Fox slip up at WTO shows he has no Brexit plan

The speech Liam Fox made at the WTO today is mostly waffle, but there is one section on Brexit towards the end which is worth paying particular attention to. It suggests that Fox does not understand the basic rules of the international trading system Britain may soon be falling into if it can’t secure a deal with the EU before the end of the Article 50 process. 

“The UK is a full and founding member of the WTO,” the international trade secretary said. This part is true.

“We have our own schedules that we currently share with the rest of the EU. These set out our national commitments in the international trading system.” This part is not true. 

“The UK will continue to uphold these commitments when we leave the European Union.” This part is potentially revealing.

“There will be no legal vacuum.” This part is false.

Let’s take them in turn.

“The UK is a full and founding member of the WTO.”

Fox is right about this. Some Remainers insist that technically the UK is not a member of the WTO on the basis that it does not currently have it's own schedules (we’ll get to those in a second). There’s a minority of legal opinion backing this up, but it’s unlikely anyone is going to question Britain’s membership itself. We were a founding member of the General Agreement on Tariffs and Trade (Gatt), the WTO’s predecessor, and we’re a founding member of the WTO.

“We have our own schedules that we currently share with the rest of the EU.”

Schedules are descriptions of a country’s tariff and subsidy arrangements with other countries in the WTO. They’re really long and very boring but a typical one would tell you what the country's tariffs are for wheat, say, or chicken. Sometimes that’s a set rate - like ten per cent on cars. Sometimes it varies. So you might have a tariff of four per cent on the first ten thousand tonnes of chickens you import and 15% on anything over that. That’s called a tariff rate quota.

Britain does not have its own schedules. We have EU schedules. Fox can say we have our own if he likes, but officials and lawyers at the WTO will disagree. We need to extract our schedules from the EU schedule, which is actually a horrifically difficult problem.

It’s not hard with tariffs, we can just replicate what the EU does there. But the tariff rate quotas are a nightmare, because they’re quantitative. The level set at one rate - the ten thousand tonnes of chicken - is shared across Europe. So we need to figure out how much of that chicken applies to us.

That’s something the EU and the UK need to figure out together. If we just unilaterally say it’s X amount, the EU, which is a member of the WTO in its own right, can trigger a dispute.

And that’s not all. Any WTO member state can trigger a dispute with us on the provisional schedule we lay down, if they feel their access to our market has been restricted or that they are on worse terms than they were when they made the original trading decisions. The WTO is minefield for British trade interests which will need a very experienced, very intelligent, very sensitive negotiating team to navigate. Fox’s speech does not suggest these things will be forthcoming.

“The UK will continue to uphold these commitments when we leave the European Union.”

This is potentially revealing. I say potentially because it's possible Fox simply has no idea what he's talking about and everything he says must be discounted.

The quickest and easiest way for us to write up some provisional schedules is to exactly replicate all the arrangements we have under the EU. That means that tariffs stay the same, the tariff rate quotas are worked out on the basis of the last three years’ trade flows and subsidies stay the same. This is invariably what we’ll do, because it’s the only way not to get into all sorts of complex wrangling with all the other member states.

But note what that means: Nothing changes. All that talk of taking back control during the referendum was illusionary. We will keep things exactly as they are, because that’s the only way to make the journey from the single market to WTO rules even vaguely doable. We're not taking back control. We are desperately trying to make a massive and perilous change in our economic arrangements without triggering huge job losses. And that means that we will copy whatever our EU arrangements were and paste them onto the WTO schedules.

But even that approach, which betrays all the rhetoric of the Brexit campaign, doesn't solve all the problems. Take rules against steel dumping, which protect our workers from competition from China. We’re obviously going to want to maintain those but the Chinese aren’t going to be having any of it. They’ll fight us on it, demanding that we demonstrate domestic injury and unfair trade. And at the moment we can’t fight back, because we don’t have an investigating authority capable of dealing with trade remedy measures. So even in this cheeriest of all possible worlds, we’ve got some major problems on our hands.

