Brexit Has Reached The Point Of No Return

Authored by Alasdair Macleod via The Mises Institute,

The actual negotiations could easily run right up to the deadline in March 2019, when Britain is due to leave. If no agreement is forthcoming by that date, both sides might agree to extend negotiations, but that only seems likely if there is a good prospect of an agreement. Otherwise, Britain leaves and falls back on WTO trading rules, or does away with tariffs altogether. This is seen by the EU negotiators as a threat to Britain, believing it is Britain which is running out of time. Therefore, if Britain wants a trade deal, she must make it clear that a no-deal option is attractive to her. And, be it clearly understood, the negotiations only cover a minor part of the UK’s overall economy.

It’s Much Ado About Not Much Trade

WTO tariffs apply to physical goods, involving only £143bn exported from the UK’s £2,000 billion economy to the EU, and imports from the EU of a larger £235.5bn. Excluding agricultural products of some £5bn (net of spirits), average trade-weighted tariffs on goods imported into the EU from non-member states without a trade agreement is only 2.3%.[i] Therefore, the EU’s external tariffs which will be applied to UK non-agricultural goods exports to the EU involves only 7.5% of the UK’s GDP, and is a tax on EU citizens amounting to roughly £2bn. Is this really worth arguing over, and paying massive divorce fees?

The larger issue is services, and here we must differentiate between services sold to consumers, such as retail investments, and wholesale services, such as capital market operations, commercial lending, legal services, architectural services, etc. The retail services involved are not material, and in any event are easily distributed through locally-incorporated subsidiaries in Dublin and Luxembourg. Wholesale services are generally excluded from trade agreements for practical reasons.

Therefore, if a trade agreement is not forthcoming, the cost to British business as a whole is not as material as the Remainers and lobbying businesses have it, and certainly less than the implied cost of normal currency volatility on cross-border settlements. One should conclude that the absence of a trade agreement costs considerably less than the UK Government paying money to the EU for an implementation period.

The Current State of the Brexit Debate

It is becoming clear that the Remainers are driven by little more than a desire to prevent change while distrusting free markets. Nick Clegg, who was Deputy Prime Minister in the Conservative/Liberal-Democrats coalition, has recently published a book entitled How to stop Brexit (And make Britain great again)[ii]. There are no substantive arguments in favour of Remain, not even a neo-Keynesian discourse. Make Britain great again? The book is miss-sold. There is nothing on the subject of the book’s subtitle at all.

Mr Clegg’s unquestioning assumption, which he appears to share with other leading Remainers, is Brexit is just plain wrong. He makes much of the Brexit campaign’s supposed lies about the extent of the rebate when Britain leaves the EU. There was no lie: it merely failed to differentiate between the funds Britain would save, and the money that is spent by the EU in the UK funded by the UK taxpayer. The latter amount is decided by the EU, not the UK, so all the Brexiteers were quoting was a gross figure sent to Brussels, which on Brexit would become available to the Government to save or spend as it sees fit.

Furthermore, there was no mention of “project fear”, the Remain campaign’s concerted effort to frighten voters into voting Remain. But, as we saw only this week, the pro-Remainers in the establishment are at it again. They prepared and leaked another negative report based on the same economic modelling. A reasonable person would have been so embarrassed by the failure of the first attempt at economic propaganda, as to not repeat it. But we are dealing with ingrained beliefs, not reason.

On the evidence, Remainers cannot argue their case effectively. Furthermore, the cost of backtracking on Brexit, which receives too little attention, is now considerable, and almost certainly unpalatable to the electorate. Unless Britain does achieve a proper Brexit, she becomes, taking the words of Jacob Rees-Mogg,[iii] a vassal state, having lost considerable political credibility and the ability to influence EU policy as she has done before.

Realistically, bridges have been burnt, even though the panjandrums in Brussels want Britain to change her mind. The Thatcher rebate would certainly be lost, and Brussels is preparing more onerous regulations in the knowledge Britain can no longer obstruct the EU executive’s plans. The Tobin tax on financial transactions can now be introduced, which would kill the City, if Britain remained, more certainly than any threat from Paris and Frankfurt as rival financial centres. A Tobin tax introduced in Euroland after Britain leaves would see Eurozone wholesale financial business migrate to London.

