Formally and legally, the United Kingdom is no longer a member of the European Union, but Brexit is still set to be a major political issue for the remainder of the transition period this year. ‘Get Brexit Done’ was a simplistic slogan that more or less won the election for Boris Johnson, but it may well turn around to bite him in 2020.
Johnson would not have won had he not had the brass neck to make so many unrealistic promises about the outcome of leaving the EU. Getting Brexit done, he reassured everyone, would not involve any threats to the National Health Service, to jobs, wages, working conditions or environmental or food standards. There was no section of the working population to whom he didn’t offer beguiling platitudes: from farmers to fishermen, from nurses to teachers, from car drivers to car makers.
Johnson claims, against all the expectations of the more sober economists and representatives of capitalism, that comprehensive trade agreements can be in place by the end of this year with the UK’s main trading partners, the EU and the USA. It will all go swimmingly, he tells us. Brimming with bombast and bluster, Johnson launched his long-awaited ‘free trade’ speech this week in the historic Royal Naval College at Greenwich, all part of his pantomime theatrics, as if it were possible, by waving a magic wand, to rekindle the past glory of British maritime supremacy.
Barnier spells out some home truths
“There is no need”, he claimed, “for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment or anything similar any more than the EU should be obliged to accept UK rules.” But even as Johnson was speaking, the EU negotiator, Michel Barnier, was spelling out some home truths and making it clear that free access to the giant European market – still Britain’s biggest trading partner by a long margin – would only come at a price. The reality, in other words, looks somewhat different to Johnson’s fairyland.
There is one small element that Johnson leaves out of account. An agreement between the EU and the UK is not one, as he alleges, between “equals.” The EU is a trading block with six times the economic clout of Britain and seven times the population. The loss of trade with Britain would be a blow to the EU, but the loss of EU trade would be a catastrophe to Britain, which has become increasingly entangled in the nearby continental economy over 47 years. Whereas the EU accounts for over 45 per cent of British exports, exports to the UK are only 15 per cent of the EU total.
There is no possibility, therefore, of the EU accepting trade terms that would put their own economies at a disadvantage – either by government subsidies or tax incentives to British companies, by reducing wage costs and working conditions or (in the case of agricultural produce) by curtailing animal welfare or safety standards. The ‘level playing field’ that the EU is demanding is not a game, despite the sporting metaphor. The EU will be insisting that trading regulations are equitable for both sides – otherwise, there will be no agreement.
‘Australian deal’ is a euphemism for ‘no-deal’
Johnson’s pursuit of a Canada-style deal sidesteps the fact that the EU and UK economies are more integrated and geographically closer than is the case with Europe/Canada trade. His claims that the UK will ‘diverge’ from European regulations, while still trading seamlessly with the EU, is just a rehash of the ‘having the cake and eating it’ fantasy of Theresa May.
The government’s apparent fall-back plan is a so-called ‘Australian’ deal, which is a thinly-veiled euphemism for a no-deal scenario, given that Australia has a miniscule trading relationship with Europe. It would mean virtually trading with the EU on World Trade Organisation terms, which the National Farmers’ Union has warned, (to cite only one example) would mean 48 per cent tariffs on British lamb exports and 84 per cent on beef going to the EU.
There is also the politically-charged issue of fisheries. At present, other than a narrow strip around the coasts, EU waters are open to all EU fishing, with annually-negotiated quotas for different species of fish and for national fishing fleets. The Tories are claiming that all British waters, which are among the richest fishing grounds, will no longer be open to EU fleets. But if that is the case, then it puts a question mark over the export of British-caught fish to the EU, which is half of the total British catch. Besides which, the EU has made it clear that access for EU fleets, with more or less a retention of the status quo, has to be a quid pro quo for British financial services’ access to the EU market.
Fishing is a highly-charged issue
Fishing represents a tiny part of the British economy and workforce – around 0.04 per cent – alongside the much bigger contribution made to the economy by financial services. But fishing is an issue that is highly-charged politically and it is not clear how Johnson can steer his way through this particular minefield.
In other words, the real process of Brexit has only just begun and the Tories’ easy slogan of last December will come up hard against a cold reality.