“There will be no legal vacuum.”

Fox is wrong here. It’s not that there’ll be a legal vacuum in the future. There’s a legal vacuum now. There are no WTO rules on what we’d be doing if we revert to their system.

There are rules on becoming a member, but we already are. There are rules on modifying a schedule, but we don’t have one. That’s why the WTO’s lawyers are bickering over what our status is and how to proceed.

The fact Fox makes these errors isn't really what's concerning about his speech. We’re used to that. This is a man who did his job as international trade secretary for a month before realising it was a legally and logically meaningless position to have been given.

What’s concerning is that Britain needs negotiators at the WTO doing the leg work now in order to prepare just in case we can’t get an EU deal and have to fall back on this system. We need relaxed informal talks with the Chinese and the Brazilians and everyone else to try to answer their initial concerns. That means that if we ever do have to put down provisional schedules, we’ll know where the problem areas are and can hopefully address them before it turns into a problem.

We urgently need smart ministers, clear-thinking and an army of trade experts and negotiators. Instead what we have is the international trade secretary talking nonsense.

Does John McDonnell even know what his Brexit strategy is?

There were signs this weekend that Labour was about to finally take a stand on Brexit.

For the first time, Jeremy Corbyn spoke out against the consequences of a hard Brexit on northern working class communities. The interview, on Andrew Marr, provided the first bit of evidence that he might actually be prepared to demand membership of the single market and try to stop the right-wing, free market reboot of the UK that such an event would entail.

There were more details this morning from shadow chancellor John McDonnell and shadow foreign secretary Emily Thornberry, who promised to maintain EU funding for deprived UK communities past the 2020 point the Conservatives have signed up to. All good stuff.

But then McDonnell stood up to make his speech and it was clear that the Labour leadership either has no plan or is not willing to share it.

Everyone talks in code over Brexit, but even on code deciphering duty it’s impossible to figure out what McDonnell is really proposing.

He said:

“Since the Brexit vote, the Tories have come up with no plan whatsoever. They have no clue. Half of them want a hard Brexit, to walk away from 30 years of investment in our relationship with Europe.  Some are just paralysed by the scale of the mess they created. Working with our socialist and social democratic colleagues across Europe, our aim is to create a new Europe which builds upon the benefits of the EU but tackles the perceived disbenefits.”

His comment that the Tories plan to “walk away from 30 years of investment in our relationship with Europe” and the negative reference to a ‘hard Brexit’ suggests he wants to stay in the single market. That is where most of the policies on workers’ rights McDonnell mentions in the speech - like the working time directive - are found. But then he says:

“I set out Labour’s red lines on the Brexit negotiations a few days after the vote. Let's get it straight, we have to protect jobs here. So we will seek to preserve access to the single market for goods and services.”

‘Access’ is an unhelpful phrase when it comes to discussing the single market. It could mean anything. It could mean simply sending goods to it, in which case every country on earth has access to the single market. It could mean a trade deal which for instance gets rid of tariffs and non-tariff barriers if you trade with it. It’s not clear. But people typically say ‘access’ when they’re trying not to mention membership. Or else, you know, why not just say membership? So it now appears McDonnell does not want to maintain single market membership.

There are a couple of reasons why that might be the case. Firstly, the current rhetoric from Europe suggests we will not be allowed to have single market membership if we choose to get rid of freedom of movement, as most now believe is necessary to abide by the Brexit mandate. In all likelihood, the European approach will be more nuanced in talks, but that is the current message. Perhaps McDonnell accepts that is the case and believes leaving the single market is now inevitable, as many others do.

Or perhaps he still ascribes to the view, long held in hard left circles, that the single market is a barrier to the implementation of socialism because of restrictions on state aid. But then, it was telling that in his Today programme interview this morning, McDonnell pointed out that other EU member states, like France, are pretty happy to just go ahead and break those rules. He doesn’t seem quite as wedded to the hard-left critique of the single market as Corbyn is.

