UK cannot have and eat EU cake
Summer’s over. It’s time to go back to the school of Brexit.
Britain’s new headmistress, prime minister Theresa May will gather her cabinet at her country retreat at Chequers on Wednesday (31 August) for the first serious round of talks as part of drawing up the UK’s negotiating strategy when it finally, eventually, kicks off talks to leave the EU.
The main battleground is clear: between ministers who want to prioritise migration and border control, and those for whom unfettered access to the single market trumps all.
This is not a huge surprise. Leaving aside the ludicrous (and entirely dishonest) pledge that leaving the EU would mean an extra £350 million (€410mn) being spent on the National Health Service, which was dropped by Leave campaigners as soon as the votes had been counted, migration control was the decisive, and dominant, theme in the Leave campaign.
Two of the three Brexiteers, international trade minister Liam Fox and Brexit minister David Davis, believe that the World Trade Organisation can help the UK to protect its trade interests after it leaves the EU.
Both are instinctively more keen for the UK to prioritise its trade links with the US, Canada and the Commonwealth over the European Union. They are also seeking to persuade May that keeping the promise of border control is more important than access to the single market.
On the other side is finance minister, and Remain supporter, Phillip Hammond, and, for the moment, foreign minister Boris Johnson. On his first trip to the US as foreign secretary in July, Johnson insisted that the City of London’s financial sector should be safe in the knowledge that a new relationship with the EU would see them keep their “passporting” rights, which enable them to offer their services across the EU.
The cabinet table is likely to be the only battleground, since May’s office has indicated that when article 50, the process of leaving the EU, is finally triggered at some undefined point in 2017, it will be done without requiring a vote by the UK parliament.
The court action brought by London law firm Mishcon de Reya is the only significant obstacle to the government bypassing parliament on article 50.
In either case, a political or economic price will have to be paid. Staying in the single market means accepting that EU budget contributions will continue each year, and integration without representation.
The UK paid around £200 per head of its population into the EU budget in 2015. The price for Norway, which is not an EU member, to access the single market, was around £115 per capita. Switzerland’s per capita contribution was around £50.
Given that German deputy leader Sigmar Gabriel speaks for a sizeable proportion of Europeans when he warns that Britain “must pay” for leaving the EU and cannot be allowed to “keep the nice things related to Europe while taking no responsibility”, it is fair to assume that single market access won’t come for free.
Norway and Switzerland accept the “democratic deficit” of signing up to “integration without representation” – the hundreds of EU legislative acts which they have to adopt as part of the single market acquis. The UK would have to do the same.
Yet full access to the single market is what business, particularly the financial services sector, will demand. Without the ability to passport their services, firms face the prospect of having to open subsidiary offices inside the EU if the UK is serious about ending free movement of people
Assuming that the EU-27 refuse to countenance a deal that involves single market membership without freedom of movement, the options left on the table are a bilateral agreement like the Swiss-EU pact, re-joining the European Free Trade Agreement (EFTA) or falling back on the WTO.
A UK-specific version of EFTA membership or Swiss-style deal could be the most likely to satisfy domestic public opinion. That said, none of these options would cover trade in services – the mainstay of the UK’s exports to the EU.
In other words, British businesses will be in a weaker position than they currently are.
In most political battles, the strongest economic argument usually wins. But Britons have just broken this convention by backing a Leave campaign which put immigration front and centre, and ignored warnings from almost every international institution and economist that leaving the EU would harm their economic prospects with no alternative plan.
Johnson, the foreign minister, is known, among other things, for his joke: “My policy on cake is pro having it and pro eating it.”
It was always going to be nigh on impossible to implement that in seriousness, however.
Faced with an EU that has its own future to consider, the UK’s two main demands: migration control and single market access are irreconcilable.
Something will have to give.
Benjamin Fox, a former reporter for EUobserver, is a consultant with Sovereign Strategy, a London-based PR firm, and a freelance writer