ANDREW FARRAN. A hard or soft Brexit. More likely Black and White

Letter from London 

Britain finds itself trapped like a fish with no way out other than capitulation to the best terms it can get – in relation to which the remaining 27 EU members have the upper hand.  

Here in this adopted land of the great linguistic philosopher, Ludwig Wittgenstein, the British are slowly waking up to the critical importance of asking the right question at decisive moments in its national affairs. Having answered a simple yes or no question about being in or out of the EU it now finds itself trapped like a fish with no way out other than capitulation to the best terms it can get – in relation to which the remaining 27 EU members have the upper hand. Having activated Article 50 of the EU Treaty there is no option to reverse course now or go for a second referendum later to recommence negotiations. It will be take it or leave it (it being the negotiated terms) on 29th March 2019. There can be no other question.

The government’s preoccupation with its Brexit negotiations is causing considerable distraction and disruption to its everyday responsibilities with cracks showing up here and there in various departments, causing some public disquiet.

Even so, how are the negotiations shaping? No one is certain? The government is still at sixes and sevens whether the objective should be a hard or soft Brexit. It has yet to resolve its priorities.

The Department for Exiting the EU (known as ‘Dexeu’) has published seven position papers including such matters as Northern Ireland, nuclear materials and citizen’s rights, and seven further papers on the future of UK-EU relations, including science, customs and security. But has declined to publish its paper on the highly sensitive matter of financial services, causing much perturbation especially in the City which is desperate to map its course post-Brexit. In some quarters this is a make or break issue as the future of some one million employees is at stake and any relocation into what might be hostile territory would need to be covered in detail by joint legislation. The mechanism for this has acquired the term ‘passporting’ allowing for operations to be conducted as it were without borders.

As for an overarching structure the approach here, adopted  from Saville Row, is to look for a ‘bespoke’ solution, which given the divergent positions in play would amount to squaring the circle. At its most categorical it would exclude continuing in the ‘single market’ as with Norway and Switzerland in the European Economic Area (EEA). The non-negotiable issue here is freedom of movement, including labour. In addition, the EEA is subject to a regulatory system controlled by the EU which excludes outsiders from a seat at the table, and is subject to the jurisdiction of European Courts. Both those features can be assumed to be unacceptable to Britain.

This leaves, in the trading sphere, some form of a Preferential Free Trade Arrangement, which consistent with the evolution of the global trading system to date – underlain by GATT/WTO principles and standards – should not be difficult given goodwill on all sides. In this respect one would think that existing terms and concessions where there is mutual inter-dependence could be transposed into this putative free trade agreement. However where these go beyond trade in goods and manufactured products, and involve both agriculture and services (broadly) there would be tricky corners to negotiate.

The government recognises (though some of its supporters do not) that it cannot retain the continued access its seeks in the EU without payment, apart from the assessed break fee. It is offering, it is said, to contribute what are described as Norway-style payments to get a good deal. These would include contributions to various EU projects in science and research. It is reported that Norway pays Euros 990 million a year for access.

Once outside the EU there are the many issues associated with UK and EU residents in each other’s countries and their future status, and whether an existing ‘resident’ would include close and extended families, and spouses and partners yet to come but unknown. The EU has as a goodwill gesture offered to meet the administrative costs of securing these residency rights, estimated to be in the region of £230 million. The French for their part are going out of their way to smooth the path of future British investment with residency, reflecting the attachment France retains with Britain, according to a recent staged address by French President Macron.

The above hardly touches the surface, with just over a year of negotiations to go. There are all the issues of transposing EU law into UK law and the adoption of the autocratic Henry VIII clause to facilitate this.

Where then are the strengths and weaknesses in this situation? As for the strengths, these seem to lie clearly with the EU which in one sense is a block but is in fact 27 different entities which despite Mr Junker’s rhetoric each will want to have its say and be willing to put a spoke in the wheel when it suits them. If the EU negotiators seem to be too accommodating to Britain this will stir negative responses from those on the periphery, counties likes Poland and Hungary in particular; but also those in or wanting to be in the European Economic Area.

As for Britain, it is largely weakness. As The Times editorialised on 24th January, it is lacking the required leadership. Referring to Mrs May it asserts that the Conservatives will need a new leader before the next election which implies that she does not have the necessary authority to deal with Brexit in the meantime. Indicative of her tenuous situation is her Foreign Minister’s antics telling the world that he was going into Cabinet to request an additional £100 million or so each week for the NHS from as a down payment on Brexit! The fact that he was ticked off by his Cabinet colleagues (“how do we trust you Boris?”) was neither here nor there. He did it to demonstrate that without bold moves like that – which “dull””dull””dull” Mrs May, as described by one former Tory Minister, could not make – was conceding further political ground to Jeremy Corbyn.

Significant also was that the head of the British Army was prepared to say very publicly that Britain must spend billions more on defence as the country was vulnerable to a sudden Russian attack, lacking the necessary long-range missiles, manpower, and cyber counter-measures!

