Cognitive dissonance and the free trade challenge, By Martin Smith

How Tory No-Deal Brexiters mimic the Left

 

It is often said by those on the Centre-Right that Socialists suffer from a particular form of cognitive dissonance regarding the repeated failure of their ideology: to achieve their stated goals of reducing poverty, they continue to advocate for policies that have the effect of increasingpoverty. They have achieved a perfect separation between the intentionsof a policy and its results.

 

This is why Jeremy Corbyn and Ken Livingstone would praise Hugo Chavez, someone who pursues policies with which they agree, as a hero for equality and ordinary Venezuelans, and then go eerily silent as Chavez’s and Maduro’s policies led to widespread poverty, hyperinflation, and empty shelves.

 

While recognition of this blind spot in the left-of-centre mind unites most Tories, a similar form of dissonance is at the heart of the latest internecine blue-on-blue Brexit spat, as Chancellor Philip Hammond recoils against arch-Brexiteer Jacob Rees-Mogg’s assertion that the UK economy is set for a No Deal Dividend. Hammond is said to be “terrified” that the Honourable Member for the 18th Century “can think we’d actually be better off by adding barriers to access to our largest market.”

 

But that’s the wrong criticism. It’s like asking Ed Miliband in 2015 why he wanted to take job opportunities away from young people, low skill workers, labour market entrants, and students (by banning zero hours contracts).

 

It is very unlikely that Rees-Mogg actually thinks that trade barriers with our largest market are a good thing. His delusions are a lot more subtle. 

 

The heart of the No Deal Brexiteer delusion is that No Deal Brexit will lead to morefree trade. And because this was an original intentionof their Brexit project, they hang on to this delusion in the face of all available evidence.

 

To understand why they ever believed this, you have to believe that there was a whole world of opportunities out there for free trade: low hanging fruit, juicy, waiting, and unpicked only because Brussels didn’t want to pick it. Get off the protectionist Little European sinking ship, the thinking goes, and Global Britain will sign those deals, more than compensating for the pinprick of shifting to WTO terms with the EU.

 

This was always a dubious claim. Under No Deal, though, it is clear that we would be destroying far more free trade than we could create. 

 

Trade with the EU – nearly half our trade - will be subject to the biggest hit against free trade that the UK could ever strike. It will go from being subject to the most seamless form of trading regime possible – an internal market – to the most restricted: the fabled “WTO terms”, which don’t negate the need for customs checks as an internal market does, don’t cover services, and serve only to put a quantitative limit on tariffs. 

 

Under the most optimistic scenario, we would then replace the EU’s free trade agreements with third countries – representing another significant chunk of our trade now that the EU has free trade agreements with Japan, Mercosur, Canada, and Australia – with our own equivalent agreements. This is already proving difficult, with a number of the counter-parties demanding concessions in order to agree to roll-over those deals to a post-Brexit Britain. 

 

We would then also achieve something that is proving even more difficult: a free trade agreement with the US. But while this would be a positive step, it would be a relativelysmallpositive step. The US is about 15% of our trade, and we will liberalise it only to the extent of going from the EU’s mishmash of agreements with the US that fall short of a free trade deal, to free trade deal, but not an internal market. It may eliminate tariffs, but it won’t be seamless, as the EU internal market is. And a deal with China will be even more difficult.

 

To be clear, a trade deal with the US would be a very good thing. If a No Deal Brexit happens, a potential trade deal with the US would be one of the few silver linings. The problem – apart from the amount of time and difficulty involved in actually doing it – is that under No Deal, it simply won’t replace the free trade that we are destroying with the EU. Moreover, if a No Deal Brexit undermines the Good Friday Agreement, don’t expect the US Congress to endorse whatever the Trump Administration may negotiate. 

 

This reality of net free trade destruction will not live up to the Leave campaign’s undeliverable referendum promises of keeping our seamless relationship with the EU while also making our own rules and signing our own deals around the world; and nor does it correspond to the government’s 2016 promise, in the event of a leave vote, to spend “10 years or more” unwinding our relationship with the EU in an orderly manner.

 

For No Deal Brexiters like Rees-Mogg, these facts don’t matter. It is totemic, it is an automatic unwritten assumption, it is emotionally true, that Brussels constrains free trade as it constrains everything else. Facts don’t matter to people who are so far down the rabbit hole of Europhobia as to believe that everything good in the world is more plentiful as far outside Brussels’ orbit as possible.

 

The challenge for Conservative opponents of No Deal is to ensure that however many fact-based free-marketeers as remain on the Conservative benches understand, as the Chancellor does, that the biggest blow they can strike for free trade and for democracy is a blow againstNo Deal.

 

Martin Smith is a CGE member and a strategy consultant for Fortune 500 companies. He was previously a lobbyist in Westminster and Brussels for UK small business organisations, as well as a researcher for a think tank and an MP. He is a former Vice Chairman of EDS, the European centre-right group to which the Young Conservative Group for Europe belongs.

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