Jayne Adye: The Government must speed up Britain’s withdrawal from EU regulations. Here’s what it should start with.

8 Dec

Jayne Adye is the Director of Get Britain Out.

On December 31 2021, it’ll have been a year since the Brexit Transition Period ended and the UK officially left the European Union, but this country has done very little to move forward and separate itself from the regulatory grasp of the EU.

There have been grand speeches from the Prime Minister and sections of Government established to investigate opportunities, but time and again action is not taken and opportunities are lost or diminished. We simply cannot afford to continue wasting time, because the longer we wait the more chances we give to our competitors to adjust and change their own regulations to gain an advantage over us.

In 2020 alone the UK took on-board 975 new regulations originating from the EU, despite no longer being a member of its political institutions – this was before hundreds of thousands more were copied across on December 31 2020 as part of so-called ‘Retained EU Law’.

Officially, there are a massive 150,000 pieces of EU legislation in effect in the UK at the moment – although it is estimated of these, only 3,000 have practical impacts on the UK – it is still a massive number.

This is why Get Britain Out has compiled its own analysis of EU Regulations still in force in the UK, which the Government should, and can, revoke or reform quickly and efficiently to impact the whole of Great Britain.

If these are to be implemented across the whole of the UK – including Northern Ireland – then this will require either total revocation of the Northern Ireland Protocol, or a significant renegotiation. Our findings cover 11 sectors of the UK and encapsulate issues which were at the heart of the Brexit debate:

  1. financial services;
  2. data regulations and properly replacing GDPR;
  3. fully breaking away from EU ‘State Aid’ legislation;
  4. ending the vulnerability of UK citizens to foreign courts;
  5. defence and procurement reform;
  6. the aviation industry;
  7. healthcare;
  8. agriculture;
  9. tax reform;
  10. correcting the injustices of the Weights and Measures Act of 1985; and
  11. regulations governing our ports.

There has undoubtedly been a loss of focus due to the Covid-19 pandemic. However, there is no excuse for what appears to be a fundamental lack of ambition to look beyond the current situation and realise embracing Brexit will be the key to allowing the UK to reach its potential and fully recover from the pandemic.

This is not to mention the fact it has now been over five years since this country voted to Leave – plenty of time for successive Governments to put plans in place, as well as execute them, including lengthy consultations. However, during that time, those in the Civil Service ‘Blob’ seem to have decided such vital work is not in their interest, as their focus appears to have been intent on trying to make sure we will end up still being part of the EU.

By no means are our findings exhaustive and there are a great number of other areas in which the Government should bring about reform. But it is about time this Government finally embraces the implementation of change, rather than appearing to be hiding behind the Covid-19 pandemic and the continuing focus on climate change – regardless of the cost to individuals and the public’s finances, or whether the infrastructure and products are ready to back it up.

In addition, Boris Johnson seems to be allowing the legislative agenda to be blown off course by an unelected, largely ‘Remain’ Civil Service ‘Blob’, which has shown itself to be extremely reluctant to implement what Ministers want.

There are large swathes of European Union Regulations which still govern this country, despite it being over five years since we voted to Leave the EU. It’s also now almost a year since the end of the transition period, which, may I remind everyone, was supposed to be a time during which many of these regulatory changes should have been implemented to get the UK ready for life as an independent country.

However, these years have been wasted, not just by this Government, but also by the former Prime Minister, Theresa May and her Cabinet, who devoted so much time to a mentality of damage limitation as they refused to embrace the opportunities of Brexit.

The regulations we have identified were created and imposed upon this country by a bureaucracy-obsessed, vast European federalist political project which we did not vote to support when we went into the European Economic Community.

They are not suitable for an independent and global UK. Using the powers, we have regained from the European Union, we must urgently amend and update these regulations to fit our own values and priorities to fundamentally help this country get back on its feet and stay strong against economic turbulence which may be down the road.

Key to any success should be a clear consistent vision from those at the top. Instead of acting as if ‘Brexit is done’ and ignoring the outstanding issues, the Prime Minister and the Cabinet must also take full control of their departments – by quickly making changes to the Civil Service where required – and focus the power of Government on generating real change.

Only by breaking away from the current focus on the Covid Pandemic and climate change, can we hope to allow an independent ‘Global Britain’ to reach its full potential.

The full research document can be found on the Get Britain Out website.

Matt Bevington: Barnier doesn’t need a new mandate to find compromises

9 Dec

Matt Bevington is public policy & foreign affairs analyst at the UK in a Changing Europe.