If Britain backtracks or compromises on sovereignty, it will be disastrous for her, and little account has been taken of the new opportunities for the City, operating from outside the EU.

Enter the European Research Group

The ERG, unlike its name might suggest, is the grouping of pro-Brexit backbench Conservative MPs determined to ensure Britain truly leaves the EU. The recent appointment of Jacob Rees-Mogg, as its new high-profile chairman, promises a new dynamism in the battle between the Brexiteers and the Remainers. The ERG has considerable power, being comprised of sixty MPs while Mrs May commands no overall majority.

Further pressure is being applied through the 1922 Committee, which officially represents all backbench Conservative MPs. Amongst them are Remainers and those without well-defined opinions, the latter becoming increasingly alarmed at the lack of a clear government policy. If forty-eight of them formally write to the 1922 Committee expressing no confidence in Mrs May, an election for a new leader (and therefore prime minister) is automatically triggered. It is rumoured that forty such letters have already been received. Between the ERG and the 1922 Committee, the Brexiteers’ ability to pressure the Government into sticking with a firm Brexit policy is increasing.

All this lends support to Mrs May’s original Lancaster House declaration, which is what the ERG is seeking to achieve. In the Commons, opposition to Brexit has been subdued enough to get the required legislation through the House, without major concessions. This is not the case, however, in the Lords, which by sending legislation back to the Commons for reconsideration threatens to delay the whole process at a time of tightening deadlines.

Mrs May’s greatest problems are likely to be in dealing with her own advisors, senior civil servants whose only world is one of bureaucracy, and the Treasury, populated with staunch neo-Keynesians. Bureaucrats resist change, particularly when it involves a whole new paradigm, which is always seen as risky. And the Treasury believes in manipulating the economy to enhance tax income, the antithesis of any free market proposition, with which it has little empathy.

These operators are unhappy at the prospect of past agreements being torn up to be replaced by, in their view, uncertainty. Thus, Oliver Robbins, whose job is to coordinate negotiations with the EU from Downing Street, and Sir Jeremy Heywood, the Cabinet Secretary, are seen by the ERG to be pursuing a policy of fudging the changes required for a true Brexit. And Philip Hammond, the Chancellor, is now being downright obstructive.

However, governments have a duty to represent the electorate, not the permanent establishment, which is there to serve ministers in pursuing government policy. Individual ministers are meant to toe the agreed policy line. Mrs May, in trying to accommodate the Remainers, appears to be in danger of siding with the permanent establishment and the Treasury, against her own stated policy, instead of firmly instructing it to do the Cabinet’s bidding. Doubtless, the ERG will ram this point home.

Keeping the Broader Picture in Sight

It is always difficult for a prime minister at the coal-face of day-to-day problems to retain a broader vision. The ultimate prize for Mrs May would be to go down in history as having laid the foundations for a prosperous Britain. To achieve this, she must have a proper understanding of free trade, as Robert Peel acquired when he sided with Richard Cobden and abolished the Corn Laws in the 1840s. Unfortunately, Mrs May has little option but to listen to risk-averse advisors and central planners who deny the primacy of free markets, not just for handling day-to-day issues, but also, it appears, to guide her for the broader picture. In short, she has to have an independence and resolve to act despite her advisors’ advice.

Some members of Mrs May’s Cabinet do understand free trade. They include heavyweights such as Boris Johnson, Michael Gove, David Davis and Liam Fox. Even though Philip Hammond, the Chancellor, has been persuaded against it by his permanent staff, the ERG does have powerful allies in the Cabinet.[iv]

The European Research Group understands, to a reasonable degree at least, the fallacies of central planning and the faults of the socialism of the European project, while understanding the benefits of free trade. Its leadership should be well placed for the task. This is where the position of Mr Rees-Mogg is important. He personally appears to understand the benefits of free markets, has a good grasp of the individual Brexit issues, and argues his case well. This is in sharp contrast with the Remain camp, and the middle ground of lobby-fodder on both sides of the House.

