The continuing Saga of Brexit

In just over 2 months, the fate of the UK will be finally sealed – the country will leave the European Union not just on paper but with full legal consequences, the transitional arrangements of this year expiring on 31 January 2021. I follow only 3 blogs on these issues – Boffy’s Blog; Brexit Blog and EU Referendum. First Boffy                        

The reality is that Britain needs the EU far more than the EU needs Britain - and all the cards are in the hands of the EU, when it comes to these negotiations. The end result will be that, at the end of the process, Britain will have less sovereignty than it did as a member of the EU, and has been greatly depreciated in its power and influence in the world, just as Boris's inevitable capitulation again leaves him looking weak and powerless, and quite frankly a bit of a blow-hard, much as is Britain itself. 

The reality is that if Britain wants a trade deal with the EU, and it does, because the EU accounts for the vast majority of Britain's trade, and will do forever more, simply on the basis of its proximity, Britain will have to comply with EU rules and regulations, because the EU is seven times bigger than Britain, and is, therefore, able to dictate the terms.

If Britain wanted a trade deal with the US or China, the same would apply, because neither the US nor China will allow goods into their economies that do not comply with their rules and regulations, otherwise they would be putting their own producers at a competitive disadvantage.

 

Similarly, the US and China would insist that Britain accept into its market US or Chinese goods that comply only with their standards, not with any that the UK wants to impose, otherwise there would be no advantage for those large economies in striking any such deal. They may not bother in relation to any goods that are not important to them, but for every type of production that is significant to their economy they will insist on their rules, regulations and standards being the ones that have to be complied with. That is the subordinate position that Brexit has put Britain in. It no longer has any leverage to determine those rules, regulations and standards, and no say in their determination, as it did as a member of the EU. 

 

Tory politicians keep banging on about it being unfair that the EU will not give them a Canada style free trade deal. Welcome to the real world where what happens has nothing to do with “fairness” or morality, but is instead determined by power relations, and those with more power get to set the terms. The Tories, of course, have always been used to sitting in the bosses' seat which has power in relation to workers, and where they have been able to negotiate on that basis. Now they are in the position of a group of weak workers, badly organised and facing a powerful employer. 

Moreover, the EU was never going to give the UK a deal like Canada, because Britain is on the EU's border; in Ireland physically on its border. Also the deal with Canada increases trade and reduces costs between them, but any EU-UK trade deal will result in less trade, and greater costs than already exists.

 

The EU does not have to worry that capital is going to relocate to Canada to avoid EU regulations, but it does in relation to Britain. That is why the EU is insistent on the points about state aid, and on regulation. Britain's perfidy in relation to the Withdrawal Agreement, and the UK Internal Markets Bill, as well as its proposals to introduce Free Ports where all sorts of fly by night and shady businesses are allowed to set up shop, and flout rules, gives the EU more than ample reason to distrust UK intentions in that regard. It’s not that the EU fears the UK's plans for “state aid” as such. Why would it, its Britain that has been the champion of the small state, and red in tooth and claw free market competition, and devil take the hindmost. Britain has not even used current state aid provisions, inside the EU, to provide short term assistance to struggling industries. No, what the EU knows is that the Tories would use any such leeway simply to provide assistance to chosen businesses to compete unfairly with it. 

 

And fisheries provides an interesting lesson. The contribution of fishing to the UK economy is minimal. If the fishing industry disappeared tomorrow the economy would not notice it. From an economic standpoint, allowing defence of fishing to get in the way of a trade deal makes no sense. Britain would benefit far more from a deal where fishing disappeared, but where it had better access to EU markets, than denying itself such access simply to protect fishing. For one thing, if Britain tries to exclude EU fishing fleets, and does not get a trade deal, it will find great difficulty selling the fish it catches, when they have large tariffs imposed on them, because the majority of that fish is sold in Europe not Britain. 

So, why are the Tories making a big thing about fishing? The reason is that the Tories hung their Brexit hat on questions like fishing. Fishing for them became totemic of the drive for national sovereignty. The right to exclude others from your waters was a symbol of the implementation of that sovereignty…..the Tories have made a big thing about fishing, because having made it totemic of their claims about national sovereignty, they picked up political support, and parliamentary seats in those coastal areas where fishing is seen as important. In other words, the Tories are failing to strike a deal, by insisting on their position on fishing, not out of any national interest, but purely out of their own narrow party political interest. They know that when they capitulate on fishing, a lot of the rhetoric around national sovereignty goes down the pan, and with it all of the nationalistic argument for Brexit itself, but they also know that they lose face in all those coastal areas where they picked up votes and MP's. 

