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There is a natural impatience in invoke Article 50. Pressure is added by demands from the EU to get on with it. Should we listen?
Article 50 provides for an orderly withdrawal from the EU. That such a withdrawal is carried out in a friendly way, being a neighbouring nation, is subject to Article 8.
The first step in any analysis should always be to question the question.
Debate during the campaigns was focused by the Prime Minister who initiated the referendum, honouring a manifesto commitment to the British people. His chosen battle ground was the economic case and access to the Single European Market (SEM). The question that remains is whether the SEM should in fact be our priority?
To expand on the context, Cameron stressed the current dependency of our export markets on the EU, currently estimated to be 44% of exports.
The next step in analysis is to identify the perspective.
Yes, the 44% figure of our exports seems to be significant. We appear dependent. It is not a figure that should be considered in isolation. Of our export growth, 90% is with the rest of the world. If imports are added into the equation, we currently run a trade deficit with the EU of around £8bn per month.
If we shift the perspective, we can immediately see that the 56% of exports that go to the rest of the world perhaps should be prioritised. We can also go further and see that more jobs in Germany and France are dependent on trade with the UK than are UK jobs on trade with Germany and France.
There are also assumptions made that are open to challenge. Some of these might affect negotiating positions.
For a moment, think back to 1944. Hitler occupied Europe and the allies planned D Day. Would Roosevelt and Churchill have asked Hitler to choose our mode of attack? Would they have agreed to use tickling sticks whilst mounted on unicycles launched from pedalos against Hitler’s choice of artillery and tanks? Of course not!
We are asked by Churchill’s successor to recognise that if we want to have access to the SEM, we have to accept ‘free movement’.
Now, let’s extrapolate some obvious conclusions to real world scenarios.
If no agreement can be reached, the fall back position is World Trade Organisation (WTO) rules for trade with the EU. The position has changed since we joined the EU. The Uruguay Round of what was then the General Agreement of Tariffs and Trade (GATT) gave rise to the change to WTO. Barriers to trade are not what they were.
We know that the EU is actually a customs union, encompassing free trade for countries within the EU. Barriers are put up to countries outside.
The simplest question is; what is access to our market worth?
Against a background of a monthly trade deficit of £8bn with the EU, what is more important for the EU is access to the British market. An estimated 3 million German jobs alone are estimated to be dependent on car sales to the UK. That is before agricultural jobs across France are considered, with cheese and wines.
Should WTO rules come in, tariffs would be applied on German cars of around 10%. EU produced Fords and Vauxhalls become more expensive, putting at risk the EU’s inward investment against British made cars under Japanese ownership.
If we do wish to buy a Mercedes, it does not have to be from Germany. We can negotiate a trade deal with Brazil, another home for Mercedes assembly. It doesn’t matter to us whether German or Brazilian jobs are supported.
The message for the EU is simple. If you want a deal without free movement, fine, we shall listen. Otherwise, we have two years for Mercedes to prepare a right hand drive assembly line. We have that time to negotiate a free trade deal with English speaking biggest value market, NAFTA, with the Commonwealth, a growing market with 1/3rd of global population.
We know where relative growth is. Our priority is to deal with friends. You have a need for our market. Our friends helped liberate Europe twice. We owe them more than we owe you. Drop free movement and we shall listen.
To invoke Article 50 now is to accept that we are weaker than the EU. We accept that we follow their diktat. To start to negotiate on our terms recognises our position of strength as a major economy in the world. We shall talk when we are ready and we have so many better options to explore.
It is an expression of good will not to exclude French, Dutch and Spanish trawlers from British waters. We are a magnanimous people. We have given the EU longer to adapt.
Yes, we can jump now. We can also create pressure. It makes sense to give our negotiators a chance to evaluate the real situation. It may take time to realise quite how strong we are. We will be stronger by taking time to write our own instruction manual rather than leap in and play with our new toy before we understand what it is capable of.
What is more important is to develop a strategy that might be attractive to politicians of all British parties, one that is flexible and one that represents the global interests of the United Kingdom and the global society. We can help to generate sustainable growth in developing countries, bringing us cheaper goods whilst helping poorer societies by granting them a market.
Ultimately, it is for the government of the day to decide. Never forget that we are in a democracy. Like students who take a gap year before choosing a career, we have time to decide on our best long term options. Let’s have a look at the world as a whole before committing ourselves to an option we may regret.
Why not give the next Prime Minister something to play with?
This post was originally published the author 27 June 2016 http://euroblog.rexn.uk/#post26
