The authoritative source for independent research on UK-EU relations

15 Jun 2018

Politics and Society

This speech was delivered by First Minister of Wales Carwyn Jones at King’s College London on Thursday 14 June

Thank you for coming this morning, it is a great pleasure to be talking to you at this wonderful location.

However, I confess it was with some trepidation that I boarded the early train from a fairly calm and serene Wales to London this morning.

Whilst this event has been in the offing for a number of weeks, I didn’t realise we’d be heading into the eye of yet another Brexit storm – but after the last two years, I probably should have known better.

I don’t intend to reflect for too long on the events of recent days, I want to take a longer term view, but let me say this.

It should come as little surprise that the papers yesterday [and today] can’t agree on a winner from Tuesday’s Commons vote.

A day on which we had one surprise resignation actually happen; a resignation that would have surprised nobody that didn’t happen; internal Conservative Party negotiations taking place in real-time across the floor of the Commons – and that was only the chaos you could actually see on TV.

Who knows how bad it was behind the scenes.

There is little wonder that the papers couldn’t agree on who won at the day’s end, because whilst this chaos continues everyone loses.

It is difficult to believe that we are now approaching the second anniversary of the Brexit referendum. We are just over nine months away from leaving the EU.

You would have thought that at this point the UK Government would have a clear strategy in place, not just for the next nine months but for the next 50 years.

Instead, we are promised a White Paper in the next few weeks to set out the Government’s thinking on the Future Partnership between the UK and the EU27.

I’d like to say better late than never, but all the indications are that the White Paper will clarify only a little and certainly will not clear the path to an early and satisfactory agreement with the EU.

So, what I want to do today is to call on the UK Government to use this last opportunity to come clean on Brexit, to erase the wobbly red lines and to get the country into a proper Brexit ready position.

My aim today is not to set out new Welsh Government policy: the priorities for Brexit we set out in January 2017 in our own White Paper, agreed with Plaid Cymru, Securing Wales’ Future remain valid because nothing the EU has said has been surprising – at least not to us – and no evidence has emerged to challenge our conclusions.

Our six priorities, which we have fleshed out in a series of policy documents over the last year remain:

  1. Full and unfettered access to the single market and participation in a customs union;
  2. Fair movement of people – retaining the principle of free movement of labour and linking it with much more rigorous enforcement of measures to prevent the exploitation of workers;
  3. Holding Brexiteers to their promise that Wales would not lose a penny in terms of public funding from Brexit;
  4. Constitutional change, recognising that we need greater shared governance within the UK once policy convergence in critical policy areas is no longer achieved through EU-wide frameworks;
  5. Retaining the social, environmental, employment and consumer protections we enjoy and continuing to participate in EU programmes open to non member-states;
  6. And finally a transition period to prevent a ‘cliff-edge’ in March 2019.

Much of our attention over the last 12 months has been focused on the fourth of these – constitutional issues – and we are pleased that the UK Government finally appears to have recognised that genuinely shared governance, with respect for devolution is the way forward.

I have always maintained that handled badly, Brexit contained the seed of the UK’s own destruction as a constitutional entity. Therefore, I welcome the progress we have made, and I still look forward to a UK Council of Ministers taking decisions in the future. However, I think this was an avoidable distraction, with avoidable delay.

Because constitutional issues have never been the most important for us: what matters most is securing a Brexit that safeguards the economy, the jobs, the incomes, the well-being of the people of Wales and indeed the UK.

And all – and I mean all – the evidence we have seen suggests that this requires continued close integration with the economies of our EU neighbours.

So, what of the UK Government. Where are they now?

And how have they arrived at this point?

To take the second question first, the pattern we have seen repeatedly over the last two years is as follows:

  • The EU sets out its position, based on the cold logic that it has to protect the interests of the 27 continuing member-states;
  • the UK Government lays down its red lines and makes bold assertions
  • – the EU can ‘go whistle’ if it expects us to pay our share of historic commitments;
  • the UK does not need a transition period because this will be ‘the easiest negotiation in history’;
  • we can rely on the German car manufacturers to tell their Chancellor to put economic self-interest before principle and that their Chancellor in turn will sort out the other EU member-states;
  • But the EU stands firm.
  • Then there is deadlock.
  • A moment of crisis approaches.
  • And the UK Government crumbles.

