Boris Johnson, Brexit, British Government, Data transfers, Michel Barnier

Brexit No Deal still looks likely

Screenshot (114)

A week or so ago, I came across this tweet from Simon Fraser, whose Twitter profile says: “Managing Partner Flint Global. Vice Chair Chatham House. Was Perm Sec UK Foreign Office & Business Dept & Chief of Staff EU Trade Commissioner.” A person, therefore, of some considerable substance and experience.

A good moment, after downbeat official comment on the latest #Brexit talks, to remind ourselves just how extraordinary a failure of successive governments it will be if UK leaves EU after four and a half years of negotiation with no agreement on the future relationship.

Which prompts the question: was an agreement ever possible? Or was Brexit always framed in such a way that for Brexiteers “no deal” was always the only “true Brexit”?

But before seeking to answer this question, let’s look at where we are now, following another couple of weeks of inconclusive talks between the EU and the UK. To put it as its simplest, the July intensive rounds of talks, triggered by Boris Johnson’s demand to “put a tiger in the tank, turned out to be little more than dinner in Brussels one week, in London the next.

Speaking after last week’s talks, Michael Barnier, the EU’s chief negotiator, said:

…there is still no progress on two essential topics of our economic partnership.

  • First, there must be robust guarantees for a level playing field – including on State aid and standards – to ensure open and fair competition among our businesses, also over time. This is a core interest for all 27 Member States – and in my view also for the UK.
  • Second, we have to agree on a balanced, sustainable and long-term solution for fisheries, with the interests of all Member States concerned in mind, and not least the many men and women whose livelihoods depend on it on both sides.

For his part, David Frost the UK’s negotiator, has this to say:

“But considerable gaps remain in the most difficult areas, that is, the so-called level playing field and on fisheries.   We have always been clear that our principles in these areas are not simple negotiating positions but expressions of the reality that we will be a fully independent country at the end of the transition period.”

All of which, led Bloomberg to report that “German Industry Says Brexit Talks Failure Is ‘Almost Inevitable’”

A top German industry official said the failure of talks between the European Union and the U.K. over a future relationship is “almost inevitable” and warned of “economic disaster.”

There are too many outstanding issues for them to be resolved in time and companies on both sides of the English Channel should “prepare for bilateral trade without an agreement under WTO rules,” Joachim Lang, managing director of Germany’s BDI industry lobby, said in a statement Friday.

“German industry does not expect the U.K. to complete the infrastructure for cross-border trade in time,” Lang added. “Companies face the threat of new tariffs, additional bureaucracy and an economic disaster.”

Meanwhile, the Daily Telegraph reports British negotiators are banking on German Chancellor Angela Merkel to unblock Brexit talks:

A senior UK source close to the negotiations said Mrs Merkel’s reputation as a dealmaker on the European stage could be key to end the impasse.

“It is definitely possible now with the (EU budget) wrapped up that member states will become more engaged in this process in Brussels and get them moving forwards politically,” the source said.

What exactly Merkel can or should do is never made clear. Agree that the UK can have single market access while being free to undercut single market standards? Accept that the UK can exclude continental fishers from waters they have historically fished for centuries? Agree that while the UK is no longer an EU member it is not a “third country”, but maybe a “two and a half” country, able to opt-in to all the bits it likes?

At the same time, an opinion piece in the Telegraph called for the “High-handed, patronising and provocative” Barnier to be fired and be replaced by someone more accommodating to the UK. As if Barnier was a one-man-band singlehandedly blocking Brexit Britain from getting the trade deal with the EU that it deserves. Barnier represents the settled views of the EU27. The Brexit commentariat simply cannot comprehend that the EU is not going to bend itself out of shape to accommodate a departed member.

Take the two Telegraph pieces together and what you get is belief that it is a Frenchman who is blocking the deal, but a German woman will come to the UK’s rescue. Which, of course, neglects the simple fact that all 27 EU countries have a veto on any EU/UK deal, as does the European Parliament. Given the nature of the UK’s political system, Boris Johnson may be able to push anything he wants through the House of Commons, which just last week voted to deprive itself of any say on trade deals, but the EU does not work that way. Johnson may also be able to pack the House of Lords with Brexiteers, but no other country in Europe has an unelected upper house.

