LONDON – The agreement reached in principle between the European Union and Japan on trade July 5 is significant not only for both sides to the agreement but also for the development of world trade. It is furthermore a well justified rebuke to U.S. protectionism as advocated by President Donald Trump, whose ignorance of economics and prejudices pose long-term threats to U.S. interests.
The agreement was reached by the EU acting together to represent the interests of the 28 member-states. The British may hope that once Brexit is “achieved” Britain can quickly reach an agreement with Japan similar to that between the EU and Japan. Perhaps Japan will concede this in the interest of Japanese investments in Britain, but I would be surprised if it were achieved without some hard bargaining. We should be wise not to underestimate Japanese expertise (legal, linguistic and product specific) as well as toughness in negotiations. The British department of international trade under Liam Fox, its Cabinet minister, lacks experienced negotiators with Japanese expertise.
Sadly the present weak British government, under an obstinate prime minister attached firmly to her “red lines,” seems stuck in a groove that could lead to serious damage to British interests.
One of May’s red lines is her refusal to accept in any form the jurisdiction of the European Court of Justice, which deals among other things with the application of the single market. This prejudice is based on the Brexiters’ determination to uphold British sovereignty at all costs despite the fact that most international treaties involve some limitation on national sovereignty.
Another red line is May’s fixation on limiting immigration. Freedom of movement is one of the four freedoms, which are essential elements in the single market. So May has declared that Britain must leave the single market. She maintains this despite the fact that the British National Health Service, British care homes and British horticulture depend to a considerable extent on EU labour, and despite the interests of British technology companies and universities on immigrants from the EU.
She is also opposed to British membership of the customs union — at the very least this would prevent Britain from negotiating trade agreements with the rest of the world.
British Cabinet ministers are divided on these issues. Chancellor of the Exchequer Philip Hammond is regarded as the leader of the faction favoring flexibility in the negotiations and giving priority to British economic interests rather than sticking obstinately to ideological principles. The leading advocates of a “hard Brexit” are Boris Johnson, the foreign secretary, and Michael Gove, the environment minister, whom May brought back into the Cabinet after what for her had been a disastrous election. David Davies, the minister responsible for Brexit, is a leading Brexiter, but he apparently gives priority to positioning himself to take over from May, and accordingly tries to give the appearance of being more flexible than other Brexiters.
British business, which May had deliberately kept at arm’s length before the election, has come out strongly in favor of trying to reach an accommodation with the EU, which will preserve as far as possible access to the EU single market for both goods and services. May has been forced to listen to their voices, but it is far from clear what difference this will make to the British negotiating position.
May has not yet retracted her assertion that no deal would be better than a bad deal — even though no deal would clearly be the most damaging outcome — but she is at least no longer trumpeting this absurdity.
Labour Party head Jeremy Corbyn, the leader of the opposition, who was at best a very lukewarm supporter of the EU, has corralled his front bench to accept that Britain as part of Brexit should also leave the single market. He has taken this position with an eye to retaining the support of Labour voters in hitherto Labour strongholds in the north that had backed the leave campaign.
This position has been taken despite the fact that London constituencies which are important to Labour backed remain and support continuing membership of the single market. Corbyn is in effect conniving with the government over Brexit.
Membership of the single market without remaining in the EU would be possible if Britain re-joined the European Free Trade Area assuming that the other members agreed. This would put Britain in much the same position as Norway. Norway is not a member of the EU but is part of the single market. It has to accept the rules made by the EU, including free movement, but it has no say in making the rules. It also has to accept the jurisdiction of the ECJ and contribute to the EU budget.
The British government understandably perhaps wants to “have its cake and eat it too” as Johnson, the foreign secretary, has — frequently and disingenuously — asserted is possible. Unfortunately some present British ministers have a tendency to indulge in wishful thinking. They shouldn’t forget the saying that “it takes two to tango.” Any agreement with the EU must be one that is acceptable not only to the EU commission but also to the other 27 EU member-states.
Michel Barnier, the EU negotiator, who is backed by a well prepared and professional team, has made it clear that any agreement with Britain has to be less favorable to Britain than continued membership of the EU. We in Britain may not like this but the stipulation is understandable. If the EU conceded on this point what is there to deter others from leaving the EU?
It is in the interests of both the EU and the U.K. that terms acceptable to both parties should be agreed smoothly and quickly. This requires a willingness on the part of the EU bureaucracy to search for compromises, but it also demands acceptance by the British side that Britain will inevitably be the loser in any settlement. The extent of British losses will depend on a willingness to drop “red lines” and pursue pragmatism rather than ideological purity.
Hugh Cortazzi served as the U.K.’s ambassador to Japan from 1980-1984.