[Ed: the following text has been excerpted from a speech given last year by Howard Gleave, Richmond/Twickenham/Teddington UKIP branch, and is published with his permission.]
The government has said it will not give a running commentary on its Brexit strategy, but we are now six months on from the referendum, with still no detail about what Brexit will mean. This hiatus is ceding the initiative to diehard Remainers, who are mounting a full-blown counteroffensive against the referendum result.
If the government’s Brexit strategy is not clear, the same cannot be said of the EU, whose strategy is only too clear.
Firstly, it’s to play hard ball.
Secondly, it’s to mobilise Britain’s EU fifth column, politicians and journalists, to act as the mouthpiece of Brussels, claiming that punitive tariffs will be imposed and many British jobs lost, and seeking to overturn the referendum verdict.
In short, it is Project Fear Mk 2.
This requires a robust response. We must start with a positive and unrelenting vision of a Britain freed from the shackles of the EU. Brexit must therefore be used as a catalyst to focus our national energies and skills.
The EU is not a free trade area. It is a customs union. While 70% of imports into the EU are at no or low tariffs, it maintains a Common External Tariff that is designed to afford protection in areas traditionally important to the EU, such as the automotive sector, agriculture and footwear. Protection acts against competition and drives up prices. Indeed, the Single Market could also be referred to as the Common Protectionist Area!
Outside, British consumers could see prices fall. Average WTO tariffs are 3.5%. The EU’s so-called tariff peaks are typically three times higher. The EU, however, is constrained by WTO rules regarding the tariffs it can impose on Britain, i.e. they have to offer us the same level of tariffs as to the EU’s most favoured trading partner outside of the EU.
Brussels is also constrained by our large trade deficit with the EU: a record of £23.8 billion for the first quarter of 2016, approaching an annualised total of £100 billion. It is estimated that Britain would be required to pay £6 billion a year if the European Economic Area States imposed tariffs. But we would earn £12 billion in return, leaving us £6 billion to the good.
Tariffs are taxes ultimately borne by the consumer but which accrue to the government. They make imports less attractive and substitutes more attractive. For the German motor industry, whose largest global market is Britain, this should give pause for thought.
We should not initiate tariffs, but reciprocate. This money could be directed towards purposes that boost our competitiveness. The WTO precludes direct subsidy of industries, such as paying their tariffs for them, but this money could be used to reduce corporation tax, or to fund tax breaks on capital investment. France, threatening to woo British businesses, has a corporation tax rate of 33%. From 2017, the UK rate will be 19%. Driving that rate lower still, financed by tariff revenues, is unlikely to do the French economy, and others, any favours.
What if the government were to bring forward a bill ring-fencing the proceeds of any tariffs that we might introduce? What if it tied those proceeds to measures to support British industry, to protect British jobs? What might be the electoral consequences for Labour, the SNP and the Lib Dems if they voted against such a bill?
And what if there were a bill dedicating the proceeds of our contributions to the EU budget to spending areas such as the NHS, housebuilding, and scientific research? Which MP would like to go into an election having voted against such a bill?
Such legislation would also send a clear signal to our EU negotiating partners that we mean business and are prepared for the worst. As such, it would surely influence the negotiating process.
On the subject of negotiation, cue Frank Field. He advocates negotiation at all levels and on all fronts. The European Commission is contesting Britain’s right to begin negotiation of Free Trade agreements in anticipation of Brexit, but legal analysis by ‘Lawyers for Britain’ suggests there is nothing in the EU treaties to stop Britain from negotiating such agreements, provided they come into force only once we leave the EU.
Field also advocates negotiating, or at least communicating very clearly, with key EU countries and their industry associations. I am thinking of Ireland, for whom we are such a vital market, and the German BDI, their equivalent of our CBI. Hundreds of thousands of German jobs depend on trade with Britain. We should not let them forget it.
And what of integrated EU supply chains? Will the EU Commission and Parliament be allowed to damage vital EU interests? Think of Air Bus, one of Europe’s largest and most lucrative industrial ventures. Airbus UK is responsible for the design and manufacture of the high-technology wings for all Airbus models, as well as the overall design and supply of the fuel system. For most Airbus models the company is responsible for the overall design and supply of landing gear. Imposing tariffs on vital subassemblies will only make the finished product more expensive and less competitive than Boeing. Is this a credible threat?
Ultimately, Britain’s negotiating position is stronger than many think. The Brexit negotiations have been placed in the hands of ultra-federalists, such as Michel Barnier for the European Commission and Guy Verhofstadt for the European Parliament. But they must be careful not to overplay their hand. Real jobs and livelihoods are on the line throughout the EU. The EU cannot afford to depress its economic prospects yet further.
Finally, deregulation. Only 6% of British companies deal with the Single Market. Yet 100% of British companies are subject to its regulation. The Single Market could be renamed the Common Regulatory Area!
The government has elected to incorporate the entire body of EU law into British legislation to ensure legal certainty following our departure. Some people have advocated a so-called sunset clause to create a presumption that those regulations which are most damaging and expensive, especially for small and medium enterprises, will automatically be removed from the statute book unless their benefit can be demonstrated. Brexit creates an opportunity, while safeguarding essential rights and standards, to create a slimmer, less onerous regulatory regime here in Britain. Identifying priority areas for repeal could create clear political dividing lines in time for the next election, whenever that might be.
In conclusion, summarising what should be Britain’s Brexit strategy:
- Communicate: communicate a positive vision of an outward-looking Britain determined to be a nimble and successful global player.
- Terminate: trigger Article 50 at the earliest opportunity so that the two-year negotiation period expires before the next general election, at least as far as is foreseeable under the Fixed Term Parliaments Act.
- Reciprocate: we should not initiate tariffs but should be prepared to levy equal and opposite tariffs should the EU go that route.
- Legislate to mitigate: table legislation to create certainty, and mitigate the effects of a “clean Brexit”, while putting pro-EU parties and MPs on the spot to choose sides between the UK and EU.
- Negotiate: negotiate trade agreements with future trading partners, and the best possible departure terms with the EU, having demonstrated our determination to cope with the worst they can throw at us.
- Deregulate: quickly identify inappropriate and burdensome EU regulation, and repeal it.
If Britain dedicates herself fully to the task of wresting back control, rediscovers its self-belief as a sovereign country, and makes a success of it we shall, in the words of William Pitt the Younger:
“not just have saved ourselves by our exertions; but will have saved Europe by our example.”