Leaving the EU is not a menu of equal options

What is becoming clear is that Vote Leave have adopted a rather cavalier approach to exit.

Michael Gove’s suggested emergency legislation, cocking a snook at international law within weeks of a Leave vote, is the epitome of this approach. Then again so is the new Vote Leave policy of leaving the single market at the same time as leaving the EU. What ever happened to the policy of not having a plan, which Dan Hannan had been valiantly defending (and doing so rather well, actually)?

What the Leave movement at large has never got its head around is that leaving is not about setting out your requirements and then looking around and picking the option that best fits. It is not a menu where the chicken dish is as good as the beef or the pork i.e. just a matter of taste depending on what takes your fancy that day.

If that’s what it was about, can we all just agree now that the theory of the WTO option would be the answer?

I stress the theory of the WTO option, which starts out with the idea that countries don’t need trade agreements to trade. This theory has been advanced by Patrick Minford, Gerard Lyons and Michael Burrage in a Civitas paper at the start of this year (cited by Boris Johnson today). It is a very select group. In this theory, the EU and the USA, the EU and China, and the EU and Australia don’t have any trade agreements “yet they happily trade with each other”. Instead, so the theory continues, they rely on WTO rules which now set the terms of free trade. And before I forget, tariffs are generally very low these days so there’s little standing in the way of free trade.

When you read that whole paragraph above, it becomes very attractive, especially to a “free trader”. Frankly, what’s not to like?

Line that up against the EEA Option and the theory of the WTO Option looks clearly superior. It does after all get us out of the single market which means it gets us out of free movement. The EEA option quite obviously does not, so already the EEA looks rubbish compared to many Leavers’ requirements. Then consider that the WTO Option represents maximum independence from the EU — no more contributions at all and no more EU regulations or directives. Under EEA, the UK would probably still have to pay half the contributions it does now and it would have to accept single market regulations and directives (about 20–28% of the total EU body of law).

So the WTO Option clearly looks like the runaway winner: the full 16 ounce steak option as opposed to the EEA nut cutlet. Indeed if you are still going for the nut cutlet at this point, then you must surely be a crank — a fringe person who must be a Remainer in disguise. Whereas any full-bodied Leaver should be drooling at the prospect of the WTO option, which allegedly puts the UK in the driving seat.

Sure, we would still need to negotiate with the EU on exit, in order to get something even better — better than the WTO option alone, better than Norway, better than Switzerland. The famous “better deal”.

But that’s OK as “they sell us more than we sell them”, don’t they?

So can I put you down for a 16 ounce WTO steak?

But before we lose sight of things, it is the theory of the WTO option that is the runaway hit. If the theory were true, you’d have to be a pretty bonkers Leaver not to like it.

Except the theory isn’t true. It’s flawed. Not just a bit flawed either, but flawed from top to bottom.

Bluntly, it’s bollocks.

Without immediately explaining why, let’s just do a little thought experiment: Suppose I’m right and it really is seriously flawed. Maybe the 16 ounce steak is a week out of date and riddled with harmful bacteria — so a major sort of “flawed” that could kill you. How does this change your approach and what are you going to do now?

Well for starters, you are going to have to negotiate with the EU but without what you thought was a palatable fallback option. That suddenly puts you at a disadvantage which in turn changes your whole outlook. No longer the cavalier approach — “we’ll take what we want, thanks, and discard the rest”. You will actually have to agree a bespoke deal with the EU from scratch. A bit more like Switzerland (over many years), only without the free movement that they ended up with. A sort of premium chicken dish option.

You begin to realise that you are entering something of a minefield that could take years and years to thrash out, during which the UK will still be inside the EU. And the EU hates the Swiss chicken option and will find any excuse not to serve it up.

Ah yes, but “they sell us more than we sell them, don’t they, and so they will be keen to do a deal”?

Well on one view they do. But on another view, our exports to them are a far more important part of the British economy than their exports to us are a part of the EU economy (about 45% to 15%). Yes we’d both like a deal but suddenly the balance of power looks reversed and one has a slight sinking feeling that they don’t actually need to be in quite the same hurry as we do (what with UK markets gyrating; people going potty over “uncertainty” etc).

The balance of power is thus very different to that imagined under the theory of the WTO option. And once you read up on the real gory detail of the WTO option here, you start to appreciate why it is so badly flawed on several levels, not least the simple fact that there are agreements for the conduct of trade between the EU and USA, and China, and Australia. For example, for the EU-USA there are over 100 separate trade agreements. For EU-China there are some 65 agreements. The EU and Australia have had a framework agreement, mutual recognition agreements and conformity agreements for years and continue to develop the relationship.

In other words, they do not rely solely under WTO rules. In fact no advanced trading nation does. To have nothing in place except WTO rules would be very bad and trade in some sectors would grind to a halt. No government advised by the civil service, and no House of Commons would ever give it the time of day. It is the obsession of some old-style free traders that haven’t caught up with the modern world and still view everything through the prism of tariffs. What Patrick Minford describes as a “Breset” or Gerard Lyons as an “economic shock” is more true than perhaps they realise: it would certainly be dramatic, and not in a good way.

And that’s barely the half of it. Our existing relationship with the EU isn’t just about trade — it is a much bigger entanglement, as the same WTO Leavers often tell us in different contexts. And some of that stuff we’d quite like to keep going after exit. A mere trade agreement will not be enough. It is going to take a LOT of unraveling.

For more information on the WTO option, you need to read a Leaver’s analysis here and I strongly urge you to do so. There is also an analysis from Remainers but it comes to the same: “If this sounds crazy, that’s because it is crazy”. But realising that the WTO ‘steak’ is actually ‘off’ can be quite a brutal experience. And the Swiss ‘premium chicken’ is going take a decade or more to cook.

If you are still hungry for Brexit, then that immediately-available EEA nut cutlet suddenly looks rather inviting.