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20.02.17

We are a European country

The wealth of the UK depends much more on European trade than with any other export market. Our prosperity, much more interwoven with continental prosperity than with prosperity over any other geography, is used to finance public services that are discernibly European in their scope and coverage. Popular support for such public services rests upon values that are more akin to those held elsewhere in Europe than beyond.

We are, in other words, a European country. Europe is not the EU. But the EU is the key organising unit for the advance of shared economic and political interests within Europe.

The challenge for the UK, outside of this organisation, is to sufficiently maintain the GDP growth that we have enjoyed within this organisation to continue to fund public services to the extent that public opinion requires. While the UK is exiting the EU, trade with other European countries is so vital to British economic performance that relations with the rest of Europe will continue to be key to this challenge.

It has long been said that the UK wants Scandinavian public services on American taxes. It has never been said that we want Singaporean public services on Singaporean taxes – with much more limited Singaporean regulation to boot. Yet the prime minister – with zero democratic mandate for this position – places this threat above both our EU partners and the British people.

“Go ahead, make our century,” the EU might say. On 23 June 2016, we choose to go our own way. They’d shed no tears for UK gutting of public services and regulations, both in workplaces and for consumers. Or for British loss of favourable trading terms, within the single market and the customs union.

It is a myth that an easy alternative to national wealth significantly based upon trade with Europe exists. Duncan Bell demolishes the notion of CANZUK (Canada, Australia, New Zealand, and the United Kingdom) in the current Prospect magazine. Alice in Wonderland stuff, as Ken Clarke’s powerful speech put it. With due cynicism, he noted:

“Nice men like President Trump and President Erdogan are impatient to abandon their normal protectionism and give us access.”

Singaporean regulation and public services would give these “nice men” more to get their teeth into. That destination suits them, even if it is unlikely to be to the taste of the British public. The pulling apart of the EU is also something that they do not mourn, though little else has ever produced durable peace on the European continent.

European trade accounts for such a large proportion of UK GDP that any diminishment of such trade, which is likely outside the single market and the customs union, is unlikely to be fully compensated by increased trade with other jurisdictions. In any case, strength in near export markets is also generally a complement to, rather than a substitute for, strength in more distant markets.

Membership of the customs union is incompatible with the trade deals that Liam Fox seeks – outside this union, tariffs on goods moving from the UK to the EU are inevitable. Perhaps even more damagingly, the UK has opened the door to the sometimes corrupt and rarely efficient ways of trade within Europe that were the norm prior to the single market, which the UK was so integral to bringing about.

Reflecting on his time as a business minister in the 1980s, Ken Clarke’s memoirs give a sense of what this will be like:

“One particularly protectionist rule stated that when a British lorry took goods to, say, Italy, it was not allowed to carry any goods from Italy to France on its way back. This, it was believed, ensured that British lorry drivers would not take Italian lorry drivers’ jobs. I spent a day arguing that this was contrary to the principles of the common market, and negotiating permits for British lorries. All the ministers were terrified of their domestic vested interests and gave no ground, so that by the end of a log day, I had achieved six permits. Of course we subsequently put in place much more sensible arrangements through the single market, which, lamentably, we now look set to leave.”

Brexit again puts domestic vested interests at the vanguard. They are as eager to be vultures upon the UK as Trump is. All EU regulation will now seek to serve the interests of the club members that remain, not that which has exited. An army of lobbyists in Brussels, advocating for every possible vested interest, will ensure that it is so. We can expect this to drive much behaviour that may seem petty, or even vexatious, from a British perspective. But a British action – Brexit – has put in place a dynamic in which such actions are unavoidable.

Many of these issues – the difficulty of the UK compensating for the likely fall in exports to the EU caused by tariffs on UK goods and EU regulatory change against UK interests, and the implications for UK public services of deterioration in the UK economy – are quite subtle and their real-world consequences, while profound, will only slowly play out.

One way or another, the more we can reconcile ourselves to being a European country, the less painful this process is likely to be. Everything else is a distraction, especially those “nice men”.