May’s Brexit capitulation bad for UK, and Australia too

Protestors shout against Brexit opposite the House of Parliament in London. Picture: AP

If Theresa May’s capitulation to the EU — her Brexit deal — is passed by the House of Commons it will be a disastrous day for Britain, a very bad day for Australia.

We will lose the prospect of a free-trade agreement with Britain, the world’s fifth-largest economy, which Brexit had promised.

Instead, we will be left negotiating an FTA with the EU, which is likely to take 15 years, not yield much in benefits and come at the expense of satisfying all the ­excessive and costly regulation the EU always wants.

Oh, and we will lose the friend at court in the EU we used to have in Britain, while not getting the new, free, independent, strategically self-confident Britain that was always the point of Brexit.

Under May’s agreement, Britain remains part of the EU Customs union until 2020, probably 2022, but more likely forever. Because under this shocking surrender disguised as a deal, Britain can only leave the Customs union with EU agreement. While Britain is in the Customs union, it is required to levy EU tariffs on any imports from foreign nations. It has no choice in the matter or ability to vary that rule.

In other words, it cannot do trade deals with anyone. There is no situation imaginable in which the EU would see benefit in allowing Britain to lower tariffs for a third country, like Australia, which might mean their goods displace EU goods in Britain.

The idea from some May government apologists that the agreement would allow Britain to do separate free-trade deals rests on two palpable fictions.

The first is that Britain will one day leave the interim agreement for a full free-trade agreement with the EU and then, after that, it could also negotiate FTAs with other nations. But Britain will have zero leverage in such negotiations with the EU, and so the ruthless and dictatorial bureaucrats of Brussels will simply leave Britain lingering in the half-death of its interim arrangements.

The second fiction is Britain, even during the transition ­period, could do a trade deal on services. But which economy in the world would want to do a trade deal with Britain in which its giant market for goods was off limits?

May’s deal is much worse for Britain than continuing EU membership. Under that, Britain gets a say, and in some areas a veto. Under May’s black fantasy, Britain has to observe all the EU rules, which will still be adjudicated by the European Court of Justice, but has no influence at all.

This is perverse in every way. It means in future EU trade deals Brussels will have an incentive to give concessions that damage British industry but help continental industry, and Britain will have to meekly comply.

That is why both Leavers and Remainers say the deal will make Britain a “vassal state” of the EU, a colony, a nation in which in fact democracy and self-government don’t apply. May and her sympathisers argue Britain leaving the EU with no deal would be a catastrophe. The truth is that a no-deal exit, which May once favoured is perfectly OK if it is prepared for in advance. May was grotesquely irresponsible in not making proper prep­arations for this contingency.

Most nations that trade extensively with the EU do so on the basis of World Trade Organisation rules, as would Britain in the event of a no-deal exit. It is perfectly fine. The only reason there would be massive disruption would be if the EU chose to apply what would be in effect trade sanctions against Britain.

If that looked likely, every civilised nation, including Australia and the US, would urge the EU to behave more reasonably. Australia will suffer in other ways from May’s deal. The EU, through regulation and sometimes malice, often wants to take anti-Australian action. Britain ­always stops it. We lose that in any Brexit scenario but that is fine if instead we get a robust sovereign Britain to pursue a historic friendship with.

Given the political instability May has produced, we are in danger of losing the normal, stabilising role Britain has always played in the Western alliance.