By Mark Buckley
The danger of a No Deal Brexit has become urgent and real with both the two final candidates for the Tory leadership saying they would accept such an outcome. Politically such a No Deal Brexit would represent the most direct subordination of Britain to Trump and the US, and economically and socially it would be the most severe attack on the working class and oppressed since the launching of Thatcherism. To attempt to divert rage from the falls in living standards that would result the Tory Party, and the media it controls, would inevitably launch an unprecedented wave of racism. Therefore, it is vital that the left understands the enormous stakes involved in the fight to block a Hard Brexit – of which a No Deal Brexit is the most rabid version.
Subordination to Trump
In the undemocratic British political system the next Tory Prime Minister has a significant possibility to crash the economy out of the EU without a deal, even though parliament has repeatedly voted against it and polls show a clear majority of the population is opposed to this. In the most recent poll, just 28% of voters supported No Deal, versus 43% for Remain, with 16% supporting a softer Brexit and 13% May’s deal (the Withdrawal Agreement). Belief that Tory ‘rebels’ can certainly be relied upon to block a No Deal Brexit is misplaced as can be clearly seen once the project of a No Deal Brexit is analysed.
The rising risk of a No Deal outcome arises from the combination of a change in the international situation with British domestic politics. That change is the election of Trump as US president, his support for the weakening or break-up of the EU, and his administration’s repeated interventions in British politics to achieve this goal.
At the time of the 2016 referendum the US was pursuing its former post World War II policy of support for the EU. Trump has reversed this and thrown his backing behind those forces supporting a No Deal/Hard Brexit.
The decisive dividing line in this, the distinction between a Hard and a Soft (or No) Brexit is whether Britain remains within a Customs Union with the EU. Britain remaining within a customs union with the EU is a Soft Brexit or Remain, Britain leaving a customs union with the EU is a Hard Brexit. The reason this is the crucial issue for the US is that if Britain is in a customs union with the EU Britain cannot enter into a trade agreement involving total subordination to the US – which is the core goal of the Tory right.
To pursue the goal of even further subordinating Britain to the US via securing a No Deal Brexit Trump has therefore backed both Boris Johnson and Nigel Farage, an each-way bet that allows him to use the defection of Tory voters to the Brexit party if the Tory leader does not leave the EU’s customs union. Trump has called for Britain to ‘walk away’ from the Withdrawal Agreement, refuse to pay the agreed £39bn and to appoint Farage as one of its negotiators. Trump’s son and his national security adviser John Bolton have both called for Britain to ‘declare independence’.
May’s proposed deal with the EU failed to block Britain leaving a Customs Union with the EU, and therefore had to be opposed, but it did not provide a cast iron guarantee of a Hard Brexit – which is what Trump/the US want. Therefore, in line with US demands the Tory European Research Group (ERG) stood firm on Trump’s line and demanded No Deal be left on the table. The ERG was victorious in that struggle, bringing down May, and with either Johnson or Hunt will have a Tory leader who will countenance no Deal.
As a result of the US position, a No Deal outcome (which was previously a fringe position and had been criticised and disavowed by the leaders of the Leave campaign in 2016) has become the mainstream within the Tory Party. In addition to the two Tory leadership rivals, a majority of the Tory membership and a majority of Tory MPs now support No Deal. With any Tory MP failing to support No Deal facing the very real threat of deselection, and with a new Tory leader elected on an explicit basis of accepting No Deal, the already small number of Tory ‘rebel’ MPs prepared to block a No Deal can be expected to fall further. The claims in some media that Parliament will certainly block No Deal are wrong. Labour will have to launch a tremendous fight if a No Deal Brexit is to be blocked.
Trump’s No Deal
The reasoning for Trump is very straight-forward. In order to strike a free trade deal with Britain, Britain must be outside a customs union with the EU. Otherwise, Britain will still be subject to all the main product rules and tariff arrangements that it currently implements as a member of the European customs union through its membership of the EU.
