With her Chequers Plan, Theresa May is repeating the mistakes of former Tory Prime Ministers

With her Chequers Plan, Theresa May is repeating the mistakes of former Tory Prime Ministers

It’s probably a mistake to devote much mental or emotional energy to the Chequers Plan. The Plan is unlikely to survive the Commons, and even more unlikely to be acceptable to the EU. If it is designed to fail in order to pitch Britain back into the Customs Union and the Single Market, it has been well-crafted.

The very best that can be said of the Plan is that it is either a political necessity for the Conservative Party, full Brexit on the installment plan, or akin to Swiss or Norwegian relationships with the EU. For a variety of reasons, I don’t regard any of these arguments as true or relevant.

But other commentators have explored the deficiencies of the Plan. So instead of merely harping on its failings, I’ll focus on how it repeats the past follies of Britain’s relations with Europe, and the barriers it throws up to Britain’s ability to conduct its own trade diplomacy — including with the United States.

The cardinal sin inherent in the way Britain thinks about the EU — and its predecessors — is that Britain focuses on economics at the expense of politics, and fixates on visible trade at the expense of invisibles. The focus on economics, I believe, reflects a couple of things.

On the positive side, there is British pragmatism, which simply can’t take the EU’s grandiose political goals seriously. From this point of view, focusing on economics reflects a simple lack of comprehension. And, on the negative side, there is a recognition by British europhiles that if they talk about their political goals, they’ll lose. So instead, they talk about economics.

Be that as it may, the Chequers Plan repeats the faults of the two most significant British initiatives in Europe, both of which focused on visible trade. First, there was the Industrial Free Trade Area of the Eden and Macmillan governments in 1956-1959.

That FTA was in some ways cleverly devised, but — as my own research has shown — it was basically driven by the political imperatives of the Conservative Party, and was unacceptable to the EEC because it seemed like (and was) an effort to get the benefits of European trade without its wider obligations.

Then there was Margaret Thatcher’s Single European Act (SEA) of 1987. Again, this was a clever effort to establish genuine free trade inside the EEC. But as Thatcher later regretted, while she had economic goals for the SEA, the European Commission had political ones – and the Commission used the SEA to drive European rule-making into areas that had nothing to do with free trade.

The Chequers Plan is the SEA all over again. Or, if you prefer, it is the Macmillan Plan all over again, with the addition of agriculture. Like the Macmillan Plan, its shape was determined primarily by the political imperatives of the Conservative Party.

Like both, it focuses on visible trade as the touchstone of Britain’s relations with the EU. Like both, it seeks to gain the benefits of that trade without making overt political commitments, while refusing to recognise that for the EU, trade is a reward for accepting those commitments. And, worst of all, like the SEA, it implies that the EU will be willing to treat the ‘common rule book’ as a technical exercise, instead of as a mechanism that is rapidly expanded well beyond its nominal remit.

What will happen, for example, if the EU tells the UK that the ‘common rule book’ must cover how goods are produced, in order to ensure that they live up to EU standards? That opens up social and employment policy. What will happen if the EU tells the UK that producers of goods on both sides of the Channel should compete on an equal tax basis? That opens up tax policy.

What will happen if the EU tells the UK that UK manufacturers should not benefit from imports of raw materials cheaper than those available to EU manufacturers? That opens up trade policy. There is nowhere you cannot get with a ‘common rule book’ on goods.

Anyone who doubts this will happen need only look at the history of the SEA. And if you think Britain will resist these EU demands, think again: by prioritising trade in goods with the EU above all else, the UK hands the whip to the EU, which can simply tell the UK that if it does not comply, it will lose full access to the EU market.

From the point of view of Britain’s trade diplomacy, the Chequers Plan is a disaster. In theory, the Plan allows Britain to negotiate its own trade deals, and, indeed, it will formally be free to do so. But in practice, it will find this incredibly difficult, if not impossible.

