The single market is not good for Scotland, so neither is Chequers nor Theresa May, writes Brian Monteith
Well, that was some week. First, a ruse about an unsustain-able and unsupportable double backstop to deflect attention away from the Prime Minister’s self-inflicted weak bargaining position. It never had a serious possibility of being accepted but it gives Theresa May the opportunity for another Dunkirk speech wrapped in an imaginary Union Flag swatting the EU negotiators. If only...
All the while the civil servant leading our negotiations was apparently making promises for the UK to remain in the customs union without approval from the Cabinet. This, and the disastrous Chequers plan he personally concocted, could not be bettered if May had subcontracted her negotiating to Nicola Sturgeon.
Chequers means the adoption of a “common rule book” to ensure the UK remains in the single market for goods and most foods, while the fresh attempt to keep us in the EU’s customs union would solve the inflated problem of a border with Ireland. Neither of these outcomes is necessary; nor are they what May promised repeatedly last year. It is not even what Jeremy Corbyn promised in his manifesto.
A report published today that I helped write, using official UK and Eurostat numbers, demonstrates that, rather than be vital to the UK’s export trade, the EU’s single market is undeniably disadvantageous. Gleaning similar Scottish Government statistics suggests it is the same for Scotland too. This runs counter to common consensus, but the economic data do not lie.
The UK trades with the whole world and is the fifth largest economy as a result. Despite being a member of the single market and customs union it suffers a massive £96 billion trade deficit with the EU. By contrast it achieves a broadly neutral position with the rest of the world and enjoys a surplus with the US, arguably the world’s most competitive market – despite having no trade deal.
Why is it that the UK can be successful in trading with the US – where we trade under WTO rules – yet have such a consistently large deficit with the EU where we have the equivalent of a trade deal through membership of the single market and the customs union?
Likewise, Scottish exports to the EU single market – where we automatically meet EU regulations and face no tariffs – grew by 10.4 per cent in 2002-16, but by comparison over the same period exports to the rest of the world – under WTO rules and often in the face of tariffs – grew by nine times as much, at 90 per cent.
The reason is simple: the single market is intentionally skewed in favour of goods to the detriment of services – the latter being the area of expertise where both the UK and Scotland’s economies excel.
Unfortunately the PM’s Chequers plan does not solve this bias but compounds it by allowing future regulations to be introduced that the UK would have no say in. This is worse than Norway’s arrangement (where it has the right to be heard but has no vote) and even worse than the UK’s current full membership (where it has only 8.6 per cent of council votes and has been defeated on every occasion it has objected to a new law).
This is why a Canada-style deal is so attractive – an agreement that gives Canada access to the EU’s single market and practically tariff-free trade without tying all its businesses into EU laws that it has no say in – nor does it have to accept EU laws on taxes and unmanaged migration – or pay an annual membership fee for the privilege. A Canada-style agreement with the EU makes so much sense for the UK – and even more so for the EU (as we are its largest export market) that you might ask why they are not proposing it themselves.
According to the EU, the only obstacle to a Canada-style deal is a disgraceful and unrealistic vision of the Irish border that promotes the harrowing spectre of physical border posts, intrusive inspections and queues that might incite terrorist action and wreck the Belfast Agreement.
It is that dispute that has led to May saying she will not seek a Canada-style deal and has opted for her Chequers plan. Yet the EU has land borders with Norway, Russia, Belarus, Ukraine, Moldova, Turkey and Switzerland that do not cause the problems that are being invented for Ireland. Each has a solution. Nothing in this technological age is surely beyond the wit of man, and customs and revenue officials of both the Irish Republic and UK have stated repeatedly they do not require border posts to do their job.
The obstinacy of the EU and Ireland to settle the dispute remains puzzling for they appear willing to end up with no deal when Irish trade across the border accounts for only 1 per cent of EU GDP but accounts for 80 per cent of Irish export trade. Both have good reason to compromise, but their unwillingness to do so begs the question if there is a political motive that overrides economics. Are we being punished for leaving?
The EU has not understood that for Conservative and Unionist politicians the question is not about trade, economics or security, it is about the very existence of the United Kingdom itself. Agreeing to any border that splits Northern Ireland on both EU single market regulations and customs union tariffs is not just unacceptable to the DUP but has become the biggest red line for the 13 Scottish MPs. What is not being said loudly enough is that while the gradual incorporation of Northern Ireland into the Republic by it diverging away from the UK through differing trading laws might be a political goal for the Irish taoiseach, the cost in the short term to the Irish economy will be catastrophic.
Is any of this solvable? Faith in May among her Cabinet, fellow Tory MPs and party supporters is now at its lowest ebb. The comments by previously loyal MPs, such as remain-voting Plymouth MP Johnny Mercer, suggest she is on the verge of being challenged – but do Tory MPs have the cojones to do it?
This Wednesday the Prime Minister is due to address the 1922 Tory backbench committee. If she cannot demonstrate in leadership the required humility to recognise she has crossed her own red lines and broken her manifesto pledges, and must therefore change course, her MPs will look even weaker than their leader if they do not act.