It's time for what I like to call a post-Brexit check. The UK has suspended trade talks with Canada, pointing to disagreements over hormone-treated beef. This decision will reduce British farmers' access to Canadian markets, and leaves tariffs of nearly 250 per cent on British cheese. That. Is A. Disg... Oh, never mind.
The backstory to this, the curds if you will, is CETA, the trade agreement signed by the EU and Canada back in 2016. When the UK effectively left the bloc at the end of 2019, a rollover deal was put in place that contained, amongst other clauses, preferential access for UK cheesemakers. That has now lapsed.
It's bad news for the UK automotive sector too. Until now, Britain's carmakers have been able to sell vehicles into the country using the same preferential rules as EU carmakers. This is set to expire on April 1.
On the one hand, this is an example of where no deal (or rather, no new deal for a few special elements) might be better than a bad deal. It is widely recognised that the trade agreement the UK signed with Australia is lopsided in favour of the Aussies, in large part because the UK was so clearly desperate for any sort of a deal.
On the other hand, it draws attention to the central bind that any British government will find itself in. The UK has a large, rich and powerful trading bloc on its doorstep. Brexit does not change this, in fact it makes it more evident, because of the large costs of divergence – that is, the shifting away from EU regulations. And thus far, we haven't done all that much of it.
Step forward Kemi Badenoch. Earlier this week, the trade secretary and likely candidate for next Conservative leader, said the UK would have to diverge in order to make Brexit worthwhile. And in a sense, she is absolutely right. What was the point of enduring all the bother, expense and trade friction of Brexit if we don't diverge in ways that suit UK strength sectors? But there's a problem: divergence is frequently both politically and economically costly.
And so we are in this strange world of what trade analyst David Henig calls "performative divergence". That is – and with thanks to UK In a Changing Europe's divergence tracker – the government seeking 'symbolic wins' on divergence around things such as GDPR and bankers' bonuses, so it has something to point to at the general election.
Long-time readers of this newsletter will recall that prior to leaving the EU, Tony Blair would frame the choice Britain was facing as between a painful Brexit or a pointless one. We have ended up with a bit of both. That is because even without divergence, the reality is that as soon as you step outside of the EU's single market, you have to make time-consuming checks and fill out endless paperwork to prove your compliance.
Consequently, the UK is stuck in a regulatory no-man's land. Neither greater divergence nor rejoining the single market appears even remotely politically feasible. For now, muddling through this decades-long slow economic puncture appears to be the most likely outcome.
In the comment pages, Tracey Emin says being in love is not bad – we cannot help who we fall in love with. Plus, tax cuts? In this economy? I call the Tory obsession a fiscal scorched earth strategy aimed at Labour.
And finally, are you adorable enough for 2024? Why everyone in London is obsessed with dressing cute.
Have a lovely weekend.
