Whether the UK leaves the EU with or without a trade deal, the UK government will claim it has achieved a victory: the UK will have regained its sovereignty after 45 years. However sovereignty this will come at a cost to the country. A cost that has been largely hidden from view by accident or design for the past four years, but it will be felt by everyone across the UK from January 2021.
If a trade deal is struck it will require some compromise regarding the ‘level playing field’. The EU will not allow the UK to use standards of goods, labour or environment which represent ‘unfair competition’ to the 27 member states. An outgoing UK wants anything but a level playing field so would agree to it on the basis that it would abandon any commitment as soon as possible. This is possible given the government was prepared to renege on the withdrawal agreement it signed in January 2020 concerning the Irish border. The UK government wants a trade deal because it promised the public it could secure one, and because it knows that the default tariff regime of WTO rules would hit GDP unnecessarily hard.
If no deal is agreed, the UK will be treated under WTO rules, now euphemistically called Australian terms, in other words higher tariffs on trade with the EU. This is the preferred exit strategy for the Tory ultras in the ERG as it represents a clean break with the EU. It allows the UK freedom to set its own employment and environmental standards distinct from the EU ones, standards it contributed to creating over the past 45 years. This allows the UK to press ahead with tax and tariff free zones or Freeports in order to stimulate foreign trade in place of lost business with the EU. The cost of leaving without a deal will be immediate on 1 January 2021; the flow of goods between the UK and EU will be disrupted impacting both food costs and medicine availability for the public.
How does one calculate the cost of regaining Sovereignty? The cost of sovereignty in a trade deal will be political rather than economic. To offer the EU a level playing field will be a fudged exit that is not clean. The UK would accept some EU standards in order to secure tariff free trade across the channel. This will be presented as a victory for common sense and fiscal prudence, but the ultras will not like it and the Tory party will tear itself apart on why the promised deal was not in fact ‘oven ready’. Sovereignty would simply mean UK citizens had blue passports not red ones and UK driving licences would no longer be valid in Europe. The cost would be more bureaucracy.
The cost of Sovereignty if we leave without a deal is more economic than political. Trade with the EU becomes immediately more expensive as the flow of goods is impacted. The Nissan factory in Sunderland would most likely shut because it could not make car manufacture viable in the UK without tariff free access to the EU. A trade deal with US would become a necessity and the incoming US administration knows this, it has also seen the way the UK negotiates with a weak hand. Be prepared for chlorinated chicken and hormone injected beef next year, this becomes inevitable, ignore what is said about protecting food standards, expensive food renders a government unpopular.
The press releases are being prepared for later this week, whether a deal is secured or not this will be presented to the British public as a victory for the UK. If it is a deal then the conditions for maintaining tariff free access to the EU will be presented in a favourable light, but there will be conditions that Brexit ultras won’t like. If there is no deal this will be presented as the fault of the EU and the unreasonable demands its protectionist regime was making on an independent state. We will have cut off our nose to spite our face, but then who wants a nose anyway? Ask a pug.