“…the issues are many and complex,” Martin Wolf writes in the Financial Times (February 5), “These include data protection, participation in the EU and Euratom nuclear programmes, trade in goods and services, intellectual property, public procurement, mobility of people, aviation, road transport, energy, fisheries, judicial cooperation, foreign policy cooperation and cyber security. It beggars belief that all this can be agreed and ratified within a year. The idea that the UK should walk away if all this cannot be agreed in that brief time seems insane.” It is no wonder this newspaper, a sober and serious representative of British capitalist interests, is urging the government to “come clean on EU trade”.
The difficulties of the Tories negotiating their way out of the Brexit maze are compounded by the only land border the UK has with the EU, between Northern Ireland and the Republic. Few people, north or south of the border, would be happy to go back to a ‘hard border’ so it will mean that one way or another, yet more of Johnson’s pledges and assurances will go up in smoke.
The next ten months will bring extremely fractious and difficult trade negotiations between the UK and the EU, but those with the US will be no easier. Trump’s Secretary for Agriculture, speaking on a mooted trade deal between the US and the EU, made it clear where he stood. “The US will push hard to include politically-sensitive subjects such as chemically-washed chicken”. If that is the stance the US takes with a trading partner of 450 million, we can be sure it will be much harder with a weaker ‘partner’ like the UK.
Outlook for British economy is far from rosy
Even without the difficulties or even a possible collapse of trade talks with the EU; even without the world economy being shunted off course by the outbreak of the coronavirus in China, the outlook for the British economy is far from rosy. The most recent Bank of England forecasts for economic growth are considerably below the chest-beating forecasts of Tories during the election. Chancellor Sajid Javid, recently spoke of his aim to get annual growth up to 2.7 or 2.8 per cent in the coming years.
This was supposed to sound impressive, but these target figures are well below the historic growth levels of the post-war decades up to the financial crash of 2008. Nonetheless, even Javid’s target growth looks wildly optimistic against the BoE forecasts of just over 1 per cent for the next few years. The net result is that Javid will have a “black hole” of £12bn in the government’s balance sheet, compared to an expected £5bn surplus, and this will have severe implications for austerity and government cuts.
…limit to any rise in real living standards
“The BoE predicted a sustainable growth rate that is so slow” The Financial Times commented, “…it would severely limit any rise in real living standards, leave the public finances struggling to meet the demands for better public services, and constrain government efforts to boost the performance of weaker regions.” (February 1).
The key indicator dragging the British economy down, in comparison to its economic rivals in the main capitalist countries, is its poor investment record and the consequently poor record of productivity. The research director of the Resolution Foundation noted that the downgrade in the BoE’s economic forecast “was reflected productivity performance that had not been so weak since the Victorian era”, adding that “it creates a tough outlook for living standards and the public finances.” (Financial Times, February 4). Add this to Brexit and you get a toxic mix. As a Financial Times editorial pointed out, “Whatever version of Brexit the country pursues…will leave the economy smaller than had it remained in the EU…Johnson has chosen the hardest, most economically harmful form of departure.” (February 1).
Tories preparing more department spending cuts
It is no accident, therefore, that we find the Tories preparing more cuts. Boris Johnson has ordered all cabinet ministers to identify cuts of at least 5 per cent to their Whitehall department budgets. ”…a letter jointly signed by the prime minister and the chancellor, Sajid Javid, tells ministers that budgets remain extremely tight, even after a decade of austerity in the public services.” (Financial Times, February 1)
The Tories’ pledges that ‘austerity was over’ and their claims to be a ‘one-nation’ government able to deliver for the ‘people’ will turn to ashes in the coming months. Johnson will not be having a long political ‘honeymoon’; he will be lucky if it lasts out the Brexit transition period. “For Britain, the past three years have been the most politically turbulent and rancorous for decades. Brexit has shaken the foundations of British democracy” (Financial Times editorial, February 1). The foundations have certainly been shaken! But so far all we have felt have been the first shocks of a much bigger, tectonic shift in politics. The Tories may have a large majority of seats in parliament, but the idea that they will enjoy five years of uninterrupted and calm government are the stuff of cloud-cuckoo land. We will see in the coming months the outlines of the huge crises and convulsions that lie ahead and the labour movement needs to be prepared for them.
February 5, 2020