The UK might simply try to negotiate trade deals that focus on services. Even here, the Plan’s acceptance that UK divergence on services will reduce its access to the EU will pose serious barriers. In negotiations on services, the UK will have lots of demands and very little to give away, lest any concessions lead to EU retaliation, a prospect that the Plan obviously accepts is likely.

But given the mercantilistic ways of the world, few countries will want to conclude a deal that gives the City what it wants, but keeps the UK’s agricultural market hidden behind pseudo-scientific barriers embodied in the common rule book, barriers so beloved of the EU. And even fewer countries will like the politics, or the optics, of excluding goods from negotiations with the UK.

Or, the UK might try to include goods. After all, Norway and other EFTA members have concluded free trade agreements. If the Chequers Plan is sort of akin to EFTA, then surely Britain can also negotiate free trade agreements. The problem with that argument is that the most significant forms of protectionism in the world are no longer the kind of tariffs and quotas that EFTA’s agreements are intended to address.

In the developed world, thanks to the WTO — and no thanks to Donald Trump — tariffs and quotas are mostly solved problems. Yes, to the extent tariffs exist, they are bad, and yes, Britain could conclude a trade deal that eliminated them, and yes, that would be good.

But getting rid of tariffs and quotas wouldn’t touch the new kinds of protectionism, which work behind the border, which involve the setting of arbitrary, discriminatory or restrictive rules, and for which the EU is the world’s biggest cheerleader.

In other words, the ‘common rule book’ approach makes the UK a rule-taker from the EU, and since those rules are all too often protectionist in intent, the ‘common rule book’ makes it impossible to negotiate the kind of next-generation free trade deals that the world needs. Indeed, it locks the UK into being an avatar of the EU’s bureaucratic protectionism.

And that, in turn, is why the US is unhappy about the Chequers Plan. Any viable trade deal between the US and the UK is going to a) include all goods, including agriculture; and b) be based on mutual recognition of standards — in other words, the US and the UK will each accept that they are basically trustworthy market-oriented democracies with a strong rule of law, and that as such what is good enough for the UK is good enough for the US, and vice versa.

But the introduction of the EU’s ‘common rule book’ spoils that. It means that the UK will have to choose between recognising US standards and recognising EU ones when they differ — and the EU will have every incentive to ensure that they do differ, and every incentive to threaten to punish the UK should it have the temerity to interpret the rule book so as to allow it to do a deal with the US.

That is why the Prime Minister has already admitted that the Chequers Plan creates “a challenge for us in relation to the United States and standards,” which is a polite way of admitting that the UK cannot hope to do a deal with the US based on mutual recognition of standards if it is committed to agreeing on standards with the EU. As the US Ambassador to the UK, Woody Johnson, said in advance of President Trump’s visit and his interventions on this issue, a US-UK trade deal has been left “totally up in the air” by the Chequers Plan.

And that, in turn, is why it is so important that President Trump should make it clear to the Prime Minister that he will move heaven and earth to conclude a free trade agreement with Britain by the time it formally exits the EU, at the end of March 2019 — but that he can only do this if Britain isn’t bound by an EU rulebook.

For now, the Chequers Plan leaves me with two sad conclusions. First, the British Government, like the Bourbons, has learned nothing and forgotten nothing from its long and unsuccessful history of efforts to do a deal with Europe that is narrowly limited to visible trade.

Second, and worse, the British Government, by failing to prepare in a way that allows it to take advantage of the wide opportunities of Brexit, has put itself in a position where it feels it has to focus on that trade, in spite of the fact that British exports to the EU are a small part of the British economy.

Since this is a road that British governments before have travelled, it is no surprise that the May Government has ended up here, and no surprise that it views this as an acceptable or even desirable outcome.

But for anyone who supports Brexit, and views it as a once-in-a-lifetime opportunity to make Britain a new and free player in the world’s trading system, it is neither acceptable nor desirable.