#Brexit: The Three Stooges

Prime Minister Theresa May’s new cabinet will be welcomed by Brexiteers, writes Catherine Feore. Three major cabinet roles that will determine the nature of the UK’s relations with the rest of the world, including the European Union’s 27 member states, have been allocated to ‘Leave’ campaigners: David Davis, Secretary of State for Exiting the EU (already dubbed SoSexEU by one tweeter), Liam Fox, Secretary of State for International Trade and Boris Johnson, Foreign Secretary.

The two most prominent roles of government, prime minister and chancellor (finance minister) are held by ‘Remain’ campaigners, but May has promised that 'Brexit means Brexit', so the negotiations with the EU and the rest of the world will be led by those who won the referendum. The Conservative Party membership may be reassured by these moves, but some of the choices may not be so appealing to the wider public and those hoping for the best possible deal with the EU.

Boris Johnson

The choice of Boris Johnson as Foreign Secretary has whipped up a storm on Twitter. It is surprising that the UK has given the role of chief diplomat to someone who has caused such widespread offence. To describe Johnson as gaffe-prone is misleading. A gaffe would suggest an accidental indiscretion. Boris’s ‘gaffes’ don’t just exist as utterances, but in his columns, speeches and most recently in a prize-winning limerick on the President of Turkey, Recep Tayyip Erdoğan.

Of course, one way May could get rid of him would be to send him to Turkey, where his suggestion that the president slept with a goat could result in a prison sentence. It is not clear that ‘Remain’ campaigner Amber Rudd, the new home secretary, who described Johnson as “not the man you want to drive you home at the end of the evening”, would be in a rush to request his extradition and repatriation to British soil.

One of Johnson’s most notorious contributions to the ‘Leave’ campaign was his attack on Obama, saying that his support for EU membership and his removal of a bust of Churchill from the Oval Office was a snub to Britain. Johnson wrote: “Some said it was a symbol of the part-Kenyan President’s ancestral dislike of the British empire – of which Churchill had been such a fervent defender” no one thought that the ‘some’ was anyone other than his good self. He has also described Hillary Clinton as being like "a sadistic nurse in a mental hospital". We suspect that these sort of comments won't make the US rush to the negotiating table.

Liam Fox

Fox was one of the candidates for the Tory leadership. Like David Davis, he has a rosy view of the UK’s economic prospects outside the EU. In his campaign he said there would be no snap election, no second referendum and that the UK would leave the EU by January 2019.  Given that May has spoken of launching the Article 50 process in early 2017, leaving the EU by January 2019 is a distinct possibility, as the EU has the right to end negotiations with the UK after a two-year-negotiating period.

With responsibility for international trade, Fox will have much to prove. The ‘Leave’ campaign’s case rests upon negotiating a large number of advantageous trade deals around the world in tandem with the EU negotiations. The idea, voiced by David Davis, is that these deals will be ready and fully operational on day one of Brexit. Expect a whirlwind tour with first stops in the Commonwealth countries.

Liam has his work cut out for him. Davis has promised that within two years, before the negotiation with the EU is likely to be complete, and therefore before anything material has changed, “we can negotiate a free trade area massively larger than the EU.  Trade deals with the US and China alone will give us a trade area almost twice the size of the EU, and of course we will also be seeking deals with Hong Kong, Canada, Australia, India, Japan, the UAE, Indonesia – and many others.

"That means that foreign direct investment by companies keen to take advantage of these deals will grow in the next two years.” And yet, there is one message that has come out loud and clear from those currently invested in the UK’s economy, particularly the car industry, without a ‘single market’ type agreement they will take their investment elsewhere. Fox will have to deliver on Davis's claim that “benefits will materialize even before the probable formal departure from the EU around December 2018”.

David Davis

David Davis MP will take the helm as Secretary of State for Exiting the EU. Davis shares Gove’s contempt for experts accusing the international elite of making assertions that do not quite stand up and a “tyranny of conventional unwisdom”. The “whole gravy train of experts” include “the President of the EU, the President of the USA, the head of the IMF, the ex-head of the WTO, the Governor of the Bank of England, the current Chancellor of the Exchequer, the previous Chancellor of the Exchequer, and of course the Prime Minister”.

