Collapse

Those of you who follow me on Twitter will know that I have been predicting that the talks will collapse since the summer. When I first said that, it was dismissed as naive. Yet now we have the government talking up its preparations for a “no- deal” Brexit; while influential backbenchers tell people to “relax, no- deal is fine.” (And so betraying their complete lack of understanding of basic trade and economics)

So let me explain why I first said it and why I think it is now even more likely to happen.

The Mandate

The first thing to understand is that the EU is a rules driven democratic organisation (Leavers scoff at this which is why they keep promising the unachievable). Once you have that concept in your head, so much of the “intransigence” becomes obvious.

Michel Barnier has been given the job of negotiating with the UK. This is how the EU negotiates – by instructing representatives to negotiate on its behalf – and so going behind his back to try and pry off member states just annoys everyone. It makes people think you don’t understand the rules or, worse, arrogantly think they don’t apply to you. Reality check here for Leavers, they do. The EU is united and will always present a united face. They may make the odd comment or float the odd idea; but they present a single position to the outside world (The government really should be taking notes here)

Mr Barnier is the representative of the EU and its member nations. Together they agreed how they were going to negotiate, what order and what topics. Mr Barnier cannot now deviate from that and so the negotiations will be on that basis, whatever the UK might want. And it didn’t want. The first thing David Davis tried to do when the negotiations started was to change this. After promising the “row of the summer”, he failed and capitulated within hours.

A signficiant reason for this was because it was beyond Mr Barnier’s power to agree to it. That power rests with the nations and they had said no. He would have had to go back and get them to agree to such a change – and they were clear they would not agree. It doesn’t matter here why they said no (the various dynamics at play would double the length of this article!), all that matters for this piece is that they did.

So Mr Barnier was given a specific mandate and instructed to deal with three specific areas before discussing trade in Phase Two. And it is on these three areas that the talks are stuck and it’s on these three areas that I believe the talks will collapse.

Let’s look at each.

EU Citizen’s rights

“Safeguarding the status and rights of the EU27 citizens and their families in the United Kingdom and of the citizens of the United Kingdom and their families in the EU27 Member States is the first priority…” Paragraph 11 of Mandate

This was – and is – the number one priority of the EU. Therefore, they made a comprehensive offer on the 12th June – a few short weeks after the mandate had been agreed. In essence, it was a simple reciprocal proposal summed up in para I.2:

“Equal treatment in the UK of EU27 citizens as compared to UK nationals, and in EU27 of UK nationals as compared to EU27 citizens, in accordance with Union law;”

That was pretty fair, I would say. Admittedly, in the enforcement section (section IV), it envisaged a role for the ECJ in enforcing those rights in the UK. If we are leaving, though, then that is hard to accept as foreign courts don’t normally have jurisdiction in the UK; and that would be where I would have concentrated the discussion.

The simplest solution – to me – would be to enshrine those rights in UK law. A simple law saying that EU nationals resident at the time of withdrawal will have equal rights to UK citizens – and vice versa for UK nationals in the EU. Then they would have the same rights as anyone living here, which is the maximum protection anyone can have and thus removes any foreign jurisdiction. British rights in British courts.

So why won’t our government accept that offer and do such a simple deal? A very good question. The only answer that makes sense (and which behind closed doors you’ll hear admitted) is that they are bargaining chips to try and get a better trade deal. There’s also a sentiment amongst some – but not many – that they want to get rid of them or want them to have less rights because their simply not British; but for the government, it’s more a question of leverage. Because with such a weak negotiating position as they have, they are desperate not to give up any leverage.

Settling Accounts

“An orderly withdrawal of the United Kingdom from the Union requires settling the financial obligations resulting from the whole period of the UK membership in the Union. Hence, the methodology for the financial settlement based on the principles laid down in section III.2 has to be established in the first phase of the negotiations.” Paragraph 10 of Mandate

This is the nuts and bolts stuff of an agreement; but the principle is simple and sound. We agreed commitments in the latest budget round and people have planned based on those and they would be seriously disadvantaged if these were defaulted on. So Mrs May made her offer of £20bn in Florence to address that specific point. Good. The exact maths of that would need to be refined – as would be payments as it could be done over many years like our current payments – but it was an excellent step forward.

But there are also the obligations for things like contracts and pensions entered into. There’s a pot of obligations run up over the years and we added to that and it was all made on the basis of us continuing to be a member. Therefore, argues the EU, we need to settle those. For pensions, even if we agreed to just settle the pensions of the Brits involved, I’m sure that would be considered. But this is an area that is currently being totally rebuffed by the UK.