Come to think of it, every country in Europe has a written constitution, except for the UK which has an unwritten constitution, which is turning out not to be worth the paper it is not written on.

Which bring us back to whether a deal between the UK and the EU is possible or was ever possible.

It seems to me that the problem is this. Over the past 50 years the UK has increasingly integrated with “Europe” in multiple ways. This integration consists of the big things, like the customs union and the single market, but also the small things like ease of travel, pet passports and the European Health Insurance Card, for instance. (On ease of travel see this from the Mail on how easily things can get snagged up at borders).

And, of course, the common membership of the European Union of both Ireland and the UK facilitated the peace process in Northern Ireland. A borderless Ireland in a borderless Europe.

Brexit now takes the UK out of a complex ecosystem of multiple agreements covering multiple issues without having “oven-ready” replacements. I have never been convinced that UK government ministers have ever fully grasped the full extent of what taking the UK out of the EU ecosystem will mean in practice both for businesses and citizens.

To take one example, data transfers, critical to everything we do today. Two weeks ago, in the Schrems II judgement, the Court of Justice of the European Union (CJEU) ruled that the transfer of personal data to the US by economic operators was close to legally impossible because of concerns over the US “security state”. Companies that continue to transfer personal data to the US now run the risk of fines of up to 4% of the global turnover or €20m, whichever is the greater. (For a good take on this judgement and what it means see here)

As and from January next, exactly the same considerations will apply to data transfers from the EU to the UK. While the UK newspapers are full of talk about lorry parks in Kent, there is barely a mention, outside the specialist trade press, of the consequences for the UK of the Schrems II judgement. And yet, a pileup on the data superhighway will be of more consequence for the UK economy that trucks queued on the M20.

The UK has never been outside the EU’s “single data space”. That data space was created while the UK was an EU member because the digital economy was only created within the past twenty years.  EU data protection regulations provided a safe and secure framework allowing data to be transferred freely between EU member states and controlling its export to third countries.

Until now, the UK government had assumed that the UK would get a data adequacy decision from the EU Commission, which would allow data to continue to flow freely across the Channel, even if Brexit meant that the UK would be outside the EU’s data architecture and decision-making processes.

Schrems II has voided all such assumptions.

Where is the contingency planning for the potential absence of an adequacy decision, now that Standard Contractual Clauses are also a high-risk way of transferring data to countries with overreaching data gathering regimes run by the security services? What thought has been given to the consequences of a digital border between the UK and the EU? Now, in my own opinion, erecting such a digital border is not in the interests of either the EU or the UK. But that does not mean it will not happen. Schrems II, more or less, puts such a border in place between the EU and the US. It will do the same when it comes to the EU and the UK.

What explains this lack of foresight, this lack of preparedness? One of the key Brexit texts is Change, or Go: How Britain would gain influence and prosper outside an unreformed EU.” here Now, in case you do not have the time to read the 1,000+ page report, it is helpfully summarised here for you by the Guardian’s Jennifer Rankin.

Some highlights, as summarised by Rankin:

  • UK/Irish relations scarcely get a mention.
  • The EU would agree to negotiate a new trading relationship before the triggering of Article 50. The UK would have a new deal in its back pocket before the formal process of leaving the EU even began.
  • The UK could enjoy “a common market relationship with EU even if it did not sign a special deal after exit”.
  • The authors were relaxed about the UK losing the benefits of EU trade deals, because “the EU underperforms at managing trade policy”. It doesn’t have a trade deal with the US and China. Anyway, it is “highly likely” EU FTAs “could be photocopied”. The UK could quickly do its own deals.
  • It obsesses on tariffs, but pays scant attention to non-tariff barriers. In revealing language, it saw limits to the EU’s ability “to penalise Britain” and inflict “malicious harm”.
  • *Easy transport links for firms and citizens: “there would be no significant disruption or inconvenience for UK firms or passengers”. UK travellers can keep the EHIC insurance card when visiting the EU.

