Now Boris Johnson really has to “get Brexit done”. Formally leaving the European Union (EU) on 31 January is one thing. Settling the real relationship between Britain and what will remain its biggest market is quite another.
The opening manoeuvres around the Free Trade Agreement (FTA) that Britain and the EU are committed to negotiating by the end of the year have already begun. The EU leaders look set to continue the strategy that, from their point of view, they pursued pretty successfully with Theresa May.
This involved letting the Brits commit themselves to a silly deadline and then spinning negotiations out. This forced May, for fear of leaving the EU without a deal and the resulting economic disruption, to sign up to a Withdrawal Agreement that kept Britain tied closely to the EU.
Johnson’s successful campaign to become prime minister was based on rejecting this deal. But he too has tied himself to a deadline. He has written into his new Withdrawal Bill that the FTA has to be agreed by the end of 2020.
Many fear that this risks a disruptive break with the EU, with British goods and services facing high European tariffs if no deal is struck in time.
The EU meanwhile has started to run down the clock. Negotiations can’t start till Brussels has agreed on its policy, which won’t happen till next month.
The EU’s aim is to prevent Britain becoming a “Singapore-on-Thames”, with much lower standards on labour rights, environmental protection, and so on.
This would allow British firms to undercut their continental rivals. German chancellor Angela Merkel said after Johnson’s election victory that the EU now had “a competitor at our doorstep”.
Containing this threat would mean keeping Britain tied to the EU’s regime of trade regulation. A seminar in Brussels a couple of weeks ago agreed, for example, that Britain should commit itself to “dynamic alignment” with EU regulations on environmental policy. This would mean changing British law every time EU law was modified.
But it seems very unlikely that Johnson’s government, with the wind in its sails after winning an 80-seat majority, will accept this. “There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union—and we will do this by the end of the year,” chancellor Sajid Javid told the Financial Times newspaper last week.
As we saw in the Iran crisis, Johnson’s strategy is to keep Britain midstream between the United States and the EU. He wants to negotiate an FTA with Washington as well as one with Brussels. Staying too close to the EU would make it much harder to get a deal from Donald Trump.
The economic impact of refusing to stay aligned to the EU will vary according to sector. Mark Carney, the outgoing governor of the Bank of England, opposes the City of London taking its rules from Brussels. “We would not be comfortable, outsourcing supervision of this incredibly complex, incredibly important financial sector,” he said as long ago as December 2018.
The City is the most powerful international financial centre, and has actually got stronger since the 2016 referendum.
But the car industry, for example, is in a very different position. It relies on supply chains rolling into the continent and exports 80 percent of its output, half going to the EU and another quarter to countries with trade deals with the EU.
The Society of Motor Manufacturers and Traders reacted with fury at Javid’s interview, saying that diverging from EU regulations would cost billions of pounds. The Unite union backed them up. An EU official warned, “Prepare for the worst.”
Sacrificing manufacturing hardly fits with Johnson’s promise to rescue the old industrial regions. Interestingly, he said last week that it was “epically likely” that the FTA would be struck by the end of the year—which isn’t the same as saying it was certain.
Remember his promise to “die in a ditch” to get Britain out of the EU by the end of last October? Maybe, as Brussels twists his arm, he will budge.