I’m afraid it has been like watching Jacob Rees Mogg square up to Anthony Joshua.

Hot air versus tough reality.

And whilst I suspect there may be some interest in the outcome of a Joshua v Rees-Mogg bout – there is no satisfaction for any of us in the UK in witnessing these Brexit humblings.

We have seen this failed approach on key issues:

  • in December, on the question of the financial settlement and the role of the European Court of Justice in relation to citizens’ rights;
  • in March, on the fact and form of the transition arrangements, including the issue of freedom of movement during transition;
  • and in the Mansion House speech, the acceptance that participation in EU programmes in future will require us to accept the autonomy of the EU to set and police – through the ECJ – its own rules.

So where are we now on the critical issues of the Future Economic Partnership, the relationship with the single market and the customs union?

Well, in her Mansion House speech, the Prime Minister made some welcome acknowledgements. For example, that for many sectors – indeed, quite possibly for all goods – the interests of UK industry require continued alignment with the regulations of the single market.

But, at the same time, the Government insists that its red line of leaving the single market is intact. That we must retain the option of diverging from EU regulations in the future. That the EU should accept that goodwill and an untested disputes resolution mechanism can provide oversight equivalent to that provided by the European Commission and the ECJ.

The position on the customs union is even more confused and confusing.

The implacable insistence that we are leaving the customs union remains. Yet it has become ever clearer that the two alternatives put forward to resolve the conundrum of how to retain an invisible border within the British Isles simply do not work.

Both have huge flaws in design.

If we are to run a parallel system of levying customs duties depending on whether goods end up in the UK or in the EU, so that goods can continue to pass the Irish border freely, are we proposing the EU does the same?

Or are we content that Ireland is a backdoor to our market?

How does ‘max fac’ solve the border, when years after introducing a similar scheme between the US and Canada, only a tiny minority of businesses have trusted trader status?

The options the Government has put forward cannot do the job, cannot be ready in time, and in the case of ‘max fac’ particularly, will cost huge amounts of money.

And the Government’s version of the backstop – so painfully delivered, so quickly rebuffed – represents an acceptance that we will need to remain in a customs union for a period after the end of transition.

Let me be clear. We welcome the dawning recognition that we cannot take the huge economic risk of cutting ourselves adrift from the single market and the customs union. Particularly in the case of manufacturing sectors, which in Wales are so important in providing high-paid, high-skilled jobs. Only yesterday the President of the CBI said that many of these sectors simply would cease to exist after a hard Brexit.

And so the risk we face now is that by only grudgingly moving the right way on the single market and customs union we suffer the consequences of Mrs May’s red lines, without securing the benefits of our new “freedom”.

This is particularly true of the customs union. In the unlikely event that we could persuade the EU27 to accept the ‘backstop’, with the UK locked into the Common External Tariff until say 2023, we would indeed suffer all the disadvantages that Brexiteers claim would automatically flow from locking ourselves into a Turkey-style customs union.

The EU would allow us no role or insight into its trade policy. Why should it, when our avowed intent is to bring the arrangement to an end as soon as possible?

But we would have no autonomy to negotiate meaningful trade deals for ourselves. And as and when the EU27 negotiates new Free Trade Agreements – with

  • Mercosur in Latin America,
  • with Australia,
  • with New Zealand…

all of which are quite possible in the next five years – we would be obliged to open our markets in line with the EU without any guarantee that these countries would give us any reciprocal access.

All this suggests that the UK Government is set on a course which seems likely to end with an outcome where the UK neither has its cake nor gets the chance to eat it. Worse still, is the very real possibility of a catastrophic no-deal Brexit. So, what is the alternative?

It is to go back to the drawing board. Rub out the red lines, and argue for a dynamic and positive relationship with the single market.

A solution where the UK makes a positive commitment to working with the EU27 to retain alignment with the single market as a regulatory space; and a new, durable, customs union with the EU.

In terms of the single market, we do not have to look far for a model.

The solution may not be to join EFTA and through it retain membership of the European Economic Area (EEA) – though as a Welsh Government we have never ruled that out as a potential part of the solution.

But at least a similar arrangement, where we acknowledge that the EU retains its decision making autonomy and where the clear and stated assumption is that, except in exceptional circumstances, we will not just have regulatory alignment on day one after we leave, but day 1,001 or 10,001.

As for a customs union, it’s true to say there is no existing model we can point to.

