Ian McConnell: Alarming signs of ‘anyone but EU’ from Conservative Brexit brigade as clock ticks down

And Boris Johnson, after another week of no significant progress in talks with the European Union over the future relationship, signals a belief on radio station LBC on Friday that a no-deal departure from the single market when the transition period ends would be a “very good option”. He talks about an “Australian-style arrangement” rather than specifically about a no-deal outcome. Australia does not have a free-trade agreement with the EU.

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His message will surely be most worrying for so many businesses and households the length and breadth of the UK.

We have entered what the UK’s chief negotiator in the talks with the EU, David Frost, has noted is “the start of the intensified process”. However, any hopes that face-to-face talks might enable progress, after months of discussions via video-conferencing and much going round and round in circles, look wildly optimistic so far.

And, as the clock ticks, many will surely be questioning how bothered the UK Government actually is about securing a trade deal with the EU, especially given Mr Johnson’s comments on LBC on Friday.

In the early days after the Brexit vote, those who recognise the huge benefits of the single market in terms of the boost to the UK economy and society of free movement of people and frictionless trade retained some hope that the Conservatives might see sense and at least retain access by remaining part of the European Economic Area (EEA).

There were even lingering hopes that there might be an outside chance that Brexit could be abandoned altogether.

Sadly, remaining in the European single market was ruled out by former prime minister Theresa May spectacularly early in the process. It seemed a strange move to start shutting down options before negotiations even began in earnest.

With Mr Johnson’s big election victory in December, won with the support of Leavers, the ideological drive by Tory Brexiters for European separation became unfettered and inevitable.

The major economic damage that forecasts drawn up by Mrs May’s government show will arise under any scenario in which the UK leaves the European single market also became inevitable with this victory, although these effects will not crystallise until after the transition period ends on December 31.

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We have, since that election victory, had talk of a Canada or Japan-style trade agreement with the EU. Such deals would, of course, in any case be far, far inferior to the current benefits the UK has as a member of the single market.

The EU, which has emphasised the importance of a level playing field with neighbouring Britain, has rightly pointed out the UK is not Canada or Japan. The UK has chosen to become a “third country”, through Brexit, it has noted. The UK is also next to the EU geographically.

Now we have the talk from the Conservative Government about Australia, and it is difficult to see how this can be anything other than shorthand for a no-deal departure from the single market when the transition period, which has protected the UK from the actual effects of Brexit, ends.

The Department for International Trade tweet about supporting exports has an embedded link to an interview with Liz Truss in Sheffield newspaper The Star.

In this, Secretary of State for International Trade Ms Truss talks about video-conferencing having a profound impact on the way UK companies trade, and notes measures to support exports of the likes of the technology, agriculture, and food and drink sectors.

She flags the UK’s attempts to negotiate new free-trade deals with countries outside the EU, and talks about “a huge opportunity for British companies out there”. Ms Truss cites potential in the US and Asia-Pacific.

In reality, such export-support measures and big talk around trade deals that have not yet materialised amount to a hill of beans relative to what the UK stands to lose from leaving the European single market, with or without a deal. Obviously, the loss will be greater with a no-deal departure.

The fact of the matter is that the noise the UK Government has made over other trade deals has not been matched by substance.

The negotiations with the US are at an early stage. The US is an important market for UK exporters. However, even if the trade deal being sought with the US is concluded, the benefits would be tiny in relative terms. There are also big questions over whether these small benefits would be worth it from the perspective of society as well as the economy, in terms of what the UK would have to give up to secure them.

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Such considerations do not appear to be raining on Ms Truss’s parade. Her Twitter feed over the weekend appeared to signal an outpouring of enthusiasm about the US.

She declared: “Happy Independence Day to our American friends. We are pushing forward on the UK-US FTA (free-trade agreement) to strengthen our trading ties further.”

The tone could hardly be more different from the UK Government’s seeming continuing testiness towards the EU – an approach that at times looks like antipathy.

On Monday, Ms Truss declared: “We’re including an SME (small and medium-sized enterprise) chapter in our UK-US trade negotiations to give small business easier access to opportunities and [cut] red tape.”

The Conservative Government notes in its own paper on its sought-after trade deal with the US that such an agreement could, in the longer term, boost UK gross domestic product by around 0.07 per cent or 0.16% under two different scenarios.

The Theresa May government forecasts, published in November 2018, show, even if there is no change to migration arrangements, UK GDP in 15 years’ time under a no-deal Brexit scenario would be 7.7% lower than if we had stayed in the EU.

We now know the Conservatives plan to clamp down on immigration dramatically, and have pushed ahead with legislation to enable that.

On the basis there is zero net inflow of workers to the UK from EEA countries, the forecasts from Mrs May’s government have it that GDP in 15 years’ time would in a no- deal exit be around 9.3% lower than in a scenario in which the UK had remained in the EU. If the UK were to conclude an average free-trade agreement with the EU, the hit to GDP would be 6.7% on the scenario of zero net inflow of EEA workers, according to the forecasts.

These numbers surely throw into stark relief the damage that will be done if there is an “anyone but EU” approach. However, it is increasingly difficult to shake the notion that this is the approach favoured by the Tory Brexit brigade.

On Friday, Ms Truss declared: “We want [the UK] to be at the centre of a network of free trade agreements including CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). We are working with like-minded nations, who importantly, play by the rules.”

The UK Government seems at the moment to be a prime example of the view, generally entirely erroneous, that the grass on the other side of the fence is always greener.

What the UK has as a member of the European single market is of huge economic benefit. It beggars belief that anyone would choose to throw away such benefit at the best of times. The folly is even more staggering as the UK and other countries around the world face up to the huge economic damage arising from the human tragedy that is the coronavirus pandemic.

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So how much does the UK care about securing a free-trade agreement with the EU? As UK ministers seemingly fawn over the US, the frustration of the EU is palpable. And it is perfectly understandable.

The EU’s chief negotiator, Michel Barnier, declared on Thursday: “The EU engaged constructively in this week’s restricted round of EU-UK negotiations, in line with our mandate. We now need equivalent engagement from the UK.”

The picture painted by Mr Barnier, who travelled to London yesterday for more meetings, would not have been encouraging for UK businesses or households hoping for a free-trade agreement to at least mitigate in some way the inevitably major Brexit damage.

Mr Barnier said on Thursday: “As agreed two weeks ago at the high-level meeting…the EU sought to inject new dynamics in the talks. Our goal was to get negotiations successfully and quickly on a trajectory to reach an agreement. However, after four days of discussions, serious divergences remain.” This is not good news.

Underlining the challenges, Mr Barnier declared: “The EU’s position remains, based on the political declaration, that there will be no economic partnership without: robust guarantees for a level playing field – including on state aid – to ensure open and fair competition among our businesses; a balanced, sustainable and long-term solution for our European fishermen and women; an overarching institutional framework and effective dispute settlement mechanisms.”

For her part, German Chancellor Angela Merkel said last week: “Progress in talks is, to put it cautiously, very limited.”

Mr Frost talked about “extra depth and flexibility” provided by face-to-face talks, describing the negotiations as “comprehensive and useful”.

However, crucially, he declared: “They have also underlined the significant differences that still remain between us on a number of important issues.” Mr Frost added: “We remain committed to working hard to find an early understanding on the principles underlying an agreement.”

It is difficult to see how where we are in all of this could be described as “early”. And are we still at the stage of trying to gain an understanding of principles underlying an agreement, less than six months from the end of the transition period the Conservative Government has refused to extend even amid the coronavirus crisis? There seems to be plenty of room for worry that the Tories will inflict maximum economic damage on the UK with their Brexit crusade.