It is still just about possible that the UK will manage to strike a trade deal with the EU once our transitional arrangement expires at the end of this year. But you wouldn’t want to bet anything of any value on it right now. The negotiations remain fraught and angry, and British attempts to re-visit the Withdrawal Agreement may mean that the talks are now in the terminal stage. It would take a miracle to save them, and those are usually in short supply.
The City forecasters already calculate that “no deal” is the most likely outcome, and it is hard to disagree with that verdict. A few diehard Remainers aside, the British have reconciled themselves to that. Across the rest of the continent, however, it is still viewed as a disaster. Many think the British should be made to pay a high price for their intransigence. And yet, if only they could calm down for a second, European governments should be able to work out that leaving without any arrangement can work for them as well. Here’s why.
First, the UK will be freed from EU rules, standards and taxes. What we will do with that freedom remains to be seen. But over time, we will gradually evolve different systems from the rest of Europe, and try out different policies. Right now, the EU thinks that is terrible, arguing that we will undercut their model with “social dumping”. But in fact regulatory, legal and tax rivalry is just as useful as every other sort of competition.
A Britain outside of the EU’s regulatory orbit will be able to provide an alternative model, and it will be a check on the over-centralised, meddling, tax-hungry instincts of the Brussels machine. That might be a bother for a few commissioners with an over-inflated sense of their own importance. But it would be far better for the Eurozone economy – it could sure use a lighter tax burden, and a little less interference.
Next, we could effectively become Europe’s Hong Kong. It is unlikely we will turn into Singapore-on-the-Thames (even if personally I think that would be great). But a slightly more free-wheeling, more lightly regulated, more tech-friendly, and entrepreneurial UK could well become a conduit for investment into the continental mainland.
In that sense, Hong Kong has been hugely valuable to the Chinese economy over the last two decades, funnelling countless billions of investment into the country, and Singapore has played much the same role for South-East Asia. Offshore hubs are sometimes a threat, but they are often also a great way of raising extra capital – and Britain, and especially the City, could play that role.
Finally, the UK should be richer. It is hard to make any calculations amid the Covid-19 crisis. Right now everyone is getting poorer at an alarming rate.
But put that to one side, if possible. With our own tariffs, our own trade deals, with control over our own industrial strategy, and with a regulatory regime designed for our own strengths, over time the UK should become a wealthier country. What will we do with the extra money? Obviously enough, we will spend it on importing more stuff from the rest of Europe, just as we always do.
True, there is one massive problem. If we leave without a deal, and it is a success, and the economy does fine, then it might encourage other European countries to do the same. It certainly won’t deter them. Perhaps that will happen, and perhaps it won’t. And yet, in truth, no other country is as well-placed to break away from the EU as Britain is.
The Brussels machine may not be able to grasp it. But at this fraught stage of the negotiations, an amicable “no deal” is by far the best outcome. The EU should call off its lawyers, and forget about retaliation, and agree to that – because it is in their interests as well as ours.