Financial Times - One year on, how do we bridge the Brexit divide?

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June 22, 2017. Peter Mandelson, John Redwood.

Peter Mandelson and John Redwood discuss the shape of an EU-UK deal.

Peter Mandelson

Of all the questions posed by the UK government’s evaporated parliamentary majority, the most important is what British voters now want from Brexit. One ‘softer’ than set out in Theresa May’s Lancaster House speech in January? Almost certainly, as polls now show. But what does that mean? And how do we work to turn ill-defined talk of softness into something concrete and politically acceptable both in Britain and Europe.

The first softening that has to happen straightaway concerns posture: clear acceptance that no deal would be a catastrophic failure rather than an assertion of UK confidence and machismo; a constructive tone on money and EU citizens’ rights that understands why a fair deal on these things matters as much to the union as it does to the UK; no more bluster about regulatory competition between us and the continent.

So much will be built on trust between the two sides, this tone cannot be more important. Flirting with unsustainable tough talk for domestic consumption will backfire — they read our newspapers. But the real issue is how to put fresh focus on an agreement that respects the will of UK voters while mitigating the job losses and sacrifice in living standards.

Mrs May called for a deep and comprehensive free-trade agreement. But the UK prime minister is not going to get it with her existing red lines, especially for regulated services. It would have to include a willingness by the UK to consider forms of regulatory alignment and enforcement with the EU, for example in finance and broadcasting, to maintain our privileged market access. Tying our standards to EU ones in return for market access is the essence of an intelligent debate about where regulatory autonomy and access to our largest market need to be balanced.

The government should put renewed emphasis on the hints in the Lancaster House speech that the UK wants to remain closely aligned with the EU in research, aviation policy and security. We should include Euratom in this. We should be clear that we see ourselves caucusing with the EU on everything from climate change and multi-

lateralism in trade policy to global financial standards. We should maintain unified capital markets, even if that means binding the UK into close supervisory co-operation with the EU.

The government should proactively argue that taking back control of migration policy does not mean closing the door to visa free travel or ending an open approach to European citizens who want to work in the UK where the labour market needs them. Rejecting the principle of freedom of movement has to give way to a discussion about how it would work in practice.

The prime minister needs to deliver a Lancaster House Mark 2. Staying in the customs union is important, although originally ruled out in January in order to signal new UK autonomy in trade policy. There is no point in pretending this does not involve compromising the UK’s ability to set its own external tariffs — and by implication its ability to negotiate independent trade deals on goods. But meaningful trade deals of this kind will be hard to achieve and are, in any case, only one part of what an autonomous trade policy means. It would also mean compromise in aligning with EU product standards and in a common approach to industrial subsidies.

But these compromises need to be weighed against the benefits: eliminating tariffs with our largest market; no origin requirements for goods and components. Even aligning with EU standards has the upside of creating a level playing field in which UK firms can rely on mutual recognition in the single market. Staying in the customs union, or, to a greater extent in the single market via something like EEA membership, would mean losing some control over EU rules but retaining all the associated trade benefits of the single market. There is no simple answer here. But there is a necessary debate.

Finally, it is important to recognise that without such compromises a hard Brexit means leaving the EU without transitional arrangements and minus the clear prospect of a deep and comprehensive trade agreement. Such a cliff edge, and without the legal continuity provided by the Great Repeal Bill, would be a disaster.

The distinction between hard and soft Brexits has always been an elastic concept. It understates how much could be possible if the accent was put on innovative policy approaches, with a large injection of pragmatism and compromise, and a wider view of the UK’s role as an EU partner. Global Britain is all well and good. It is time to be a whole lot clearer about what a European Britain will look like in the future.

The writer is a former UK cabinet minister and EU trade commissioner

John Redwood

When the British people voted for Brexit they voted to take back control. They knew exactly what they wanted. The official Leave campaign stuck to the same vision throughout. We want control of our laws, our money and our borders. When Britain leaves the EU in 20 months’ time, that is what we will have.

Prominent members of the Leave campaign stated that leaving the EU meant leaving the single market and customs union too, and stopping all contributions to the bloc’s budget once out. While Philip Hammond, the chancellor, is right to say that people did not vote to be worse off, those of us who voted Leave wish the UK to agree good terms with its neighbours and friends in the EU for a positive and mutually beneficial relationship.

This should include tariff-free trade with no new harmful barriers, continuing co-operation on security and intelligence, mutual defence through Nato, and many investment, academic and cultural links. The UK offers a lot and is happy to carry on with these contributions to the greater good.

Once out of the EU, Britain will regain its full voice and vote on international standards and trade bodies, giving it more of a say. Of course, the UK will no longer have a seat at the table when the EU interprets the decisions taken by global institutions for its internal market. British exporters will need to comply with EU rules when selling into the single market, just as today they have to accept US rules when selling into the American market. Once out of the EU, Britain will have two advantages: it can help shape the global standards that lie behind the EU ones, and it will not need to apply the EU variants to domestic and non-EU trade, as we do at the moment, if that is unhelpful to business.

Some say there is no way the EU will allow tariff-free trade after Britain leaves. If the UK has to go over to World Trade Organization terms because there is no special trade deal, the EU will lose out. The UK does not sell much that would be subject to high tariffs, whereas EU farm exports would be badly hit.

One of the main problems with Britain’s membership of the EU has been the continuing and huge balance of trade deficit we have run with the rest of the bloc, £70bn last year. Given the fact that we run a surplus with the rest of the world, it implies there is something about EU rules and trade arrangements that are unhelpful to us. Just look at the way the common agricultural policy has damaged British farming and turned the UK into a massive importer of EU food.

Or look at the way the common fisheries policy has turned a nation with one of the richest fishing grounds in the world into a heavy net importer of fish. Out of the EU Britain can have a fishing policy that is kinder to our fish and fishermen. If the EU decides on high tariffs for food, the impact on prices can be cushioned by removing tariffs from agricultural products we cannot grow for ourselves from elsewhere in the world.

There is also the problem of too many people coming to Britain from the EU to look for low-paid jobs. We need to do better at training and educating people already settled in the UK to do the jobs that need doing, and to help business raise the skill and pay levels as we do so. Britain has always made clear that a new migration policy will welcome anyone with the skills and educational qualifications we seek, and anyone coming in on a company transfer who is needed.

There is no “cliff edge” ahead. The next 20 months should be used by both sides in the Brexit negotiations to ensure exports run smoothly after we leave. Some say, for example, that planes will not fly to Paris from London for want of an air services agreement on the day Britain departs the EU. But many countries around the world lack such agreements with others, yet their planes fly with landing rights granted.

The UK can agree landing rights even if the EU fails to agree a full air services agreement with us. There is plenty of time to make the customs documentation work for the new relationship. If all else fails and we are left with WTO rules, then we know how that works as that is what drives all our non-EU trade today.

Business should therefore get behind the government negotiators who want to sort out these matters in a timely way. It should understand that Britain can be better off out, as it will at last draw up policies for deeply damaged sectors like fishing and farming where we currently import too much thanks to EU rules.

The EU is bound by article 21 of its own treaty to have positive and friendly relationships with neighbouring states based on the pursuit of trade and prosperity. Obeying that makes sense for the EU and for Britain.

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