The report was written in 2015. Any objective commentator would have to say that they got it wrong. For example, a trade deal with China is not on the cards anytime soon. For America, see below.

Which goes a long way to explaining where we are today. If the intellectual framework, the plan, the road map, was faulty from the beginning then it is no wonder you end up down a cul-de-sac. Sorry, that’s a dead-end in Brexit English.

The Change or Go report provided the underpinning for Michael Gove’s “We hold all the cards” 2016 speech. Taken together, Gove’s speech and the Change or Go report make it clear that Brexiteer’s believed:

  • The EU was about to implode sometime soon or, at the very least, be severely weakened
  • Brexit would trigger a domino effect and other countries would follow the UK out
  • After the Brexit vote, the UK would hold all the cards and be the center of an new, anti-EU European alliance
  • The UK could dictate terms because the EU would desperately need UK trade
  • The UK could have customs union and single market benefits without the commitments and obligations of membership
  • Travel to the EU from the UK would continue without interruption and with no new requirements
  • It was all about the trade in goods, tariffs and borders
  • The UK would quickly be able to negotiate trade deals with all the major powers to compensate for any loss in EU trade

And, of course, the UK would be able to end freedom of movement.

To put it simply. Brexiteers believed that the UK could be outside the EU with all the benefits of being in the EU, but with none of the costs or obligations and also be free to go off and do deals with other countries as it saw fit. They did not need to do any planning because all they wanted would be handed to them on a plate by a shattered and demoralized EU.

All upside, no downside.

Now, five months before the UK leaves the single market and the customs union the same Michael Gove is overseeing the ‘Let’s Get Going’ government information campaign, which, as Chris Grey says

…consists of a range of empty slogans about ‘independence’ and ‘the opportunities ahead’ for a ‘sovereign nation’ tagged to vague messages about preparing for this ‘new start’. It is only if you follow this up by looking at the government’s website that it becomes clear that, without a single exception, people and businesses need to prepare for something which will be worse, more cumbersome, more expensive, or more limiting than now. And even then it raises as many questions as it answers about what you actually have to do about this.

Far from collapsing, the EU has grown stronger and more integrated. As Brigid Laffan notes of the recent EU summit:

Over weekend #EU27 negotiated a financial package that was unimaginable in February. #UK’s absence helped as no country was willing to veto. UK not even a ghost at the table.

1 year into his premiership was grappling with Russian Report & a dash to Scotland to keep Union intact. Another round of Brexit negs made no progress. Attention & agenda of UK & EU politics diverging. At a macro-political level BREXIT happened this week

Brexiteers also believed that the election of President Trump would help them create an “Anglo-Saxon” counterweight to the EU. An “Anglosphere” that would also pull in Canada, Australia and New Zealand. That hasn’t worked out either as planned. A trade deal with the US is on hold and deals with Australia and New Zealand will be of miniscule economic value. If Joe Biden is elected president in place of President Trump, a US/UK trade deal may well be the least of his priorities. (See this from the New York Times).

What do you do when the underlying assumption of the entire Brexit strategy that the UK’s exit would strengthen the UK’s hand and severely weaken the EU turns out to have been profoundly wrong, that the EU has not imploded but instead it is the UK that is creaking?

A rational actor would look for a reasonable way out. But, unfortunately, there are just too many on the wilder shores of Brexit who, because they drank the full bottle of Kool-Aid, cannot see the changed circumstances and still insist on a “pure Brexit break” from the EU. These are the ones in the Commons. There are even wilder ones outside the Commons.

The Johnson team may well calculate that there is little political benefit for them in signing a “bare-bones” trade deal with the EU. Any deal could easily shred his commons majority as Brexiteers shout “sell-out”.

The Brexit rubber has hit the road and there is little road left.

With that, goodbye until September.