Wednesday, April 26, 2017

Piece of Cake

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Mrs May’s priority is to fulfil the Leave campaign’s promise to “take back control” by ending the free movement of EU citizens to Britain and the jurisdiction of the European Court of Justice (ECJ). She has acknowledged that this means leaving the EU’s single market. But leaving would be a mistake. Even if it takes control of immigration, Britain will not be able to cut the numbers much without damaging the economy, as ministers are slowly realising. And the government is wrong to claim that there exists some relationship with the single market that has all the benefits of membership with none of the costs.

It is true that many Britons backed Brexit because they wanted to cut immigration and regain sovereignty, but they did not vote to make themselves poorer—as Mrs May’s “hard Brexit” will. Her government has been characterised by U-turns and her letter this week was more emollient than some of her earlier statements. Even so, in thrall to Brexiteering backbenchers and the Eurosceptic press, she is unlikely to change course now.

Mrs May is not just making the wrong choices, but also downplaying awkward trade-offs. By promising barrier-free access to the single market while stopping EU migrants and ending the ECJ’s jurisdiction, she is still telling Britons they can have their cake and eat it. Although she concedes that exporters to the EU will have to obey EU rules, the more Mrs May insists on controlling EU migration and escaping the ECJ, the less barrier-free will be Britain’s overall access to the single market. This is not just because free movement of people is a condition for the EU, nor because it will be hard to secure tariff-free access for trade in goods, something both sides can readily agree on. It is because the biggest obstacles swept away by the single market are not tariffs or customs checks, but non-tariff barriers such as standards, regulations and state-aid rules. Unless Britain accepts these, which implies a role for the system’s referee, the ECJ, it cannot operate freely in the single market—as even American firms trading in the EU have found.

The most dangerous of Mrs May’s illusions has been her claim that no deal is better than a bad deal. Her letter this week steps back from this notion, but only a pace. To revert to trading with the EU only on World Trade Organisation (WTO) terms would cause serious harm to Britain’s economy. It would mean the EU imposing tariffs plus a full panoply of non-tariff barriers on almost half Britain’s exports. No big country trades with the EU only on WTO terms. An acrimonious break-up would make it harder to co-operate in such areas as foreign policy and defence. And it would surely increase the risk of Brexit triggering Scotland’s exit from the United Kingdom.