Then McDonnell addressed the freedom of movement point directly. Kind of. He said:

“Today, access to the single market requires freedom of movement of labour. But we will address the concerns that people have raised in the undercutting of wages and conditions, and the pressure on local public services.”

That’s a very interesting statement. For a start he says ‘access’ requires freedom of movement, whereas in reality membership does. So perhaps this distinction is meaningless when it comes to his statements.

He does not say freedom of movement needs to be scrapped or even reformed, but instead he goes back to Ed Miliband’s old left-wing answer to concerns about immigration: address the effect on wages and services. These are domestic responses, which governments could do regardless of freedom of movement. This suggests that McDonnell wants us to retain single market membership and then put in a concerted effort at home to deal with the practical complaints of working class voters anxious about the influx of new arrivals.

So the firmest conclusion you can come to is that McDonnell will fight for retaining membership of the single market, but he is not prepared to say so quite in those terms.

Is there any point to this analysis? Possibly not. Maybe McDonnell isn’t even aware of the seeming contradictions in his speech, or the way the codes he’s using can’t be decoded in any useful way. Maybe this is equivalent to Corbyn demanding we trigger Article 50 the day after the referendum: he just doesn’t know what he’s talking about.

But I suspect that he is aware. McDonnell is smart. Probably he thinks saying “access” as opposed to “membership” keeps Labour’s policy options open, but that specifying membership would be a more restrictive position.

If so, it’s not enough. Labour supporters urgently need a more thorough strategy than this.

Brexit is, at its heart, a problem about capacity and time. We have hardly any negotiators or trade experts to call on. With this limited capacity, we must unpick 40 years of UK/EU law, which itself will take about a decade; sort out a free trade agreement with the EU, which will take about seven years; and lay the ground for a return to WTO trading by extracting our goods and services schedules from those of the EU, which will also take several years.

The timetable Europe offers is two years. And that is why we will experience a hard chaotic Brexit in 2019 unless something changes. That means that workers’ rights are out the window, environmental protections are out the window, all the hard-fought for achievements of the left are out the window. The single market rules which protect them will be gone. And the incentive in trade talks will be for a reduction in standards across the board. That will coincide with a return of tariff and non-tariff barriers, both of which will hit manufacturing hard. Britain will become poorer and its poorest communities will get hit first.

The way to prevent this is to clearly and explicitly and robustly campaign for single market membership. At the very least McDonnell and Corbyn should be campaigning for an interim EEA deal which keeps us in the single market for the next ten years while we sort out our trade arrangements, firm up our legal standards and prevent damage to financial service revenue and manufacturing. That delivers on Brexit but protects working class communities.

But that would require a plan, a firm, clear plan for Labour to hammer the Tories with. And despite their repeated criticism of the Tories for not having one, it does not appear that Labour really has one either. And if they do, they’re not willing to share it.

This is standard operating procedure for the Corbyn era: Fine words, but scratch the surface and there’s not much there.

It’s not the time for fine words. It’s time for Corbyn and McDonnell to say exactly what they’re doing to prevent a hard Brexit hammering the poor. 

Ian Dunt is editor of

The opinions in's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.

Farron's speech brings identity politics to Westminster

There’s plenty of standard, run-of-the-mill political strategy in the Tim Farron’s speech today. He sees an opening, so he takes it. And British politics is increasingly full of openings. The Brexit vote has dragged the Tories to the right, with most of the party now actively lobbying for a strategy which most experts agree would cost Britain jobs. Labour has been dragged to the eccentric reaches of the hard Trotskyist left by Corbyn.

You don’t need to be a political genius to  see the opportunity that opens up for the Lib Dems and Farron wasted no time positioning the party as the responsible but socially-conscious centre, the new New Labour - good for business, good for workers, good for refugees; open, rational and progressive.

Sure, it’s basically the same positioning Nick Clegg attempted just before the 2015 election. But that was sensible then and this is sensible now. They both have the same problem, which is the tarnishing of the Lib Dem brand. It’s unclear how much has improved in that respect, but the basic strategic decision is obviously sound. A Lib Dem leader would be mad not to follow it.

