It’s easy to mock Jacob Rees-Mogg’s new non-job. The man who famously declared that it would take 50 years to see the benefits of Brexit has been appointed minister for Brexit opportunities, with a mission to deliver benefits by the next election. The scale of that challenge was laid bare by the government’s own “Benefits of Brexit” paper published on January 31 to mark Brexit’s second anniversary. Most of the paper consisted of empty boasts about things that could have been done while in the EU, such as changing the colour of passports and putting crown stamps on pint glasses, and airy talk of deregulation that lacked any detail on when and how this might be achieved or what trade-offs it might involve.
Meanwhile the costs of Brexit are visible from outer space. The giant queues of lorries snaking through the Kent countryside are causing such disruption to the local economy that Natalie Elphicke, the Dover MP, yesterday pleaded with the prime minister in parliament to expand the motorways in Kent to keep traffic flowing. Yet a report from the public accounts committee also published yesterday suggests the situation is almost certain to get worse as passenger numbers pick up after the pandemic and when Britain finally gets around to introducing its own import controls, which it is committed to doing despite multiple delays. As the committee noted, those controls will heap extra costs on businesses.
The reality is that even the supposedly nailed-on benefits of Brexit are proving elusive. Take the mission to turn Britain into a global leader in free trade. This did not survive its first contact with reality last year. The Trade Remedies Authority was supposed to be the guarantor that post-Brexit Britain would not succumb to protectionist pressures. This anti-dumping watchdog was established to take over the role previously played by the European Commission in determining whether and what sanctions to impose on foreign imports that have benefited from unfair subsidies. This is a vital part of trade policy for economies with open markets that are vulnerable to predatory trading practises.
This is a function that even the EU’s critics would acknowledge it has performed well, in terms of resisting protectionist pressures from member states. Decisions to impose tariffs or quotas are made on the basis of transparent criteria, where the remedy was proportionate to the damage sustained by EU firms. Britain aimed to emulate the EU model by setting up the TRA as an arms-length body, limiting the power of politicians to override its decisions. Moreover, the government added an extra criterion by which to assess the economic case for trade sanctions: it was required to consider the impact on consumers as well as producers.
Yet when the TRA, in one of its very first adjudications last year, concluded that Britain should drop EU tariffs on nine out of 19 categories of Chinese steel, the government overruled it. The TRA concluded that in those nine categories, the damage to consumer interests outweighed the risks to the steel industry. But under lobbying from the steel industry, ministers caved in. The result is that just weeks after the TRA had come into existence, the government passed an emergency law, extending the sanctions for a year and giving itself new powers to overrule the TRA.
What this means is that trade policy in Britain can no longer be considered immune from protectionist pressures but has in fact been politicised. The government is expected to lay new secondary legislation this week which will formalise the right of ministers to “call in” TRA decisions that it finds inconvenient. Meanwhile Anne Marie Trevelyan, the international trade secretary, must decide before the end of June whether to extend the tariffs on Chinese steel, after the completion of the government’s “review”. Few expect the government to back the TRA. The UK regime can no longer be considered transparent and predictable, or even to put consumers first.
Nor is the treatment of the TRA the only example of the government’s actions falling short of its rhetoric. The Subsidy Control Bill, designed to replace the EU’s state aid regime, is making its way through parliament. The main criticism of the EU regime was that it was too bureaucratic. But few would dispute that its processes were transparent and evidence-based, as they had to be to maintain public confidence in a market spanning 28 countries. But the proposed new British regime will be less transparent and allow wider discretion. As things stand, half of all subsidies do not have to be disclosed.
That will make it far easier for ministers to lavish taxpayers’ money on favoured projects, opening the door to cronyism and corruption. Again, the risk is that it will make Britain a less predictable place to do business. Indeed, John Penrose MP, Boris Johnson’s anti-corruption tsar, urged the government to lower the threshold for disclosing subsidies from £500,000 to £500 to give competitors an opportunity to raise objections. In a pamphlet for the Centre for Policy Studies, he warned that “subsidies are a heavily addictive political drug. Controlling them is vital to stop political meddling, cronyism and tilting the playing field so Britain becomes less competitive, less fair, and less attractive to international investors too.”
The danger is that instead of becoming a global leader in free trade, Britain outside the EU will become more protectionist, more open to political interference and more susceptible to vested interests, with damaging consequences for long-term competitiveness. That would come as little surprise since this was the situation in Britain in the 1970s, before EU membership constrained what politicians could do. If Mr Rees Mogg is serious about delivering Brexit opportunities, he should make it his priority to dispel these fears. Until then, the lesson for businesses is that when it comes to assessing the government’s approach to Brexit, look at what ministers do rather than what they say.