The Threat of a No-Deal Brexit
Boris Johnson seems hell-bent on leaving the European Union on October 31st. He has virtually no time to renegotiate and the EU shows no sign of budging. That means it is odds on that Britain will leave the EU with no deal. What does this mean?
First, though a majority voted to leave in 2016, the terms on which Britain would depart were never spelled out. Prominent Brexiteers such as Nigel Farage lauded Norway in 2016 as an example of a country going its own way. In fact Norway is in the EU single market, which means it obeys all the trade rules laid down by the European Union. Nobody argued in 2016 that Britain should crash out without a basic agreement as to how trade with the EU should be conducted. A no-deal Brexit is a sign of desperation.
We are currently in the midst of a political and constitutional crisis. A clear majority of Parliamentarians oppose a no-deal Brexit. Nobody knows whether Parliament can stop a crunch departure. The constitutional position is unclear. It seems monstrous that an unelected Prime Minister can overrule Parliament on this matter, but the default position is that Britain will leave on October 31st.
Chaos is predicted in the event. Twenty mile queues of lorries at Dover are possible. Apart from the ‘temporary’ shambles a no-deal Brexit could well inflict long term damage to jobs and prosperity in Britain. Massive disruption is inevitable.
As a current member of the EU Britain is part of its customs union and single market. A customs union means free trade on goods between member states. No tariffs (taxes on imports) are allowed. What will replace this arrangement if we leave without a deal? Nobody knows. We do know that UK exports to the European Union will be confronted by EU tariffs. The only rules-based body covering international trade outside the EU is the World Trade Organization (WTO), which we discuss in more detail later. WTO rules dictate there should be border checks on imports and exports. This is bound to mean disruption and delay, but will be particularly damaging in relation to the Irish border.
In order to minimise disruption and save jobs Labour has always campaigned that Brexit should be accompanied with negotiations for Britain to remain in a customs union with the EU and in close alignment with the single market. Labour has been ignored and excluded from talks with the EU over the past three years.
Medicines and Health
Twenty-first century capitalism is bureaucratically ordered, necessarily so. There are any number of EU bodies making regulations covering medicines and a thousand other matters. These are all part of the single market, intended to harmonise transactions across the European Union. Don’t we want to make sure the medicines we get are safe? On leaving the EU without a deal, we would no longer be a member of the European Medicines Agency. Even if we eventually negotiate a new deal, Britain imports much of its medicine. It often requires storage in very delicate conditions, and can become unusable with any delay in its shipping. A no-deal Brexit means an immediate emergency in the provision of medicines and could be a catastrophe for some very ill people.
Around 37 million packets of medicines are imported every month from the EU worth £18.3 billion. According to the Nuffield Trust those 37 million items of medicine imported from the EU, for example, would face 44 new checks, requirements and controls.
Here is just one example: importers could face a wait of two to three days, a period as long as the half-life of the crucial diagnostic material molybdenum-99, all of which must be imported. Molybdenum-99 is used to produce technetium-99m, which is given to patients so that the patterns of the radiation it produces can be used to scan the skeleton, heart and other organs for cancer or damage. In the ensuing chaos, will vital imports like this be waved through? We hope so, but there are no guarantees.
The Nuffield Trust assesses the extra cost of medicines to the UK to be £500m. This will be borne by our long suffering NHS.
UK citizens travelling in the EU would lose their European Health Insurance cover.
The Auto Industry and Aerospace
As well as regulation modern capitalism also takes advantage of a thoroughgoing international division of labour. We have previously cited the example of the Mini’s crankshaft, which can make a journey of 2,000 miles before the finished car rolls off the production line. https://www.theguardian.com/business/2017/mar/03/brexit-uk-car-industry-mini-britain-eu
A modern car consists of literally tens of thousands of such components. It is vital that each part arrives just-in-time, requiring systematic international planning. All these delicate arrangements will be massively disrupted by a no-deal Brexit. The Society of Motor Manufacturers and Traders calculates that a no-deal exit will cost the UK car industry £50,000 per minute. The auto industry contributes £18.6bn to the UK economy and employs hundreds of thousands of workers, if we include all those employed in making components for the long industry supply chain. 80% of these cars are exported, the majority to the EU. All these jobs are in peril in the event of a no-deal Brexit.
