BEERG Brexit Blog

#Brexit, a Dickensian example of: “Please sir, can I have less?”

This article was written on Oct 29, 2017.

If the absence of economic rationality, as a driving force behind Brexit, was ever in question, comments this week from three very different speakers should put an end to the doubt.

First, the French ambassador to the US, Gerard Araud tweeted:

“Maybe I am too cartesian but leaving the largest free trade area in the world and 53 free trade agreements on behalf of free trade is weird.”

Indeed, much too logic. But that’s the French for you.

Second, Michael Bloomberg, the billionaire founder of Bloomberg and former mayor of New York commented:

Brexit is the “single stupidest thing any country has ever done…it is really hard to understand why a country that was doing so well wanted to ruin it”

Third, and most significantly, speaking to a House of Commons committee, Sir Ivan Rogers, the former UK ambassador to the EU (Photo above with David Cameron), who resigned earlier this year after warning against “ill- founded arguments and muddled thinking” in the UK’s approach to leaving the EU, said:

You cannot know how long a free trade deal discussion will last until you get into it. I have lived through a number of them, including the Canadian one, which we all thought was relatively straightforward, which we kicked off in about 2009, and it still is not in force; and they are one of the more simple partners. You cannot know until you get there. There are things that are simpler with us than with Canada simply because we have been in the organisation. There are things that are more difficult because we are a diverging partner rather than a converging partner.

All trade deals in history are struck between people that are trying to get closer together. This is the first trade deal in history struck between partners who are trying to get further apart. There are some things that are simpler because they know us better and we have been part of their organisation and, by definition, there is a huge degree of regulatory convergence and they know our regulation but we are obviously going to diverge to some extent, and the question that is politically live, including in this House, will be how far we diverge. (Our underlining).

I would take issue with Sir Ivan’s comment that the two sides are trying to get “further apart”. It is just the one side, the UK, that wants to make the break. But apart for that, what he says is right.

Normally, the parties to a trade deal believe the conclusion of the deal will be win-win for all, making them better off than they are now, boosting trade between the parties, enhancing business opportunities rather than limiting them. Getting closer together rather than “trying to get further apart”.

But in deciding to leave the EU, the single market and the customs union the UK will not be better off than it is now. As Sir Ivan said earlier in his remarks to the committee:

… from other capitals often it is read as meaning the Brits would rather like the benefits of three of the freedoms whilst suspending or ending the fourth freedom. The Brits would rather like to have continued, largely unchanged, market access in all the areas that they want, and see no reason why that market access should be diminished…
But if that is what the “Brits” would like, they are not going to get it, Sir Ivan continued:

… The Brits need to understand that there will be a radical difference as a consequence of exiting, in terms of levels of market access in multiple sectors that they care about.

… The British cannot simply expect the world to carry on broadly as is. They cannot suspend free movement of people because that is no longer applicable to them, live outside the jurisdiction of the Court of Justice, but still have everything that they liked about the levels of market access when they were inside the venture.

Given his long experience of the EU, Sir Ivan knows what he is talking about, which is probably a lot more than can be said for many members of the government and many leading Brexiteers.

If Britain cannot expect to have as good terms outside the EU as inside, how does it go about negotiate a lesser deal than the one it has now? The answer, in all probability, is that it can’t. How can the UK government turn around to the motor industry, the pharmaceutical industry, the food industry or the chemical industry and tell them that the agreement it has just negotiated with the EU will put more obstacles in their way when exporting to the EU? More paperwork will be required, more customs checks, longer waiting times at borders will all be part of the new deal.

Read Sir Ivan’s remarks, quoted above, closely. Better still, read the full script of his testimony to the House of Commons committee, which can be found here.

While diplomatically couched, he is saying that if you think the Article 50 negotiations on the financial settlement, citizens’ rights and Ireland are difficult, wait until you actually get to the trade talks. They will be brutal and bloody. Because, as we noted in last week’s blog, what the “Brits” want is to move from a marriage to a “friends with benefits” arrangement and there are no circumstances in which the “jilted” EU will agree to such an arrangement, where the UK gets all the benefits it wants but incurs none of the costs.

Further, Sir Ivan, along with his two fellow panellists, clearly makes the point that the UK government is deluding itself if it thinks that a DCFTA, a “deep and comprehensive free trade agreement” in the Brussels jargon, will be agreed before March 2019, to be followed by a two-year transition period, or “implementation phase” as UK Prime Minister, Theresa May, insists on calling it.

At best there will be an agreement, as part of the Article 50 process, to negotiate a DCFTA during the transition period, by which time the UK will have left the EU. All the transition period does it to buy two more years before Brexit bites.

It is not “hard” Brexit or “soft” Brexit. It is just slow Brexit. Because it will be impossible to negotiate such a DCFTA within the two-year transition. At the end of the two-year transition the UK may still find itself without a trade agreement with the EU.

The UK has gotten itself into an impossible negotiation. The structure and the timetable of the negotiations, which they agreed to, plays against them. The clock ticks remorselessly down. The negotiations open with the UK having all it wants; free and frictionless trade with the rest of the EU. But the price of that trade is the free movement of people, a price the UK no longer wants to pay. If it won’t pay the price, it can’t have trade on frictionless terms. What does it give up as the price of ending free movement?

How do you ask for less in a negotiation?

Those of you of a certain age will well remember the scene from the movie Oliver in which Oliver, approaches the top table in the workhouse and, holding out his bowl, says “I want some more”, to the outrage of Mr. Bumble, who runs the workhouse. Theresa May and David Davis are now both holding out the UK’s bowl to Juncker, Barnier and Tusk and the EU 27 and saying: “We want a lot less than we now have”.

Just how do you negotiate that?