Brexit: one year to go
It's clear, we're coming out. The UK is leaving the EU. In agreeing the transition terms (or most of them), the Prime Minister has managed to leave both sides of her party grudgingly accepting the deal. So what is next?
Well, between now and the end of September (or, allowing for the traditional EU fudge), October or November, the withdrawal agreement will be strengthened, with more parts coloured amber and then green. The heads of terms for a free trade agreement with the EU will be agreed. That is because all member states actually want a free trade deal with the UK—in many cases their largest market—despite all the bluster about not getting away scot-free. From November to March 2019, it will be a case of dotting the i's and crossing the t's on that free trade agreement. Then from April 2019 until December 2020 will be a process of obtaining ratification of the deal from member states and subsidiary bodies. And meanwhile, the UK will be negotiating free trade agreements with other countries such as the US, Canada, Australia, New Zealand, and China.
Suddenly, Theresa May—whatever you may think of her and her disastrous election campaign—is looking stronger, not just in terms of her own party leadership, but in terms of how the EU are treating her. Forget the newspaper babble about Barnier being intransigent, the UK being outgunned. The discussions have certainly been forthright, but both sides figure that the outcome so far has been fair, and they aim to keep it that way, given the considerable progress already made. It is true that issues like immigration and the UK's contribution to the EU budget have united the other member states against the UK. But now the discussion is turning to other issues where the other nations are divided, or where there are clear interests in reaching mutual agreement with the UK. Ireland may have been playing up the border issue for domestic political consumption but it is plainly in their interests to have an open border—and with modern technology there is no problem about doing that. As Norway, and any of the many other countries that have open borders with their neighbours, show.
Sure, business doesn't like change. But it is actually adept at adapting to change. And remember, our future is not down only to the big firms of today: it will be made by the pioneers of tomorrow, firms that may not even exist right now but will grasp the post-Brexit opportunities. And twenty years ago, 60% of our trade was with the EU. By 2020 it will be 40% and still falling. The Treasury's 'gravity model' is less and less relevant in this era of truly international trade and ultra-cheap freight costs. Gravity is a proxy for these costs and services have few such costs. Remember, services have just overtaken goods as the UK's main export earner and there are disproportionate benefits to liberalising services trade with countries with similar legal systems and common languages (just as we are looking to do with the USA, Canada, Australia, New Zealand and Singapore).
Yes, we will be accepting regulatory unity with the EU and a lot of deregulationists don't like that very much. But it certainly makes negotiations easier. We are not starting from a position where our laws and regulations are far apart. We are starting from where we are: with a large volume of EU-agreed common rules, and free trade between us. So reaching a future deal becomes that much easier.
And sure, we have to plan for the possibility of no deal—that member states do not ratify what is agreed centrally. Frankly, the UK is strong enough to weather that, the economy has repeatedly outperformed the dire predictions of the Treasury's doom and gloom economists. There's no reason to expect this trend not to continue. And the UK has a history of doing the right thing, even if others don't. We can be, and will be, a new force for free trade across the planet. We know how to do that. We've done it before. We have nothing to lose but our tariff and regulatory shackles: we have the world to gain.