That middle ground is his to win, but time is severely limited. To do so he must not only argue his case well, but also get the following points across, loud and clear:

  • The best outcome for the British consumer is no tariffs, and their removal is the responsibility of the UK Government. The best outcome for the economy is not found in protecting business through trade tariffs, because that is to the detriment of the consumer.
  • Current EU trade tariffs disadvantage the poor most. This point will become increasingly relevant when price inflation gathers pace ahead of the final Brexit date (March 2019), as the global credit cycle progresses. An appreciation of this simple fact makes tariffs indefensible, and a clean break Brexit becomes more obviously the best solution.
  • No separation payments should be made to the EU, unless they are specifically itemised and contractually justified. The capital payments demanded by the EU in any political compromise are not only a needless expense, but an imposition on the Treasury’s finances which are already in deficit. Furthermore, the loss of revenue from the removal of all tariffs is a considerably smaller sum than the amounts demanded by the EU negotiators.
  • The Treasury must be persuaded that free trade leads to a stronger economy, which will be reflected in higher tax revenues. Moreover, a botched compromise, effectively being advocated by the Treasury, is a significant threat to the government’s finances.
  • There is no need for an implementation or transition period. These extensions do not encourage businesses to adapt to Brexit so much as they delay the necessary changes. Any such period should be firmly restricted to be as short as possible and involve no payment.

In any event, time is short, not only given the Brexit timetable, but ideally it must be concluded, or at least set in stone, before the disruption of the next crisis of the global credit cycle.

Comments

HRH of Aquitaine 2.0 Mon, 02/12/2018 - 03:32 Permalink

Either the UK stops the importation of gimmigrants or the natives will be outbred and outworn when the legal system is turned against them. I think the legal system in many western countries has been hijacked by the moslem hordes. That stinky, flea-bitten, lice-infested camel has moved into the tent and made itself comfy cozy. Good luck to the west. There will be rivers of blood to cleanse the streets of moslem vermin. That can't happen soon enough.

GreatUncle khnum Mon, 02/12/2018 - 07:13 Permalink

Hahahaha ... best joke all day.

Teresa May voted BREMAIN so she will be 0% committed to BREXIT.

The bit I love and take solice from all this shit and another referendum. In the future and if it gets bad economically enough parliament can have a vote and just kick the fucking EU out. There will be no need to have a referendum at all for the UK parliament are the lawmakers. [Before anybody says bullshit - Gordon Brown with no approval of the British population was able to sign the Lisbon Treaty and all its laws including infamous but treasonous article 50 - a lawmaker].

Reneging on BREXIT then.

So if we start assassinating lawmakers until we get 330 BREXIT MP's the deal is done. That is why this is so fucking ludicrous but it did reveal the appointed only EU that has all the power. That point is for any soon to be formed terrorist group as an idea to fight for democracy.

A new referendum with the following attachment in the event of BREMAIN fixing the election.

If we have another referendum, BREMAIN wins, the commons and the Lords with the queen should be removed from the political process as NOT FUCKING NEEDED ANYMORE. Why pay for something that really is fucking worthless and we can transfer the civil service to the EU also. Get fucking rid of the lot.

In reply to by khnum

Moving and Grooving Dr. Bonzo Mon, 02/12/2018 - 13:13 Permalink

See US and President Trump for further examples.

 

These folks, like their UK counterparts, want nothing more than a mulligan on the election whose result they disagree with. And coincidentally, many of the people in both countries realize that it's a total sham, that the idea is to fix the new election to get their desired result 'fair and square'. And elites complain when they are criticized.

 

.

In reply to by Dr. Bonzo

hooligan2009 Mon, 02/12/2018 - 04:04 Permalink

a very well timed and astute commentary, if brely skimming the surface in monetary terms. the deflationary impact of not having to pay Common Agricultural Policy prices and bringing in better quaity foodstuff at half the price from around the world is indeed a massive saving to consumers. same goes for cars, building materials, electronci equipment etc.

the bank of england has nothing to do with it or say about it - it has no done no research before Brexit and will be purely reactionary after it.

it is true that britain's politicians prefer to do no work (true feeders at the taxpayers trough) and rubber stamp the policies of european bureaucrates - their biggest failings of the last forty years are the manifest in the protests against a UK government being responsbile for all the laws that were made in brussels and for which tye have simply waved through since 1973.