“The last round of talks finished with Michel Barnier waving around the declaration from last year. Does the Minister agree that he should wave it towards EU leaders and ask them to refine his mandate so that he has more chance of making a deal on state aid and fishing?” Nigel Mills MP, 16 June 2020

“Yes.” Michael Gove

Like many of the arguments around Brexit, those about the EU’s negotiating mandate never seem to go away. On December 8, Paul Goodman reported on this site that the idea was still floating around among Conservative MPs that the EU mandate needed to change to advance negotiations. If only Michel Barnier wasn’t so hamstrung by an unrealistic set of negotiating instructions, the argument goes, real progress could be made.

It is true that the EU mandate makes some demanding asks of the UK. On government subsidies, for instance, it says “The envisaged partnership should ensure the application of Union State aid rules to and in the United Kingdom.” In other words, EU rules on subsidies should apply in the UK in future and, by extension, the European Court of Justice would need to adjudicate those rules.

On fisheries, too, the EU mandate is uncompromising. It says, “the provisions on fisheries should uphold existing reciprocal access conditions, quota shares and the traditional activity of the Union fleet”. It argues that, basically, nothing should change when it comes to fish. EU boats should get the same access and quota as now.

On so-called level playing field issues, the EU mandate, again, demands EU rules be followed in future. It says, “the envisaged agreement should uphold common high standards, and corresponding high standards over time with Union standards as a reference point”. This would apply to a swathe of areas, including labour and environmental standards. The UK and EU would keep in lockstep on these issues over time according to how EU rules developed.

Looking at all this, you might reasonably conclude that such a mandate was incompatible with anything the UK could agree to. It could never agree to follow EU subsidy rules, accept the status quo for fish or promise to keep in lockstep with EU rules on level-playing field standards.

With negotiations now entering their tenth month, and seemingly little prospect of a solution on these issues, surely Barnier should go back to EU governments and ask for a more flexible mandate. Shouldn’t he?

Put simply, no. The fixation on the EU’s negotiating mandate is a red herring.

There are at least four reasons why. First, because it’s not necessary. EU negotiators have already moved away from the EU mandate in crucial areas. They are no longer demanding the UK follow EU state aid rules and they accept that the status quo on fish will not continue. That doesn’t mean these issues have been solved, but it shows that the mandate is far from gospel and plenty flexible already.

Second, because it’s not necessary. EU governments are the ones that gave Barnier his negotiating instructions and it is they who would sign off on any deal. They can decide to make compromises not foreseen in the mandate and even contradict it if they wish because they wrote it. EU governments are not about to sanction themselves for having accepted a deal on different terms to the original mandate.

Third, even if the EU were to try and draw up a new negotiating mandate now, it is such a complex process – involving 27 different governments, each with their own competing interests – there is simply no time to do so. These things take months of internal debate and discussion. Trying to do so mid-negotiation is a recipe for undoing lots of what has already been agreed and going backwards.

EU negotiators and member states are in constant contact at this stage in the talks anyway. If Barnier is not moving, it is because he is being told not to, not simply because of his interpretation of the mandate. Equally, if he is given the green light to move, he will, even if that goes against parts of his original mandate.

It is not completely unheard of for EU negotiating mandates to be changed. For instance, in the EU’s talks with the US, it adopted a new, more limited mandate in 2019 following the failure of the TTIP negotiations. This was because of “difficulties in negotiating mutually acceptable commitments in areas identified as priorities by the Union”, necessitating “a more limited agreement”. Note, though, that the EU did not change its mandate mid-negotiation with the US. It did so once those talks had failed to advance a much more limited agenda.

Fourth, given all that, the EU has no reason to want to change its mandate. Such a move would be tantamount recognition that the initial mandate was a mistake. That would weaken its position in negotiations. Part of the EU’s posture in these talks has been that it is monotonously consistent in its principles and demands. Changing this now would undermine that completely.

The UK itself would not dream of changing its formal negotiating objectives at such a crucial point in the talks. Why would the EU?

One of the reasons politicians in the UK may be so keen to focus on the EU mandate is partly the blame game. If talks fail, it can be pinned on the EU for not being flexible enough in its negotiating instructions. That would be the wrong conclusion.

Ultimately, the EU mandate does not prevent a deal being reached and does not need to be changed to do so. The same goes for the UK’s negotiating objectives. They are a guide for negotiations – and very important – but not a script. Indeed, the EU mandate has already been diverged from in fundamental ways, on state aid and fisheries. There would many explanations for no deal if it happened – either side’s negotiating objectives is not one of them.

Labour are divided over an EU deal, but no-deal Brexit would pose its own problem for Starmer

7 Dec

As the denouement of the EU negotiations loom, the papers have offered a running commentary of Sir Keir Starmer’s struggle to unite the Labour Party behind his Brexit policy.

The Labour leader is reportedly “leaning heavily towards whipping in favour of a deal if ministers strike one”, according to the Times, “but his top team is divided on the merits of such a move”.