But it is quite feasible to construct one.

Where the EU no longer is responsible for negotiating on behalf of the UK, but where both the EU and the UK agree to the closest consultation about future trade policy; to launch and conclude new free trade negotiations with trading partners in parallel; and to co-ordinate closely on trade disputes and trade remedies.

And surely, the need for such co-ordination is brought into sharp focus by the Trump administration’s attack on the UK and EU steel industry.

So, if this is the direction which the White Paper should set, what are the barriers – substantial and presentational, rational and political – which might prevent it from doing so?

To start with the serious objections – these are, I believe, the notion of becoming rule-takers; the role of the ECJ; immigration and, finally – the internal politics of the Conservative Party.

The first, and possibly the most serious is the loss of control, the argument that we will move from rule-maker, to rule-taker. There are a number of answers to this, but no easy ones. The first is that we can continue to exert influence. The single market is not, for the most part, based on the rigid prescription of standards, but on allowing countries which participate in it a degree of autonomy in achieving the outcomes which are prescribed.

This applies to Norway no less than to France.

Not least, because in many cases the development of detailed standards and rules is ‘contracted out’ by the EU to technical bodies in which the UK can continue to play an active role.

Yet it is still true, that all those participating in the single market need to accept the autonomy – and in many senses the primacy – of the decision-making institutions of the EU, the European Parliament and the Council of Ministers.

If the UK adopts the approach we believe is necessary, it will have less real capacity to determine some of the rules by which UK businesses have to play than it has been used to. We’ve got to be honest about that.

For some sectors, that may be a price that is just too high: I know there are those within the financial services sector who feel that.

And it may be possible, despite the EU’s rhetoric about cherry picking, to agree that single market alignment will not extend fully to some service sectors, provided we pay a price for that in terms of market access – just as the EFTA countries chose to exclude agriculture and fisheries from the EEA, so they could protect and subsidise them.

But for goods – both manufacturing and indeed for our agriculture and fisheries – it is probably a price worth paying to both safeguard our economy, while respecting the result of the referendum.

When I visited Norway eighteen months ago, it was striking that most businesses I spoke to were happy with the status quo.

They felt they had the possibility to shape emerging regulations in the sectors they cared about by using their technical knowledge and expertise in working groups which they had access to by virtue of Norway’s EEA membership.

And single market participation gave them huge economic benefits which could never be replicated outside. But they admitted that Norwegian politicians would have more influence if Norway had joined the EU.

So we have to ask the question: if a price is to be paid for our decision to leave the EU – and there surely is – then is it best paid by a reduction in our political influence, or by the loss of investment, jobs, and livelihoods.

As a politician, as a socialist, as someone who has seen the damage to generations of Welsh citizens of wholesale closure of industries, I know what my answer is.

I have made this argument before, and it is one I even heard Brexiteers make during the referendum – if Norway can strike a deal like this, in the interests of its people, and not its politicians, then what is stopping us?

The second potential barrier for the UK Government developing a sensible Brexit approach is the role of the European Court of Justice.

Again, while the Brexiteers in particular and the UK Government in general have an almost obsessive hatred of the Court, there is a serious underlying issue.

How can we agree to be subject to the direct jurisdiction of the Court on issues vital to our economic prosperity when we no longer have representation in the Court? So we need to find a different solution.

Arguably, one presents itself in the model of the EFTA Court. Here is a court which has autonomy, is recognised and trusted within the EU legal order – including setting precedents where it deals with issues which have not come before the European Court of Justice. Surely, here is a model we should be discussing with the Article 50 taskforce?

The third barrier is, of course, immigration and freedom of movement. And while I would refute utterly the Brexiteer contention that continued participation in the single market or a customs union is ‘not what people voted for’ – believe me, neither were subjects raised on doorsteps in Amwlch or Ystradgynlais! – it is of course true that simply retaining the status quo on migration post Brexit would lead to charges of a betrayal.

Perceptions and misperceptions of the role of EU migration in fuelling the poor living standards, pressurised public services and sense of alienation experienced by many people, particularly in our poorest communities, of course played a part in the referendum result.

With that in mind, I do not argue for the status quo. But we have to talk and think in terms which reflect the basic philosophy of the EU – that participation in the unique construction of the single market requires preference for EU/EEA citizens. The suggestion in the press that the new Home Secretary does not understand this is deeply worrying.