The remarkable thing about Farron’s speech isn’t the positioning, though. It’s the identity politics. He spends plenty of time criticising the Tories and the SNP for following the politics of division. But even in challenging them, he has to place himself on the identity politics map. This is the first conference speech by a Westminster leader which starts by assuming that we live in an identity politics world.

“I am a white, northern, working class, middle aged bloke,” he said in the opening minute. “According to polling experts, I should have voted Leave. May I assure you that I didn’t. But mates of mine did. People in my family did. Some of them even admitted it to me. And some of them didn’t.”

He then describes his home town. “Preston voted 53% to leave,” he said. “There were some places in Lancashire where two-thirds of people voted out. And I respect those people. If you’ll forgive me, they are my people. And if they’ll forgive me, I’m still utterly convinced that Britain should remain in Europe.”

When he turns his guns on Ukip and Nigel Farage, he says:

“There is nothing so dangerous and narrow as nationalism and cheap identity politics. But there is nothing wrong with identity. I am very proud of mine. I am a Lancastrian, I am a Northerner, I am English, I am British, I am European. I am all those things, none of them contradict another and no campaign of lies, hate and fear will rob me of who I am. But we lost didn’t we?”

Farron is using the language of identity politics, even as he challenges it. We’ve seen identity politics spread like wildfire on the left when it comes to class, race, gender and sexual orientation. North of the border, Scottish Labour is constantly complaining that they can’t get a hearing without paying tribute to identity politics.

That view has taken hold on the right, with Brexiter increasingly demanding an expression of national loyalty as a condition of political debate. The patriotism of Remainers is constantly brought into question. And it was telling that Farron today felt the need to frame his support for refugees in terms of his own patriotism.

The referendum - with its stark divisions between young and old, both sides holding seemingly incompatible world-views on social liberalism and diversity - cemented this. And now we see this language beng reflect, even having a hat tipped in its direction, by the leader of a major political party.

We’re in new ground here. The basic outline of the speech is the same as they’ve always been: personal story, strategic plotting, trying to inspire members. But the tacit way in which Farron feels he must outline his own identity before making his case against Brexit shows how rapidly our political conversation is changing.

The speech was very good, by the way: principled, genuinely angry, funny, and offering a clear, unequivocally liberal view of the world at exactly the moment that those ideas lie shattered on the ground. For anyone who felt the need to hear a mainstream politician express views which not so long ago would have been considered utterly conventional but now seem daring, here was Farron to provide it. Trade is good, diversity is good, we should be kind, we should pursue large-scale national change carefully and soberly. It’s basic stuff, but it now suddenly feels contentious because of the wave of lunacy which hit the country during the Brexit vote.

But the question remains, is there any point in a Lib Dem vote? Farron is right to target moderate Tories and - probably more realistically - moderate Labour supporters. But from a baseline of eight MPs can he really get into a position where the party are even relevant, let along in power?

The Lib Dem leader has a realistic strategy and realistic objectives. He wants to use the Lib Dems much-discussed ground operations to build from the bottom up. Everyone should be targeting a ward, the wards should be helping the Lib Dems to take controls of councils, and the councils will help them to take back dozens of wins at the general election. “My challenge to you is to pick a ward and win it,” Farron said. It’s not exactly ‘go back to your constituency and prepare for government’, but it has the virtue of being credible. With a very positive view, it might just work. But even if it did - so what?

Getting a few dozen more Lib Dem seats in 2020 - the target Farron himself set - is a functionless achievement. If May, as expected, triggers Article 50 in the new year and EU leaders, as expected, make us stick to the two year timetable, the Brexit negotiations will be long gone by then. We’ll already be in whatever situation the Tories put us in.

Farron needs an extension of the timetable, just like British negotiators do. And he’s unlikely to get one. So while his plan is a good one and his strategy is sound and the speech was well written and delivered, it remains a compelling proposition rather than a realistic one.

He has a sequencing problem. The current political reality is unforgiving. And the Lib Dems are at their most beaten precisely when they’re at their most needed.

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