A substantial section of the Shadow Cabinet want the Opposition to abstain and let the Government carry the can for the consequences of whatever manner of Brexit the Prime Minister eventually delivers. The problem is that it is extremely difficult to simultaneously claim that Britain’s relationship with Europe (or indeed approach to lockdown) is an issue of paramount importance, as so many in Labour have, and then sit out of the vote on that relationship.

Voting against the deal, at this stage in the negotiations, risks not only looking inveterately hostile to Brexit to many of the ‘Red Wall’ voters Labour needs to win back from the Conservatives, but is also a tacit endorsement of ‘No Deal’, as at this stage no alternative to whatever Boris Johnson brings back is on the table.

So Starmer is probably right, on balance, to row in behind the deal in the Commons. Voters seldom blame the Opposition for Government policy anyway. But what if, contra to all the weary cynicism of those watching the London-Brussels pantomime, the talks really do fall through and No Deal Brexit it is?

The Leader of the Opposition can scarcely endorse it, especially given his personal role as the champion of the Europhile rearguard during the previous parliament. In a recent piece for Prospect, Peter Mandelson claims Starmer is one of the principle suspects in the mystery of what killed a soft Brexit:

“Ultimately Keir Starmer, then Labour’s Brexit spokesman, used the paralysis to wear Corbyn down until he accepted a People’s Vote as the Labour platform – hoping that the cul-de-sac would turn into an exit route from Brexit. It was a high-stakes, winner-takes-all gamble – and they lost, with a softer Brexit being the collateral damage.”

But attacking it will carry its own risks. The Government will (or at least, given its messaging record, ought) to come straight out of the traps with an exculpatory version of events, pinning the blame for the collapse of the negotiations on unreasonable EU demands to prevent it protecting the fishing industry and setting up a state aid policy to help regenerate regional industries.

If it wants to win back the territory lost to the Tories at the last election, Labour probably can’t look like it’s endorsing Brussels’ policy. But if it doesn’t, that invites the obvious question: what would you have done in Johnson’s place: accepted the terms he rejected? Or walk away, as he did?

Stephen Booth: As the Brexit deadline nears, the UK is strong on fishing rights – but Frost indicates movement on state aid.

15 Oct

David Skelton: Brexit can unleash a new era of reindustrialisation. But only if we are free from state aid laws.

17 Sep

David Skelton is the author of Little Platoons: How a revived One Nation can empower England’s forgotten towns and redraw the political map.

Brexit provides the UK with an opportunity to build a new, high-skill, high-productivity economy. A bold agenda of reindustrialisation can revive regional economies and see the levelling-up agenda made flesh. But we can only make the most of these opportunities if we aren’t unnecessarily restricted by the EU’s state aid laws. As a sovereign nation, we should be free to follow an industrial policy that is best for Britain. We mustn’t have the ability of the British state to support innovation to be hidebound by the EU’s strict state aid rules.

There were many reasons that we voted to leave the EU. The ability to set our own laws and have them made by people who were elected and could be held accountable was a crucial part of the decision to Leave. A clear message was delivered in the referendum from long forgotten “post-industrial” towns across the country that we needed to tackle regional inequality. The EU’s apparent insistence on maintaining state aid rules after Brexit would ride roughshod over the first and make tackling regional inequality much more difficult to achieve.

I’ve long taken the view that the restrictive state aid rules imposed by the EU were one of the major obstacles to us achieving a new economic settlement that benefits the whole of the UK. The pursuit of a level playing field for the EU meant that the parts of the country that I talked about in Little Platoons, which were heavily impacted by deindustrialisation, became stuck in an economic cycle of low innovation, low skilled, low wage work.

This was bad for post-industrial parts of the country, but also bad for the economy as a whole, with the UK’s low productivity problem being particularly pronounced in those parts of the country that had seen economic decline for decades. The recycling of UK taxpayers cash (a reminder that we were a net contributor to the EU budget for decades) through much trumpeted structural funding was no substitute for the fact that state aid rules bound our hands and prevented us from a more ambitious strategy to reverse decades of decline.

Now we have left the EU, it’s essential that the EU isn’t able to bind our hands again as we look to shift the economic paradigm to that of a high-skills, high-productivity, high-wage, tech-driven economy. Freedom from EU state aid rules represents an important opportunity for us to deliver that altered economic settlement and to pursue a bold strategy that focuses on a high-tech reindustrialisation of our economy. This should emphasise the importance of manufacturing (including green industry) in reframing our economy.

Crucially, manufacturing is generally higher skill, more productive and more export driven than other sectors. Whereas manufacturing accounts for less than eight per cent of the jobs in the UK, it accounts for around two thirds of our R & D investment – the kind of investment that is crucial to future growth and prosperity. This R & D emphasis also underlines the importance of manufacturing creating what Shih and Pisano have described as the “industrial commons” – skills and knowledge networks and clusters that drive innovation further.