Currently, UK-US trade is governed by the existing trade arrangements between the EU and US. If Britain does not leave a customs union then that will remain the case for UK-US trade and there would be no advantage for US firms.
By comparison, there are huge benefits for the US if it can dictate trade arrangements with Britain. The combination of the generally higher productivity and lower regulatory standards of US firms means they will make huge inroads into the British economy, in everything from foodstuffs, to pharmaceuticals, to cars and other manufactured goods.
At the same time, where large-scale production in Britain is integrated into European supply chains, in many of these same sectors the new tariffs and non-tariff barriers that will apply if Britain leaves the European customs union will be a body blow. This is the basis of the recent direct warning from Japan’s government about production in Britain by that country’s companies, as well as the spate of disinvestment, closures and relocations that have already been announced because of Brexit.
No Deal effects
Structurally the effects of a Hard/No Deal Brexit are clear and would immediately unleash a fierce attack on living standards even before a trade deal with the US was concluded. In a modern economy the scale of production in the most advanced sectors of the economy is too large to find a market solely in a single country. A No Deal/Hard Brexit, by imposing tariffs on World Trade Organisation (WTO) terms, which are an average of 10% on manufacturing goods, would immediately make sectors of the British economy such as the motor industry and pharmaceuticals internationally uncompetitive – with a huge impact on industries employing directly and indirectly hundreds of thousands of workers. Other sectors, such as financial services, would suffer in the same way – for which what is important, of course, is not bankers but hundreds of thousands of workers in routine jobs.
The fact that many of the most advanced sectors of the British economy would suffer a devastating blow with a No Deal/Hard Brexit would in turn unleash an attack on the living standards across the entire working class. As the British economy no longer had the productive potential it possessed previously the pound would sharply devalue, unleashing inflation across the entire economy with a consequent sharp drop in real wages and incomes. This would inevitably be followed by attacks on social protection. Given the severe attacks on living standards that would follow from a No Deal/Hard Brexit anyone who studies politics knows what would happen. The Tories would attempt to claim that the effects of these reductions in living standards were due not to those who had really caused them but immigrants, Muslims and other minorities. The economic attack of a No Deal/Hard Brexit would therefore be accompanied by a huge wave of racism by the Tories.
The economic impact of a No Deal/Hard Brexit would make it very much harder to implement the economic policies of a progressive Labour government led by Jeremy Corbyn. Such a government, to raise living standards and meet its environmental objectives, has to shift the British economy from reliance of jobs in low value service industries (the ‘MacDonald’s economy’) into higher productivity jobs in advanced industries such as green energy and other high value-added sectors. Hemmed in by tariff barriers from the EU, or even worse a trade deal with the US, very major barriers would be placed in the way of a Labour government implementing its progressive agenda.
A No Deal/Hard Brexit would therefore be, and is intended to be, a huge shock to the British economy directly driving down living standards and preparing the economy for its direct subordination to Trump and the US. This would be the greatest defeat suffered by the working class since Thatcherism. It is these fundamental structural consequences, not the much discussed short term shortages of medicine or food, and grounding of flights, which are probably exaggerated, which are why a No Deal/Hard Brexit would be such a fundamental attack on the working class – although such short term effects cannot be fully excluded due to government incompetence.
After the huge economic shock of a No Deal/Hard Brexit itself there would then be the second attack from the threat to jobs from much larger and more lightly-regulated US firms under a US trade agreement, as well as the relocation from Britain to elsewhere in the EU of parts of existing production that would be the major consequences of a No Deal Brexit. But these will not have the enduring impact on living standards that the destruction of a significant proportion of advanced production will entail.
Of course, this economic attack would severely damage parts of British capital – which is why a No Deal/Hard Brexit is opposed by significant sectors of British capital. But this is irrelevant to Trump and his British puppets such as Farage. What is important to Trump is the further subordination of Britain to the US, not whether parts of British capital suffer – and of course Trump does not care in the slightest about the living standards of British workers. The move to a No Deal/Hard Brexit by the leadership of the Tory Party, and the great bulk of its members, is therefore a move to dominance by the most cravenly pro-US parts of the British ruling class.
