Chris Johns: Ireland needs to prepare for Britain to go full WTO

With no trade deal in sight, it is still unclear what Brexit will mean for the Irish Sea border

Britain’s then Brexit secretary Dominic Raab (now its foreign affairs secretary) and the European Union’s chief Brexit negotiator Michel Barnier at a news conference in Brussels in July 2018. The UK has said it will not seek an extension to current trade talks, raising the prospect of World Trade Organisation rules applying to goods between the two from the end of this year. Photograph: REUTERS/Yves Herman/File Photo

Britain’s then Brexit secretary Dominic Raab (now its foreign affairs secretary) and the European Union’s chief Brexit negotiator Michel Barnier at a news conference in Brussels in July 2018. The UK has said it will not seek an extension to current trade talks, raising the prospect of World Trade Organisation rules applying to goods between the two from the end of this year. Photograph: REUTERS/Yves Herman/File Photo

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If Brexit didn’t exist, Dominic Cummings would have to invent it. In several ways he is inventing it. Brexit has already happened but we keep talking about it as if it is both in the future and under threat.

To repeat: Brexit is over, it’s done. Yet it has a new British government-sponsored acronym: GBD – get Brexit done. The decision to retain the services of Cummings was taken for two related reasons: to GBD, and to keep the culture war going. Without the bedrock of Brexit-fuelled populism, its hard to know what the Johnson cabinet is for.

That culture war supplies the glue that keeps the Conservative party together. Without it, the catastrophic handling of Covid-19 would have caused many a fracture. In the absence of the culture war we wouldn’t view everything through a Brexit lens. Supposedly serious people wouldn’t be able to claim that criticism of the government is motivated only by a plot to Remain. Seriously?

In language that George Orwell would have struggled to parody, a British secretary of state told us last Friday that in order to supply business with the “certainty that it craves”, a complete break with the EU is now on the cards for December 31st.

At about the same time, Michael Gove formally told Brussels that the UK would not be asking for an extension to the transition period. Trade talks have gone nowhere. Again at the same time, Britain’s lack of preparation for a trade schism prompted a unilateral declaration that there would be minimal customs and other checks at Dover for imports from the EU for the first six months of the widely expected no-deal departure. A deal is still possible, but it’s odds against, and those chances get worse by the day. What those minimal checks mean for the Irish Sea border is anyone’s guess.

Bulwark

Populist Brexit dogma is the bulwark restraining the anger that many people feel about the handling of Covid-19. As the Black Lives Matter protests reveal, anger is something that can be suppressed for a long time but can burst through at unexpected times.

The point of the broad lockdown is lost on many of us. Just why a group of scientists are being allowed to make policy, to make decisions properly vested with politicians, is a real puzzle.

The costs of the lockdown are both obvious and, in many instances, hidden. The UK economy shrank in April to the point where it has given back virtually all of GDP growth of the 21st century. The effects on mental health, the consequences of lost education, domestic violence and other forms of abuse are obvious, if not as easily measured as GDP.

As in Ireland, the scientists urge caution. But in the most recent minutes to SAGE meeting (the group of 57 scientists advising the British government), we now learn that the infamous R was between 0.5 and 0.6 outside care homes and hospitals. On May 12th, a whole month ago.

Suspicion that the virus has very uneven incidence is, consequently, growing. Crowded indoor venues, super-spreaders, care homes and hospitals account for a lot of the problem. That evidence does not seem consistent with an ongoing broad lockdown. If we are to stay heavily restricted because of fears of a second wave, we are going to be restricted for a long time.

Where to from here? The UK suggests the possibility of a state that has lost the capacity to govern. The Irish authorities display a greater willingness to take the necessary decisions in the face of some scientific advice to the contrary.

Fiscal capacity

The economic debate focuses on the fiscal capacity of the state. Orthodoxy demands that we worry about a potential fiscal crisis: too much debt. In normal times, it would be correct to focus on this. One day, it will be right to focus on this. But that day is far into our future.

The technical thing to worry about is the day bond yields rise. We got a clue about this last week when the chairman of the US Federal Reserve, Jay Powell, mused about something called “yield curve management”. Economists call this financial repression. Essentially, it means that the central bank buys enough bonds to make sure their price stays high and corresponding yields stay low. It is in the power of central banks to make sure that a fiscal crisis of the state doesn’t happen. Where the Fed leads, the ECB is clearly following.

As with Covid-19, the state must take a risk-based approach. With coronavirus that points to an accelerated easing of the lockdown alongside comprehensive test and trace. With the economy, it means borrowing and spending enough to generate the much desired V-shaped economic recovery.

Without a sustained period of growth, we will, eventually, have that fiscal crisis. So take a calculated risk with borrowing now and for a year or two to minimise the risk of a debt crisis in the future. Dominic Cummings wants the UK to take a “moonshot” approach to spending.

Mercifully, Ireland can be less fanciful and spend on all the things we know we need. Get ready for the UK to trade on WTO terms. Keep SMEs and tourism businesses alive. Broadband, alternative energy sources, housing and public transport are where we should spend much of our political and economic capital. It’s almost a cliche to call for these but apposite nonetheless.

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