An industrial strategy free from the constraints of state-aid policy means that we can support the businesses and sectors that are at the forefront of the new industrial revolution and also use the power of government to create innovation hubs in the regions, along with government-supported and business-backed centres of industrial excellence. A new industrial policy, free from state-aid restrictions, could aim to deliver high innovation industrial hubs in regions where the transformative power of a government accelerated industrial commons could have an enormously positive impact.

Any discussion about the positive impact of industrial policy and the importance of a state-aid regime that supports it is normally accompanied with the construction of straw-men or, more accurately, straw “lame-ducks” and the argument that any industrial policy will inevitably go down the route of Britain in the 1970s.

This is an ideological worldview that regards the bailing out of British Leyland as trumping any international experience in the decades since.  However, what that international experience has shown is that by far the biggest risk for the UK lies in us not pursuing an intelligent industrial strategy.

International experience shows that state aid and industrial strategy can not only help to turn around lagging regions but also place countries at the forefront of emerging technologies. And successful international experience illustrates that an ambitious industrial strategy shouldn’t be about “bucking the market”, but, instead working with the market and using market signals to maximise the impact of government investment.

In many parts of Asia, including Korea, Japan, Taiwan and Singapore, industrial strategy has used market feedback to develop a sectoral industrial strategy that has seen living standards and productivity surge. In all cases, the feedback mechanism of the market has allowed governments to identify sectors for future growth and provide government investment that has allowed these countries to be leaders in key sectors.

The mid-century United States, seen wrongly as a laissez-faire bastion, also provides an example of gains that can be made when business and government work together. The hero of that story is Vannevar Bush, who saw the importance of the government strongly investing in and incubating innovation and helping to transfer ideas from the initial invention to the marketplace.

His importance has been summed up recently in the excellent work of Safi Bahcall. Bush understood that innovation and invention is key to future growth and prosperity, but also that early innovation is fragile and risky. Without government support, such innovation might well perish, but government support, through the likes of the National Science Foundation and DARPA allowed innovation to be nurtured at a crucial stage and resulted in a stream of inventions that transformed the economy.

Such a model, in which government nurtures innovation at the most important stage and invests in those companies at the cutting edge of key emerging technologies could be transformational for the UK economy, which already has a world-leading research base but often lacks the ability (or often means due to distorted or inefficient funding models) to maximise the commercialisation of innovation.

Government is in a position to support innovation at the most fragile stage of the innovation process in a way that the market simply cannot. An effective industrial strategy could maximise the UK’s strengths and use the directional sway of government to promote long-term growth outside of the South East. Such an ambitious policy would not, however, be fully possible under the stricture of EU state aid rules.

Brexit represents a remarkable opportunity for an economic renaissance in the UK. We no longer have to have ambition or imagination restricted by the EU’s state aid rules.

This renaissance could place the UK at the vanguard of the most industries and technologies over the coming decades. It could also bring about a lasting and meaningful transformation of parts of the country that have long been characterised by economic decline. This requires a sensible and strategic role for government, based on an independent economic policy that isn’t limited by the narrowly restrictive nature of EU state aid limits.

Stephen Booth: With four months left to get a Brexit deal, state aid is the major stumbling block for the UK and EU.

3 Sep

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

At this delicate stage, predictions of whether the Brexit negotiations will conclude with a trade agreement or not are bound to be no more than guesswork. With only four months until the end of the Brexit transition period, the chances of a UK-EU trade deal being ready for January 1, 2021 are in fifty-fifty territory.

The EU’s “parallelism” policy – blocking progress in one area as long as there isn’t progress elsewhere – means that Michel Barnier is refusing to discuss British proposals on fishing until the UK moves on other issues, including the most difficult of them all: the EU’s desire to establish a “level playing field” for state aid. It could be argued that Brussels’ insistence on solving the difficult issues first prevents rather than permits progress.

Ultimately, fishing is not likely to be the deal-breaker. The eight EU member states with significant fishing fleets will completely lose access to UK waters if there is no deal at all, so cutting a deal is clearly better than the default, even if it falls well short of the desire for “relative stability” for existing EU quotas.

At the start of the summer there were reasons for optimism about a deal. The EU had signalled a willingness to water down its most ambitious demands on fishing and state aid and the UK had acknowledged the EU’s concerns about the overall structure of the agreement.

However, the mood appears to have turned and the last negotiating round yielded very little, according to the readouts from both sides. This week Jean-Yves Le Drian, the French Foreign Minister, cited the “intransigent and frankly unrealistic attitude” of the UK for the lack of progress. Barnier yesterday gave a speech outlining the continued areas of disagreement. Equally, recent media reports suggest the UK is preparing the ground to walk away from the talks if the stalemate continues much longer.

