Tomorrow in Florence, Theresa May needs to make the speech of her life. Britain has a strong hand to play in these EU talks and it’s time the Prime Minister showed it.
May must assert once again that ‘no deal is better than a bad deal’, shoring up the UK’s bargaining position. She should also insist Britain won’t confirm any ‘divorce bill’ until these Article 50 talks end in March 2019, with the final amount dependent on the goodwill the EU has shown.
Above all, taking her cue from Foreign Secretary Boris Johnson, the Prime Minister needs to present an inspiring vision of the UK outside the EU. The heyday of Florence was as a free-trading, outward-looking, independent city-state, long before it was absorbed into a unified Italy. Brexit, likewise, is a golden opportunity for Britain to look beyond the EU – boosting trade, innovation and growth.
Despite the constant drumbeat of TV news negativity, the UK holds sway in these Article 50 talks. Our £96 billion EU goods trade deficit represents profits and jobs across thousands of powerful EU firms.
Germany alone sold £65 billion of cars, machinery and other exports in Britain last year. That’s why the German BDI union – which covers 100,000 companies, employing one in five German workers – says Brussels would be ‘very, very foolish’ to impose high trade barriers against Britain.
And while President Macron threatens to ‘punish’ the UK for Brexit, numerous French firms – and even the French government itself - have extensive UK commercial interests, across manufacturing, transport and nuclear power.
In an ideal world, Britain would strike the ‘deep and comprehensive’ free trade agreement with the EU that May outlined in her clear-sighted Lancaster House speech of January 2017. But that depends on the EU, which wants to use the limited Article 50 timeframe to impose a deal that is bad for Britain.
So we must prepare to use World Trade Organisation rules – under which the UK and EU apply generally low tariffs on each others’ goods. That’s not the disaster Brussels would have us believe. The US, China and all other leading economies trade happily with the EU using WTO rules – with American doing a quarter of a trillion dollars of EU trade last year. And the UK already uses WTO rules for most of our non-EU trade – which accounts for well over half of our overseas commerce and generates a trade surplus.
It is a major strategic error to think Britain must secure an EU trade deal by March 2019. It makes a lot of sense to negotiate a long-term EU agreement in our own time, after Brexit has happened, using WTO rules as a base. The billions of pounds the EU will pay us in tariffs – given that they sell us more than we sell them – can meanwhile be used to compensate UK exporters. So no deal really is better than a bad deal, as May must make crystal clear in Florence.
When it comes to our ‘divorce bill’, the UK is under no legal obligation to pay the EU anything. With its second-largest contributor leaving, Brussels faces a cash crunch – again, giving us leverage. Britain should pay something, to maintain goodwill and help smooth any transition period – which, if it happens, must be strictly time-limited. But the final sum should be agreed only at the end of the talks, with each additional amount being used to extract specific concessions.
In the birthplace of the Renaissance, the Prime Minister needs to assert not just the UK’s European identity but our global ambition too. Most importantly, May must highlight the economic benefits Britain can derive from a ‘Clean Brexit’ – with the UK leaving both the EU’s single market and customs union.
The benefits of the single market are wildly overstated – and may even be negative. Our membership means all UK firms, including the 95pc that don’t export to the EU, must comply with often unnecessary and expensive regulations dreamt up by Brussels. The single market in services barely exists, penalising the UK, the world’s second-largest services exporter.
Staying inside the single market, Britain would also be bound by rulings from the highly politicised European Court of Justice, but unable to influence them, even if they’re changed to our disadvantage. And multi-billion pound annual payments to Brussels and ‘freedom of movement’ would continue – which isn’t Brexit.
Big international firms like the single market, as it helps them avoid tax, while tying up smaller rivals in red tape. Large corporations also like the EU’s protectionist customs union – which makes non-EU imports more expensive for UK firms and shoppers and prevents Britain cutting trade deals with the four-fifths of the world economy beyond the EU.
Across the cabinet, despite rhetorical jousting , there is broad agreement. Yes, there is political argy-bargy among senior Tories, and much jockeying for position given that May is on borrowed time. But, astonishingly perhaps, the main principles of what the government wants are agreed - and have been for some time.
Everyone from Remain-voting Amber Rudd to arch-Brexiteer Liam Fox agrees that Britain is aiming to leave both the single market and customs union and that a transition period would help. For all the briefing and counter-briefing, that's exactly what the Prime Minister outlined at Lancaster House and in her Article 50 letter of March 2017.
Labour, in contrast, is deeply split - with traditionalists wanting to leave, while the metropolitan 'Soft Brexiteers' are trying to scupper the entire shebang. The party's June election manifesto pledge to ‘honour the referendum result’ is already history.
Corbyn’s Brexit policy is now to say and do whatever is necessary, at whatever time, to cause Parliamentary chaos and topple the government. That’s why, far from seeing Brexit as a cross she must bear, the Prime Minister must put forward a confident and positive case for a ‘Clean Brexit’, getting the country firmly behind her.
The birthplace of Machiavelli, Florence is often associated with political scheming and intrigue. May, instead, must throw caution to the wind and show Europe – and the world – that Brexit is a commercial, economic and democratic prize that Britain is determined to grasp.
‘Clean Brexit – How to make a success of leaving the EU’ by Liam Halligan and Gerard Lyons, is published by Biteback. Follow Liam on Twitter @liamhalligan