EU-US free trade talks show why Britain is better off in

Few can seriously claim that UK on its own would have as much clout in trade negotiations as the whole of the EU.

Like it or not, David Cameron had a good win at the EU budget summit last week. After over 24 hours of caffeine-powered talks he got what he came for - a real terms cut in EU spending. That said, it is easy to overplay Cameron's role in the marathon talks. Germany's Angela Merkel was, as ever, the real dealmaker.

In any case, as Will Straw wrote last Friday, the budget deal is hardly something to celebrate. The budget headings that suffered the biggest cuts were "Global Europe" - which includes development spending - and investment in infrastructure projects. In contrast, despite being cut by 11 per cent, spending on the Common Agricultural Policy - possibly the worst and most wasteful of all EU policies - remains the largest single area of spending.

But while 99 per cent of the summit media coverage was about rehearsing centuries-old cliches about European diplomacy - in last week's case, Britain screwed the French by making a deal with the Germans - the importance of the EU budget was actually pretty low. In fact, while over 24 hours were spent haggling over how Europe would spend just over €900bn of its own money, leaders spent a few minutes and several pages of the summit communique talking about something of far greater significance to the EU's future.

The importance of Barack Obama's launch of formal negotiations aimed at agreeing the world's biggest ever bilateral trade deal during his State of the Union speech to Congress yesterday, dwarves the endless debates in Brussels on rebates, "own resources", and the difference in funding for Pillars 1 and 2.

It hasn't happened overnight. Since autumn 2011, diplomats have been working behind the scenes on preparing the ground for a EU/US trade talks. Full negotiations on a deal looking not just on the elimination of tariff barriers but also on harmonising regulatory and technical standards for products could generate 2 per cent of GDP on its own. EU officials think that, by itself, a US trade deal could translate into €275bn per year for the European economy and two million new jobs.

The EU - as both its supporters and critics would agree - is not just about the single market, but its status as the world's largest market is a valuable and, so far, relatively under-used commodity. At the moment, just four of the EU's 29 trade deals are with countries from the G20, and those four are with South Korea, Mexico, South Africa and Turkey. But the EU is now devoting increasing amounts of political capital to trade. An FTA was agreed with Singapore in December while a deal with Canada is expected to be completed imminently. Negotiations with Japan are expected to be launched in Tokyo in April, meaning that the EU will spend the next year brokering trade deals with the two largest world economies. In contrast to the EU's budget talks, there's nothing inward looking about that.

It is also a welcome sign that leaders are recognising that trade is the single most effective alternative to austerity. The collapse of the Doha round of WTO trade talks in 2005 followed by the financial crisis did real damage to world trade and to the European economy. One of the little-noticed developments in economic policy in recent years has been the glut of protectionist measures. The World Trade Organisation stated earlier this year that only 18 per cent of the trade restricting measures adopted by G20 countries since 2008 have been scrapped, amounting to a total loss of 3 per cent of world trade - equivalent to some €350bn.

But while the drive towards trade marks a decisive shift in priorities by the EU, it is also hugely significant to the debate on Britain's continued EU membership and to the Conservative Party's attitude to Europe.

One of the common lines of attack from the 'better off out' brigade is that, shorn of its EU shackles, Britain would be able to go around agreeing its own free trade deals. In response, one of the most convincing argument in favour of Britain being at the heart of Europe is that together we're stronger. In the EU we are one of the most powerful players in a bloc of 27 countries and 500 million people. Outside, we are, at best, a medium-sized power. When it comes to dealing with the likes of the US and Japan, few can seriously claim that Britain on its own would have as much negotiating clout as the whole of Europe.

Besides, an EU pursuing a free trade agenda should be like manna from heaven for most moderate Tories. It should also pacify those who grumble that the EU should be about trade, not political union. At the very least, if the EU continues the shift towards using its muscle to drive international trade deals it will becoming increasingly difficult for Conservative eurosceptics to maintain that we are better off out.

A couple of days before last week's summit, the Europe minister, David Lidington, told reporters that, come 2017, he and David Cameron wanted to be "campaigning with enthusiasm for a 'yes' vote". On his wish list, alongside less EU regulation and a liberalisation of the services sector, was the "fantastic prize" of a transatlantic trade deal. In Lidington's words, failing to go for it would be "betraying future generations". Cameron himself said today that an EU/US agreement would "create jobs on both sides of the Atlantic and make our countries more prosperous." It looks as though his wish may yet be granted.

It goes without saying that a transatlantic trade agreement is far from a fait accompli. Both sides like to subsidise large parts of their economy - particularly farming - and both will be under pressure from powerful internal lobby groups hoping to strangle the baby before it is born. But the EU and US have, nonetheless, made a bold statement of intent which could eventually lead to a seismic change in the world economy.

Ben Fox is a reporter for EU Observer. He writes in a personal capacity

European Commission President José Manuel Barroso speaks following a summit with US President Barack Obama as European Council President Herman Van Rompuy looks on. Photograph: Getty Images.
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.