State aid is the major stumbling block. The impasse would appear to be a bigger problem in theory than in practice. UK orthodoxy has seen past governments refrain from major interventions in the economy. According to the European Commission’s “State aid Scoreboard”, the UK spent state aid equivalent to 0.34 per cent of GDP in 2018, compared to an EU average of 0.76 per cent. Meanwhile, France spent 0.79 per cent, slightly above the EU average, and Germany spent a much larger per cent.

The perception in Brussels is that this UK Government is different. David McAllister, the German MEP who chairs the European Parliament’s Brexit committee and who is close to Angela Merkel, has said the “UK’s interest in subsidising sectors”, such as steel and cars, would have “direct consequences for EU industries and jobs if these goods have ‘duty-free, quota-free’ access to the single market”.

This precise fear of the UK turning to a historically continental strategy of promoting “national champions” may be wide of the mark. Nevertheless, it is clear that some members of this Government view industrial policy and strategic investment as important levers at its disposal.

In this area, the devil will be in the detail. In the post-Covid world, it is difficult to predict what will be required of the state and nimbleness may be critical. Therefore, it is understandable that the UK would not want to find itself bound permanently by treaty into the EU state-aid regime, much of which is “temporarily” suspended in any case due to the pressures of the crisis on national and regional governments.

Little headway appears likely until the UK sets out its blueprint for domestic state subsidy control, which is expected to be later this month. At a minimum, the UK will need to comply with WTO rules, but these fall far short of the requirements of the current EU regime.

WTO rules only apply to goods, while the EU rules apply to both goods and services. The EU rules are prescriptive in what and what is not permitted, whereas, in practice, WTO rules set a high threshold because complainant countries must demonstrate that disputed aid is harmful in its effect.

The EU appears to have walked back from its initial position – clearly unacceptable to the Government – that the UK should continue to be bound by EU state aid rules into the future, with the European Court of Justice (ECJ) having the final say in respect of enforcement. In contrast, the EU’s agreement with Canada simply uses the WTO model as a basis and expands it to services, but there are limited options for enforcement.

A possible compromise would be for the UK to implement domestic legislation, adopting some aspects of the status quo, enforced by an independent UK authority and subject to review by Parliament and the UK courts (not the ECJ). Subject to dispute settlement, set out in the UK-EU trade agreement, the EU (and the UK) would retain the right to adopt countermeasures, such as tariffs, against any state aid deemed to be trade-distorting.

Whether this would be acceptable to the EU remains to be seen. The essential objective from the UK’s perspective is to depart from the EU’s desire to micromanage the UK’s subsidy policy by treaty. However, the UK would need to accept the principle that the EU could deal with the consequences of UK subsidies with countermeasures such as retaliatory tariffs.

A bust up in September or October does not necessarily preclude a deal at the last minute. Weighed against these important, yet technocratic considerations, is the prospect of no agreement at all.

A trade agreement, with no tariffs on UK-EU trade and regulatory cooperation, would better enable the UK to implement the Northern Ireland Protocol in the light-touch way the Government has outlined.

Any disruption attributed to a no deal exit, however transient, would give Keir Starmer ammunition in his continued attack on Government competence. Against this, the Government is in a much stronger position than it was in the autumn of 2019 when renegotiating the Withdrawal Agreement.

Failure would have economic and geopolitical consequences for the EU too. The UK may only be Germany’s seventh largest trade partner, but it ranks second in contributing to Germany’s trade surplus.

It is notable that Tom Tugendhat MP has on this site recently called for the UK to break with EU policy on Iran to adopt an approach closer to the United States. In the event of a breakdown in the trade relationship, Brussels should not be surprised to encounter a more muscularly independent UK in other fields.

We are now approaching the end game. The technical negotiations have probably achieved as much as they can at this stage. It will soon be up to the politicians on both sides of the table to make the big call about whether to make the deal or not.

Tom Harris: Scottish Labour’s continuing capitulation to nationalism reeks of political desperation

20 Aug

Tom Harris was a Labour MP from 2001 to 2015. He resigned his party membership in 2018.

The Scottish Labour Party is not proving to be as reliable an ally in the fight against nationalism as many of its current and former supporters might have hoped. And that is being generous.

The latest capitulation came yesterday in the chamber of the Scottish parliament, when a motion tabled by the Scottish government on the proposed new UK single market was debated. There is so much dishonesty and hypocrisy involved here that to cover every aspect would demand too much space. So I will try to summarise.

SNP ministers, for perfectly understandable reasons, don’t like the idea of a single market in the UK, despite our having enjoyed the benefits of one since 1707. About 60 per cent of all Scotland’s exports are destined for markets in the rest of the UK, far outweighing the importance of the EU single market.

Yet the nationalists have consistently prioritised, in a political sense, the EU single market over the UK because… well, because it suits them. Scottish nationalism has thrived by emphasising Scotland’s links with Europe and diminishing its historical, economic and social ties to the rest of the country.