amazing really, there are 650 mps and around 800 lords at the federal level, with all their support (plus expenses and pensions) for a country of 64 million. that would be the equivalent of having 3,000 members of the house and 4,000 senators. all the time the elected government is frightened of doing any work at all - preferring to bitch and nag at each other, rather than coming up with ideas (like examining outcomes in different postcodes to continually improve standards in health, education or policing).

sad.

along with europe, the UK lacks leadership. unlike europe, the UK has given itself an opportunity to lead. for example, instead of sending off 15 billion a year to countries it has assisted in destroying, it could use that money to build 4-5 modern cities - which would boost gdp and allow the upskilling of currently underemployed immigrants. another 15 billion could be used to boost the attractiveness of working in the healthcare, social care and education sectors.

of course, leadership would mean advocating policies such as solar panelled, 3d built, houses, hospitals, schools, sewage and, heaven forbid, a ban on fossil fuel powered vehicles - the cities could be linked with britains other major cities via maglev trains - but hey, that al requires leadership and vision.

what britain has is a cabal of a majority of uninspiring fishwives and snobs, much like the ones that pervade europe and the US. trouble is, the women need to be there, because most of the men are worse.

 

kellys_eye hooligan2009 Mon, 02/12/2018 - 04:29 Permalink

Your discourse was going well until you got to the 'green' BS ideas.

Lowered taxes (via tariffs) plus cheap and accessible energy - which automatically eliminates all-things-green - would make the UK a force to reckon with.  EV's are a nonsense given the current energy policies we maintain and the likes of HS2 are an enormous waste of resources.

And good luck with 'upskilling unemployed immigrants' - you can't make a silk purse of a sows ear when they abhor all things pork.

In reply to by hooligan2009

ukipboy Mon, 02/12/2018 - 04:16 Permalink

I agree that a clean break from the Fourth Reich in Brussels would be the best option, but will the EU even exist by the time the UK comes to leave? What with the Visegrad four soon to become the Visegrad six (with the addition of Austria and Slovenia), Italy on the brink of elections that may bring a Eurosceptic prime minister to power, and Deutschebank being exposed as insolvent, it seems to me that the Euromess cannot last much longer. 

GreatUncle adonisdemilo Mon, 02/12/2018 - 07:01 Permalink

Yep say "appointed" to clarify it ... so even if they applied torture to a population (they doing rather well) those screams can and will be ignored. Mass immigration kind of confirms it.

It turns out all appointed systems will turn into dictatorships if it gets tough economically enough.

So the parties in the UK appointing their own selected people is a dictatorship also as we are seeing.

The majority of those selected by the 3 main politicial parties in the UK are BREMAIN, like 90%+ or more.

Then because all these parties are the different heads of the same dictatorship those in the population that object will endure gaslighting, shadow banning, censorship, intimidation and the refusal of many of their human rights. The last point is here already and getting worse because we know the above.

In reply to by adonisdemilo

adonisdemilo GreatUncle Mon, 02/12/2018 - 08:09 Permalink

@GreatUncle

Dictators are appointed, usually by themselves.

If we don't agree with our Government we can vote to change it.

How can you change a Dictator?

We have had a few instances lately of the advantages of Democracy over Dictatorship.viz a viz; Welsh windbag Kinnock, bloody useless Welfare statist, Tony liar Blair, Two faced warmonger, Gordon Brown, failed theoretical economist. All Socialists by the way, whose only skill is in the redistribution of hard earned taxes to their feckless supporters

 

In reply to by GreatUncle

kellys_eye Mon, 02/12/2018 - 04:23 Permalink

The strength of feeling - on the ground - is firmly for Brexit despite what the pundits and fake media try to prove.  Any new referendum, extremely difficult to justify under any circumstances, would need very obvious corruption to win a Remain vote.

If/when the media start to talk about the conditions the UK would be faced with in a Remain position - EU Army, loss of rebate, mandatory Euro membership etc - the odds on Remain getting any momentum at all is plainly ridiculous.

Brexit is now guaranteed and, hopefully, a change in Tory leadership as a result as they will certainly face defeat if PM(T) May leads into another election period - no pun intended.  If someone like Rees-Mogg was to lead the party AND be seen as the person who actually delivered (forced) Brexit then the Tories would wipe the floor with Labour and we could thank God for a result like that....

