After two years of both sides positioning themselves, we all saw that negotiations about the United Kingdom’s future relationship with the European Union truly started in Salzburg. The conclusion was clear: the Chequers proposal is unworkable.
It is also extremely unpopular. Both prominent leavers and remainers have branded the government’s plans as worse than EU membership itself. This is because we would still be subject to the jurisdiction of the European Court of Justice and the EU regulatory body on goods, without having any say on how these develop over time.
Britain would become a rule-taker, not a rule-maker, which would be a betrayal of the referendum result where people voted to take back control. These arguments were made before Salzburg, but the Prime Minister insisted that the Chequers proposal was the compromise that was needed. The events of Salzburg, however, demonstrated that this was not the case.
Donald Tusk, President of the European Council, stated that the Chequers proposal was a non-starter. As I argued in an earlier article: “the EU is extremely unlikely to accept this offer without us having to abide by freedom of movement”. The Chequers proposal broke the integrity of the EU’s single market by separating the four freedom: goods, capital, services and labour. Preserving the unity of the Single Market is a red line for the EU and that is why Chequers, regardless of the debate in the UK, was always going to fail.
So, the government should go back to the drawing board and put together a negotiating position that protects the red lines set out by the Prime Minister at Lancaster House, and also the red lines set by the EU. These red lines consist of leaving the single market, the customs union, and the jurisdiction of the European Court of Justice in full; bringing an end to freedom of movement and budget contributions to the EU; ensuring no border in the Irish sea and on the island of Ireland; and protecting the integrity of the European Union single market.
These red lines, therefore, rule out EEA membership (the Norway option) and the Chequers proposal. There are, however, two broad templates which would ensure that the red lines of both the UK and the EU are protected: a so-called Canada+++ deal and a World Trade Organisation (WTO) deal.
Canada+++ is the best outcome for both the UK and the EU as it would ensure that tariff-free trade continues after our departure. That is why it is the deal that the government should be seeking. The only problem with a Canada+++ deal, however, is that the EU would only offer a trade deal for Great Britain, meaning Northern Ireland would be separated from the UK with a customs border in the Irish sea. This is because of the demand from both sides not to have a hard border on the island of Ireland. But, as the Institute of Economic Affairs has shown, there are bespoke technical solutions which can unlock this deadlock.
However, if the government fails to negotiate a Canada+++ deal, there is the fallback option of a WTO deal. In the short term, this would be a challenge for both the UK and the EU. Tariffs would be introduced, making prices more expensive for consumers; supply chains would be broken, which could result in businesses relocating; and the introduction of customs checks could result in a shortage of goods. These genuine worries represent a serious problem that both the UK and the EU face.
Yet, as the only outcome that respects both parties’ red lines, the government should not only be preparing for a WTO deal but expecting it. But this requires a change of tone in the negotiations. A WTO deal is not to be feared. As stated above, it would bring some short-term challenges; however, it also brings a great number of long-term opportunities. The ability to diverge from EU regulation, which has held British businesses back; the capability to strike new free trade deals with emerging markets, allowing us to share their economic growth; ensuring that the laws of the land are written by our representatives, which would restore British sovereignty; and the halting of our annual £10 billion cheque to the European Union, resulting in more money for our public services.
While a WTO deal is not the best outcome for Britain, the EU could easily reject technical proposals to the Irish question – a scenario that would force us to put the integrity of the UK first and, therefore, walk out of the negotiations. So, with Chequers breaking both sides’ red lines and EEA membership shattering almost all of ours, both of those options are off the table. Unless we can agree on a trade deal for the whole of the United Kingdom, the government has a duty to prepare for the likely prospect of no deal.