From the Times - 07/05/2018
Fear of Jeremy Corbyn-led government prompts tough EU line on Brexit
Brussels vows to protect single market from Labour’s left‑wing policies
Britain faces restrictions on post-Brexit trade and draconian measures to enforce free-market policies because the European Union fears a future Jeremy Corbyn government.
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.
The revelation came as the dispute intensified in senior Tory ranks over the customs arrangement between Britain and the EU after Brexit. Jacob Rees-Mogg accused Greg Clark, the pro-EU business and energy secretary, of promoting “Project Fear” by saying that thousands of jobs were at risk if Britain did not minimise friction in trade. Mr Clark advocated the customs partnership preferred by Theresa May but which is fiercely opposed by Mr Rees-Mogg as well as Leavers in her cabinet.
EU negotiators are highlighting post-Brexit concerns about lower social and environment standards “because it is better public relations”, but European governments are more worried about the prospect of state subsidies and a return to public ownership in key services should Mr Corbyn become prime minister.
“The idea that Conservatives would legislate a race to the bottom is a myth and no one really believes it, even if some Tories have helped create it. The real fear is state subsidies under a Jeremy Corbyn government,” a senior Brussels source involved in Brexit negotiations said. “British policy has remained unchanged for generations but now there is a real chance of a left-wing government reversing it. We have to protect ourselves and the single market.”
The EU fears Britain could steal a competitive advantage by subsidising manufacturing industries and that a shift to public ownership could damage European companies involved in privatised public services or utilities such as energy. Included in the EU’s armoury will be a “non-regression clause” that, in effect, fixes Margaret Thatcher’s privatisation and free market policies into a withdrawal treaty.
The prospect of a Corbyn-led government has led the EU to demand a mechanism that would hit Britain with trade tariffs, compensation demands and, in the event of fiscal policy to subsidise industry, measures to restrict British air traffic, grounding flights.
“If a Corbyn government implements his declared policies the level playing field mechanism will lead to increased costs for Britain to access the single market because of distortions caused by state aid. That is why this is where the real battle is,” the source said.
EU governments were alarmed in February when Mr Corbyn said Labour would seek “protections, clarifications or exemptions” from single-market “state aid” and ownership liberalisation directives. “We cannot be held back . . . from taking the steps we need to support cutting-edge industries and local business, stop the tide of privatisation and outsourcing,” he said.
The plan for enforcement powers, which would risk causing a trade war between the EU and Britain, indicates the fear that European states have of a future left-wing government.
Exports from Britain to the EU could be hit by tariffs. Queues could form at ports for EU customs checks, and the City could be blocked from Europe’s markets. The “nuclear option” could lead to British aircraft being grounded through the EU’s “single sky” rules.
The EU’s treaty prohibits state aid for industry, defining it as “an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities”.
A poll by IPPR/Opinium in March indicated that 53 per cent of the public supported ditching EU free market rules, even at the expense of a far-reaching trade deal after Brexit.
However, Labour’s softer stance towards Brexit has been welcomed by many in the EU. The party wants Britain to be in a customs union and remain “close to the single market”, though not in it. Labour peers are trying to persuade the party to seek to remain in the European Economic Area. They say that staying in the internal market would solve the Irish border problem.
The Labour peer Lord Alli is among signatories to an amendment to the EU withdrawal bill setting out the position. He accused the party of cowardice yesterday after it emerged that Labour peers would be whipped to abstain from the vote in the Lords tomorrow.
Barry Gardiner, the shadow international trade secretary, said that such an arrangement would leave Britain a “rule taker” without any influence in shaping the rules. John McDonnell, the shadow chancellor, said the party backed a “traditional British compromise”.
Chuka Umunna, a pro-EU Labour MP, said: “Labour MPs were whipped to vote in the Commons for it [to keep the UK in the EEA] and yet now, when there are enough Tory rebels, we abstain — this is ridiculous.”