The problem is that the Prime Minister is having to deal with people who say we have no obligation and that we should just walk away not paying a penny; so even offering the £20bn is causing her massive political problems. The real difficulty with that view, though, is that it is both technically accurate and stunningly naive.

A strict reading of Article 50 says that at the end of two years (or earlier by agreement), we stop being a member with all the associated rights and obligations. That’s it. So many say that we could just leave and not owe a penny for anything. Legally, I believe that is actually right. But it is also unbeleivably short sighted. Our economy wants to – needs to trade – with the EU. And is this the best way to build a trusting partnership of mutual respect? I don’t think so.

Put it this way. Imagine you went out to dinner with a large group of friends and all ordered a large meal and some excellent wine and all started to enjoy it. Then – halfway through – for some reason, you decide to leave. Too late to cancel the orders, the food and wine has ether come or is about to; but you want to go now. OK, says everyone, fair enough, just let us have your share so no one’s out of pocket and we’ll see you soon. But you say “No”. You say “I’m not legally obliged to pay for anything so I won’t”.

At this point, a few of your friends get a little annoyed. They didn’t kick you out. You’re leaving, it’s your choice, but you made it after running up the bill; so they see this as just a little unfair. To pacify them, you agree to throw down a bit to pay for a couple of items – nowhere near all – but some. People continue to get upset as that doesn’t even cover half; but you insist you’ve made a “generous and fair offer” and now you’re going. Your choice, your future, the fallout is down to them now as you’ve been more than fair as you had no legal obligation to pay anything at all. After all, there was no contract, no written agreement; so you’re off. But as you leave that restaurant – on your own – consider this:

Do you think they’ll ever invite you out with them ever again?

If your future depends on having a relationship with these people, this is short sighted. Compounding it by telling them you will hold back on even that offer unless they agree to discuss the job you want to do with them tomorrow is daft. You’re just poisoning the relationship. (As a rule, if you are ever in a position where you have to rely on specific legal wording and lawyers to get what you want, that relationship is knackered.) And so for what it perceives as leverage – keeping back money to get what it wants on a trade deal, our government is harming the future. A more self-defeating policy it is hard to imagine.

The Irish Border

“…the Union is committed to continuing to support peace, stability and reconciliation on the island of Ireland. Nothing in the Agreement should undermine the objectives and commitments set out in the Good Friday Agreement… Negotiations should in particular aim to avoid the creation of a hard border on the island of Ireland, while respecting the integrity of the Union legal order.” Para 14 of Mandate

This was inserted as a key initial concern because of the place it has in the Good Friday Agreement that brought peace to Northern Ireland. The EU – like the UK – has therefore clearly stated that it wants to avoid a hard border with Northern Ireland. However, the last part is vital as it clarifies that, while the EU wants that, it will only occur if it does not wreck the integrity of the EU’s rules – which are always principally about trade. Specifically, they are about customs and standards.

For example, goods subject to lower tariffs would need to be stopped and taxed as they cross the border. Things like Beef would need to be inspected to prove that they meet health standards such as an absence of hormone treatment. And these checks require a hard border. So for all the positive talk, there are just 5 ways of achieving the desired goal:

  1. Soft Brexit – UK stays within the Single Market and the Customs Union. Then the standards and the tariffs are the same
  2. Northern Ireland stays within the Single Market and the Customs Union. Same as above; but the border where the checks and tariffs now apply would run down the Irish sea. It would still be there; but much less visible and less of a threat to the Good Friday Agreement.
  3. A unified Ireland.
  4. Ireland also leaves the European Union.
  5. Remain

For very different reasons, options 3 & 4 are simply not going to happen as a part of Brexit. Option 4, in my opinion, never will and option 3 is such a major development it would take decades. There’s much resistance in the North and it is frankly not on the cards here.

Option 5 is obviously not a Brexit option which leaves option 1 & 2. The problem is: the UK government has ruled out both. So you get a hard border.

This is the simple truth of the matter and no amount of creative thinking is going to make it go away. If Northern Ireland is outside the Customs Union and Single Market, different rules, regulations and taxes apply. Therefore goods cannot move freely between it and the Republic and you will have a hard border: that’s it. It is unavoidable. And on this point alone, the talks could collapse as it is insolvable – given the UK government’s position.

What next?

