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4 January 2019updated 09 Sep 2021 4:38pm

Labour must decide whether it is for the current Brexit deal – or no Brexit at all

Whoever’s in Downing Street, there are only two viable options. It’s time for Labour to choose. 

By Jonathan Lis

For the last three years, the Labour leadership has endured a sustained assault from across the political spectrum. It encounters outright hostility from the mainstream media. Its Brexit strategy faces daily attacks from both Leavers and Remainers. And I sympathise. I support Labour, I want a Labour government, and Labour’s policy on Brexit is better than the Tory alternative. But we are 12 weeks from our withdrawal and Labour is still not being upfront about what that policy actually entails.

Labour’s Brexit approach has much to recommend it. It is opposed to Theresa May’s deal; it rules out an exit without a deal. May’s deal delivers, through the backstop, EU integration with British powerlessness, combined with a political declaration that removes us from our most important trade relationship without any concrete assurances on its replacement. As Matthew Parris recently observed, if it were not for the referendum not one MP could or would support it.

And so Labour broadly has the right idea. The first step is to reject May’s deal; then to try to secure a general election; and as a last resort, support a second referendum. Jeremy Corbyn was widely condemned for his recent Guardian interview in which he discussed his plans to implement Brexit if he won that general election. This was unfair. He could hardly promise to stop Brexit when Labour’s policy is to try to renegotiate it. But we must be honest about what that renegotiation could achieve. To put it another way: Labour needs to get real.

The EU has made it absolutely clear that the legally binding part of the withdrawal agreement cannot be altered. This part mostly covers citizens’ rights, the divorce settlement and the Irish backstop. The first two are politically unproblematic for Labour. The third one is.

Labour’s solution is to nullify the backstop by negotiating a permanent customs union with the EU. This is a more realistic offer than the backstop’s customs union by the back door. But it comes packed with problems.

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First, that customs union will have to be negotiated during the transition, and is consequently not guaranteed. That means the backstop has to stay as a fall-back option, and the unpopular part of May’s deal will become the unpopular part of Corbyn’s deal.

Second, the customs union itself. A customs union functions as a tariff firewall and, as Corbyn notes, allows a smooth functioning of supply chains, particularly for just-in-time manufacturing. But being in a customs union requires you to cede control of tariffs and large parts of your trade policy. This isn’t a problem for us now, because we are in the room when those tariffs are being determined and trade deals negotiated. But we cannot leave the EU and expect to retain those privileges.

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Say the EU negotiates a trade deal with Australia. We will surely be consulted on that deal, and the EU will use our clout to its advantage. But as a third country, we will not be entitled to a meaningful negotiating role, let alone a veto as we have now. And while that deal will force us to cut tariffs and liberalise markets for Australian goods, Australia will be under no obligation to return the favour. Unless, that is, we become a full signatory to the EU’s deals as part of the common commercial policy, which is currently limited to members only. That will make us a de facto EU member without any formal power – a stark and pointless loss of sovereignty.

Third, the issue of state aid. The EU has insisted on a state aid commitment as part of the backstop, and would replicate the demand as the price of any permanent customs union. As George Peretz QC has explained, the EU would see any significant increases in state aid as unfair competition, which it would seek to combat with targeted tariffs on UK exports. The customs union prohibits such tariffs, so the EU will accordingly prevent any state aid divergence.

Then we come to the biggest hurdle: the single market. Labour wants to negotiate a “close relationship” but has never spelled out what that might entail. The Chequers proposal posited the free movement of goods, and the EU comprehensively rejected it. Brussels’ red line remains as solid now as it did in 2016: the four freedoms cannot be divided. Labour therefore faces the same insurmountable problem as the current government: it wants to end the free movement of people.

Leaving the single market has consequences. Under the backstop, there will be a regulatory barrier in the Irish Sea, particularly for animal products, which compromises the UK’s economic integrity and means the DUP still won’t support a Labour deal. The damage there is chiefly political; the damage in the Channel, on the other hand, will be economic. Even if we remain in the customs union, French and Belgian officials will be compelled to subject British goods to new regulatory checks. That will rapidly clog up the Channel ports and create many of the problems currently associated with no deal. As if that weren’t enough, no third-country trade deal can replicate our current access for services. A Canada model would lead to a vast downgrade – and the EU would not offer us greatly improved terms as it would then have to offer them to its other trade partners as well. As services account for the bulk of our economy, that could prove just as damaging to jobs and prosperity as leaving the single market in goods.

Again, this trade deal would have to be negotiated. It could not be included in the legally binding withdrawal agreement. Even if Labour decided to embrace the full single market and customs union (the so-called “Norway Plus”), that would still be subject to complex negotiations, which would include difficult trade-offs on agriculture and fisheries. We would likely end up with a Brexit that kept us tied to all the key EU institutions, but as non-voting lobbyists.

If any of this is wrong, the Labour leadership needs to explain why. The EU is not going to grant the UK special favours just because it has a new government. Crucially, it will never divide its four freedoms or give a non-member voting or veto rights in its councils. Even if it did, by some miracle, agree to renegotiate the withdrawal agreement to make it more favourable to Britain, it would demand key concessions in return. President Emmanuel Macron, for example, might be quite interested in EU fishing rights. And Ireland will still insist upon a backstop in all circumstances and for all time.

This is not a debate about the rights or wrongs of Brexit (or Lexit), but an inquiry about Labour’s policy in the circumstances that currently exist. Even if you believe, mistakenly, that the EU would prevent a Corbyn agenda, or, improbably, that freedom from state-aid rules are a price worth paying for sacrificing thousands of jobs, it is incumbent upon Labour’s leaders (and Leavers) to detail how they would secure a better Brexit than the one on the table today. Labour has acknowledged that no-deal will shatter the economy and end lives. But the EU remains the more powerful partner and will not improve its offer. Whoever is in Downing Street, the only viable options are to leave with the current withdrawal agreement or not to leave at all. It’s time for Labour to decide.

Jonathan Lis is the deputy director of British Influence, which campaigns against a hard Brexit.