Britain, as an EU member state, is a partner in the Airbus project. The Aerospace and Defence industry gives 260,000 workers secure employment at present. The ADS lobby group working for the UK Aerospace, Defence, Security and Space sectors claims the industry will lose €1bn per week if Britain crashes out without a deal. ADS Calculates that a no-deal Brexit could increase their costs by 38%.
The EU’s Common Fisheries Policy (CFP) has provoked anger among the dwindling fishing communities in Britain, who see it as stealing their livelihoods. In fact the biggest loss of trawler jobs took place before Britain joined the European Union. There is a tendency among capitalists who own fishing vessels to see fish as a ‘free’ resource and therefore to overfish. The CFP is in part an attempt to conserve fish stocks, which is necessary. Only last month there was an alarm about the virtual disappearance of Atlantic cod.
The CFP is perceived as bureaucratically imposed by the EU authorities. Jeremy Corbyn gave the lie to this in the House of Commons in 2016. "You will be very well aware that reforms that were made three years ago actually put the power back into the hands of member states and it's the UK Government that has given nearly two-thirds of the English and Welsh fishing quotas to just three companies. Thus excluding small fishing communities all along our coasts. Can you stop blaming Brussels on this and tell us small-scale and sustainable fishing communities what action you will take to allow them to continue their work and indeed go further out in collecting fish?"
Beleaguered fishing communities have also been stirred up by the demand to ‘take back our fisheries’ that have supposedly been given away by EU bureaucrats. One problem is that some fisheries, such as those in the Channel area are shared or contested areas. There is little doubt that British fishing vessels will face protest including direct action from the French if they try to unilaterally invade these zones.
Britain exports the majority of its catch to the EU - £1.32bn. This includes high value added items such as crabs, lobsters and scallop destined for upmarket restaurants in France and Spain. Much of this produce is landed in ports such as Peterhead, far from the EU market. It has to be fresh in order to attract a premium price. Delays to its delivery could be fatal to the livelihood of the seafood processors in Scotland.
Food and Farming
Nearly one third of our food comes from the EU. There are of course wide seasonal variations when fruit and veg cannot be harvested in the UK. For instance in the month of March 90% of the lettuces eaten in the UK, 80% of the tomatoes and 70% of soft fruit is sourced from the EU. October 31st has been identified as the worst possible time to exit the EU. While warehouses are preparing for Christmas they will have no room for perishable foodstuffs. Retailers typically keep only a couple of weeks’ food stocks. Chaos in food supplies is guaranteed in the event of a no-deal Brexit. All these storage costs are of course a huge waste of preparing for the UK crashing out without a deal.
One area where Britain is a net exporter to the EU is in sheep and lamb. Though the World Trade Organization rules are not completely clear it seems UK exports will face a tariff of 46% into the EU. This will make our exports utterly uncompetitive. We face the distressing prospect of a mass slaughter of sheep. Prices in the UK would also collapse. The National Farmers’ Union calls this a ‘halloween horror story.’ There are rumours that the government will then ‘compensate’ farmers with £500m in addition to the hundreds of millions they have already spent on no-deal preparations. What a waste!
Hill farmers are often hanging on financially by their fingertips at present. We also regard them as custodians of the countryside. What is to happen if they are wiped out by the self-harm of a no-deal Brexit?
OK, we would be out of the Common Agricultural Policy. The CAP has been rightly criticised by socialists as it basically dishes out subsidies according to the acreage farmers own. This leads to aristocrats, the royal family and other very rich people who really don’t need the money being subsidised by the rest of us.
