Brexit: The cliff is being pushed further back!

Dec 15, 2020

The negotiators have been given a few more days to achieve what they haven’t been able to in more than four years. Has there ever been such a prolonged display of muddled statecraft – negotiations that affect people’s lives and businesses to a far greater degree than in any other deal?

To recall: it was Boris Johnson and Britain alone that asked to leave the European Union. Boris’ relentless sense of entitlement cannot be justified by the circumstances.

General Charles de Gaulle, a former President of France, got it right when he said back in 1967 that Britain does not belong in Europe. Britain is too fond of its myths, legends and traditions to allow much foreign infusion. Sovereignty and national superiority, especially over the French, go hand in hand. It is worth keeping in mind however that without Britain Europe would be indefensible.

The European Union is of course an artificial polity, negotiated in the wake of horrendous cross-continent armed conflicts, and designed to achieve mutual prosperity by avoiding further internecine wars. It is now anxious about the Union’s shaky unity. It is remarkable that in the recent weeks all 27 members have held together, including the Poles and the Magyars, entrusting the negotiations solely to the Commission and its delegate, Michel Barnier, and have firmly declined Boris’ several requests to negotiate bilaterally with the leaders of France and Germany. Their watchword is solidarity.

Over the past four years or more the negotiators have produced an 800 page document, with annexes, but with significant gaps. There is a pervading sense of growing failure on both sides. This further delay will infuriate and frustrate the millions in Britain who are trying to run a business or regain some predictability in their lives.

If there is no agreement, as noted many times,, all parties will experience frustration, exasperation, disruption, congestion, confusion, and even uncertainty about essential supplies, including food. Combined with the still surging pandemic there will be less of a sense of transition to a new normal than an existential trauma. There are reports however that the government is preparing a multi-billion bail-out package for vulnerable industries including agriculture and food producers, chemical suppliers, the automotive industry, and fishing.

Will the EU buy this degree of subsidisation? This is not putting down a level playing field!

In this analysis there is little point in examining the Brexit documentation, as we have it so far, in any depth. It is not detail that will resolve the impasse. It is raw politics. We must concentrate of the three principal issues that have defied resolution – fisheries, the ‘level playing field’, and governance (or, in another word, enforcement). Permeating these is a deep question of trust, or lack of it, in Britain following the move to enact the Internal Market Bill which would have breached international law and dis-apply the Northern Ireland Protocol on goods crossing the Irish Sea given that if there were an agreement Northern Ireland would remain within the jurisdiction of the EU for trade purposes.

After several acrimonious exchanges the EU promised it would minimise checks and controls due to be imposed on food and medicines going into Northern Ireland from mainland Britain. It was agreed too that agriculture and state aid rules would be exempted from Northern Ireland, and the tricky undefined matter of what uncertified ex-UK goods would be ‘at risk’ of being traded or smuggled across the Irish border was clarified. The UK agreed to withdraw the offending sections of the Bill. It was reported that a EU presence would be established within Northern Ireland to monitor implementation of the Protocol at the borders but this was never confirmed. Irish politicians condemned the proposal as far as it went as ‘unnecessary’ and ‘disturbing’. A no-agreement will inevitably result in a hard border with Ireland, endangering the Good Friday Agreement, contrary to repeated solemn undertakings by the British government.

As to the three substantive matters, beginning with fisheries: These were never intended to be part of a trade agreement in the first place but became so and were seen as an indicator that might set the tone for success and an eventual overall agreement. That is, their political influence is disproportionate to their relative importance to British trade. Fish is worth £784 million to the UK economy compared to £182 billion for services. The matter turns out to be more complex than earlier realised and apart from revising underlying principles could not be settled in the time available. In Britain it has long been thought that the then Prime Minister, Edward Heath, in the original 1970s negotiations for Britain’s entry to the European Economic Community, had conceded too much of Britain’s waters to the Europeans. Politically this needed to be rebalanced. Over the intervening years the interests of all parties have became mixed through cross-investments in each other’s businesses and in waters shared de facto – in addition to complex quota arrangements for fish types in specific waters.

