Why Bank of England Governor Mark Carney might be more sympathetic to Brexit than we all thought

Why Bank of England Governor Mark Carney might be more sympathetic to Brexit than we all thought

The Governor of the Bank of England has hitherto been a mild and rather mocking critic of Brexit. He has been criticised for a lack of impartiality. But earlier this month he made some thoughtful remarks that deserve closer attention than they have so far received. He was discussing the worldwide revolt against international trade and the commitments underpinning it. He added:

“In many respects, Brexit is the first test of the new global order. It could prove the acid test of whether a way can be found to broaden the benefits of openness, while enhancing democratic accountability… [through] a better balance of local and supranational authorities.”

His words follow much recent comment on the troubles of globalisation: these are said to be due to “overreach”: open trade is under attack for eluding democratic control: for trespassing into fields seen by domestic voters as domestic issues. When the imperatives of trade bring a given area of policy within the scope of international agreement, a consequence is that this area of policy gets to be removed from the scope democratic control. Voters rebel when too much is removed from their control, as American and French voters have shown, along with many others.

Hence the Governor’s rather thoughtful call for a “new global order”, to “broaden the benefits of openness, while enhancing democratic accountability” and to bring “a better balance of local and supranational authorities”. He implies a new order bringing a new definition of the scope of openness, sufficiently restricted that voters can be persuaded to accept some form of pooling of sovereignty over it, given their continued sovereignty over domestic issues through normal domestic democratic processes.

If the Governor meant what he said, its implications for policy are profound. The logic implies a radical critique of everything the EU stands for; and that in turn implies a strong endorsement of Britain’s decision to quit.

Take first the Governor’s quest to “broaden the benefits of openness”. That is not a standard by which the EU can afford to be judged. Openness is not what it is about. Its protectionism is a global scandal. Its Customs Union is a closed tariff club, notable not for openness but for what it excludes: likewise its Single Market, a closed regulatory club driven more by empire-building than by openness, whose net result has been to hold back the trade between its members.

These arrangements cut Britain off from its best customers and its best suppliers (of food and other necessities). Escaping that is Brexit’s biggest prize.

Second, take the Governor’s quest to “enhance democratic accountability.” If globalisation has been guilty of overreach in its intrusions into the proper sphere of democratic control, then “overreach” is indeed the EU’s middle name. A middle name adopted more aggressively as it has evolved by stages from a Common Market into a presumptive political federation. The Brussels bureaucracy sees no problem that cannot be met by “more Europe”. That is, by stripping ever more democratic control from its Member States’ voters.

Thus the European Commission does not share the Governor’s concept: it does not think it exists to promote openness, or that it must measure its activities in deference to local democratic accountability. Far from the Governor’s concept of a better balance between those imperatives, the EU is simply hostile to them both. Balance is not its aim.

For Britain, the clash between domestic policy and European trading obligations is inherent. It raises the cost of living for families. It aggravates our trade deficit. And it poisons our relations with our natural trading partners. Successive British governments tried hard to swallow all this, while restraining its wilder ambitions. But in the end it became unacceptable, and Brexit is the result.

Brexit means taking back control, and control can be used well or badly. The Governor is right to call it an acid test. While Brexit cannot alone hope to create the new global order the Governor calls for, it can point the way and that is what he calls the “first test” of his new order. He sets that test in three parts. Brexit must broaden the benefits of openness; enhance democratic accountability; and achieve a better balance of local and supranational authorities. As we survey the rival Brexit options, how do they match his criteria?

As we have seen, the EU counts itself out. It does not even seek to be judged by these criteria.

Much the same must be said of poor Mrs May’s Withdrawal Agreement. Openness is not on her list of priorities. Her scheme would keep us trapped as non-voting members within the EU’s closed tariff club and its closed regulatory club. Cut off from our best customers and our best suppliers, Britain would become the plaything of the EU and an international pariah. Our own poorest consumers would remain captive to high European prices for food and household supplies.

And for none of these mischiefs would our voters have any democratic recourse. The Governor’s predecessor, Lord (Mervyn) King, well said of it:

“There are arguments for remaining in the EU and arguments for leaving. But there is no case whatever for giving up the benefits of remaining without obtaining the benefits of leaving.”

So how can the Governor’s acid test be met? The only way remains the rules of the WTO. Under these we can broaden the benefits of openness, as now we cannot. To broaden those benefits to our own people, through lower prices for essentials, as now we cannot. To broaden them to the world, by opening our market, as now we cannot. To make immediate unilateral tariff cuts, as now we cannot. And in time to make free trade agreements with the world. In this way we can demonstrate the broader benefits of openness, and having done so to win democratic consent for them. The Governor’s better balance of local and supranational authorities would follow, because there would be an end to the clash the EU imposes on us, between our trading obligations and our domestic policies.

For these benefits, a price would have to be paid. We would admittedly face modest tariffs (about 3% on average) on our exports to the EU, where our trade is already stagnating. That price can be eliminated if the EU agrees to a genuine free trade agreement on acceptable terms, which it might or might not do. But even without one, the burden would be more than offset by the elimination of our contribution to the EU budget. And more important would be the broadening of our openness to trade with the world at large; because that is already where most of our trade is, and where it is already expanding fastest.

The Governor’s criteria are a welcome guide. A Brexit that fulfils them has everything to be said for it. It will add up to a significant liberalisation, and a clear declaration that Britain, on regaining the right to direct its own trade policy, intends to drive it strongly in a liberalising direction. It will establish Britain as once again a beacon of freer trade, to its own benefit and to the benefit of its trading partners worldwide.

But these benefits, to ourselves and to the world, come within our grasp only in the event that we quit the EU with unimpaired freedom to follow open policies. Any plan like poor Mrs May’s would make them impossible.