The strategy seems to be working, so who can blame them?

Not Scottish Labour, that’s for sure, which lent its wholehearted support yesterday to the nationalist narrative. The SNP’s ostensible opposition to a UK single market is (it is claimed) based on fears that a UK-US trade deal will flood the country with sub-standard food which would then be sold in every part of the UK, denying devolved governments the right to impose tougher food standards in their neck of the woods.

Labour then piled in with its own grievance about how a post-EU single UK market would somehow prevent state aid being offered to parts of the economy. This is the same Scottish Labour Party that, virtually unanimously, campaigned against leaving the EU, despite the commission’s well-known restrictions on state aid in member countries. Brussels preventing member states bailing out companies is fine, but we can’t have Westminster doing that, can we? (Ironically, it’s far more likely that a post-EU Conservative government will look more kindly on state aid than the EU ever did, as we have seen in recent months).

When we were still in the EU, the devolved administrations had no power to restrict the sale of any item that was on sale anywhere else in the EU single market, nor did they ask for such powers. Anything manufactured in the EU, or even imported into it and deemed an acceptable standard, was A-OK by nationalists. But now that we’re outside the EU, trade barriers within our own island are the only thing standing between us and a lorry load of chlorinated chicken.

Let’s cast our minds back to the negotiations on the Transatlantic Trade and Investment Partnership (TTIP), the embryonic trade agreement between the EU and the US that hit the rocks in 2018 after President Trump called a halt to the talks.

It is quite possible that if Hillary Clinton – that figure so beloved of the left and, we must assume, the nationalists also – had become president in 2017 instead of Trump, the TTIP process would have continued and might by now have been enacted.

Yet where was the opposition in Labour and SNP ranks to a deal that was negotiated in the strictest privacy and whose terms could only be speculated upon even as talks were on-going?

In the 1990s, Scottish Labour cynically and dishonestly painted the Conservatives as anti-Scottish because of its then opposition to devolution. The tactic proved profitable in terms of electoral gains. But then – and who could have predicted this? – the SNP learned that lesson and turned it on Labour itself, decrying Scottish Labour as anti-Scottish because it opposed independence. Again, the electoral dividends were considerable.

And now Scottish Labour is returning the compliment by taking a leaf out of the nationalists’ playbook and obediently repeating the mantra, “London bad, Brussels good”. The SNP is so opposed to the British state that it would rather have Scottish fishing policy decided in Brussels than in Edinburgh. Labour follows this line.

Likewise, nationalists would prefer Scotland’s trade policy to be decided in Brussels than in London, the former being trusted to produce a marvellous and, no doubt, progressive, deal while one negotiated by those evil Tories in London would necessitate customs checks at Gretna. Again, Labour is happy to parrot this propaganda too.

Perhaps Labour’s continuing capitulation to nationalism is an inevitable response to a succession of increasingly humiliating electoral defeats; its members and elected representatives must gaze upon the SNP’s seemingly unstoppable rise and conclude that Nicola Sturgeon’s party is doing and saying something right.

To paraphrase an old (and funny) anti-French joke, how many Scottish Labour MSPs does it take to defend the Union? Answer: no one knows because it’s never been tried.

Stephen Booth: The UK’s parallel trade negotiations are of unprecedented ambition

6 Aug

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Brexit is necessarily reshaping Britain’s trade relationship with the EU. Meanwhile, the UK is simultaneously trying to ensure continuity of, or build upon, existing trade agreements with non-EU countries, such as Japan, and reach entirely new deals with partners including the United States, Australia and New Zealand.

The UK also intends to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which currently includes 11 countries on the Pacific rim including Japan, Australia, New Zealand and Canada.

Predictably, the EU negotiations are set to go down to the wire. Since Boris Johnson became Prime Minister all signs have pointed to a so-called “skinny” free trade agreement (FTA) or none at all. For this Government, Brexit is primarily about establishing sovereign independence, while the EU has sought to underline and assert its role as the dominant regulatory and economic power.

It is no wonder that politics has trumped economics throughout the Brexit process. The EU is a political endeavour pursued by economic means. The €750bn economic recovery plan agreed by EU leaders last month illustrates the extent to which the UK’s preference for confining deeper political and economic integration to the Eurozone faced an uphill struggle had it remained in the bloc. It is impossible to imagine any British government agreeing to such a dramatic expansion of the EU’s financial firepower or the precedent it has set for further moves towards a common EU fiscal policy.

Nevertheless, there are reasons to be cautiously optimistic about a UK-EU deal being reached. The latest negotiating round appeared to mark a breakthrough on governance issues. David Frost’s statement welcomed the EU’s “more pragmatic approach” on the Court of Justice and suggested the UK was ready to consider the EU’s preference for one set of governance arrangements, rather than a suite of separate arrangements.

