An EU settlement that frees finance at the expense of industry
Financial Times backs a customs partnership
Ahead of the 22-24 May round of negotiations in Brussels, details of debates in the Cabinet were discussed in features and editorials in the Financial Times on 17 and 18 May. The key issues were how to avoid a hard border between the north of Ireland and the Republic and how at the same time to retain the freedom to conclude trade deals outside the EU. The Financial Times reported a provisional deal had been agreed in the Cabinet on 15 May described as a customs partnership or a ‘maximum facilitation’ agreement that would be preliminary to any final agreement. The FT continued ‘such a delay could be a politically expedient route to a permanent customs union’.
Such a deal, the FT Ed continued, would apply to goods but not services. It would mean that all goods production in Britain would still have to meet Single Market competition rules but financial services would not. It adds, Britain is ‘largely a service-based economy’. Financial services would not therefore be bound by EU regulations and Britain would also have the freedom to negotiate non-EU trade deals for services. Such a deal, it says, would solve the Irish border issue without upsetting the DUP (all of Britain itself would also be in a ‘goods’ Customs Union) and would ‘protect’ all-EU supply chains for British manufacturing.
EU’s real worry is Labour’s state aid programme
On 7 May The Times carried a report that ‘Senior European officials have told The Times that concerns over Labour’s economic policies are the main reason for the EU’s insistence on a tough “level playing field mechanism” in a future deal after Britain leaves.’ Further reports claim EU negotiators were demanding a ‘non-regression’ clause that would allow the EU to impose tariffs, block financial services and end aircraft landing rights should a British government provide state aid for industry or seek to nationalise German assets in energy or rails. Paul Mason argued in the New Statesman for 9 May that this demonstrated the determination of the EU Commission to lock Britain into a neo-liberal settlement. He contested the arguments of Andrea Bondi and Andy Tarrant, in Renewal, that Labour’s industrial strategy was fully compatible with EU regulations.
Italy’s new government:
EU Commission fearful of threat to financial control
Financial Times on 22 May carried two features reporting acute fears in EU Commission resulting from the programme of the new Italian coalition between Five Star and Northern League. The coalition promises to increase government spending by 100 billion euros - equivalent to 6 per cent of Italy’s GDP and breaching EU deficit limits.
The features by the Editor, Tony Barber, and Martin Wolf stress the extreme danger posed by Italy to the EU financial system – as well as the dire consequences of past EU policies on Italy. The Italian economy has not grown for twenty years (GDP is only 3 per cent higher than in 1997), unemployment exceeds 20 per cent across most of the centre and south and Italy’s public debt is the biggest in the Eurozone at 2.3T euro, seven times that of Greece. Overall debt through Italy’s Central Bank is 443T euro, much of it owed to the German Bundesbank. A financial crisis in Italy, triggered by increasing interest rates (bonds have already risen to 3.4 per cent against 1.2 per cent for Germany) could result in serious consequences for the financial system across the EU.
EU Withdrawal Bill:
What is the significance of the Scottish Parliament’s refusal of consent ?
On 14 May the Scottish Parliament voted by 93 to 30 not to consent to the Withdrawal Bill currently before the Westminster Parliament. Only the Tories voted for consent. The issue concerns 24 out of 158 currently devolved areas over which the UK government wishes to retain jurisdiction for a period of up to five years after withdrawal from the EU. These areas are devolved under the Scotland Act and are currently mainly governed by regulations determined by the terms of the EU or the EU Single Market. They are agriculture and fisheries, public procurement, food labelling, environmental protection and the safe use of chemicals and pesticides. In preliminary negotiations the UK government offered to ‘consult’ on any post-EU changes in these areas; the Scottish government wanted the right to consent to any changes. The UK government had offered a two year limit on its power to change these regulations and a five year limit on the continuation of existing, generally EU-determined regulations. Earlier, on the assurance of consultation, the Welsh Assembly had supported the Withdrawal Bill. The Scottish Parliament now requires full consent. Constitutionally, however, the UK parliament retains the right to ignore the vote of the Scottish parliament on this issue.
What is the significance of this vote and of the UK government’s determination to retain these particular powers ?
The main reason is the government’s wish to retain a UK Single Market as the basis from which to negotiate trade deals outside the EU. The UK government argues that trade deals will be necessary and customs and external trade are not devolved under the terms of the Scotland Act. These powers would give a UK government the ability to lock in existing EU provisions on public procurement and other areas that would block progressive change.
Does this matter ? It is likely that the current SNP government in Scotland would do the same. It supports the EU Single Market.
The challenge for the Left is political. It is to ensure at both British and Scottish level that there are governments elected in both Westminster and Holyrood in 2022 that will scrap reactionary, anti-worker EU regulations that Conservative and SNP governments would keep. This means, for instance, ending EU regulations that prevent governments excluding blacklisting firms from public contracts or which stop governments introducing comprehensive public ownership by ending competition by private companies in, for example, posts or railways. It is clearly important that majorities exist both in London and Edinburgh to do this.
The issue also highlights, as Pauline Bryan and Vince Mills have argued in the 2018 ROSE pamphlet Getting the Best out of Brexit, the need for the Left to address the issue of constitutional change NOW. In order to avoid politics being played with the issue of EU withdrawal, there is an urgent necessity to define the way British, national and regional democracies will work in a post-EU federal Britain. We need this in order to assure national rights are protected and at the same time strengthen progressive working class unity across Britain - unity in pursuit of a redistribution of wealth and power across the nations and regions and across society as a whole in favour of working people.