Brexit: lost souls

06/07/2018

When I used to work with Owen Paterson as his confidential political advisor – which I did for well over a decade, until just after the EU referendum – part of my job was to talk him down from some of the more stupid positions he would occasionally adopt.

Sometimes I had to get quite stroppy, as when we were preparing this speech on his "optimistic vision of a post-EU United Kingdom", which he delivered to Business for Britain on 24 November 2014.

After I'd written the first draft. Owen – unbeknown to me – gave it to Dan Hannan to "improve". He produced a draft so riddled with factual errors that I refused to have anything to do with it, threatening to resign if he went ahead with it. Only later did I find out that Hannan had been responsible for the new draft but, at the time, I warned Owen that his reputation would suffer irreparable damage if he went ahead with it.

That time round, Owen relented and almost all of Hannan's input was removed. As a result, I think we produced a pretty good speech, one which advanced the idea that we should "grasp the opportunity" to leave the EU and its "current political arrangements". But this we would do, "while keeping our vital position in the single market".

In all, Owen mentioned Norway 13 times in the speech, and the EEA 14 times, telling us that membership of the EEA allowed "full participation in the Single Market without being in the EU, as enjoyed by Norway, Iceland and Lichtenstein". To "those such as the CBI, who confuse the memberships of the Single Market and the EU", Owen's message was simple and direct. They were "making a basic error and misleading the British people".

It was thus Owen's view that we could "leave the political project and enter into a truly economic project with Europe via the European Free Trade Association (EFTA) and the EEA". We would, he said, "still enjoy the trading benefits of the EU, without the huge cost of the political baggage".

Needless to say, the speech was panned by the Guardian's John Crace, which is as good an endorsement as one could hope to get at the time.

What none of those reporting the speech bothered with, though, was Owen's comments on the "all-important car industry". Showing a remarkable level of knowledge for a British politician, he took on board the claim that "Norway's position is abusively dismissed as simply submitting to EU law by fax machine", and referred to the range of international standards which were shaping the Single Market acquis. This, he said, was "staggering".

In the car industry, he said, the regulatory focus had moved from Brussels to Geneva. There, he told us, the EU's Single Market standards start as "UN Regulations" produced by the World Forum for the Harmonisation of Vehicle Regulations. Known as WP.29, it is hosted by the United Nations Economic Commission for Europe (UNECE). Then, Owen declared:

European vehicle production is extraordinarily integrated; the UK produces 1.6 million cars but produces 2.6 million engines. Most of these engines are exported to Europe. As we move to world standards of vehicle production we would be at a massive advantage if we were directly represented, on the body influencing standards, in our industry's interest.

Those particular nuggets of information Owen would have done well to recall when yesterday he went on to BBC Radio 4's Today programme. His task then was to set the world to right about Jaguar Land Rover's (JLR) fears on the impact of a "hard" Brexit, the company having claimed that the combined effect of tariffs and non-tariff barriers could cost it more than £1.2 billion.

However, it was a very different Owen who stepped up to the mike, telling the world that leaving the customs union, the Single Market and European Court of Justice (ECJ) would put JLR in a "wonderful position to compete world-wide because they would be able to buy components cheaper around the world".

This harps back to a piece Owen had done the previous day in the "ultra central" Telegraph, reasserting his new-found belief that we should go for the WTO option and use our "new freedom" to remove all tariffs. Producers, he wrote, would benefit because removing tariffs would "reduce the cost of raw materials". Furthermore, he asserted, "We can free them from over-burdensome regulation and allow them to embrace the innovations they need to compete".

This, at least, had the merit of allowing the Independent to observe that the BBC had been able to come up with "someone other than loopy economics prof Patrick Minford to go on the Today programme".

With his enthusiasm for removing tariffs, though, Paterson might have reminded himself that, while we are free to do this unilaterally (as long as we remove them from all nations and not just the EU Members), the EU will doubtless apply tariffs to UK goods, which indeed it must once we become a third country without a trade agreement.

Therefore, while we might (for the sake of argument) benefit from cheaper components from the rest of the world, our exports to the EU will suddenly become considerably less competitive.

But reverting to his 2014 speech, Owen would also know that automotive parts are heavily regulated – the origins, as he told us, in Geneva though UNECE. And while the UK industry might be able to source cheaper components from the rest of the world (as if it didn't already), there will be a limited suppliers who can produce the volume that also conforms with UNECE WP.29 standards.

Without the type approvals that require conformity with these standards, companies such as JLR will not be able to sell their products to the EU at any price. Removing this "over-burdensome regulation" will ensure that car manufacturers will be unable to trade in huge areas of the international market, as those countries which rely on EU standards will also refuse UK goods.

This transformation of Owen Paterson from sensible, considered commentator to rabid, "ultra" zealot thus has to be one of the stranger phenomena to tarnish this Brexit debate. But one can see why this born-again "ultra" felt the need to intervene, given a sudden upsurge in business interventions over the last weeks.

Nicole Sykes, CBI Head of EU Negotiations, agrees that it's "undeniable" that there's been a big shift in businesses coming out to warn against the dangers of a "no deal" or "hard" Brexit. The reason why businesses are speaking out now, she explains, is because firms are now at the point where it is necessary to implement their contingency plans. Having made their "no regrets" decisions, they are now having to make expensive "regretful" decisions, spending money on things like warehouses and customs staff.

Furthermore, Brexit is no longer just pausing pre-referendum investment decisions but putting off new ones. And, since both sides of the political divide have failed to guarantee sensible transition in case of a "no deal", there is no longer any trust that the interests of businesses will be secured.

As to why firms didn't speak before, Sykes says that they are wary of the concerns of investors, employers, suppliers and customers. "It's a big decision to be political", she says. "It's not a world CEOs are comfortable with. There are hundreds of firms not speaking out for these reasons".

The trouble is, as I have remarked before, when business does intervene, it tends to do so badly - as in the car industry calling for the UK to remain in the customs union with a deal that "maintains the benefits of the single market".

This is exactly the sort of "cakeism" of which we accuse the politicians, but when push comes to shove, business is no better at defining realistic outcomes. Tariff-free trading would come with our continued participation in the EEA, so the customs union is an irrelevance. And there is no possibility of enjoying the benefits of the Single Market outside the EU without being in the EEA.

Thus, while we have lost souls like Owen Paterson, who is making a complete fool of himself, businesses are failing to step up to the mark with sensible alternatives. To deal with his particular brand of stupidity, they need to be much more focused.

CEOs need to be where Paterson was in 2014, not just playing catch-up with all the derivative wonks who are finally beginning to get to grips with the scale of the problems we confront. They get the big bucks – it's time they earned their money and stepped outside their comfort zones. We don't need more lost souls, struggling to find their voice.

And if they think Mrs May's pyjama party is going to deliver any useful results, they need to think again. If the outcome includes proposals for a Single Market in goods, it will be rejected by Brussels and we will be headed for the chaos of a "no deal" Brexit.