The remaining sticking points are fishing and state aid. Fishing is not significant in terms of GDP but is politically totemic in the UK and certain EU member states. Therefore, a deal must be left to the last minute. Establishing a “level-playing field” on state aid is proving to be the biggest substantive issue to resolve. The EU is moving away from its request for dynamic alignment and the issue now is what domestic regime the UK will propose.

Negotiations with the US appear to have got off to a good start. However, both sides accept that a deal cannot now be reached until after the US elections in November. Therefore, the most difficult areas, such as agriculture, will not be addressed until later in the year at the earliest.

The most pressing issue Liz Truss, the Trade Secretary, discussed on her trip to Washington earlier this week is the removal of US retaliatory tariffs as part of the ongoing Airbus/Boeing dispute, which sits outside the FTA negotiations. The US has levied tariffs on whisky and further tariffs could be extended to gin and other products if the dispute is not resolved.

The prospect of delay with the US has made UK engagement with the Asia-Pacific countries all the more important and pushed accession to the CPTPP up the agenda. Toshimitsu Motegi, the Japanese Foreign Minister, is in London this week in an attempt to finalise talks on the UK-Japan FTA.

The Japan deal is an important stepping stone towards CPTPP accession, since Japan is the biggest economy within the agreement. The Japan negotiations are working to a condensed timetable because the parties are aiming to ensure a successor to the EU-Japan FTA is in place before the end of the Brexit transition period on January 1, 2021.

The time constraints mean that a UK-Japan deal will be largely modelled on the EU precedent. However, media reports have suggested Japan might be prepared to accelerate tariff cuts for British pork, and Japan is seeking the immediate elimination of car tariffs. The major opportunities for innovation in UK-Japan trade relations is on regulatory cooperation in the services and digital sectors. The FTA can provide the architecture but domestic regulators will need to work together to realise long-term gains.

Another reason why the CPTPP may become increasingly important is that Joe Biden has indicated that he might be prepared to (re-)join the CPTPP if his presidential bid is successful. President Trump pulled out of its previous iteration, the Trans-Pacific Partnership, spearheaded by President Obama. However, this could be a slow process, since Biden’s campaign has also emphasised that his primary focus will be on domestic investment and he has previously suggested he would seek to renegotiate CPTPP if the US were to re-join.

Some have suggested that engaging with the US via the CPTPP rather than bilaterally would defuse some of the thorniest issues, such as agricultural standards on chlorine-washed chicken or hormone-treated beef. However, the reality is that while the optics might be different, the UK will face many of the same substantive trade-offs whoever is president.

The CPTPP rulebook is much closer to the US approach – indeed the World Trade Organisation’s (WTO) approach – to regulating agriculture than we have inherited from the EU. Blanket bans on agricultural imports, not supported by scientific evidence, will not only be viewed as a protectionist move by the US but potentially by other members of the CPTPP.

The question of agricultural liberalisation cannot be ducked for much longer. Equally, as we noted in the recent Policy Exchange paper, The art of the UK-US trade deal, the issue need not be as stark as some of the hyperbole has suggested. The starting points should be to promote consumer choice, while ensuring consumer safety. The UK already has the right, under WTO rules, to prohibit the import of unsafe food. Labelling, either via domestic legislation or voluntary certifications, can be used to inform consumers of food production methods.

The UK’s domestic and international policies must also work in tandem. UK tariff liberalisation can be phased in gradually, giving UK producers time to adjust to new trading conditions. This would reflect the gradual introduction of the UK’s Environmental Land Management scheme, replacing the EU’s Common Agricultural Policy. Meanwhile, it should also be remembered that agricultural liberalisation is an export opportunity for high quality UK products, particularly beef and lamb.

In today’s world, trade agreements do not merely set tariffs or regulate cross-border investment. For medium-sized powers in particular, they are important building blocks for wider political relationships and alliances. However, in order to unlock these relationships, the UK must be willing to live up to its rhetoric on free trade.

David Gauke: Without a proper state aid regime, the UK is unlikely to make a deal with Brussels

1 Aug

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

Within the next three months, Boris Johnson is going to have to make the decision that will define his premiership and determine the future of British politics – especially the Conservative Party – for a generation. And the subject matter of this momentous decision? The previously obscure issue of the regulatory regime constraining the ability of the Government to provide taxpayer support for private sector companies. In other words, state aid.

Before turning to the issue in hand, let me set out a little context. My last two columns (here and here) have made the case that there is an electoral logic that points towards the Conservative Party moving in a leftwards direction economically but in a rightwards direction when it comes to social issues or, to put it more precisely, issues of national identity. Politics appears to be realigning as the biggest dividing line ceases to be about economic class or ideology but in relation to cultural issues.

