The UK has left the EU, but Brexit is not over. In truth, it is only just beginning – and it will come at a cost. The question now is how big the price, particularly in terms of our rights as EU citizens, security, our ease of trade and our influence in the world. Already, there are signs that the government is stepping back, not stepping forward, into the world.
A damning letter to The Times last week from former Foreign Secretary Sir Malcolm Rifkind stated: “It would be deeply disturbing if in any year neither the Foreign Secretary nor any other senior minister chose to attend the Munich security conference, Europe’s premier gathering for global security and defence policy. That this occurred two weeks after we left the EU, proclaiming a new belief in global Britain, is incomprehensible.”
This is significant in that it is setting the backdrop for how Britain plans to engage with the world and whether this government’s actions will match its words. On Thursday, the government is expected to publish its negotiating mandate for trade talks with the EU, with formal negotiations over the future UK-EU relations set to begin next week. The time for mis-steps is over.
The government has made known its aspiration for a Canada-style free trade agreement that would see, among other things, our tariff-free access to the single market significantly reduced in exchange for greater regulatory autonomy. The government has also signalled its desire for further agreements on trade in services, fishing and security co-operation. We will not be able to have it both ways. There are huge trade-offs to be made. Get it wrong, and this is a deal that could see Britain give up much for little in return. Rebalancing our trade with the rest of the world must not come by throwing out the best of what we already have.
Despite shared stated ambitions for an EU trade deal, there still appears to be a wide gulf between the UK and the EU on the terms of such a deal. There are only seven months in practice to overcome the remaining sticking points – and to make matters harder, the government has ruled out the possibility of extending the transition period set to end in December.
What’s the backup plan? The government has said it would support falling back onto World Trade Organisation terms come the end of the transition period. The risk of a ‘no deal’ Brexit remains on the table, which the previous parliament rightly opposed, but with the caveat that the provisions of the Withdrawal Agreement relating to the protection of citizens’ rights and the Northern Irish border would come into force. Even so, the smooth implementation of both will need significant political focus.
The consensus among experts is that a ‘no deal’ Brexit would be a disaster. The Confederation of British Industry has estimated that leaving without a deal would mean tariffs being applied to 90% of UK goods exported to the EU, where almost half of all UK goods exports currently go. Meanwhile, the treasury’s analysis of the long-term economic trade-only impact of a ‘no deal’ Brexit estimated that such a scenario would cause a 7.6% reduction in GDP compared with remaining in the EU.
But even without no deal, taking the bluster out of the talks and the negotiations is needed to reduce short-term uncertainty and the risks to our economy in the future. As a start, we need to see a focus on limiting trade costs, clarity about trade barriers and understand far better the government’s plans for migration.
It is vital that we are able to strike as close and as comprehensive a trade deal as possible with our most important trading partner, and not fall into the mindset that says it should be the quickest trade deal in history. To do so misses a fundamental point – that it’s the first trade deal in history with economies looking to diverge from each other rather than more closely align.
And more than ever, the debate now needs to involve the whole country, not just government loyalists in Whitehall. The government must plan for how it engages the sectors, regions and the nations more seriously in how we move forward and how it will work with parliament. This is not least because different sectors and places will be less resilient to the economic shocks that may come, and the risk we face as the outcome of Brexit could be greater regional inequality not less.
The foundations we set now on trade, food and agriculture, the environment, manufacturing, services and security will be the base on which the next generation’s prosperity is built and indeed for decades to come. Alongside this must be a serious plan for our engagement on the world stage. The budget in March will be the next sign of how well thought through the government’s plans for our nation’s future really are. And for the Brexit select committee, which begins its work in the coming weeks, the future of our relationship with the EU and the hard choices ahead must be high on the agenda.