The current government needs economic growth if it is to realise its economic and social ambitions.
To achieve that it needs to establish better relationships with the EU. 42% of our exports and 52% of our imports come from the EU. Although this is slightly less than the high point of almost 50% in 2010 it is still a large proportion and has remained stable over the last few years. Trade deals with exotic far flung places such as Australia have not done much to change this percentage due to one rather obvious fact. They are a long way away.
Total Economy
Most economists predicted that Brexit would result in the UK’s Gross Domestic Product (total economy) being reduced by 4 to 5% in the long run. Put another way this is a contraction rather than growth.
Coping with the new regulations has had a much tougher effect on small-scale enterprises than large ones who are better able to absorb the costs. Many specialist food producers for example are no longer able to export their products such as speciality cheese because the regulations are expensive, and also hold up a highly perishable product and make it unsaleable.
Economic growth and EU relations
Thus, it is not surprising that a government committed to economic growth would want to reset our relations with the EU. There is a temptation to regard this as highly toxic politically and not touch it, even though the economic benefits are obvious. That is more or less what Rishi Sunak’s government did although he did manage to improve relations and solve the Northern Irish problem. But it looks as if Starmer is making an effort.
Problem is an agreement with the EU will require us to concede something. “As much as its good to show that your much friendlier towards the EU, the Commission is going to be reluctant to look at any forms of new cooperation until existing obligations are dealt with” Joel Reland, a research fellow at UK in a changing Europe, explained. Still outstanding are post-Brexit arrangements for Gibraltar and some border checks on EU imported goods under the 2020 Trade and Cooperation Agreement.
Agricultural trade
Britain wants a new veterinary deal to help agricultural trade. Industry has estimated that checks on plant and animal products were costing 3.5 million euros per year. It is interesting that Farmers and Fishermen, once enthusiastic Brexit supporters, now regret the decision. Trouble is a new agreement would have to be interpreted by the European Court of Justice. The EU wants a youth mobility agreement in return which would allow young people to study and work in European countries. This is being resisted strongly by the Home Secretary who is committed to reducing immigration.
The objective is clear and agreed on by most. We want to improve trade with the EU. But getting there is difficult.
Events in the wider world have forced European countries to act together. Russian and Chinese aggression, and the possibility of America becoming more isolationist have forced European countries to work closer together militarily. NATO has welcomed more members. Stronger trade would seem logical. An independent role for Britain now seems fanciful, even if it ever looked possible.
Trade agreement
Much of the subtext in the Referendum campaign was fear of immigration. It has in fact increased since the decision, and much of it is legal. So long as we need care workers, or builders, and cannot train our own, or starve our universities of funds so they are obliged to recruit overseas, we will have immigration. Illegal immigration requires stronger enforcement and international cooperation. All the European countries have the same problem while there are disasters in the world caused by wars or climate change, and dealing with it would be easier if we worked together.
The European Union is a trade agreement. We already recognise the need to cooperate militarily. It is not going to take away our national identity.
The way forward: Economic growth and trade agreements
I think the way forward is to negotiate about the youth mobility scheme. This would help not only young people who want to study abroad but also solve the labour shortage in the hospitality sector. Young people used to like to come here to work in hotels and restaurants as a way of having a break in an attractive place such as the Lake District or Scotland. Most of them did not want to permanently move here.
I visited Scotland last summer and found many cafes and guest houses having to restrict their hours because they simply could not get enough staff, now that the supply from Europe has dried up. Universities would also benefit by acquiring more overseas students and be able to forge better relationships with their European counterparts.
The reward for concessions here would be unblocking the negotiations about a veterinary deal and boosting our trade in plants and animal products.
Better relations with the EU
Achieving this requires political courage. Labour politicians seem to be cowed by the popular feeling against the EU and reluctant to act. They should stress this is not about rejoining the EU, simply seeking better relations with them, and it will encourage growth in the economy. Opinion research seems to indicate that many people now feel that leaving the EU was a mistake.
Resetting relationships with the EU is not just about politicians smiling at each other but being willing to take some difficult decisions. Kier Starmer is good at that.
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