The frantic search for a Brexit dividend is one of the few growth areas in the UK economy, at least when measured by the consumption of government time and effort rather than by the resulting output. A less obvious truth is that the EU’s trade policy would also be better if the UK were still a member.
The entries in the UK’s Brexit debit column are clear. This week it emerged British exports have seriously underperformed during the global post-lockdown trade rebound since early 2021. Even chancellor of the exchequer Rishi Sunak, a longtime Brexit enthusiast, took time out from counting the number of cars and varieties of bread consumed in his household grudgingly to accept the damage his project had done. The UK doesn’t even have the capacity to check imports from the EU, repeatedly deferring the introduction of full border controls.
In its obsession with showing gains from Brexit, Boris Johnson’s government is mulishly pressing ahead with puerile symbolism like setting up an entirely separate “UKCA” safety and quality mark for products to rival the EU’s “CE” mark — duplication without deregulation. The UK’s attempts to diverge are also constrained by the trade deals by which it is bound. The EU this week started a case against the UK at the World Trade Organization over discrimination in the way Britain subsidises offshore windpower.
There may, of course, be some real dividends in the future. The UK is authorising gene editing of crops, a welcome departure from the EU’s fear of gene science, for example.
But so far, the one gain the government can reasonably claim is its relative speed in procuring Covid vaccines in late 2020 and early 2021. In theory, the UK could have done this within the EU. It obtained regulatory authorisation while still under the aegis of the European Medicines Agency, and it was not compulsory for EU members to join the centralised procurement programme. But in practice it might have been difficult to ignore an EU-wide project from the inside.
However, the procurement only got the UK a couple of months’ start on the EU, an advantage which probably won’t be replicated in future. The UK’s edge with Covid rested on a research tie-in between Oxford university and AstraZeneca, together with nifty contracting which prioritised supplying the UK. Britain has long experience in large-scale public health procurement, while Brussels was learning on the job.
In any future pandemic the UK will struggle to reproduce that relative overperformance. The EU frequently makes a shambles of unfamiliar problems — the eurozone debt crisis, for example — but then learns quite quickly.
Next time, you can bet Brussels will be primed with big budgets and watertight procurement contracts — and if necessary another export authorisation scheme to focus manufacturers’ minds on supplying the EU market. If you’re a big pharma business and you’re concerned about another round of vaccine nationalism, whose market do you want to be trapped in? One with a population of 67mn or one with a population of 447mn?
There’s an obvious temptation in the EU to feel schadenfreude about the UK’s content-free Brexit triumphalism. But if you care about good policy rather than descending to Johnson’s point-scoring level, it’s an instinct worth resisting.
Certainly, there are policy areas in which the EU is freer to move in the right direction now the UK has gone, such as centralising fiscal policy. Trade, however, is not one of them. EU trade policy is at serious risk of protectionist drift, and some liberal Nordic and central and eastern European member states privately bemoan the loss of the traditionally free-trading UK as a constraint.
One obvious sign is the anti-coercion instrument (ACI) that the EU is currently developing. Its intentions are good — to deter the kind of intimidation China has tried on Lithuania. (It’s not really relevant to a situation as extreme as Russia, where the EU has correctly leapt straight to massive sanctions.) But the ACI is currently being drawn up with a lot of leeway to interpret “coercion” and design a response, leaving it open to protectionist lobbying. Krister Nilsson, Swedish state secretary for foreign trade, last month told a seminar at the European Council on Foreign Relations: “Our businesses, the companies that actually live their daily life in trade . . . they see this as a too broad, too strong, too weaponised an instrument.”
Another example is the EU Chips Act, where money is being shovelled into the semiconductor supply chain without enough care being given to how it gets spent — plus provisions on preferential domestic supply that could easily slide into de facto export restrictions. The post-Brexit UK may be all about giving itself more space to throw public cash around, but it was a strong voice against abuse of state aid when it was in the EU.
Traditional economic theory emphasises the mutual gains from trade. The whole surpasses the parts. The same appears to be true with trade policy and Brexit. Britain, so far, is definitely worse off outside the EU, but then the EU would also be having a more balanced and reasonable debate if the UK were still in the room.
The EU and UK’s trade policies are both weakened by Brexit
Pinoy Variant