The UK stands to gain, provided it remains firm in EU negotiations

A trade deal is possible, but the UK must not waver. Britain needs to be prepared to walk away if a good deal cannot be reached, argues John Baron MP.

The foreign policy adage that the UK seldom reads the writing on the wall until its back is against it has seemed pertinent in recent years. Courtesy of misguided leadership, the UK has certainly been unsighted and often digging its own holes, and then digging further. The defeat of the Withdrawal Agreement in the last Parliament helped to put a stop to that. However, despite the UK's renewed vigour under new leadership, there remains the danger that the EU's tried-and-tested tactic of obfuscating until the 11th hour will deny the UK the result it deserves. The UK must remain robust in its negotiations and be prepared to walk away on no-deal terms if a good deal cannot be achieved.

Although negotiations are naturally clouded in secrecy, it remains likely that a trade deal with the EU is possible before the end of the transition period. Both Britain and the EU wish to present themselves to the world as reasonable trade partners, and it would send a bad message to all future partners, of both sides, if a departing state cannot agree a deal with the EU – especially since unlike almost all other trade deals, we start from a basis of total alignment and therefore the only real questions centre around which barriers we wish to erect, not eliminate.

However, the Prime Minister must not waver and is quite right to point out that Britain would certainly thrive without an EU deal. Economists talk about the importance of 'comparative advantage' in attracting inward investment. By comparison, the UK enjoys the relative advantages of lower tax rates and greater labour market flexibility than many of our neighbours and competitors. Our language, time zone, financial and legal expertise, our universities and skilled workforce all stand us in very good stead. In combination, these advantages easily outweigh low WTO tariffs averaging 3-5%.

If evidence were required, the economy faired very well pre-Covid in comparison to others – despite Theresa May's talk of 'no deal is better than a bad deal'. The warnings of impending doom should the UK vote to leave the EU simply proved false – with some erstwhile organisations having the grace to apologise for their error. No wonder the industry of economic forecasting is in crisis. In recent years, inward investment has been twice that of Germany and France combined, in the full knowledge that no-deal remained a possibility.

Once again, the same siren voices of gloom predicting a no-deal Armageddon are attracting media attention. Yet we should be encouraged with the quiet progress made on international agreements. In addition to the in-principle trade agreement with Japan, the UK has just signed a fisheries agreement with Norway – our first as an independent coastal state for over 40 years. A totally clean break at the end of the transition period would give us an even freer hand to develop overseas trade links, completely out of the EU's orbit. Meanwhile, the UK trades very successfully and profitably with the rest of the world outside the EU essentially on WTO terms.

Various political considerations weigh in favour of the UK remaining robust in its negotiations. The agreements with Japan and Norway highlight it is the EU which is being unreasonable in its demands. The Prime Minister knows he cannot betray those voters, let alone his backbenchers, who no longer want to be shackled by the EU. The EU's strategic thinkers might mull over whether they wish to 'lose' the UK to the US, and whether insisting on unreasonable 'level playing field' arrangements, far greater than anything contained within its recent trade agreements with Japan or Canada, is therefore worth the candle.

Meanwhile, EU politicians, particularly the Germans, understand that the effect of tariffs will weigh in our favour given the extent of the EU's trade surplus. Little wonder that, while there is clearly no breakthrough in the talks, there are signs that the negotiations are finally attracting political attention, which is the key to unblocking deadlocked talks. Michel Barnier is meeting the German Chancellor, and the Dutch Prime Minister recently spoke of the 'geopolitical necessity' of the EU and Britain striking an agreement. The penny is dropping that tariffs are the last thing the EU needs given its much higher pre-Covid unemployment and history of sluggish growth.

History tends to grant perspective from which the wise can profit. Let us hope the EU realises its past errors when dealing with the UK and negotiates in good faith. Having read the message on the wall, the UK is now more sure-footed and my sense is that it is content to embrace the benefits of a complete break more readily than previously – with those in No.10 benefiting accordingly.