Chris Grey’s weekly Brexit Blog is, for me, the bible on these issues – and his latest weekly post duly landed yesterday with a thud in my letterbox

It is clear that the EU will not walk out of the talks and that whilst they continue, fisheries, state aid and the governance of any agreement remain the familiar, widely-reported, stumbling blocks. Of these, the third, governance, has grown in salience because the Internal Market Bill (IMB) has so badly damaged the EU’s trust in the UK (£). But the truth is that this lack of trust has been growing over years, as I catalogued in a post last May, accelerating with Johnson’s cavalier repudiation of much of the Political Declaration.

Lack of trust is now central
The IMB was just the last straw, and - even if the relevant clauses get abandoned, as they still may - its attempt at hardball tactics has badly misfired. For, especially given the new Covid-19 situation, Johnson might want to play the same trick as he did in January and sign up to some kind of deal which he could then try to backtrack on later. If so, the IMB has made that a great deal harder. He has played his tricks so many times that there is no longer any goodwill. Trust and goodwill can sound like airy-fairy concepts in the cold-eyed world of trade negotiations and international relations but they are indispensable, especially in such a complex and unprecedented negotiation as this one.
…..At the same time, there are increasing concerns about the government’s commitment to the rule of law, not just because of the IMB but also the recent attacks from the Home Office on the legal profession, attacks repeated by Johnson in his party conference speech. The backdrop of the illegal prorogation of parliament and the grab of executive power in relation to both Brexit and the COVID-19 pandemic, especially through the extensive use of Statutory Instruments, contributes to these concerns. As David Allen Green, the Financial Times’ Law and Policy commentator, discusses, there is now a question as to whether Britain is moving towards “government by decree”.

Also rumbling away in the background is the long-standing hostility of many parts of the Tory Party – strongly overlapping with those that are the most pro-Brexit – to the Human Rights Act and, even, to the European Convention on Human Rights (ECHR). Indeed it is worth recalling that before the Referendum, Theresa May, whilst campaigning to remain in the EU, proposed that Britain leave the ECHR. Perhaps of more relevance at the present time is Dominic Cummings’ assertion that after Brexit “we’ll be coming for the ECHR”.

No doubt this would find considerable support amongst many leave voters. Throughout the Referendum campaign in conversations and on social media when leavers were asked to give examples of EU laws they disliked these were almost invariably judgments of the European Court of Human Rights (usually garbled versions of these, but that is another matter). Although this is only based on my own experience, I’m pretty sure it was the case more generally. It perhaps doesn’t need to be said here, but the ECHR and its Court are not EU institutions, and Brexit does not affect Britain’s participation in them.

A problematic neighbour
Having been repeatedly stung by British perfidy – especially over the Withdrawal Agreement/ Political Declaration - there is a strong incentive to nail down the governance terms of any agreement, and if that is not possible to accept that there will be no deal this year. As Clement Beaune, the French European Affairs Minister said this week, “it’s a matter of how the UK is a partner of trust in the years to come”.

Britain unprepared
If such strategic considerations inform the EU’s approach to these final phases of the negotiations, in the UK it is short-term factors which mainly predominate. I’ve been writing since at least October 2018 about the lack of preparedness of businesses (and other organizations) for Brexit, and in several recent posts about how government information for businesses has come too late and been lacking in key operational detail. Throughout that time there has been a drumbeat of implicit criticism from the government of businesses for being unprepared (and – paradoxically – a veritable orchestra attacking business bodies for their warnings of how much will change).
In recent days, these criticisms have mounted. First, the Business Secretary, Alok Sharma, issued a panicky sounding “urgent message” to businesses to get ready for the end of transition. The next day Cabinet Office minister Lord Agnew accused them of “burying their heads in the sand”, attracting widespread condemnation (£). I’m conscious that I keep repeating that I am repeating myself but as I wrote a few weeks ago these criticisms of business are outrageous given the years of dishonest promises of continued ‘frictionless trade’, the lateness of government planning for the effects of Brexit, and the dismissal of the warnings about both.

Even now, although it is true that some of what is to come will occur with or without a deal, businesses that will face tariffs if there isn’t a deal are left in limbo since, in at least some cases, this is not something they can prepare for as it will simply sound their death knell regardless of any actions they take in advance. Nor are tariffs the only issue. It has long been explained to Brexiters that a ‘Canada-style’ Free Trade Agreement – actually, any Free Trade Agreement – will do relatively little for services trade and, certainly, will offer far less integration than single market membership. But for years they either ignored it, or pretended that a ‘Super-Canada’ deal would be done that would magically avoid this problem. 

