Mrs May: why anticipate, with threats, failure in the negotiations?

In the immediate aftermath of the UK referendum last June, there was fevered speculation in this country that there might be a second referendum, a general election, or that Brexit could somehow be averted through some other undiscovered mechanism.

This was followed by a realisation that the electorate’s decision would be honoured and the wishful thinking found a new outlet. The British would stay in the single market via the Norway option, or close to it through an arrangement similar to the deal with Switzerland. Since the leave voters clearly wished to re-impose immigration controls, these options were never realistic. Free movement is a condition of access to the single market.

Theresa May’s speech on Tuesday means that the UK will be leaving the customs union as well as the single market. May wants to negotiate a free trade deal with the EU and a partial customs union. Any country in the world is free to negotiate free trade deals with the EU within the parameters laid down by the World Trade Organisation. But if Britain also plans to negotiate its own deals with countries around the world it cannot continue as a member of the customs union.

There is just one non-member, Turkey, which has a customs deal with the EU. Understandably there were no headlines shouting “May decides on Turkey option” but that is what she has done. She would like to have a free trade agreement alongside a partial customs union for some products and services. Her partial customs union would somehow allow the UK to conclude free trade agreements with countries around the world.

This sounds unworkable and is not the basis for the existing deal with Turkey. The EU-Turkey arrangement has in any event proven troublesome: it was agreed when Turkey was a live candidate for EU membership, no longer the case, and some commentators have been speculating that Turkey’s affiliation to the customs union will not long survive.

It is in any event quite limited – only non-agricultural merchandise trade is covered. Most of Britain’s exports nowadays are in services. It constrains Turkey’s ability to set external tariffs on the products covered and the UK can hardly accept any such constraint given the buccaneering rhetoric about new trade deals with far-flung partners.

The background noise throughout the speech was the grinding protest of circles being squared. The UK is an open, trading economy, an apostle of free trade, Global Britain according to the prime minister, but about to exit the largest free-trading bloc the world economy has seen in modern times.

The UK government is now committed to the hardest form of Brexit, the outcome least welcome in this country.

Aside from the ritual genuflection to the common travel area, there was nothing concrete in the speech about Ireland. The adopted slogan is “Global Britain”, not Global UK, which tells its own story about the place of Northern Ireland in the order of priorities. More ominously for both parts of Ireland, there was not a word about agriculture.

It should now be crystal clear that Northern Ireland farmers will no longer enjoy the benefits of the Common Agricultural Policy, including protection from cheap non-EU imports and assured access to income supports. Whether they will be spared some of its regulatory irritations is a matter for the UK government when the dust settles.

Britain’s exit from the single market means the likely loss of easy access to the UK for Republic of Ireland produce. At least there will still be access to markets elsewhere in Europe but margins will be affected. Donald Trump’s offer of a trade deal for the UK in his interview on Sunday is not good news for farmers: Britain does not have a vast array of goodies to offer US exporters in most categories but US food producers currently face serious handicaps selling into the EU. It will be difficult for British politicians to resist the temptation to trade better exporter access to the US market against cheaper food in the UK, even if British (and Ulster) farmers are losers.

May repeated the threat, first espoused by the chancellor Philip Hammond, that the UK could slash corporate taxes and become an offshore competitor for foreign direct investment into Europe if it does not get the trade deal it would like.

She neglected to point out that the UK is perfectly free to cut corporation tax inside the EU, and has indeed been doing so. This threat of Singapore-on-Thames sits uneasily with the expressed desire for a mutually advantageous relationship with Europe. Why anticipate, with threats, failure in the negotiations?