The distinction for access purposes between British waters (I.e. the Exclusive Economic Zone, some 200 nautical miles beyond its territorial sea and waters above its continental shelf) and the waters common to all members of the EU was being continually being tested. The emotional issue lies in the coastal towns where local fishing families have been crowded out of traditional waters by massive trawlers of mixed nationalities serving international markets. Most fish consumed in Britain is imported from overseas yet 75% of seafood caught in British waters is exported, while 80% of that goes to the EU. Confusing? Local fishers cannot compete with the trawlers as they lack the infra-structure and capital necessary for viable business. The same is the case with the French fishers which explains the strong intervention by President Macron in the late stages of the Brexit negotiations, in support of his own locals and their need to build up infra-structure and secure markets. These communities have strong domestic support and will be influential in the French Presidential Elections to be held in 2021. It had been agreed that access and quotas for fishing will be reviewed annually until more stable arrangements can be settled. Meanwhile, in true Elizabethan style, the British navy has been put on stand-by!

The issue of a ‘level playing field’ is undoubtedly the deal breaker. It has been negotiated back and front against the mantra of Boris’ Ultra Tories: “Sovereignty and taking back control of our laws, our trade, and our waters”. In their view any further EU involvement in the regulatory system in Britain offends its sovereignty, over-looking the obvious fact that being a party to an agreement is an exercise of sovereignty. Expecting frictionless trade on tariff free and quota free terms without committing to fair competition criteria is oxymoronic. To the EU the integrity of the Internal Market is at stake and it can see no reason why the UK should be granted privileges available only to members. What incentive would there be for other members to remain in the Union if those privileges were not conditional. The UK could not at the same time be half in and half out unless it was regulated. A path to that might have been available to the UK via a bilateral free trade agreement or customs union; but again the constraints these would involve would not have allowed the UK to be seen as having thrown off the shackles of the Union, and would have been rejected by hard-line Brexiteers anyway.

A misjudgment on their part perhaps. A Canadian style FTA was proposed but the trade circumstances of a Canada far across the Atlantic and a UK cheek by jowl with the Union would have necessitated stronger constraints on the UK to offset competitive advantages from sheer proximity. What is left is the WTO option (World Trade Organisation), sometimes referred to as the Australian option, whereby the UK could seek trade far and wide on WTO terms in bilateral or multilateral preferential agreements with others, including the US and Australia. A close regional option is precluded given the existence of the EU – now a closed shop.

The third major issue impeding an agreement is the enforcement of commitments or the prevention of back-tracking by either parry. The central issue concerns divergence, either initially or over time, in the rules and standards affecting the environment, labour conditions, and traded products generally. Were these to remain more or less in alignment neither party would be at an advantage or disadvantage vis a vis the other; but as commitments on concomitant issues are intended to continue overtime, divergence could change or disrupt the competitive balance between the parties, The EU claims that any necessary rebalancing could be done unilaterally, by raising or lowering tariffs. But such unilateralism by the EU is unacceptable to the UK which had proposed a Joint Committee to arbitrate disputes in this regard. A role for the European Court of Justice – anathema to the UK – or the European Commission, was out of the question as being inconsistent with Boris’ objective of taking back control of its laws. So far the negotiators haven’t been able to overcome these differences. Reference to the WTO was seen as cumbersome and interminable – and in present circumstances impractical.

In any event, there will be a critical need for practical ad hoc arrangements with the EU covering a host of non-trade matters such as air, sea and land movements, data exchanges to enhance mutual security, medical and pharmaceutical cross-country supplies, and the many other areas requiring co-operation (hopefully without rancour) which until now have been taken for granted or well provided for.

Standing back one might ask whether this, as it is, is what the promises made at the 2016 referendum were meant to achieve? It’s a bad job either way. But what can Boris do now that would make a difference? Is there an identifiable price worth paying, or can be paid, in order to get there; or is the EU demanding too much to allow the UK to remain in its market consistent with Boris’ objectives? Avoiding the additional inconvenience of checks and fees at the borders is one positive. So is avoiding the imposition of tariffs of between 5 and 10% or more on agricultural goods, cars and car parts and whatever else, and dealing with certificates of origin for certain goods moving from the UK to the EU. And over and above is the need to restore the UK as a good place for investment in a much wider market.

Will Boris be able to do all this and more in a fraction of the time taken to get to this stage of the imbroglio, and will the EU be obliging anyway?

It looks to me that the gap remains too wide and the purpose of the extension is to avoid blame for an inevitable no-deal. If it goes otherwise the audience might be entitled to feel it has been hood-winked all this time.

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