After four and a half painful years, we have reached the end of the beginning of Brexit. We have a deal. It is, inevitably, a damaging deal for the British economy compared with remaining inside the EU. But it is far better than the stupidity of no deal. Above all, it maintains a working relationship with the UK’s close neighbours and principal economic partners.
No responsible government would leave mere days for businesses to adjust to the complexities of this new situation. Still less would it do so in the midst of a pandemic. This will remain a foolish and unnecessary divorce. But the reality of Brexit may even bring some benefits.
The EU should already seen some. It would almost certainly have been unable to agree its €750bn pandemic recovery fund if the UK had remained at the table. From now on, the EU will be able to move faster towards its shared objectives.
For the UK, too, Brexit will bring the big benefit of separating reality from delusion.
Some delusions have already disappeared. Brexiters told the country that it would be easy to secure an excellent free trade agreement with the EU, because it held “all the cards”. In fact, it has proved quite hard to do so and the UK has had to make difficult concessions since 2016, notably over the money it owed the EU, the Irish border, and EU demands for a “level playing field”.
These delusions were buttressed by others. Among them was the idea that the UK and the EU would negotiate as “sovereign equals”. Yes, the EU and UK are equally sovereign. But they are not equally powerful. The UK economy is less than 20 per cent of the EU’s. Forty-six per cent of UK merchandise exports went to the EU in 2019, while only 15 per cent of EU merchandise exports (excluding its internal trade) went to the UK.
The economic relationship between the EU and UK is rather like Canada’s with the US. As Jonathan Portes of King’s College London points out, the trade deal imposed on Canada and Mexico by the US is quite intrusive.
Given this imbalance, and the UK’s sovereignty fetish, the UK has won a good deal. The 1,246 page text of the agreement contains scant and insignificant mention of the European Court of Justice. The detailed agreement on the vexed issue of the “level playing field” is symmetrical. But any action by the EU to “rebalance” its policies, in response to a UK action to which it has successfully objected, will have a far bigger impact on the UK than vice versa.
The reality is asymmetrical. That will remain the case in the many negotiations with the EU still to come. When one deals with foreign powers. and especially more powerful ones, “taking back control” is somewhat notional.
Yet that slogan is also a delusion in some other respects. In defence, education, housing, health, regional development, public investment and welfare, the UK already largely had control. But British people are about to lose valuable opportunities to do business or live, study and work in the EU. They will not “take back control” over their lives, but lose it.
Even where control will be regained, in theory, the reality may shock Leavers. Consider immigration. In the 12 months ending June 2016 (the month of the referendum), net immigration from EU plus non-EU sources was 355,000 (with net emigration by British people ignored). In the 12 months ending March 2020, net immigration was 374,000. Net immigration from the EU collapsed from 189,000 to 58,000. But that from the rest of the world — always notionally under UK control — exploded, from 166,000 to 316,000.
The UK has in fact preserved relatively favourable (albeit markedly worse) access for manufactures, in which it has a comparative disadvantage, while accepting substantially worse treatment of services, in which it has a comparative advantage. Indeed, it fought harder for the control over fishing, which generates 0.04 per cent of UK gross domestic product, than for services, which generates the great bulk of it.
Mr Johnson promised that the UK will “prosper mightily” even without a deal. But virtually all economists agree that the UK will be significantly poorer in the long run, even under this sort of deal, than if it had remained a member.
Even the survival of the UK is in doubt. Scotland and Northern Ireland may both leave the Union, the former to join the EU, arguing that it, too, wants “to take back control”, and the latter to join Ireland and so the EU, too. England may then have a border with the EU on the Irish Sea and the Tweed.
Brexit is, in many ways, the English equivalent of Donald Trump’s promise to “make America great again”. A big difference is that, unlike Mr Trump’s time as US president, Brexit is forever. It seems almost certain to damage the country’s prosperity and influence permanently. But only now can we find out. Let us look and learn.
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