As the veteran Tory MP and former Cabinet Minister, Ken Clarke said on BBC Radio recently: “the political structure of Britain is broken”. One would hope that things might be, and will be, otherwise. But recalling the many stirring past events in British history, captured recently in award winning British films, the present is rather sad. But I guess Britain is not alone in that predicament.

Andrew Farran is a former diplomat, trade adviser, and international lawyer. Former Treasurer of Australians for War Powers Reform.

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3 Responses to ANDREW FARRAN. A hard or soft Brexit. More likely Black and White

  1. Peter Small says:

    Andrew Farran’s “Letter from London” provides an interesting insight into the current Brexit negotiations. Something to which we in Australia are giving scant regard; but is, never-the-less of significant international geo-political importance.
    While there is a lot of substance in my view to Malcolm Crout’s (who ever you are) “rave and threats” Andrew Farran is quite correct -these are matters that will “make and break governments” so they are of considerable consequence!
    In 1966 whilst on an agricultural study tour of the UK I argued with my hosts against Britain entering Europe. Today my position hasn’t changed. Most recently I was staying with farming friends in Northern Island,- the night Teresa May did a “Turnbull” and nearly lost the unlosable June General Election. At the time I was reading Yanis Varoufakis book, “Adults in the Room” My battle with the Europe’s Deep Establishment. If ever any one wanted evidence that Europe would fail it is there in the pages of his book. Britain is indeed fortunate to be exiting Europe but what Britain lacks is leaders who can develop a narrative to explain to the electorate as to why this is so.
    Europe is built on a lie, in fact more than one. It is possible of course to correct lies but it takes a robust political system to do so. Not one run by technocrats, bureaucrats and politicians with vested regional interests. This class prefer the system to implode ( after they have gone), rather admit deceit to which they are a party. Varoufakis uses the Greek debt disaster as an excellent example.
    But the nitty gritty of it all is, it is impossible to run a common monetary policy without a common fiscal policy. And without a robust democratic political system to change, eventually it will implode. And a robust democratic political system cannot evolve until political leaders can talk to their electorate in a language that most can understand. Not going to happen. Most realist including I believe Macron, know it and yes Britain is best out now before it is too late to exit on honourable terms!

  2. Andrew Farran says:

    Perhaps Malcolm Crout coukf have told us who he is and where he was coming from as his comment is more in the nature of a rave and treats the massive concern now disturbing the UK at this moment up and down the country as of little consequence, politically and otherwise. If it was as simple as he implies then everyone could settle down and relax. The fact is, seeing it from here, they can’t. It will continue to make, shape and break governments. Is that of little consequence?

  3. Malcolm Crout says:

    It’s amusing that the least important macroeconomic consideration, being the FIRE industry, and it’s role as a rent seeking “clipper” is being seen as the stumbling block to the Brexit negotiations. The fact is that it is of little relevant economic and social importance, other than the unemployment of the alleged variable numbers (one million?) of hangers on (sorry, workers) the doom sayers pluck out of thin air from time to time.

    The City of London has much to answer for in terms of the destruction of the social fabric of inner London to an enclave of vested interests established to serve the financial elite of Europe with comfort. It’s almost as though the British see this with great trepidation whereas it is similar to the non event that was the loss of Hong Kong. I doubt the reality will match the perception. In my view, loss of the City status along with trappings of the elite would give inner London the chance to again become the thriving metropolis is once was to British citizenry. A few well heeled property owners will take a financial “wash” sans the City, but they made their assets as a means of speculation, so whatever goes up comes down and so the story goes. They will survive, but perhaps not the investment parasites funded by the ordinary folk, who will need some assistance from the BOE. And so what! The BOE are the monopoly issuers of the pound so would have no trouble stumping up the funds to protect citizens – it’s a fiat currency for Heaven’s sake!

    “Much ado about little or nothing” would be my catch cry as the vultures in that ridiculous non democratic establishment called the EU draws their measure of blood from the UK. When the EU crumbles from it’s stinking head of the so called monetary union, the UK will look back on this period and breathe a sigh of relief they pulled themselves out of the dysfunctional mess that Europe has become as the oligarchs and non elected bureaucrats strangled the wealth out of the weaker members and cart if off to Germany via Brussels. I won’t even mention the migration aspects as this is an issue of their own making and something that has to addressed in any event as a country must secure borders to ensure it protects it’s citizens. As the instigator of third world crises, the chickens coming home to roost will encourage citizens to stop politicians declaring illegal wars in the future and so be it.

    Just get on with it and give the politicians the space to untangle this mess without the incessant harping and wining so common with so called Brexit experts. Articles like this are at best pseudo demonstrations against the will of the people, designed to fill citizens’ heads with dread and misgivings about what is a straight forward process. It’s the economy stupid and entirely within the capability of the sovereign to manage for the benefit of ALL citizens and not cede to the shrill cries from financial vested interests.

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