While the vast majority of economists believe Brexit to be bad news for the UK's economy, the eight economists behind ‘Economists for Brexit’ (EfB) are still optimistic about the UK’s prospects despite the current instability, estimating a 4% increase in UK GDP. This contrasts with Commission Vice President Valdis Dombrovskis’s estimates of a 1-2.5% decrease in GDP for the UK by 2017 and a 0.2-0.5% for the EU27. The EfB’s assessment is based on the idea that the UK can become an ultra-liberal, regulation free, giant Singapore.

Professor Minford, EfB’s ring-leader, is phlegmatic on the prospects of manufacturing in the UK; in a column in The Sun, he wrote: “Over time, if we left the EU, it seems likely that we would mostly eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech. But this shouldn’t scare us. Britain is good at putting on a suit and selling to other nations.”

Davis is more optimistic and has highlighted the car industry, where he believes that if tariffs are introduced the British government will receive more than £2 billion of levies on EU cars alone. He says that there is nothing to stop the UK from supporting its indigenous car industry to make it more competitive. Let’s call it a ‘Land Rovers for everyone’ policy.

He does recognize that the WTO rules would not allow the UK to explicitly offset the levies charged, but that this could support investment tax breaks, lower vehicle taxes and “a whole range of possibilities to protect the industry, and if need be, the consumer”. Let’s hope that more details emerge on how this can be achieved in the coming weeks. May has already spoken of the UK having an industrial policy – five years ago it would have been unthinkable for a mainstream Conservative to take such an interventionist approach - the times, they are a-changing. The last time the UK had an industrial policy it also had a three day week, imposed by the Conservative government of the time to conserve electricity; let's hope things work out better this time.

The eight economists behind ‘Economists for Brexit’ (EfB) are still optimistic about the UK’s prospects despite the current instability, estimating a 4% increase in UK GDP. This contrasts with Commission Vice President Valdis Dombrovskis’s estimates of a 1-2.5% decrease in GDP for the UK by 2017 and a 0.2-0.5% decrease for the EU-27. The EfB’s assessment is based on the idea that the UK can become an ultra-liberal, regulation free, giant Singapore.

Professor Minford, EfB’s ring leader is phlegmatic for the prospects of manufacturing in the UK, in a column in The Sun, he wrote: “Over time, if we left the EU, it seems likely that we would mostly eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech. But this shouldn’t scare us. Britain is good at putting on a suit and selling to other nations.” These words will not provide much comfort to the Leave voters of Coventry and Sunderland.

Davis says his first calling point as the UK’s negotiator in the time immediately after Brexit will not be to Brussels: “It will be Berlin, to strike the deal: absolute access for German cars and industrial goods, in exchange for a sensible deal on everything else.” He then outlines similar deals to be reached with other key EU nations: France on food and wine, Italy on fashion exports, Poland on manufacturing an electronics exports.

Davis is oblivious to the European Commission’s exclusive competence on trade deals, the EU-27 will no doubt discuss their individual interests in maintaining trade with the UK, but it would be naïve to think that the UK will be able to strike separate deals and have the market access it currently enjoys. He claims that this will be easy to do because Germany and France have elections in 2017. Even if this stood up to any scrutiny, the UK is tied into the EU for at least the next two years, so the threat is an empty one.

There is one glimmer of hope. Davis will carry out a ‘serious’ consultation with all stakeholders before triggering Article 50. This exercise has already been carried out in the Review of Competences; while the EU is certainly not perfect, it is extraordinary hubris to think that the UK will have a better deal than the one it currently enjoys as a member. Hopefully, Davis, Fox and Johnson will have the courage to face-up to their flawed logic before the UK goes down the Brexit path.

Davis misunderstands the EU-27’s Brexit fears; apart from the sadness of a long-standing member choosing to opt for divorce, the EU is worried about the impact of the UK’s downturn on the EU-27 and the world's economy; a fear that has been borne out by the facts. According to Davis, the real fear is that the “UK will make too much of a success of being outside the EU”.

Never has it been so clear that a political career will end in failure.

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