Before the referendum, David Frost, Britain’s Brexit negotiator, advised that remaining in the EU would be better than leaving.
In June 2016, just before the big vote, Mr Frost (as he was then – he’s now Lord) wrote an article for a pamphlet published by Portland Communications on what would happen in the event of Brexit.
Lord Frost’s piece was called, ‘Can the UK secure free trade outside the EU?’ [See pages 32-41]. Back then, his answer was not hopeful. He was the CEO of the Scotch Whisky Association but wrote his article in a personal capacity.
There were two key questions, he asserted.
Can any future trading arrangements, as a matter of theory, be as good as the current ones provided by membership?
Is it possible to negotiate such arrangements, as a matter of practical politics?
Concluded Lord Frost:
“I have doubts on both points.”
He explained,
There’s a very simple trade-off in this area.
It is that the more independent your national trade policy is, the more difficult it is to negotiate completely barrier-free access to any other country.
Negotiating new free trade agreements in the event of Brexit is “a mammoth undertaking.
Simply setting out the task underlines how risky a decision to Vote Leave will be.
If, as is the case with the UK, pointed out Lord Frost:
… a country is already part of a customs union and has already adapted its trading arrangements to it, the case for change has to be overwhelming.
He asserted then,
It isn’t. … it’s important to remember that trade is no longer about making one product and sending it across one border.
The situation in the modern world is much more complicated.
Most modern products are made up of components from many other countries.
A car finished in Germany might have components made in Italy, incorporated into a larger component in the UK, be re-exported to France and incorporated again, be sent back to the UK and incorporated in (say) the final car engine, before going back to Germany for final assembly.
The result is that it would cross the UK border more than once and the administrative costs of doing so would keep mounting up.
That would be a barrier, over time, to making the components in the UK in the first place.
So all these arrangements would leave the UK with less access to the single market than before.
Lord Frost asked a pertinent question.
Would this be outweighed by freedom to negotiate our own trading arrangements with other countries?
A simple bit of maths shows the answer is no.
He went on to explain that the EU already has free trade agreements covering nearly 60% of the UK’s trade, including the EU itself.
If TTIP and the EU/Japan FTA can be negotiated soon, that figure goes up to 80%.
It can’t possibly make sense to have less good arrangements with the 60% or 80% in return for slightly better arrangement with the 20%”
In another argument against Brexit, Lord Frost went on to explain that the single market is plausibly worth 5% of GDP, which would be boosted by the EU’s future new trade agreements with other countries, such as Japan and India.
He concluded that:
It simply isn’t worth jeopardising access to the single market for the sake of global trade.
Negotiating “realities” were another barrier to Brexit.
After leaving, the UK will have to renegotiate trading arrangements simultaneously with many major countries, including the EU.
Wrote Lord Frost
Britain will be demandeur [the country applying for the trade agreement] and so it will be Britain that has to make the concessions to get the deal. True, other countries will want deals too, but they won’t be under anything like the same time pressure and can afford to make us sweat.
Another barrier to Brexit would be the “formidable administrative task” involved.
Trade negotiations are complex and a good modern trade agreement requires many stakeholders within a country to be involved in the negotiations and be ready to implement the result.
Explained Lord Frost:
That is why negotiations take years not months.
He added:
The EU is involved in perhaps a dozen live FTA negotiations at any one time and even that puts strain on the system.
The UK would have to do many more, with few experienced trade negotiators at our disposal.
The bottom line?
In reality therefore what we can negotiate will fall short of the theoretical ideal.
In short, even the best-case outcome can’t be as good as what we have now; and we won’t be able to negotiate the best-case outcome anyway, because in real life you never can.
That’s not all, because as Lord Frost pointed out:
These negotiations would not be happening in a vacuum.
There would be political turbulence in Britain and, no doubt, the EU.
Firms and other countries would see that the future arrangements for British trade were up in the air and that existing tariff-free access could not be ensured.
So it could be a traumatic and difficult period, with no guarantee of a good outcome.
What would Lord Frost recommend if he was Britain’s negotiator in the event of Leave winning the referendum?
Believe it or not, Lord Frost recommended a Norway Brexit – even though that would mean retaining Free Movement of People.
He explained:
Exit from the EU to a Norway model is probably the easiest thing to negotiate, because the model already exists, it would be hard to refuse us, and Britain would keep access to the single market and apply single market legislation.
Over time, he wrote then, the UK could move towards a Swiss style Brexit.
But, he added:
All this said, there is no doubt that leaving would be fraught with economic risk.
It would be a step into uncertainty and, in many key respects, into the unknown.
If this is the situation on 24th June, we will face an anxious and potentially turbulent time.Today, Lord Frost seems to be a different man with an entirely different agenda. He is attempting to negotiate a deal with the EU that he not only wrote before the referendum wouldn’t be possible, but also, wouldn’t be desirable. In reality, doesn’t this show what a two-faced sham Brexit represents?
Ed: This article is taken from Jon Danzig’s blog
