Ronald Stewart-Brown (let’s call him RSB for short) appeared on the eurosceptic scene many moons ago. He presented himself as an enthusiastic sceptic, looking for ways to distance the UK from the EU, but also as an international trade expert who believed, rightly, that we should not simply rely on the argument that on leaving the EU “We’d have a Free Trade Agreement (FTA)”. Rather, we should look carefully at the detailed trade issues, so as to reassure British industry that leaving was in their interest.
I agreed, and in fact supported his work for a while, a few years ago.
But since then, he seems to have “Gone on a Journey” (as they say of Bercow and Portillo). He has concluded that the only acceptable way of ensuring EU market access whilst reducing the impact of membership is to go for a curiously contorted hybrid solution — remaining within the EU’s Customs Union, while exiting from the political and fiscal aspects. And he has published a strongly worded condemnation of “UKIP’s flagship policy” of leaving the EU.
So far as I know, no one else supports RSB’s hybrid approach. It is mentioned briefly by the Fresh Start Group, as the “Turkish Option”, but dismissed. Some will see it as the worst of both worlds. Few will understand it: fewer still will support it.
It would, I suppose, get us out of the EU’s defence, foreign affairs, justice and home affairs, fiscal and monetary policy, agriculture and fisheries. But surely Brussels would not allow us to remain in the Customs Union without retaining all the mountain of employment, social affairs and health & safety regulation — which is a key reason why we wanted to leave in the first place.
RSB completely ignores the opportunity cost of remaining in the EU’s Customs Union. We should sacrifice the objective of pursuing our own independent free trade arrangements, for example strengthening and restoring our trade links with the Commonwealth (whose GDP is just overtaking that of the eurozone). Yet the ability to make such arrangements is another key reason why we want to leave the EU.
He argues that outside the EU, we should be subject to the EU’s Common External Tariff, which he says averages 2.7% of the value of exports to the EU. I think he means goods exports — the overall figure including services is more like 1.7%, and declining year-on-year.
Let’s try to put some rough numbers onto this. If UK GDP is around £1.6 trillion, then (being generous) exports to the EU might be £160 billion. This is a mix of goods and services, so the duty paid might be around £3.5 billion. That’s only around half of the UK’s net budget contributions to the EU, and still less compared to gross budget contributions. It’s downright trivial compared to the costs of EU regulation, estimated by TPA to bring the total cost of our EU membership to £118 billion p.a. So if we left and paid the duty, UK PLC would be hugely better off.
To put an emotive twist on it, RSB is willing to sell out our freedom and democracy for £3.5 billion, which is pretty small beer compared to the national economy. That’s a bad deal, Ronald.
But of course we wouldn’t pay the duty anyway. The EU has (or is negotiating) free trade deals with nearly half the countries in the world. It has FTAs with Mexico and Korea, for heavens’ sake. And the UK is its largest export market. We have a trade deficit of around £50 billion a year with the EU. Sheer naked self-interest would require Brussels to agree an FTA with us.
Some commentators argue that we’d still have to pay a fee to Brussels for access to the Single Market, as Norway and Switzerland do. Bunkum. Given our huge trade deficit with the EU, we ought to charge them for access to our market, and if we agree an FTA with no fees either way, that’s generous.
RSB notes that while his quoted average duty is 2.7%, some half of goods exports are duty free, so the other half face higher tariffs. We have to recognise particular sectoral concerns, for example in the automotive industry, where import duty to the EU, without a special deal, would be 10%. (This is a nominal maximum, which RSB quotes — though for various technical reasons the actual figure is significantly lower). But does anyone imagine that Mercedes and BMW and Audi and VW and Citroen and Peugeot and Renault and …. (I could go on, but you get my drift) would be happy to face a 10% tariff into the UK? Of course not. Of course cars would be included in our UK/EU FTA.
Then RSB gets to the new shibboleth of the pro-Europeans: Rules of Origin. Even with a Free Trade Area, they argue, we should still face horrifyingly complex Rules of Origin requirements, which would make trading with the EU a nightmare.
Now RSB is an international trade expert. But I myself spent decades in international businesses, and I talk to many companies. I never, ever remember having any issue with Rules of Origin. I’ve talked to people in the shipping business who simply don’t recognise Rules of Origin as a problem. I’ve also talked to exporters who tell me that paperwork on trade within the EU’s much-vaunted Single Market is already worse than that for exports elsewhere, and even some who have abandoned the EU for that reason, and are focussing instead on the faster-growing markets of the BRICS and the USA.
Of course Switzerland has Free Trade Agreements with the EU, so would presumably suffer from the same Rules of Origin problems. So RSB needs to explain how, despite this handicap, Switzerland still manages to export more to the EU (on a per capita basis) than the UK does.
My assessment is this: that as the arguments for EU membership are stripped away like the layers of an onion, as the pro-Europeans fear they’ll be left naked in the Conference Chamber, they’ve agreed to make a last stand on one obscure technical point: Rules of Origin. They’re confident that the issue is so arcane that no one will feel able to challenge them.
Some people in UKIP are suggesting that RSB has been “got at”, or even that he was inserted years ago as a mole into the EU debate by the Brussels side, charged with earning the trust of sceptics before blowing them out of the water. I don’t buy conspiracy theories like that. But I would suggest that RSB is so focussed on his narrow, specialist expertise that he’s missing the big picture. Which is a pity.