Michael St George’s take on four of this past week’s key Brexit-related headlines.
NB: (£) denotes article behind paywall
Former Brexit Party MEP Ben Habib is right to say Britain enters its Covid-19 emergency response in a stronger position than the EU. Not only do we embark on it with lower unemployment and lower public debt than the main EU member-state economies; having, correctly, not joined the euro, we also retain our own currency and thus control over both interest-rate and monetary policy, giving us the independence and flexibility to cut rates and launch a monetary expansion quickly, as seen this past week.
When the EU bloc emerges from the coronavirus crisis, it is likely to be in a weaker state, economically, than the UK. To re-stimulate its economies, it will need more urgently a trade deal with the country with whom it enjoys a substantial trade surplus, and also be in far less strong a position to go on insisting on its shamelessly protectionist ‘level playing field’ regulatory equivalence.
We should, therefore, be pressing home our advantage, not to exploit, but either to try to conclude a Canada++ style Free Trade Agreement or, if rebuffed, to declare exit on WTO terms on 31 December 2020. We have the leverage, and we should use it, ruthlessly if need be. There is no room for lawn tennis club etiquette here. We are in a hard-nosed negotiation with an unco-operative foreign power, not a genteel game of mixed doubles where you wait politely for your opponents to recover before continuing.
The Budget, The Virus, and Post-Brexit Britain – Briefings for Britain
Assuming, firstly, that Britain’s overall coronavirus approach, a mix of mitigation and suppression strategies rather than one or the other, actually works, and secondly, that the Brexit transition is not extended, our first year fully outside the EU should see faster than normal growth. Paradoxically, the fastest growth should, all other things being equal, occur in the sectors which have taken the biggest hit from the virtual shutting down of the economy, such as the travel and hospitality industries.
However, since Professor Gudgin’s piece was written, the Chancellor has announced his £330billion business assistance package and the Bank of England has launched a further £200billion of quantitative easing. The former will overwhelmingly be funded by additional borrowing, which eventually means increased debt servicing costs to be paid by individual and business taxes. This makes it even more critical to secure a post-Brexit trade deal which doesn’t impose ‘level playing field’ regulatory cost burdens on British business.
In a welcome counter to the multiple calls for a formal postponement of the Brexit trade talks, and consequently, of the date of full Brexit, Johnson this week published a draft Trade Bill whose effect would be to expedite and facilitate Britain’s ability to trade with other countries outside the EU. In addition, draft legal texts were exchanged between Britain and the EU on how the two parties would conduct business after the end of transition.
From the texts, it looks unlikely that a delay would be productive in terms of any softening of Brussels’ intransigence. Britain fundamentally wants a sectoral agreement under which some issues would be wholly excluded from it, whereas the EU wants an all-encompassing deal from which almost nothing would be excluded. With the two sides as far apart as this on basic principle, it is hard to see what a delay would achieve.
We must question suggestions the transition period should be extended – Brexit-Watch.org
Given that European responses to the coronavirus crisis are primarily being directed by national governments acting individually, rather than centrally from Brussels, it increasingly looks a weak excuse for deferring full Brexit. Apart from that, every extra month we stay in Transition means a continuing financial contribution to the EU’s coffers, taxpayers’ money which, one suspects, taxpayers would rather see being spent domestically in Britain on healthcare.
On Friday morning, former MEP David Campbell Bannerman raised a further powerful reason for not extending the implementation period. Late on Wednesday evening, the European Central Bank unexpectedly announced a €750billion stimulus programme of bond purchases after its €120billion big-bank stimulus package of only six days earlier had signally failed to reassure volatile sovereign debt markets.
If – or perhaps when? – the eurozone collapses, suggested Campbell Bannerman, if still in Transition, Britain is in real danger of having to pay hundreds of billions through European Investment Bank liabilities and/or EU Commission decisions on EU ‘solidarity’.
When Britain is already borrowing another £330billion to prop up its own coronavirus-hit economy, that prospect alone should be enough to rule out any extension.