EU’s Brexit negotiating strategy is the product of insecurity not strength
“Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expense.”
With these words David Hume, the great Scots philosopher of the eighteenth century, opened his essay exploring the phenomenon that he called “the jealousy of trade”. Hume’s insight that human states are easily swayed by a zero-sum, envious approach to commerce and trade is something which resonates profoundly today. It is especially relevant when considering the European Union’s endeavours to forge an advantageous economic relationship with a post-Brexit Britain.
The EU member states have, at long last, approved their new negotiating mandate for the upcoming trade talks between Brussels and the UK. It is tougher than previous drafts and more adamant in its insistence that the British government complies with EU regulations. In response to Boris Johnson’s declarations that the UK will only be seeking a “Canada-style” Free Trade Agreement, the mandate has doubled down on demands for regulatory control over Britain’s economy beyond 1 January 2020.
Since the publication of the draft agreement, which was unveiled on 3 February, much furious work has been going on behind the scenes. The original document, French President Emmanuel Macron decided, did not express firmly enough that the UK must abide by a “level playing field” with the EU 27 on regulations.
Accordingly, the language has been changed and clarified. Paragraph 89 of the 3 February draft mandate outlined that “the envisaged agreement should uphold the common high standards” from state aid and competition to environmental standards and labour rules. Now, this has been strengthened in paragraph 94 of the new mandate to request not only “the common high standards” but also “corresponding high standards over time.”
In other words, they wish to control not only the short-term alignment of Britain and the EU 27, they also want to guarantee that the UK will remain aligned in perpetuity. And we must now entertain the possibility that the EU is not only entirely serious about its supposed “red lines”, but also that they will be unwilling to compromise.
This much was clear when Amélie de Montchalin, the French Secretary of State for European Affairs, said in an interview today that France and the EU will not give in just because of the timing. “We will protect the interests of Europeans and we want to be very clear and strong about the route that we want to follow.”
It is patently obvious that the UK – or any other self-respecting, independent nation – cannot accept such terms. This is especially the case when the EU would never dream of imposing such terms upon other comparable trading partners – such as Japan, South Korea, and Canada. These countries’ trade agreements with the EU are based upon a mutual recognition of each other’s standards because they all unilaterally subscribe to international conventions protecting environmental standards as well as labour regulations and human rights. To ask for more than this is entirely unreasonable and undermines the point of political independence.
The value of the trade between the EU and these countries, when each is taken individually, is a fraction of that between Britain and the rest Europe. This is not to mention that Britain is one of the world’s leading exporters of services; its financial hubs, historic stability, and common law contracts provide the gold standard for international exchange. Accordingly, there is no reason why the UK and the EU should not come to a fair, mutually-beneficial trading arrangement that respects both the integrity of the Single Market and allows Britain to exercise its political independence and freedom to diverge from it.
Why, then, such obstructionism?
Europe’s leaders are indulging that insecure, primal instinct – the jealousy of trade. Their zero-sum approach to commercial exchange is on full display. They are, for some reason, terrified of the consequences of genuine free trade. This is perhaps because they see the world through the lens of a rather rigid geopolitical framework. According to their strategic imagination, if Britain’s economy – the world’s 5th or 6th largest – isn’t within the European Project, then it represents a threat to be neutralised and not an opportunity to be embraced.
Ironically, this same protectionist mindset also continues to play into the EU 27’s inability to agree upon their own budget for 2021-27. Here, President Macron, as well as trying to ramp up the punitive qualities of the negotiating mandate, is also seeking to squeeze the rebates out of the EU’s spending arrangements. He wants Europe’s big budget contributors (the so-called “frugal states” such as Austria, Denmark, the Netherlands, and Sweden) to continue funding the generous agricultural subsidies for farming goods that form the backbone of Europe’s Common Agricultural Policy. These amount to about 40% of the European budget and France, consequently, is by a long way the largest net beneficiary of a policy that serves to prop up incomes and uncompetitive agribusiness in La France profonde.
All the while, this protectionism distorts global markets and cripples small producers in developing countries in Africa, the Caribbean, and South America. A mounting body of evidence, including that published by international development NGOs, demonstrates precisely how the CAP allows a mass of cheap, heavily subsidised farm goods to be dumped in these regions’ emerging markets. The effect is to crush local producers by robbing them of the relative cheapness of their labour and production. Unsubsidised small producers quite simply cannot compete with the edge afforded by Brussels’ fiscal firepower. How’s that for a level playing field?
Britain is justified in not wanting to be part of a project in which the values of free trade and cosmopolitanism are often lauded, but little practiced. And the government is resisting a blatant attempt to strong arm the UK into the sorts of conditions that Brussels wouldn’t dream of imposing upon any other economy of equivalent strength and influence. That European statesmen are trying to do so represents a triumph of economic self-harm and integrationist political ideology over rational statecraft.
If the EU wishes to avoid Britain moving ever further away from the orbit of the Eurozone, they would do well to heed David Hume’s conclusion on the jealousy of trade. Whatever the geopolitical jealousies of ambitious nations and their statesmen, Hume had it right: “The increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours.”