This blog was written early on Sat August 31st 2019
Sometimes, all you can do is to shake your head in disbelief. I’m not talking about Boris Johnson’s decision to suspend parliament for five weeks to push through a no-deal Brexit to guarantee the future sovereignty of parliament. After all, was not returning sovereignty to parliament from the clutches of Brussels what the slogan “take back control” was all about? What better way of returning sovereignty to parliament than suspending parliament. See this By Chris Grey on what all this means.
No, I’m talking about the fact that every day it becomes clearer that those who have campaigned longest and hardest for the UK to leave the EU have no real idea what this will actually mean in practice. The day-to-day consequences of the UK putting new barriers between itself and the largest, single market in the world have never been thought out.
This week Steve Barclay, the UK cabinet secretary responsible for Brexit, tweeted;
The car industry’s ‘just in time’ supply chains rely on fluid cross-Channel trade routes. >1,100 trucks filled with car parts cross seamlessly from EU into the UK each day. We need to start talks now on how we make sure this flow continues if we leave without a deal.
It is now two and a half years after Brexit was triggered and five months after the UK was due to leave the EU on March 29th last. After all that time, Barclay finally realises that a no-deal Brexit, of which he is a vociferous proponent, will shred just-in-time supply chains on which the UK car industry is totally reliant.
Now the 1,100 trucks that service the car industry may well have all the necessary pre-clearances and paperwork in place to pass smoothly through customs after Brexit. After all, companies like Honda, Toyota, VW and Land Rover, and the big logistic suppliers that work for them, have the personnel and resources to get things right. But what about the 7,000 other trucks that cross the channel each way every day? The small operators? The trucks from Romania and Poland? How quickly does a queue form when one person in the queue has not got their paperwork right? The first law of Brexit will apply. If it can go wrong it will go wrong and go badly wrong.
As trucks roll off the ferries and the Euro Chunnel the UK authorities may impose no checks and just wave them through. But those trucks have to go back and the EU is not going to let trucks enter the single market without proper checks and controls. There is no “frictionless” way into the single market from a third country. In any event, Theresa May defined Brexit as the UK taking back control of its money, laws and borders. The UK can hardly complain if the EU asserts control of its border. Border controls work both ways.
A great deal of the focus of the Brexit debate is on goods, and trucks and border delays with queues on the M20 in the UK or the E40 in France. You can see such queues and the chaos they cause and that makes for good TV footage.
Often overlooked in all of this is the impact of a no-deal Brexit on the services sector. As a paper in the past week from the European Institute at UCL EU-UK Data Flows, Brexit and No-Deal: Adequacy or Disarray? notes:
It is not easy to measure data flows, due to their ubiquity and virtual nature. Also, unlike trade, there are no legal obligations to monitor the volume of data flows. In consequence, it is not easy to measure the importance of data flows to the economy, nor the economic impact of disruption to data flows. However, its importance can be inferred from proxy measures. For example, half of all trade in services is enabled by seamless cross-border data flows. Also, global data flows are estimated to have raised global GDP by 3% ($2.8 trillion) in 2014, and the UK is ranked as the third most connected country in the world for cross-border data flows.
After Brexit, the UK becomes a “third country”. The only way personal data can be transferred from the EU to a “third country” is if the EU grants an “adequacy decision” to that country. These are not easy come by. Only around a dozen countries have such decisions. Adequacy decisions are not negotiated.
They are unilaterally decided on by the European Commission and can be cancelled at any time. The quickest such decision took eighteen months consideration by the Commission. They can take up to five years.
Individual companies can put procedures in place such as Binding Corporate Rules (BCR) or make use of Standard Contractual Clauses (SCC). These take time to arrange, are costly, and cannot be done overnight. Again, big multinationals have the resources and expertise to make use of BCRs or SCCs, but the vast majority of companies are not even aware of the problem, much less the solution.
In the event of a no-deal Brexit, the shutters on data transfers from the EU to the UK will come down overnight. Take a simple example. Anytime you book a room online with a major international hotel chain you are usually asked to tick a box saying that the hotel chain can send you details about promotions and other marketing material. Assume the hotel chain’s data centre is in the UK. You book a room in Paris and your personal details get sent to the UK. After a no-deal Brexit that simply will not be possible. Given that the fines for breaching the GDPR run to 4% of global turnover or €20m, whichever is the greater, very few companies are going to take the risk. Have a look here for the fines that are already been handed out under the GDPR: http://www.enforcementtracker.com/
As the modern, data-based service sector has developed within Europe there have never been “data borders”. The WWW and the commercial internet only began to really take off in the 1990s. The original Data Protection Directive, which regulates the processing of personal data within the European Union, was adopted in 1995. More or less from the beginning, there has been a Europe-wide legal framework in place regulating the flow of personal data through the single market. This has helped the growth of the cross-border services sector.
