Britain rejoins the world
Friday, July 20, 2018
Britain is in a position once more to become an outward-looking, trading economy, connecting to the world’s growth spots
The pundits who were caught flatfooted when their countrymen and women voted to leave the EU two years ago are struggling yet again.
On the fringes of the inaugural Australia-UK Leadership Forum which I attended in London this week, there was general agreement that whatever happens on Brexit Day on 29 March next year, it won’t be the full-scale disaster many commentators are predicting.
Agreement or no agreement, the shops won’t run out of olive oil, Britons won’t be turned back at Calais and British Airways won’t be forbidden to fly in continental airspace.
The darkest predictions are actively being encouraged by the EU, with the willing assistance of the British media establishment.
Yet Brexit will certainly happen, and almost certainly on that day, opening up bright possibilities for Australia to expand its trade and cultural ties with Britain.
It will happen because Parliament has voted to leave, even though a clear majority of members really want to remain. We can safely predict that it won’t have the courage to reverse that decision.
One of the delightful qualities of a liberal democracy, as Alexis De Tocqueville discovered when he visited America, is that while elected officials are frequently faithless and mistaken, “they will never systematically adopt a line of conduct hostile to the majority.”
The politics of Brexit have become all-consuming for the Conservative Party, obscuring our line of sight on what will actually happen next year.
The most likely Brexit deal at this stage appears to be no deal.
Prime Minister Theresa May appears incapable of reaching an agreement acceptable to both the EU mandarins and her own party.
That’s a good thing for Australia. An exit deal that bound the UK to European customs rules would make a free-trade deal between our two countries impossible. Australian businesses would find the barriers to entry virtually unchanged.
The default no-deal position is far preferable. Britain would trade with Europe under World Trade Organisation rules on term not dissimilar to those that apply to Norway, country that does no appear to be suffering unduly from its outsider status.
What’s more, Britain will get to keep the 40 billion pounds the EU is demanding in
return for a smooth exit. Given the troubling state of the UK national debt, that’s no bad thing.
Lord Peter Lilley, a former trade secretary under Margaret Thatcher, outlined the WTO option two years ago on a visit to Australia hosted by the Menzies Research Centre. He said then that while a zero-tariff agreement would be better, Britain would still be better off operating under WTO rules than it was funding the enormous cost of the EU.
When I caught up with Lilley in London this week, he said the WTO solution now seemed the most likely option.
The BBC’s coverage is predominantly one-sided. When Lilley appeared on the BBC’s Any Questions last month, for example, he was the sole Brexit voter on a panel of four that included Tony Blair’s former advisor Alastair Campbell. Interestingly, Campbell told the audience he had changed his position and now supported leaving. Neither of the other panelists, journalist Maya Goodfellow and economist Linda Yueh, were prepared to argue unequivocally to remain. Opinion seems to be turning towards reluctant acceptance of the inevitable.
Nevertheless, the continued uncertainty, and inept political handling by a divided government, is damaging.
The British economy defied the pundits by growing in strength in the year after the referendum.
Over the last year, however, the indicators have softened considerably. Employment remains strong, and the economy is still growing, but only just.
Low productivity highlights the chronic need for investment, but investors are wary of uncertainty.
Structural problems in public financing have been ignored for far too long. This week the UK government’s Office for Budget Responsibility warned that gross national debt would hit 283 per cent of GDP within 50 years unless the growing burden of welfare and health costs was addressed.
The current uncertainty and division are of no mean consequence in medium term.
In the long-term, however, there is every reason to be confident about an independent UK outside the EU.
Britain is in a position once more to become an outward-looking, trading economy, connecting to the world’s growth spots, unburdened by cumbersome European rules, security in its island setting, populated by entrepreneurially minded people who are free to conduct business.
In other words, just like Australia.