The General Election of 12 December 2019 called to end the Brexit impasse in Parliament turned out to be a disaster for the Labour Party. Boris Johnson’s Tory Party was elected with an overall majority of 80 seats. It now finally had free rein to push the European Union (Withdrawal Agreement) Bill1 through Parliament and leave the European Union (EU) on 31 January 2020, more than three years after the leave vote in the EU referendum of 23 June 2016. On 20 December 2019 a revised, harder version of the Bill was passed in Parliament by 358 votes to 234, a majority of 124. Six Labour MPs ignored Jeremy Corbyn’s call to oppose the Bill and voted for it and another 32 abstained or did not turn up. DAVID YAFFE reports.
The new version of the Bill ruled out an extension of the transition period after 31 December 2020, allowing only 11 months to negotiate a trade deal with the EU. This means that Britain would fall out of the EU into a ‘no deal’ scenario if no trade agreement has been agreed with the EU by that date. The new Bill removed the section on protection of EU-law derived workers’ rights after Brexit, which was in earlier versions and designed to win over Labour MPs in the last Parliament. It significantly reduced parliamentary scrutiny of any trade agreement signed by the UK and EU, and it has taken away a legal guarantee to give refuge to unaccompanied refugee children from Europe after Brexit (Financial Times 21/22 December 2019).2
The 600-page Bill includes agreements on citizens’ rights, the UK’s financial settlement (‘divorce bill’) with the EU of around £33bn and the Northern Ireland protocol, laying down the arrangements for maintaining an open border on the island of Ireland.3 Acceptance of the Bill by the UK and EU parliaments is essential for the post-Brexit transition period, at present ending on 31 December 2020, during which Britain will attempt to negotiate a long-term trade deal with the EU. In that period Britain will remain in the single market and customs union and will continue to apply and be bound by all EU laws, while playing no role and having no say in the EU’s political institutions. Britain will also continue to contribute to the EU Budget over this period.
The Bill was passed after the government overturned five House of Lords amendments. It received Royal Assent on 23 January 2020. Boris Johnson formally signed the EU Withdrawal Agreement after a copy, signed by the leaders of the European Commission and European Council, was sent in a diplomatic bag across the channel to Downing Street. He said it was a ‘fantastic moment’ for the country. On 29 January the Agreement was ratified by an overwhelming majority in the European Parliament. Britain formally left the EU at 11pm GMT 31 January 2020, midnight European time. The EU’s negotiating standpoint, or mandate, is due to be adopted by EU ministers on 25 February after which formal negotiations will begin on the future relationship. Brexit has been done! The harsh reality will soon be exposed.
Brexit and the crisis of British imperialism
As we have consistently argued over many years the imperialist character of Britain is decisive in determining all the major economic and political developments in this country. The parasitic character of British capitalism, its dependence on the earnings from its vast overseas assets and particularly those of its parasitic banking sector to sustain the British economy, not only makes it vulnerable to any external financial or political shocks, but leaves it increasingly incapable of withstanding the economic and political challenge of US or European imperialism as an independent global imperialist power. That is why more than 14 years ago we argued that the British ruling class knows that, sooner or later, it will have to make a choice between Europe and the United States, if it is to maintain its global reach as an imperialist power.4 The Brexit conflict is essentially a dispute between sections of the British ruling class over two necessarily, totally reactionary outcomes for British capitalism – staying as part of a European imperialist bloc or leaving and becoming an offshore centre for usury capital under the umbrella of US imperialism. The decision to leave the EU will have significant consequences for sustaining the City of London as a leading global financial centre.
The City of London and the financial services sector need to keep a close relationship with the EU but will not have the same access as previously under the single market. Instead of the present ‘passport’ rights that allow financial companies easy access to EU markets, bankers and traders will be on a stricter ‘equivalence’ regime, allowing market access to be withdrawn at 30 days’ notice. While there will be equivalence assessments and ‘appropriate consultations’ on these issues during the transition period, it will be a serious blow to the 5,500 UK-based companies that will be losing their ‘passport’ rights. Given the centrality of financial services for the British economy, these developments represent a serious setback for British capitalism. The City of London earns around £205bn a year from European financial services. It will not be business as usual after Brexit.