The attack on the NHS from a No Deal/Hard Brexit
There will be further negative consequences on the social field. Trump and Trump’s allies repeatedly and accurately warned that the ‘NHS is on the table’ in a deal with the US. The later denials were simply tactical, to avoid antagonising public opinion against No Deal.
In fact, public services as a whole are increasingly up for grabs to the private sector, as the negotiations around both the failed Transatlantic Trade and Investment Partnership (TTIP) and Trans Pacific Partnership (TPP) trade treaties which were supported by the Obama administration, show (pdf). The EU itself, as well as the British government, play a pernicious role in this area, focused solely on the opportunities of their own private sector firms to demand access to public service budgets. Protecting those public services was not a priority.
But Trump’s objections to these proposed Treaties was because they contained elements of a two-way street – Trump considered they made too many concessions to US ‘partners’. He insists on only greater access for US firms, and uses trade tariffs and sanctions to achieve this. The NHS is one of the largest purchasers of medical goods and services in the world. Of course, US firms will want to increase access to it, and will object to the NHS being a ‘monopoly purchaser’ as they attempt to drive medicine prices higher. This will in turn accelerate the privatisation of the NHS.
Locking Britain into Trump’s position on climate change
Locking Britain into a trade deal with the US would, of course, also be used to put pressure on Britain to abandon even the Tories weak positions on climate change, let along Labour’s progressive policies. The US is the only country to reject the Paris climate change accord. The US under Trump is literally prepared to sacrifice the future of humanity in order to promote the US oil industry. But Trump is attempting to spread his deeply reactionary policies on climate change internationally using allies such as the extreme right wing president of Brazil Bolsonaro. The ERG/Johnson wing of the Tory Party has the worst positions of any party in Britain on climate change. A No Deal/Hard Brexit, by tying Britain even more tightly into US policy, would pose a direct threat to Britain being able to pursue progressive policies on climate change
The attack on workers’ rights
There is also a race-to-the-bottom effect of increased direct competition with the US. When the EU introduced the ‘social chapter’ of workers’ rights in 1992 it was motivated by a desire to protect German industry (and others) from competition within the Single Market from countries with much lower protections. Initially, the British government opted out entirely, but its later adoption meant all sorts of rules against discriminations in the workplace were introduced, and new rights established (to parental leave, preservation of contractual terms and so on).
A No Deal Brexit, and trade deal with Trump, will push in the opposite direction. US workers have among the lowest protections of any working class in the advanced industrialised countries. US workers are legally entitled to only 10 days’ paid holidays annually and, almost uniquely, there is no right to maternity leave at all. In addition, the absence of significant public health provision means that most workers and their families are at the mercy of their employers’ healthcare provision, with all the scope for bullying and increased exploitation that entails.
If there is a trade deal with the US outside the EU customs union, there will be a hue and cry from firms based here that they are facing ‘unfair competition’ from US rivals, who don’t have to provide the luxuries of maternity pay and other benefits. Jeremy Corbyn is absolutely correct, and not at all scare-mongering to warn about this race to the bottom when he says, “Labour will work with anyone across party boundaries and do whatever is necessary to stop a disastrous no deal outcome, which would open the way for a frenzy of deregulation and a race to the bottom in jobs, rights and protections”.
The same logic applies to lower US environmental standards, as well as consumer rights, food quality and product standards. Following No Deal, and with Britain desperate to strike any sort of deal with the much more powerful US, everything that the US wants will be ‘on the table’ and it will be on US terms. The British economy, jobs in high-value sectors, general living standards, climate change and workers’ rights will all be the casualties.
These political, economic, and social realities mean that there must be no underestimation whatever of the very serious threat now facing the British working class and oppressed. A No Deal/Hard Brexit would be direct subordination to Trump and the launching of Thatcherism 2.0.. It is the greatest threat which today faces the British working class and progressive movement.