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17 November 2017

Brexit puts politics before prosperity. Why shouldn’t the EU do the same?

David Davis and the Conservatives are in no position to deliver lectures to Germany and France. 

By George Eaton

Eight months after triggering Article 50, the UK has made painfully little progress in the Brexit negotiations. Faced with this reality, David Davis has appealed to Germany and France not to “put politics above prosperity”. That, of course, is a subject on which the Brexit Secretary and his fellow Conservatives could write a PhD.

The essence of Brexit is precisely that it elevates politics above prosperity. It was party mangement that forced David Cameron to hold the EU referendum. And it was party management that forced Theresa May to commit to a “hard Brexit”. For the sake of ending free movement and regaining theoretical sovereignty, Britain will leave the world’s largest single market. In other words, it will put politics before prosperity. 

The EU derives no pleasure from Brexit. As Andrew Adonis told me following his recent meeting with chief negotiator Michel Barnier and other senior European politicians: “They desperately want us to stay. I didn’t meet a single person who thought that the EU would be better off without us.” 

But since the government shows no sign of revisiting its stance (though read my cover story on how Remainers believe they can stop Brexit), the EU is determined to preserve the integrity of the single market. They will not allow the UK to maintain the economic benefits of membership without the political costs (otherwise known as having your cake and eating it). Were Britain to secure such an arrangement, the EU would immediately gift other member states an incentive to pursue the same path. For reasons of history above all, Brussels is determined to maintain European unity. 

And though the EU would pay an economic price for no deal or a bad deal, it is far smaller than that the UK would face. Failure to reach an agreement would deprive Brussels of Britain’s budget contributions but, spread across the other 27 member states, each country would have to contribute just 0.1 per cent of GDP more a year. By contrast, though the UK would save 0.4 per cent of GDP, economists estimate no deal would lead to a loss of between 3 and 6 per cent of GDP. With good reason, the only country that currently trades with the rest of the globe under World Trade Organisation rules is Mauritania.

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It is worth recalling at this juncture that the Brexiteers used to claim that economic logic would secure the UK a good deal. They boasted that the Germans and the French would be desperate to sell their cars and wine to Britain. But EU politicians long ago dismissed this argument. When Boris Johnson last year told Carlo Calenda, Italy’s minister for economic development, that Britain would have to be granted a favourable trade deal “because you don’t want to lose Prosecco exports”, Calenda replied: “I’ll sell less Prosecco to one country and you’ll sell less to 27 countries.”

Politics, rather than economics alone, will shape the final deal (as anyone who studied the EU-Greece negotiations knew). On this front, cabinet ministers have routinely harmed Britain’s prospects through offensive World War II comparisons, crude insults (Philip Hammond labelled the EU “the enemy”) and opaque policy aims. 

Indeed, the UK has put politics not merely above prosperity but above peace by triggering the Irish border crisis. Britain’s planned departure from the customs union has conjured the spectre of a hard border between Northern Ireland and the Republic (or between the former and the rest of the UK). As the Irish prime minister Leo Varadkar has warned today, the UK government’s refusal to propose a workable solution remains the biggest obstacle to progress. 

Thus, ordered by Davis to put prosperity before politics, the EU could reasonably reply: “physician, heal thyself”.

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