enthusiastically making inroads into the parts of our health service which have already been privatised. And let’s not forget the Trump administration’s “American Patients First” plan to end the US being “cheated by foreign countries” who enjoy lower drugs prices and to end the “global freeloading”. His health secretary blamed “socialised systems” for higher drugs prices in the US than elsewhere.

4. No solution for the Irish border

And finally, as with a number of recent Brexiter-backed reports, there’s no workable solution for keeping the Irish border as free flowing as it is now. There’s not much new here: more technological solutions, checks away from the border and “trusted trader” schemes. This all amounts to new infrastructure and a harder border than we have today – exactly what both sides in the Brexit negotiations agree should not happen. Without a solution to the Irish border, the EU won’t give us a Canada-style trade deal.

So this is the future Brexiters are planning for: rushed-through trade deals, lower food standards, exposing our NHS and no solution in Ireland. Hopeless all round.

Edited by Hugo Dixon

7 Responses to “4 gaping holes in Brexiters’ latest trade fantasy”

  • Your four gaping holes do not cover many other major points. Beyond scrapping tariffs, the next item of the ‘Canada’ agenda means tackling non-tariff barriers. For this ‘Canada’ means each side having its own technical standards for industrial products. But the EU standards are largely also international standards (of the ISO), and it is inconceivable that the UK would rewrite some 25,000 such standards, so that our British safety standards for kitchen kettles for example (and 25,000 other products) can be different (more safe? or less safe? or just different so as to gum up trade and supply chains with the EU?). For the likes of Rees-Mogg to do just this is what is needed to escape being a ‘vassal state’, while the UK has actually been a leading actor to developing these combined EU and international standards. There would be countless further stories in the same category.

  • Does this mean we will have to accept: ‘Recombinant bovine growth hormone; Arsenic-Laced Chicken; Ractopamine-Tainted Meat’ – all of which are banned in the EU?

  • The points you make are valid but consideration of them is unlikely to stop the Brexiteers. Many of the drawbacks are in fact advantages to them as they dream of the completion of the long desired transatlantic right wing alliance. On Ireland I suspect the tactic will be to ignore the EU’s wishes and even the stage one agreement reached last year and then dare the other side to set up border checks.

    Since this vision of our future is supported only by a minority and is certainly not what was voted for in the referendum, the question arises how it has got so far and has such a substantial chance of coming to pass. It is vital to keep in mind that unless Parliament does something (approves an agreement with the EU or delays leaving) we will leave at the end of March 2019 with “no-deal” and that this is very much to the taste of the hard right. Since opposition to them is so divided it is going to be very difficult to agree on what Parliament will actually do and the Brexit leaders are counting on this.

    That opposition has to be led by the Labour Party which of course ought to be utterly against the Brexit vision of a Trumpist future for Britain. The principal tactic appears to be to bring the government down, which is understandable for an opposition, but that is only possible if at least half a dozen Tories are willing to commit political suicide and bring down a Conservative government. Labour appears uncertain about what to do if there is no satisfactory Withdrawal Agreement but the government does not fall. That is where a referendum offering the public the chance to say if they do want the Brexit vision of the UK at odds with rest of Europe or want to cooperate on the only basis that makes sense – full membership but not of the eurozone- has to come in.

  • Next to the true gaping holes. 1. Trade deal with US wil worcen some UK problems obesitas for instance. 2. How will this gang fight international crime and terrorism?

  • No it does not. A free trade agreement might simply be an absence of tariffs – though, as the fate of NAFTA shows even that can be set aside. It does not require regulatory alignment so some goods from country A could be prohibited from entering country B e.g. genetically modified foods.

    A free trade agreement plus regulatory alignment allows a single market but to avoid customs check between countries in the single market you need a common external border with the same rules applying to incoming goods from anywhere so that once inside the customs union they can move freely without further checks.

  • > Does a Free Trade Agreement mean no Customs checks?

    No. But even if it did, it would not eliminate border checks for regulatory compliance.

    -A.