Boris Johnson’s threat over export subsidies could result in an EU deal
One of Boris Johnson’s strengths as a prime minister is that he is odd. He is not bound by convention; he is unpredictable, inconsistent and a bit unknowable. He is as constrained by law, institutions and politics as any leader, but he sometimes acts as if he isn’t, which makes him a difficult person to negotiate with.
That is why he was able to break the Brexit logjam. This time last year, the House of Commons had just passed Hilary Benn’s bill to prevent Britain from leaving the EU without a withdrawal agreement. It was a fundamental challenge to the government’s right to govern, and yet the same parliament refused to allow Johnson to hold an election.
I said at the time that he had been prime minister for six weeks and was staring disaster in the face: he couldn’t have an election; he would be forced, by law, to ask to postpone Brexit; and even his brother had abandoned him, resigning from the government. Yet he negotiated a new withdrawal agreement with Leo Varadkar and threatened all sorts of unconstitutional things, confusing his opponents so much that they eventually allowed him to have the election he wanted.
He succeeded where the sane, dutiful and predictable Theresa May had failed.
So let us pause and wonder, as the world throws up its hands in shock and disbelief at the very idea that a Conservative government – a Conservative government – would destroy an EU trade deal because it wanted the right to subsidise exports. Has Johnson converted to Jeremy Corbyn’s policy of limitless state intervention just as the Labour Party is trying to forget it? Or does he want Angela Merkel and Emmanuel Macron to think he is irrational enough to walk away without a deal, in order to persuade them to instruct Michel Barnier, the EU negotiator, to offer a better one?
Everyone knows that state aid is a sticking point in the EU trade talks. In the conventional world, the issue is simple. No country will readily tolerate another country’s government subsidising their exports in order to gain an unfair advantage. That is pretty much what the whole history of trade agreements has been about. The EU has laws to limit state aid, and it wants those principles to apply to Britain when the transition period ends in December – although it accepts that they would be enforced by a new arbitration body, and not by the European Court of Justice.
Johnson’s view, as expressed this week by “one figure with intimate knowledge of the negotiations” to James Forsyth, the political editor of The Spectator, is, well, unconventional. It is that “state aid is critical if you are going to try and shape markets in technology”. It is that the US and China use state power to promote tech innovation, and that we should too. It is an update of Harold Wilson’s white heat of the technological revolution, and appears to be based on the belief that the gentleman in Whitehall – in this case, presumably, one of Dominic Cummings’s weirdos and misfits – really does know best which moonshot technology to back.
This is so important to the prime minister, apparently, that he insists he would rather have no deal than compromise. He sometimes says that “only three people in government agree with me” on the question of, as Forsyth puts it, “how ambitious – or purist – to be on Brexit”, but he is “convinced” of his position.
Well, I have my doubts. However, I cannot be sure that this is not what Johnson thinks. He has so few ideological moorings that he could quite easily be a believer in free trade and free markets, and also a kind of souped-up Michael Heseltine wanting the state to intervene before breakfast, lunch and dinner. Maybe he does want to flood the EU market with subsidised versions of whatever the next craze is after TikTok. Perhaps he does think unfair competition is good, as long as we are the ones who are doing it. And it could be that this uncertainty is enough to disrupt and unsettle the EU side in the negotiations.
It doesn’t seem likely, but then it didn’t seem likely that Johnson would ever be able to get Britain out of the EU this time last year. In the end, the state aid issue comes down to this: if a British government ever wanted to go against conventional economic wisdom and subsidise exports, the EU would retaliate by imposing tariffs. That can either be written down in a trade deal or not, but it would be the reality either way.
That is why I predict that the unpredictable Boris Johnson and the boring, pragmatic and predictable EU leaders will do a deal.
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