And we also should acknowledge – particularly in the wake of the Windrush scandal – that basic decency (not EU diktat) requires that once people have contributed through work to the well-being of the country they have chosen to live in, they should be entitled to the same rights (as well as responsibilities) of citizens of that country.

Our policy paper, Fair Movement of People sets out a viable way forward on all this, based around two pillars:

  • Linking the right for EU citizens who are not students or economically self-sufficient to move to this country more clearly to employment (and accepting that is also the case for UK citizens wanting to up sticks and live in Berlin or the Dordogne).
  • Addressing the root causes of the disaffection and despair which causes deep suspicion of immigration, ironically mostly in areas where it is least prevalent. We need much more energetic enforcement and enabling of legislation which already exists to protect workers from exploitation; further measures to promote fair work and an end to the misguided and disastrous policy of austerity.

The first of these will need new thinking about our administrative processes: but I think we can all agree that the Windrush scandal proves that an overhaul is long overdue in this area.

Of course, it is also true that pressures are building within the EU – think Austria and Italy – to challenge key aspects of freedom of movement, like equal rights to welfare benefits and that the current system within the EU might yet be eroded.

But if we are to achieve the right Brexit outcome, we need here, as across the piece, a different approach to the negotiations. Rather than acting as cheer-leaders for populist attacks on the core principles of the EU, we need to provide reassurance that we respect the rights of the EU to safeguard the coherence of the single market which we did so much to create.

Which leads me to the final, and no doubt for Mrs May, the most difficult barrier to changing course in the way I have advocated: the problem of managing her own party.

Here I have a great deal of fellow-feeling for the Prime Minister.

As a leader, juggling responsibility to do what is right for your country, on the basis of the evidence of what will work and what is do-able, with the views, interests, sometimes prejudices of your own party, is not easy.

But Brexit is, as many have said, the greatest challenge in peacetime to this country for generations. Get it wrong and it will take decades to make good the damage.

This is not ‘project fear’ part 2: just the uncertainty about the Brexit outcome has caused our growth rate to plummet to the lowest of the large economies when two years ago it was at the top of the league.

The Bank of England thinks our economy is already smaller to the tune of at least £20 billion than it would have been.

Of course, as a country we will survive even the hardest Brexit – but with lower growth, lower investment, fewer jobs, lower incomes, less money for investment in public services than needs to be the case. That is what the Government’s own figures conclusively show.

This ought to be incentive enough for the Prime Minister to think again.

And to be fair, I believe she has, but the change in substance – to a policy of keeping us as close to the single market and the customs union as possible – is not reflected in the change in tone and tactics, an honest admission that the red lines set out at Lancaster House in January 2017 are simply not compatible with achieving that result.

But if the national interest is not enough to persuade the UK Government to face up to reality, then Parliamentary arithmetic should do so.

I ask a simple question. Where is the Parliamentary majority against the sort of Brexit outcome I have described? For all his bluster, Jacob Rees-Mogg and his cohorts can only veto the negotiated Withdrawal Agreement if Labour, the Lib Dems and the SNP vote with him.

And is that really a credible scenario if the Government commits to and delivers and outcome close to that set out in Wales’ own White Paper?

Because here’s the bigger point – I do not believe there is a Parliamentary majority against the Brexit I advocate, but nor do I believe there is a public majority against it either.

It is absurd to argue that this was a referendum fought on the merits or demerits of the single market, or customs union.

This was a referendum based on an idea – not a plan.

Now is the time for a plan, and the Welsh plan – I believe – finds the sweet spot of honouring the referendum, whilst protecting jobs and businesses across the UK.

So my message to the Prime Minister is clear. Use the opportunity presented by the White Paper to change direction; to challenge M. Barnier and the EU27 to make good on their promises that it is our red lines that prevent a very different future partnership; and to be led by the national interest, not by fear of a few dozen backbenchers.

There are bigger challenges in front of us as a people, as a country.

A battle between tolerance and totalitarianism.

The world is increasingly divided, and we have an historic responsibility to retain our place amongst the liberal European democracies that have acted as a beacon for others over many decades.

Being inside or outside the EU, we must meet that responsibility seriously, solemnly and unbendingly. If the notion of Global Britain means anything at all, then it should mean standing up for a safer, fairer, more equal Europe.

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