JDFX Mon, 02/12/2018 - 04:51 Permalink

Well done Brexiteers ! 

 

So the EU are gonna think UK sucks for a bit. Too bad. The British do what is right, and that ain't being run  by a  bunch of Jonny foreigners . I respectfully submit .

 

 

BritBob Mon, 02/12/2018 - 04:55 Permalink

Even the people of Gibraltar have had enough of the EU -

 

Sir Joe Bossano, former Chief Minister of Gibraltar , says the European Union’s negotiating guidelines for Brexit are enough to convert him, from a supporter of the EU, into a Brexiteer.

Speaking to GBC, Sir Joe said it was disgraceful that the EU has effectively given Spain a veto over the application to Gibraltar of any Brexit deals made with the UK. He said it was a complete betrayal of the trust that the people of Gibraltar had in the EU. (Gib Chronicle 31st Jan 18).

Prior to joining the EU, Spain recognized that the borders in Europe can only be changed ''by consent". 1st August 1975, Spain gives Gibraltar away again,

Gibraltar – Helsinki Accord 1975 (1 pg) https://www.academia.edu/32824301/Gibraltar_-Helsinki_Accord_1975

oncemore1 Mon, 02/12/2018 - 05:27 Permalink

EU is good for Soros and his ilk in Tel Aviv.

EU is bad for every European.

They let Germany head EU.

Germany, through its foreign policy, has incited 2 world wars with 100M dead.

Germany is not capable of domestic policy either, the unification is still not closed.

Germany was entnazifiziertand so heavily dumbed down, that they are gping to admit 8M moslems, 1.5m ivaders plus 5 in chain of family  each.

The worts choice for the EU, which could be made.

Uk has to be lucky, that they are not run by Germany any more.

Vendetta Mon, 02/12/2018 - 06:33 Permalink

When I read material that implies that free trade is the equivalent of ‘free markets’ ... I lose interest and the source loses credibility very quickly for me.  

GreatUncle Mon, 02/12/2018 - 06:46 Permalink

What price is my right to have a supposed meaningful vote when the appointed EU commission has no such recognition of that vote.

What price when in a referendum about the nearest thing we get to a true representation of what a population wants is built by the sum of those meaningful votes?

Those two points really outline the whole concept of humanity where privilige some believe is their divine right and the rest have no say but to be treated as cattle.

So the EU ...

When Soros and his like created the EU they purposefully kept out the voices of populations because it was being crafted as a government for population control (the police state) across nations. soros "open society" recognises the appointed commission ... means the Soros "open society" is not democratic it is a simple as that.

Sandmann Mon, 02/12/2018 - 07:26 Permalink

Whenever EU spends funds in UK those funds must be matched 50:50 by UK Government and EU Spend reduces UK Budget Rebate pari-passu which is why UK Govt denies spending in areas of Northern England where BreXit vote was reward for treating people like sh*t

Dr. Acula Mon, 02/12/2018 - 07:53 Permalink

Who is worse?

Vote up for Theresa May

" May had ordered a review of current legislation that would prevent pedophiles from adopting children claiming that it was a “breach of their human rights " - http://www.philosophers-stone.co.uk/?p=19637

Vote down for Queen Elizabeth

" On a related point Royal rumour has it that Prince Harry is under great pressure, especially from the Queen, to marry a black woman to help promote the racial genocide of the indigenous British people through mass immigration, cultural Marxism and Zioncorp promoted miscegenation " - https://northerntruthseeker.blogspot.com/2012/12/the-truth-about-so-cal…

Greed is King Mon, 02/12/2018 - 08:26 Permalink

The whinging remoaners would be well advised to shut their (greedy self serving you`re not taking my EU gravy train trough away from me) mouths and accept the democratic self determination verdict of the referendum; if they don`t it won`t only be democracy that has been put to the sword in Britain, it will be THEM as well, do they really believe that the majority of Brits who voted to leave the EU will meekly accept their demolition of democracy job ?, no chance, pitch forks and torches will be marching to demolish their Ivory Towers and eager busy hands will be throwing their troughs and them into the incinerator. And I`m not joking, that is just about the level of disgust and hatred the Brexiteers feel for these loathsome Fascists who would deny us our human right to independence from the Brussels Bureaucratic Dictatorship.