Regular readers will know that this is a Helvetophile column. I love pretty much everything about Switzerland: its courteous people, its frosty peaks, its regular referendums, its extreme localism and, yes, its relationship with the EU.
In 2015, I wrote an article in this space explaining why Switzerland had a better arrangement with Brussels than had Norway and the other members of the European Economic Area (though I argued that we should treat Switzerland as a rough maquette, not as a precise mould). In my most recent book, What Next, I propose that Britain should now join EFTA à la Suisse – in other words, without joining the EEA.
Why, then, am I so chirpy about Theresa May’s speech? Isn’t my market-oriented version of Brexit soggier than her supposedly granite-hard one? Doesn’t mine place more emphasis on trade and less on immigration?
Actually, when you read her speech in full, our positions are very close. Before I come to that, though, let me make a point that should be obvious to ConservativeHome readers (except those working for UKREP), but which, in the current climate, needs to be reiterated. No one should go into negotiations without a bottom line. Imagine that you were buying a house, and that you opened by telling the seller: “I want you to know, before we discuss the price, that I have nowhere else to live.”
That sounds absurd, doesn’t it? But it’s the position that poor Alexis Tsipras was in once it became clear that Greece had no plan to leave the euro. Indeed, it’s pretty much where David Cameron found himself during the renegotiation. The Financial Times‘s George Parker has reported that our Prime Minister told G20 leaders in the run-up to the referendum that he’d win by 70-30. Is it any wonder that the rest of the EU made no concessions?
Theresa May is determined to avoid that mistake. She has emphasised that Britain would walk away rather than sign a bad deal. To be clear, “walk away” means enjoying normal relations with the EU without any special arrangements, in the way that, say, Australia does.
In a worst-case scenario, WTO rules provide for tariffs of £5.2 billion on British exports to the EU 27, and of £12.9 billion on EU exports to the UK – small sums compared to our gross annual budget contributions. Not that anyone on either side of the Channel is calling for tariffs. I’m simply making the point that failure to reach a swift deal, though a nuisance, would not be catastrophic. Around 70 per cent of our economic activity is domestic; and of the rest, a large and growing proportion is related to non-EU trade. Only six per cent of British firms do any business with the rest of the Single Market.
To repeat, neither I nor the Prime Minister nor, as far as I’m aware, any mainstream EU politician is calling for tariffs. It’s in everyone’s interest to maintain something close to the existing economic arrangements. All I’m asking is that we keep a sense of proportion. A slight disruption to part of our EU-related trade is undesirable; but it would be less painful than, say, handing over tens of billions of pounds to the European Commission as a departure fee.
The Eeyores have naturally focused on this part of the Prime Minister’s speech; but her own focus was on the more probable scenario that a deal is done in a workmanlike way. Even in the European Parliament, where I am writing these words, her speech has been met with guarded approval. The chief exception is Guy Verhofstadt who, having spent six months warning May that she could not cling to aspects of EU membership, now seems perversely vexed because she has agreed with him. Most other MEPs, while still sad about the referendum, now say that there is a realistic basis for talks, and want those talks to produce an outcome that is as useful for all sides – or at least as painless – as possible.
Which brings us to the under-reported but critical gravamen of May’s case. She ruled out full membership of the Single Market on grounds that “it would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country.” But she immediately went on to say that she wanted the freest possible trade compatible with ending that jurisdiction.
Her proposed free trade deal, she said, “may take in elements of current Single Market arrangements in certain areas as it makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years”.
Indeed. It could presumably also take in the real basis of the Single Market, namely the rules that prohibit discrimination against goods or products on the basis of national origin. Obviously, without ECJ authority, these rules would have to be applied through our domestic law, in agreement with our partners through a bilateral treaty – which is, again, is more or less what the Swiss do.
Just as the Single Market is not a single entity, neither is the customs union. May made clear that we shall leave the EU’s Common Commercial Policy so as to be able to sign our own trade deals with Australia, Brazil, the United States and so on. But other aspects of the customs union might be worth keeping, such as the rules that obviate veterinary and phytosanitary checks at EU borders.
Obviously, such arrangements will remain in place only if they suit both sides. No one should go into these talks expecting special favours. But where there are practical arrangements that benefit all participants, it is hard to see why anyone would want their abolition. Remember that in these talks, unlike in most trade negotiations, we are beginning from a position of regulatory equivalence and zero tariffs. The inertia bias that usually is the biggest obstacle to free trade will, this time, pull the other way.
It’s possible, though I see little sign of it, that some in the EU will care more about hurting British citizens than about benefiting their own. It’s conceivable, I suppose, that the talks could break down completely, leaving us with a temporary dislocation – though, even here, I can’t help being cheered by the Chancellor’s promise that we would react by radically slashing taxes and regulations.
Far likelier, though, is that we will end up as what Winston Churchill envisaged: an ally of the United States of Europe rather than a member, supporting the project from outside like a flying buttress. You can call that hard or soft Brexit or anything else you like. Within a few years’ time, the only thing we’ll ask why we didn’t do it earlier.
Daniel Hannan is Member of the European Parliament for South-East England, and a Member of the Bow Group's Parliamentary Board