At the same time we have to remember that many farmers have become dependent on these subsidies. A sudden withdrawal of them as a result of a no-deal Brexit could prove disastrous for farming. Until such time as we have an improved system in place (no sign of this under the Tories) crashing out of the EU without a deal would be a disastrous for our farming community.
The Irish Border
Our new Prime Minister has shown little interest in the Northern Ireland peace process. In the past the border between North and South has been dominated by machine gun posts and observation towers. The vast majority of the Irish people are massively relieved that the state of civil war in Northern Ireland is at an end.
The onset of the peace process marked an increase in trade between Northern Ireland and the Republic. There is a substantial transfer of livestock and animal products such as dairy between the two. The border is effectively invisible. This is the case because up till now both the UK and the Republic have been members of the EU. When and if that ends without a deal the border will become a massive obstacle to mutually advantageous trade. Paperwork and delays are bound to proliferate. We are back to a hard border, a threat to both peace and prosperity.
Huge quantities of ink have been spilled on the issue of the Irish backstop, an insurance arrangement insisted on by the EU to protect their member state Ireland. Our unelected Prime Minister absurdly labels it a threat to democracy. The backstop is intended to keep the border (the only land border between the UK and an EU member state) open for business. A no-deal Brexit makes a hard border across Ireland inevitable.
Citizens and Free Movement
There are more than 3 million EU citizens living in the UK at present. What will happen to their privileges as fellow citizens of the EU? They are right to be concerned. Jeremy Corbyn has guaranteed the rights of EU citizens here in the event of a Labour government.
The LRC supports free movement of people, but the Brexit movement has been fired in part by concerns about immigration. Free movement will come to an end. A no-deal Brexit is likely to produce a drastic, ill-conceived and damaging clamp down on migration. Johnson has vowed to introduce a points based system like that of Australia. A points system is intended to allow in migrants who meet certain criteria such as qualifications, occupation and language skills.
The government is in the process of registering EU citizens already resident in the UK (called settled status). Those who try to arrive after a no-deal Brexit will for the most part be regarded as unwelcome aliens and will not be allowed in. The Government has published regulations which would “end the EU’s rules on free movement in the UK and other retained EU law on immigration”. As a result of the new laws, European nationals and their family members would require permission to enter and remain in the UK under the Immigration Act 1971 just like other foreign nationals. The UK will pull up the drawbridge, despite the fact that migrants come here to work, contribute to our economic welfare and are desperately needed to help our economy.
About 900,000 UK citizens living in the EU will lose their special privileges and be treated like any other non-EU national
Science and Research
We earlier mentioned the European Medicines Agency. This is in the process of moving from Canary Wharf to Amsterdam. These are exactly the sort of jobs we don’t want to lose.
Scientists naturally see themselves as part of an international community. But they won’t know what their future is in the UK after a no-deal Brexit. According to the Royal Society 1 in 6 researchers in Higher Education are from the EU. They may have to pay 14% of their annual salary in the form of immigration charges to enter the country to pay for their family to follow. What a welcome! They have the right of free movement throughout the European Union to advance their careers. Why should they put up with restrictions here?
In any case collaborative research facilities across the EU are likely to withdraw their funds from the UK. Without regulatory alignment with the EU the UK could be excluded from many clinical trials of new treatments, falling behind in best medical practice. We would also lose over £1bn in EU research funding.
Johnson has been belatedly blabbering about relaxing the rules for top scientists. He has been ridiculed by Nobel winning physicist Andre Geim. “The government may try to reduce the barriers to entry for scientists but they cannot reduce the turmoil that would be caused to science in the UK by a no-deal Brexit. They know the turmoil is inevitable for many years.”
Not all the scenarios we have painted will come to pass immediately in the event of a no-deal Brexit. Some will take time to work their poison. Other sectors will certainly be hit. Uncertainty will rule. Some of these events will dramatically harm our jobs and prosperity. All in all a no-deal Brexit will be a catastrophe for working people in this country. We have to fight that outcome with all our might.