ANDREW FARRAN. Brexit: Time’s almost up.

Jul 3, 2018

Former UK Chancellor George Osborne’s London Evening Standard headlined after the recent Brussels summit: “Stop Your Squabbling or Games Up, Cabinet Warned”. Britain’s negotiating position to this point has been “ambiguous, from a divided place” and must tighten up. Cabinet will be meeting at Chequers on 6th July, to hammer out and clarify its settlement terms once and for all. That and the White Paper to follow, and the EU’s response, will determine whether the clamour amongst the Remainders for a re-run of the Referendum, or for a final say on the outcome in Parliament, will subside or rise to the point where it could bring down the government.

Decision time on whether Britons will end up with a hard or soft Brexit is rapidly catching up. Their negotiators have been told by EU President Donald Tusk that agreement on settlement terms cannot be pushed out beyond October, and the process needs now to be accelerated and intensified. An orderly withdrawal next March, pursuant to Article 50 of the EU Treaty and the terms of UK Withdrawal Act will be impossible if that is not done. In a letter to British PM Theresa May, the President of the European Council (Jean-Claude Junker) wrote that the lack of clarity on Brexit “could cost the UK economy billions of pounds, thousands of jobs and leave many families without a main income”.

The U.K. cabinet will be meeting at Chequers on 6th July, to hammer out and clarify Britain’s settlement terms once and for all – or so it is being said. One way or another it will be time to toughen up. How this turns out, and the White Paper that will follow, will determine whether the clamour amongst the Remainers for a rerun of the Referendum, or a final say in Parliament on the outcome, will subside or rise to a point where it could bring down the government.

The divisions within the Government remain the same as ever though the balance continues to waver. Fervent Conservative ideologues on the Right, some 60 on the Tory side, have shown little regard for practical (economic) consequences, particularly the adverse consequences for business whose unofficial spokesman (Boris Johnson) was heard to declaim:

“F……… business”. Because of the divisiveness in its ranks, the position of the government is seen by their European interlocutors as “ambiguous, from a divided place”. How far the fractious factions may in fact yield in a post-cabinet showdown will probably be known in a week or two at the latest.

Meanwhile, opinion polls are showing that only a third of the public has confidence that Mrs May can bring about a deal that is good for Britain; and two-thirds doubt she can bring about a viable outcome at all.

The Labour Party’s position on Brexit is no clearer, particularly as its leader Jeremy Corbyn has been ambivalent the few times he has attempted to expound on the subject. He has not participated in recent street demonstrations for or against. While the Party appears to be split, most Labour MPs would seem to be swinging away from Brexit and would prefer to retain closer links with Europe. Younger members in the Momentum movement are becoming alarmed at the real prospect of a hard Brexit (i.e. in effect crashing out) and the adverse effects that would have on the economy and living standards. They are coming to insist that Corbyn should support a second Referendum. The issues would obviously become very much sharper were the May Government to fall and by some means or another Labour found itself in government.

More moderate sections of the Tory Party are holding on to the possibility of some continuous participation in the Customs Union, even in the internal market, with adjustments for services, agriculture, labour and capital movements, and regulation. Nothing new in this except that it crosses Mrs May’s red lines which are now turning decidedly pink. This written down version of the EU mantra crosses their existing lines also. Without compromise, the negotiations will collapse.

Indeed there is an increasing readiness on the part of a number in government ranks who have had enough of equivocation and humiliation – particularly when confronted with aggressive polemics from EU negotiators and ‘upstart Central/Eastern Europeans’ – to show that the whipping hand is not just one way. The high dependence of major European industries, not least German and French, on critical tariff-free supply lines running through the UK creates a shared vulnerability throughout Europe. This is no less for those Central/Eastern European states, and their increasingly autocratic regimes, should a hard Brexit eventuate.

Taking inspiration from Donald Trump, the US Ambassador to Britain asserted in a TV interview that Britain needs to shed its “defeatist attitude” towards Brexit, and he questioned why it was so nervous about leaving the EU. He said UK pessimism was “sorrowing”.

To be specific about some aspects of business, Airbus, BMW and other major pan-European industries in Britain (motor vehicles and otherwise) – on whose operations hundreds of thousands of British jobs depend – have threatened to remove themselves to the Continent or elsewhere altogether if the main elements of free trade (read customs union), and the free movement of professional and technical personnel, are withdrawn. The present lack of detail has held up critical future investment plans and industrial momentum is stalling. These businesses had been slow to speak up, and are now being criticised for doing so, but any further failure on their part to make their point would be a matter of much regret in time.