The consequences of such a dividing line – and the Conservative Party unambiguously placing itself on one side or the other – is an uncomfortable one for those Conservatives with a desire for intellectual consistency.

At least since Margaret Thatcher’s premiership, the Conservative orthodoxy has been in favour of sound money and free trade. That is not to say that the State had been banished from making any kind of intervention in the economy – no recent government could accurately be described as laissez faire – but that any such intervention would be made carefully, recognising that the market was, by and large, a rather good way of allocating resources.

As for cultural issues, the Conservative Party has been a broad church consisting of social conservatives and social liberals, tub-thumping patriots and committed internationalists. Generally, we rubbed along alright.

These Conservative traditions were abandoned in 2019, resulting in the Prime Minister’s electoral triumph in December when he won previously safe Labour seats. He did so by promising an economic policy that involved more spending and greater government intervention. He also promised to deliver Brexit at whatever cost. It was an uncompromisingly Leave prospectus that appealed to patriotic/English nationalist working class voters.

This brings us to the UK/EU negotiations over a comprehensive Free Trade Agreement. Contrary to promises of an oven-ready deal, discussions have not yet made a lot of progress. There are two sticking points. The first is fish. This is a matter of economic irrelevance (our fishing industry contributes less to GDP than Harrods) but of disproportionate political importance. As one can make a similar point about the EU, it would be an extraordinary failure for this matter to prevent a wider deal being reached.

The more substantive issue relates to the level playing field provisions. These are the EU’s requirements that the UK will not engage in “unfair competition” by undercutting the EU’s social and environmental legislation, nor provide anti-competitive subsidies.

The UK Government’s response to these demands has been to argue that this is an outrageous attempt to fetter the actions of a newly-independent nation. Given that (1) free trade agreements inevitably involve accepting some restrictions on a country’s ability to determine its own rules and (2) the UK accepted the principle of level playing field provisions in October’s Political Declaration, the EU is less than impressed by the argument.

The particular focus of the dispute has been state aid. At one level, this is surprising. The UK has traditionally eschewed state aid spending, seeing it as market-distorting and a wasteful use of taxpayers’ money. We spend less of it than the French and Germans and, as EU members, consistently argued against its use.

Nor has it traditionally been a touchstone issue for Eurosceptics. From my days in the ERG, I recall plenty of conversations about how the EU imposed regulatory burdens on businesses, prevented trade deals with rising economies like China and resulted in too much power in the hands of the unelected (oh, happy innocent days). Restrictions on bailing out private sector companies were not so much of problem for us Thatcherites.

This issue could have easily been de-escalated if we had put in place our own, independent and robust state aid regime, perhaps enforced by the Competition and Markets Authority. Such a regime is probably necessary (albeit not sufficient) in order to reach a compromise with the EU on this topic.

Instead, we have refused to set out our own domestic regime and there is much talk of how we can use our new freedoms as ex-members of the EU to support our own companies, like the rather odd acquisition earlier this month of a £400 million shareholding in a failed satellite company.

According to the Financial Times, Dominic Cummings is digging in against anything other than a “minimal, light-touch” state aid regime, believing that once you have left the EU “you should just do whatever you want”.

This brings me back to the nature of the Conservative victory last year and, in particular, the new supporters. If the Government’s focus is appealing to nationalists who favour an interventionist state, it would want the ability to back national champions or other businesses in favoured locations.

And if you are temperamentally inclined to think that any constraint on your ability to “do whatever you want” (whether by the EU, Parliament or the legal system) is an affront to democracy, then you will be all the more the likely to resist a robust and independent regime.

There are, however, consequences. First, it is very hard to see how the EU will agree to a deal if the UK does not have a proper state aid regime. I wrote in February how there may be a political case for not getting a deal (any deal will be very thin in any event, some parts of the economy will suffer as a consequence of leaving the Single Market, better to collapse the talks and blame the EU for the consequences) and that argument still applies.

But, as a consequence of the handling of Covid-19, the Government is more vulnerable to the charge of incompetence. In addition, a no deal Brexit would be a gift to the SNP, thus weakening the Union yet further.

Second, even putting aside the EU dimension, there are very good arguments for having in place a robust state aid regime. The Treasury will be arguing the case. Both as a finance ministry (ensuring that taxpayers’ money is spent wisely) and as an economics ministry (wanting resources to be allocated productively in order to maximise economic growth), it institutionally hates state aid. Presumably, the Chancellor of the Exchequer, well-regarded by his officials, will have similar views and will be making the case forcefully. At least, he should be.

It will be for the Prime Minister to decide. Go for the purist view of Brexit (“you do whatever you want”), embrace the new political alignment and splash the cash in order to play to the Red Wall voters. Or keep open the possibility of a deal, look after the interests of taxpayers and maintain some kind of consistency with economic orthodoxy. Whichever way he goes, it will be a hugely consequential and revealing decision.