The reason why trade agreements do little for services is because, even more than for goods trade, liberalisation requires removing non-tariff barriers. This in turn entails some loss of national regulatory control or, in Brexiter terms, sovereignty. An example of the kind of issue at stake is the mutual recognition of professional qualifications in, for example, law and accountancy, and in fact, despite its recent rhetoric of asking for no more than what Canada has, the UK has been seeking such recognition in the negotiations with the EU.
This seems to have been unsuccessful (though that cannot yet be said definitively) and if so that is unsurprising as it is a version of ‘cakeism’ – that is, wanting to have a benefit of single market membership without being a member. The consequence, as a House of Lords sub-committee reported this week (£), will be very considerable potential damage to the UK’s £225 billion professional services industry. As with sectors like pharmaceuticals, auto, aerospace, chemicals and also some that get less attention (e.g. music, computer gaming, fintech) the UK is ripping up some of its biggest economic success stories – areas where, to use the government’s favourite phrase, Britain is ‘world-beating’ – in the name of the Brexit theology of sovereignty.

Holding all the cards?
Also unsuccessful has been the “UK plea” for special allowances on electric car and battery exports (this would have meant an exemption for this sector from rules of origin which, in general, we already know will be applied). This, remember, is a sector identified by Boris Johnson in 2019 as being one in which the UK plans to emerge as a future world leader. And in the balance are arrangements for air travel at the end of the Transition Period if there is no deal. As things stand, it is not known what will be in place but, in the event of no deal, the Transport Secretary says “we expect the EU to bring forward contingency measures” so that flights can continue. Hardly reassuring for those wanting to plan travel for a time which is now less than eighty days away.
It’s worth noting the tone in both these stories. Whereas the Brexiters promised that Britain would ‘hold all the cards’ once it voted to leave the EU it is now a matter of ‘pleading’ with the EU for special treatment and being entirely dependent upon the EU to keep something as basic as air travel to the continent. That’s not the result of EU ‘bullying’ but the fact, as the air travel case illustrates literally, that if a country disconnects itself from an interconnected world then inevitably it becomes the supplicant when seeking to reconnect itself. Sovereignty doesn’t put planes in the air.

But there is small comfort in the spectacle of all the Brexiter claims being discredited. Between the ravages that Covid-19 is inflicting on businesses and those self-inflicted by Brexit it is becoming increasingly difficult to see what kind of economy Britain is going to be left with this time next year. And that self-inflicted wound isn’t just a result of Brexit, but of the way Brexit has been done and even just of the bone-headed refusal, in the midst of a pandemic, to extend the Transition Period, which would at least have cushioned or delayed much of the damage.

Time is running out but negotiations will never end
Having refused to do so when it was both possible and obviously going to be needed has now exposed the UK to a dire set of risks, for the end of year deadline is one that Johnson cannot now conveniently drop. It is ironic that David Frost is reportedly complaining that (£) the EU is “using the old playbook” of “running down the clock” when it was the UK that ensured that the clock stopped on 31 January. That of course was predicated on the theory that ‘the EU always blinks at the last minute’, a theory now being tested to destruction, with the most recent EU Council statement having a decidedly ‘take it or leave it’ tone.
This exposes the obvious difficulty with the government’s approach which is that it entails the UK being willing to ‘walk away’ without a deal. But apart from all the damage that would do, disproportionately to the UK, the story about contingency measures for air travel in the event of no deal shows the hollowness of the idea. For immediately after having done so Johnson would have to return to the table to agree these and other measures. So if later today, or any other time, he were to announce the end of future terms talks then almost the next day they would resume in a new form.

In several recent posts I’ve argued that it is pointless trying to predict whether or not there will be a deal, and I must confess to becoming increasingly irritated by the numerous pundits trying to do so. But, in addition to that, the wider implication of what I’ve written today is that if there is no deal – and, in a less dramatic way, even if there is a deal – that won’t be a ‘settled’ relationship, and so won’t be the end of ‘Brexit negotiations’. It will be the beginning of more negotiations.
So, depressing as it is to say it, the current ‘deal or no deal’ episode isn’t even the prelude to a resolution. For, given the irreducible fact that the EU is a major economic bloc sitting geographically right next door, there will be never-ending negotiations of one sort or another. Indeed it must be conceded that one, at least, of the Brexiters’ slogans has been proved true. Unsurprisingly so, since it was the truism that ‘we’re leaving the EU but we’re not leaving Europe’.