The mistrust between the government and business is said to be deep and mutual – which leaves one to wonder what purpose Tory governments have any more apart from keeping Britain safe and pure. For Airbus to leave the UK may paradoxically make sense for its business structure overall but the consequences meanwhile would have huge political repercussions. The insouciance over Airbus in Boris Johnson’s crowd was illustrated by one Minister who asserted that “we could take over Airbus’ plant for wing construction and add to that our Rolls-Royce engines, and then we would be back in the business of major airplane construction” – overlooking the fact that there are only two manufacturers of that scale surviving in the world today because of their exceptional market and capital requirements, already beyond Britain’s resources.

However business has taken some comfort from the recent deal between BAE Systems and the Australian government for the construction of nine Type 26 anti-submarine frigates which it sees as a big deal and harbinger of a new future for Britain.

Back to trade, the EU appears to have ruled out a bespoke deal of the kind Britain might want and should get if both sides were to commit to the least disruption to their trade and supply lines – and which moreover would provide a solution to the Irish border issue. That would need to be an arrangement close to a Customs ‘partnership’ and the retention of a substantial number of internal market rules, as opposed to a ‘vanilla’ free trade arrangement. What both sides have to be mindful of here are their obligations under the GATT/WTO which prescribe under Article 24 that a trade arrangement with the features of a Customs Union must include substantially all the trade of all the parties with few exceptions. While services and agriculture are less

circumscribed it would make no sense, even if it may offend the sensibilities of the hard Brexit brigade, to severe existing arrangements for the sake of ideological purity. Realistically the world more widely has moved beyond that.

The Bank of England has drawn attention to a £29 trillion issue which can- not be ignored – the need to prevent disruption to derivatives and insurance contracts that span the region if financial services companies cannot continue to service UK clients after a hard Brexit. The contracts would need to be changed or restructured before March 2019 to make them Brexit-proof, a practical impossibility as matters stand. Bank staff have said that any rewriting of contracts and transferring them to the EU would take four years. The negotiators in Brussels, the sector believes, should give way to the needs of customers and not to their personal ambitions.

The concern over the residential status of the citizens of each in the other country is approaching resolution, at least on the British side, as the Home Office has uncharacteristically announced a generous migration (affirmative) scheme for relatives and partners to secure this. Some 3.5 million people are likely to be affected. Much of the credit for this is owed to the new Home Secretary, Sajid Javid, a rising politician who is likely to be a key figure in the Tory hierarchy post-Brexit. He has reformed attitudes and practices in the Home Office that were both archaic and virtually lawless, and which had been the object of serious criticism for many years.

It is interesting too that the number of individual applications for citizenship as distinct from residence in other EU countries has surged of late – some 7,500 in 2017 compared to just under 600 in 2015. Most of these have been to Germany but those with Irish ancestry have been busy also – but that shouldn’t prevent them from standing for Parliament should they choose to do so!

On a higher note, the British PM made clear at the recent EU Summit in Brussels, as to the looming geo-strategic issues affecting the region, particularly those closer to the Russian border, and signs that NATO may be falter- ing – as much due to President Trump’s preference for the West’s enemies over its friends – together with on-going concerns with sectarian terrorism, in addition to the political consequences of massive disorderly migration flows (now decreasing) – all of which have produced disruption and uncertainty throughout Europe, at levels not seen since the Cold War or even since the

Second World War. Mrs May pointed out that these issues required more, not less, cohesion and cooperation among all countries that adhere to Western values. The threat by the EU negotiator, Michael Barnier, to exclude the UK from European security arrangements was said to “beggar belief” – consider- ing that Britain is acknowledged to have the most professional and, through the Anglophone Five Eyes network, the most comprehensive intelligence services in the world. She was in effect questioning European priorities at this time.

Whether either side in the EU/UK divide will be sufficiently motivated to heed these considerations and not succumb to hubris and parochialism is an open question. The real shape of things to come will be formed over the next few weeks, an anxious time for many. I hope to cover that at the time.

Andrew Farran, former diplomat, law academic and trade policy adviser, presently in the UK.

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