Business
A sovereign Brexit is suddenly possible again
By Ambrose Evans-Pritchard, Telegraph, 10 July 2018
Jul 10, 2018 - 9:07:17 AM

Theresa May made a fatal error trying to bounce the Cabinet into a violation of its Manifesto

The Chequers Plan is still-born. Theresa May cannot command a Tory majority in Parliament for her fatal compromise. The votes can be found only by turning to the opposition, and that way lies Sir Robert Peel and the schism of 1846.

The Prime Minister overplayed her hand disastrously by trying to bounce the Cabinet and the Parliamentary party into support for a settlement that violates the electoral manifesto, the Lancaster House speech, the verdict of the referendum, and the minimum conditions of sovereign self-government. 

An entirely new Brexit chapter is suddenly upon us. Anything is now possible. The spectrum ranges – by way of a snap election – from "Global Britain" on WTO terms at one end, to a Corbyn government at the other.

Markets are belatedly waking up to the enormity of this. There had been a view among currency traders that the resignation of David Davis would clear the way for an even softer Brexit, or partial EU membership without voting rights to be more accurate. Sterling briefly rallied. The departure of Boris Johnson hours later shattered that illusion.

Thirty Conservative MPs were in revolt even before the misjudged lock-in at Chequers. They now have two of Brexit’s Cabinet heavyweights in their camp, flanked by Jacob Rees-Mogg and the seventy-strong militia of the European Research Council. The floodgates have opened. It is surely only a matter of time before the requisite 48 letters needed to trigger a leadership race arrive at the 1922 Committee.

I do not wish to labour the details of the Chequers Plan. Martin Howe, QC, has already conducted a forensic analysis of what we know about this week’s White Paper. His verdict – all over the internet – is worth repeating:

“These proposals lead directly to a worst-of-all-worlds 'Black Hole' Brexit where the UK is stuck permanently as a vassal state in the EU’s legal and regulatory tarpit, still has to obey EU laws and ECJ rulings across vast areas, cannot develop an effective international trade policy, and has lost its vote and treaty vetoes rights.”

Yes, it pulls Britain out of the EU’s foreign policy sphere (Pillar 2), and "justice and home affairs" (Pillar 3). It remains to be seen how this squares with Mrs May’s Munich pledge in February to accept the writ of the European Court in dealings with Europol, Eurojust, and the European Arrest Warrant.

It removes the UK from the ambit of the Charter of Fundamental Rights. This was the mechanism by which the ECJ was acquiring jurisdiction over almost anything it wanted – in violation of Britain’s opt-out under Protocol 30 – and was the biggest single reason why I voted for Brexit. Hurrah for that.

But what it does not do is to free Britain from EU’s ‘Pillar 1’ legal structure, the central corpus of directives and regulations that make up most of the 170,000-page Acquis. This is an inertial body of law. The EU rarely repeals any of it even when known to be harmful.

The UK would accept this existing stock of law totally. Some divergence would be possible on future laws but subject to “consequences” (ie reprisals). There is any case a separate pledge for “ongoing harmonisation with EU rules on goods” written into the withdrawal treaty.

The plan effectively binds Britain into EU law on the environment, social policy, employment, and consumer protection, and leaves British judges subordinate to rulings by ECJ – all behind a cloak of formal sovereignty. It is in fact suzerainty. 

The Facilitated Customs Arrangement would make it all but impossible to carry out free trade deals with the US, or Australia, Japan, China, or to join the Trans-Pacific Trade Partnership. The UK would not be able to offer “mutual recognition” on goods and farm produce. It would therefore leave the UK trapped in perpetuity in the EU’s legal orbit.

While Britain would still be free to pursue service deals, it would lack the chief instrument of leverage needed to pry open this highly-protected global market. If the UK cannot offer other countries open access to its market for goods as a quid pro quo, it is not going get very far knocking on trade doors. The only way to carry out global trade negotiations with force and credibility is to restore total control over all areas of policy.    

There is some merit to Michael Gove’s view that “best is enemy of good” and that what matters now is to consummate Britain’s legal exit from the EU before it is obstructed by Brexit foes. Much can be done later.

You can certainly argue that Britain should bide its time as the EU lurches from one convulsive crisis to another. It is doubtful whether the eurozone can survive another global downturn with its current structure, in which case the EU will evolve into a different animal.

Yet to rely on this is dangerously passive. As Boris Johnson wrote in his resignation letter, Britain is “headed for the status of a colony” in the Chequers course. Such an outcome would have corrosive effects on our democracy. It could not plausibly be a stable settlement for either Britain or the EU. Nor is there really an economic imperative to accept this.

"The collective loss of nerve by the British establishment is pitiful to behold"

Observing the European side of the Brexit drama closely over the last two years, my views have hardened. Much ink has been spilt on the likely damage to the UK economy if Britain opts for a clean Brexit, that is to say if it leaves the customs union and the single market, and opts for the WTO rather prostrating itself in hope of a Canada-minus trade package on the EU’s ideological terms.

Little has been written on the traumatic consequences for EU itself if – as a result of its own actions – trade barriers with Britain are erected in March 2019, and if it loses full access to the City’s capital markets. My conclusion is that the EU is extremely vulnerable to such a shock. Large parts of European industry would be paralysed. Recession would reignite the EMU banking crisis. The political fall-out would lead to bitter recriminations between EU states with different strategic interests.

These are themes that I will explore over coming days. Suffice to say that the collective loss of nerve by the British establishment is pitiful to behold. They have succumbed to a psychology of fear. Vested interests have run amok.

Conservative MP John Redwood has pithy advice in his latest Brexit diary. The Prime Minister should offer the EU the choice of trading with this country on the basis of a comprehensive free trade deal, or on WTO terms. End of story. No requests should be made. No concessions should be made.

Britain should reclaim its schedules from the WTO while leaving the door open for a full trade deal that includes services on the basis of mutual recognition, should the EU wish to protect its €80bn (£71bn) surplus. This would concentrate minds in Brussels, Berlin, Amsterdam, Rome, Madrid, and Warsaw.

If Theresa May will not embark on a radically different course, others might.