A no-deal Brexit will put the UK outside that legal framework overnight. An industry which has never known restrictions will be faced with unprecedented challenges. The UK will become the first known example of a country that has put obstacles in the way of data transfers rather than seeking to eliminate them. Maybe that is not what is intended but it is what will happen.
Whatever about short-term measures to facilitate the passage of trucks through Dover and Calais there is no “quick and dirty” fix to data transfer blockages. Even if the European Commission was inclined to offer a provisional “data adequacy” decision to the UK it would immediately be challenged in the courts. Anything to do with data transfers within the EU is politically highly sensitive. Just have a look here at the list of cases before the European Court concerning data-related issues.
Here is all that the UK government has to say about data transfers in the recently leaked Yellowhammer paper on the consequences of a no-deal Brexit:
Data: The EU will not have made a data decision with regard to the UK before exit. This will disrupt the flow of personal data from the EU, where an alternative legal basis for transfer is not in place. In no-deal, an adequacy assessment could take years.
Less than 50 words on something that could cripple large parts of the UK services sector. The words “disrupt the flow” is somewhat of an understatement.
If the modern services sector is highly dependent on data flows, it is also highly dependent on people being able to travel freely to client sites, wherever they are. The EU’s founding principle of freedom of movement has greatly facilitated this. EU citizens are free to travel to any EU country to work without the need for prior authorisation or work permits.
Anyone under the age of seventy has spent most of their adult life living in the EU. Anyone under the age of fifty has spent their entire life in it. We have grown comfortable with freedom of movement and take it for granted. Freedom of movement is about the right to live and work in other EU countries. It is not about passport or border controls. Within the Schengen area, there are no passport or border controls. But anytime I travel from Calais to London I have to show my passport at both Calais and London. That, however, does not undermine my “freedom of movement” as set out in the EU Treaties.
Ending freedom of movement is precisely what Brexit is about. EU citizens will no longer have an automatic right to live and work in the UK, nor will UK citizens have the right to live and work elsewhere in the EU. What immigration regimes and requirements covering short-term work assignments the UK and the 27 EU countries will put in place after Brexit remain unknown. The rejected Withdrawal Agreement provided for a transition phase during which these details could be worked out.
A no-deal Brexit means a sudden change overnight. Here’s an example of what that could mean.
Since the early 1990s my “day job” has been negotiating and renegotiating European Works Council (EWCs) agreements. EWCs bring together employees’ representatives from across Europe in major multinational companies to meet with central management to be informed and consulted about on-going developments. These meetings can be held anywhere in Europe.
After a no-deal Brexit UK employees’ representatives will no longer have the legal right to sit on EWCs, though they may have a contractual right, depending on the wording of the EWC agreement. Nevertheless, managements in many companies may decide, for employee relations reasons, to accept the continued involvement of UK representatives.
An EWC meeting is scheduled for Brussels. Two UK representatives fly into Brussels airport. Today, they pass through the “EU Citizens” lane. The day after a no-deal Brexit they have to join the non-EU line. They get to the desk. The officer asks them what is the purpose of their visit to Belgium. They say they are there to attend an EWC meeting, a work meeting. The officer asks them if they have a visa/permit to work in Belgium for three days. “No, they reply, we’ve never had one before. Was never necessary”. “Unfortunately”, replies the officer “you now need one as you are no longer EU citizens. Sorry, entry denied”.
Lest anyone says this will not happen I remember having to send an letter of invitation to a Turkish academic so he could apply for a visa to attend a meeting in Spain. These things do happen.
Oh, not to mention the language problems that may arise at borders. Brussels airport is in the Flemish part of Belgium and most Flemish people speak excellent English. But what about, say, Barcelona airport? Our two UK EWC representatives arrive at Barcelona airport and have to join the non-EU line. When they get to the desk the officer asks, in Catalan: “Quin és l’objectiu de la vostra visita a Barcelona?” Our two EWC representatives look blankly at her and start to talk loudly in English. She looks back at them and says: “El permís s’ha denegat.”
Further, our two EWC representatives will need extra health insurance when travelling and who knows what else, depending on Spanish regulations. Spanish regulations will be different from those in Germany, France and all other EU member states because there is no common EU policy on the work rights of third-country nationals.
We take freedom of movement for granted. It is like the air that we breathe. You only miss it when it is gone. What is true for our two EWC represnetatives is also true for lawyers, IT experts, financial specialists and anyone else who travels to deliver services. No more spur of the moment decisions to go. A lot more preparation will be needed.
All of which brings me back to where I started.
I am utterly convinced that more than 95% of UK politicians have no real idea of what leaving the EU will mean in practice and certainly do not understand the dramatic impact a no-deal Brexit will immediately have.
Sure, there may be fixes to all of the problems that Brexit will throw up but putting such fixes in place will take time, a lot of time.
And in the meantime? Our second law of Brexit will apply: it will all be a lot more complicated than people think.
Brexiteers like Barclay still believe that the UK can have all the benefits of the single market with none of the costs or obligations. It is just not going to happen.