In early December Martin Wolf, chief economics commentator of the Financial Times, described the British economy as ‘unstable rentier capitalism’ with weakened competition, feeble productivity growth, and high inequality. In a world of growing inter-imperialist rivalry its influence, as an independent global imperialist power after leaving the EU, will be much reduced. Martin Wolf frankly spells this out in a later article: ‘The UK is also likely to find it hard to exercise much independent influence upon a world entering the era of great power rivalry. Next to the US, China or the future EU, it is an economic minnow, albeit a large one’. He goes on to say that Britain, again and again, will face choices over which side to choose in struggles that are occurring far over its head. All this, he says, will be very uncomfortable for the UK (Financial Times 29 January 2020). It negates the Brexiters’ claim that leaving the EU will allow the UK to regain control of its destiny.
EU or US trade deal
Boris Johnson wants rapid trade deals with the EU and US achieved through parallel negotiations. This is a fantasy. Neither the EU nor the US would entertain such a process. Britain has to make a choice: to go with the EU or the US. Leaked UK government forecasts suggest that a US trade deal would see a rise of economic output of 0.2% in the long term. By contrast it predicted a loss of 5% in potential growth over 15 years if the UK leaves the EU customs union and single market and reaches a Canada-style trade deal with the EU (Financial Times 21 January 2020).
A trade deal with the US may prove less easy than Johnson hopes
Trade deals with neither the EU nor the US will be straightforward as each power lays down its own rules and conditions for doing a deal with Britain. On 17 January, the Tory Chancellor Sajid Javid gave an interview to the Financial Times in which he said that ‘there will not be alignment’ with EU regulations. Boris Johnson, Javid said, has made it clear that he wants to break free from the bloc’s rules. The EU, however, insists that, in exchange for a trade deal, Britain must respect what it calls a ‘level playing field’ of common rules in areas that affect the cost of doing business such as environmental legislation, social policy, tax and state aid. The EU is clear that the weaker Britain’s commitment to a level playing field the more limited Britain’s market access will be. The Croatian Prime Minister Andrej Plenkovic, whose country is taking over the EU presidency, said the EU will block the City of London’s access to its markets if Boris Johnson tries to free the UK from Brussels’ laws. Boris Johnson also said that the UK would ‘take back control’ of its fishing waters after Brexit, setting up a further clash with Brussels over a trade deal. The EU with its massive market clearly holds the stronger hand.
On 22 January trade tensions between the UK and US erupted as the US threatened to impose ‘arbitrary’ tariffs on UK car exports as Sajid Javid confirmed plans to introduce a digital services tax from April that would primarily hit giant US technology companies such as Apple, Amazon and Google. The clash intensified as Javid made it clear that the UK would give priority to a post-Brexit trade deal with the EU over a deal with the US. The UK decision to give the Chinese company Huawei a limited role in parts of Britain’s 5G mobile phone networks defying strong lobbying by the US to exclude Huawei completely only made matters worse.
The EU accounts for 45% of UK exports and 53% of UK imports while the US accounts for 20% of UK exports and 10% of UK imports. It is therefore clear why the UK must give priority to a post-Brexit deal with the EU. But it will not be easy. Boris Johnson’s desire for parallel trade negotiations with the EU and the US is not going to succeed.
Northern Brexiters will lose out
The north was promised a bounty after Brexit from what was euphemistically called the ‘shared property fund’ a supposed replacement for EU structural funds, which for many years have been used to invest billions in Britain’s regions to encourage economic revival. In reality, according to a government assessment when Theresa May was Prime Minister, because of the loss of trade with Europe after Brexit the northeast, with its high quality manufacturers, could lose 11% of income with a trade deal at the end of the year and 16% if no deal. The northwest would lose 8% rising to 12% without a deal.
In addition, England’s northern councils will lose millions of council funding to the southern shires after a controversial review of local authority funding, which was published before the General Election. Some £320m a year will be shifted out of councils in the most deprived areas in England. Tory-controlled shire councils in the southeast will gain £300m. An estimated 37 of the 50 new Tory MPs represent areas that are set to lose millions a year. The government is expected to launch a consultation on this review in the spring (The Guardian 25 January 2020).
These are some of the harsh realities of post-Brexit Britain. They make a mockery of the claim that Britain will be an independent, prosperous global capitalist power after Brexit.
Fight Racism! Fight Imperialism! No 274, February/March 2020
1. This was essentially based on the deal made with the EU on 17 October 2019. See David Yaffe ‘Brexit impasse forces General Election’ in FRFI 273 December 2019/January 2020 on our website at https://tinyurl.com/vflf32n
4. See David Yaffe ‘Britain: parasitic and decaying capitalism’ FRFI 194 December 2006/January at http://tinyurl.com/88po6dx for a discussion on the parasitic character of British capitalism and the importance of the City of London for the British economy.