So that’s it. Three hurdles to clear, just to get to talk about trade. And the UK government’s position means that they can’t be agreed. On the first two, it could easily come to an agreement; but it won’t because it believes that to do so gives away its best bargaining chips. And the Irish question can’t be solved because it’s an impossible ask. And so we collapse.

“Sufficient Progress” is the key term being bandied about as this what is required to open up the trade discussions of Phase Two; and this is subjective idea. It’s not happened yet and for that hurdle to be reached, I would say there would need to be broad agreement on two out of the three areas – but that is just my opinion. Since the Irish Border is insolvable and tied up with trade, that is the one I could imagine being waived before getting onto Phase Two. The other two, no. There needs to be agreement here or nothing will happen. And nothing is.

Understanding some of these problems, there is a growing acceptance in government that the UK will need some form of transition. That’s fair enough; but you need to know where you are going – at least in principle – before you can agree transition. Otherwise you are simply kicking the difficult decisions away. Might seem like a good idea; but this would be kicking them to a time when the UK’s position would be even weaker.

Equally importantly, the Prime Minister keeps talking about a transition where we are not in the Single Market or Customs Union and where we can pick and choose which elements apply. Whatever she may think, that is not on offer. The EU has been very clear that if the UK wants to stay in the Single Market and Customs Union for a period, it will consider it; but it’s all or nothing. Failure to understand that – or a belief that the EU don’t really mean it – indicates that there will be no agreement there either. So we have a collapse on the three negotiation priorities; and a collapse on the transition.

Does not having a deal matter?

Oh God yes.

At best, you’ll be trading under WTO rules, there will be massive queues at Dover and at the Irish border, air travel will be massively restricted, business will have to bear huge new costs through tariffs and having to comply with onerous extra paperwork – all the while Europeans who don’t have these problems steal their customers.

And that’s at best! At worse, with no agreement whatsoever on anything with the EU, with no understanding on how the new customs arrangement works, the border closes. Air travel stops. Trade plummets. That’s an extreme; but it’s possible. And it can easily happen if people do not act; yet we are running out of time. HMRC have said that they need a year to implement a new system and they still have no idea what it would be! Time is running out and yet you have cultish Leavers parroting, “It’ll be fine”.

More and more forecasts are coming out all highlighting the impact of this across all areas – here is a particularly detailed one . Of course, dismissed as the work of “experts” by the most closed minds on the Leave side, these reports make sobering reading. For example, the recent headline from an analysis by Dutch bank, Rabobank, forecast an impact on our country of £400bn by 2030 if there is no deal. That’s £6,153 per person – not per household – per person. It makes George Osborne’s £4,300 figure per household by the same year look positively optimistic.

Even ardent Leavers such as Pete North can see it and he has eloquently expressed the scale of the problems ahead. Crazily, though, despite his economic forecasts of the possible consequences, he says he will still support such a Brexit. As the cost ratchets ever higher, he says the benefit is still worth the cost (see blog article). My message to him and any Liberal Leavers out there is that they need to start making that case to people who are going to be hungry and out of work. Explain to us all why such pain is worth it.

Conclusion

The UK government’s stance means that we are heading for a no-deal Hard Brexit. Now no one voted for that degree of economic pain. That might be because they didn’t think it would come to that; or that they simply didn’t understand what a hard no-deal Brexit means (so some people are going to get a rude shock – and then will blame someone else for it).

Either way, if that becomes the only Brexit available – and I believe it will – then the mandate is gone. And if Leavers still want to plough ahead, they need to make the case to the country again and convince us all why making us poorer, weaker and with fewer jobs available is actually worth it.

Because I can’t see it. Can you?

 

2 thoughts on “Collapse”

  1. Good stuff, I found it informative. I don’t know how you get it through to the cult leavers, that I believe is now the biggest problem. How to combat right wing brainwashing would be worth some research. Or perhaps how to dismantle a right wing media establishment.

  2. Very succinct and clear. hank you. What I find utterly unacceptable is that Davis et al KNOW this, and yet are totally happy to push the UK over a cliff edge for PRINCIPLE. Even today (19th Oct) we have Redwood talking about trading under WTO rules on BBC, and how ‘it will be fine’. We are being copiously and comprehensively lied to, as we were by the LEAVE campaign. The Remain campaign made the ‘mistake’ of pointing out the dire consequences of voting to leave. They were castigated as ‘the politics of fear’ and ignored. EXACTLY the same scenario os now being replicated, with Davis/Redwood etc lying about how great the UK will be post Brexit, while experts in business/finance predict a total collapse. Scared? Bloody shit terrified!

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