Photo: The Times / News Syndication
Imagine driving through central London, at rush hour, with no traffic lights. Imagine the Merseyside derby (the fixture that has seen more red cards than any other in British football) being played without a referee. Imagine flights trying to land at Heathrow without any air traffic controllers. It probably would not end well, would it?
And now imagine that Britain exits the European Union with no Article 50 deal, and no prospect of a trade deal -– the so-called World Trade Organisation (WTO) option.
Much as we have all wished, even if just for a moment, that the offside rule did not exist, or that we could just jump that red light, ultimately we always come to see the value of rules, systems and the institutions that oversee them.
Why? Because the alternative is chaos. And the need for rules, systems and institutions is particularly acute when it comes to trade in goods and services.
For months now the prime minister and the Tory Brextremists who run her government have repeatedly stated that ‘no deal is better than a bad deal’.
No deal means crashing out on WTO terms. No deal means the removal of the well-established rules, systems and institutions that have governed the United Kingdom’s membership of the EU and the single market, to be replaced by the law of the jungle. Crashing out of the EU on WTO terms would give rise to a range of deeply damaging tariffs, and a myriad of non-tariff barriers.
WTO tariffs will destroy industries like automotive, for two reasons. First, the finished article will be hit by minimum tariffs of 10 per cent on every vehicle that we sell into the EU. And second, the highly integrated nature of automotive supply chains means that component parts travelling back and forth between the UK and the continent multiple times would be hit by tariffs every time they cross the border.
A WTO Brexit would therefore destroy the British automotive industry, which is estimated to directly employ around three quarters of a million workers. And that is before we even start to think about the extended supply chain that serves automotive. An example of this that is close to my heart is the steel industry. The British automotive sector absorbs over half the output of the Port Talbot steel works, so a WTO Brexit would also be catastrophic for our steel industry.
WTO tariffs spell disaster for British manufacturing, but non-tariff barriers are equally toxic. Non-tariff barriers are the rules, regulations and specifications that regulate trade in goods and services. Every label, standard and qualification with which producers and service providers must comply is the result of complex international negotiations. For these labels, standards and qualifications to work they have to be aligned across borders. So, regulatory alignment is the holy grail of trade negotiators, and it is this alignment that lies at the heart of the success of the EU’s single internal market.
A WTO Brexit would inevitably wrench the UK out of that regulatory alignment, in essence turning us into a rule taker, as opposed to a rule maker. That does not feel like ‘taking back control’ to me.
Having assessed the impact of taking the traffic lights off the roads, let us now turn to the impact of removing the referee from the pitch. The WTO arbitration process available if a country feels that the rules are being unfairly implemented (for example protectionism by the importing country through the imposition of artificial non-tariff barriers), is pitiful. In the EU, a British company being obstructed by another EU government could appeal directly to that nation’s courts, the European Court of Justice (ECJ), and the Commission. Under WTO terms that company would have to persuade the UK government to issue a complaint on their behalf, and enter into months or even years of arbitration. And even then, WTO enforcement penalties are slow and imprecise. The reality is that the WTO institutions make the much-maligned ECJ look like a well-oiled machine.
How ironic that a WTO Brexit, held aloft by Brextremists as the very definition of taking back control, would in fact lead to the greatest loss of sovereignty in our modern political history. Their reckless nationalism will turn our government into a rule taker, beholden to WTO bureaucrats in Geneva.
Non-tariff barriers would also destroy the UK’s world class professional services industry. Regulatory equivalence is essential for our financial, legal and accounting services. But an agreement on equivalence today is meaningless without a UK commitment to ongoing equivalence and enforcement, something that is only possible if we have some kind of deal with the EU27. No deal, therefore, is not an option if we wish to see our professional services survive and thrive. And it is important to remember that we are not just talking about the City of London here. These jobs are distributed throughout the United Kingdom, with two-thirds of the 2.2million jobs in the sector being outside London.
A WTO Brexit will not only inflict huge damage on our manufacturing and services, it will also enable Theresa May to make good on her threat to change our entire economic and social model. We will see a bonfire of workers’ rights, and the transformation of our country into a tax-dodgers’ paradise – a European version of the Cayman Islands.
A WTO Brexit is not the only option. Labour can, should and must offer an alternative, based on our Brexit tests. Transitional arrangements based on the UK dropping into the EEA should be at the heart of our negotiating strategy, as I outlined in my speech during the Article 50 debate.
Some have argued that our party and candidates should avoid talking about Brexit during this election campaign. I disagree. I believe that we should learn the lesson of the Stoke byelection, where we did not shy away from talking about Brexit and immigration – and we won.
So, let us roll up our sleeves and get out there on the doorsteps.
Let us make our constituents aware of the deeply damaging impact of a WTO Brexit.
And let us outline our alternative vision for a deal that works for our country, and for the communities that we are proud to represent.