Last week was some Brexit week, a week in which the UK government introduced legislation, the internal market bill, which a government minister admitted in the Commons would break international law, but only in a “specific and limited way”.
The minister, the Secretary of State for Northern Ireland, Brandon Lewis MP, was talking about the powers the government proposed to take which would allow them to override provisions in the Withdrawal Act signed with the EU in 2019 when it comes to the movement of goods between Great Britain and Northern Ireland. The UK, according to the minister, was deliberately and consciously going to break an international treaty that it had only recently signed.
The international treaty, the Withdrawal Agreement, provides that Northern Ireland, a part of the United Kingdom, will remain in the EU’s customs union and single market for goods to avoid rebuilding a hard border on the island of Ireland between Northern Ireland and Ireland, a continuing member of the EU.
The EU has reacted by saying that the UK government has until the end of September to withdraw the offending language from the draft legislation or there would be consequences, generally understood as meaning an end to trade talks. Legal action against the UK is also being contemplated. The European Parliament has said that if the UK persisted with its planned action then the Parliament would veto any future trade deal.
All sorts of reasons were offered for this unprecedented action on the part of the British government. “It was to protect the Good Friday Agreement”. It was to “preserve the Union of Great Britain and Northern Ireland”. “It was to clear up loose ends”.
It was to stop “Brussels carving up the UK”, UK Prime Minister, Boris Johnson, said on a Zoom call with his MPs last Friday here.
“The agreement was negotiated at pace in 2019 and the full implications were not understood at the time”. “We were negotiating with one hand tied behind our back, since Parliament had voted to deprive the UK side of the right to walk away.”
In an article in the Daily Telegraph on Saturday last, UK Prime Minister, Boris Johnson, argued that the Withdrawal Agreement, the basis on which the UK left the EU, was an “excellent deal” which is now at risk of a “serious misunderstanding” on the part of the EU. “… so, it is deeply regrettable that what seemed so simple and clear to us is seen very differently by our EU friends.”
This, despite the fact that Johnson said at the time, that the agreement was “oven ready” and just needed to be popped into the cooker. “We have a great new deal that is ready to go … It is oven-ready, and every single Conservative MP elected at this election … has pledged to vote for this deal immediately”.
He limited scrutiny of the deal in the Commons to just three days because, he asserted, what it meant was already clear to all. Now, he is saying, that what he thought it meant and what the EU thought it meant were two vastly different things. Maybe parliamentary scrutiny might have flushed out the different interpretations? So, according to ministers, to bring the EU to its senses, all the UK can do is to break international law. But if the EU does “come to its senses” then the UK will drop the threat.
Personally, I am not persuaded by any of these arguments. Now, I know that agreements negotiated “at pace” will often be regretted at length but it is difficult to believe that there were not those in the UK civil service, particularly its legal services, who would not have made clear at the time what exactly the agreement would mean in practice. Not to forget the Northern Ireland DUP shouting from the rooftops that this would mean a border in the Irish Sea. See this from the Financial Times and this from RTÉ’s Tony Connolly.
My own view, for what it is worth, is that Johnson signed the Withdrawal Agreement in 2019 knowing full well what it meant, but was convinced at the time that he would get a “cake and eat it” trade deal with the EU in 2020 that would make the Northern Ireland provisions in the Withdrawal Agreement largely redundant. In any event, as Michael Gove said in September 2018 any agreement could be ripped up and renegotiated afterwards.
By a “cake and eat it” deal I mean a deal in which the UK would have tariff free and quota free access to the EU market, including minimalist border checks, financial equivalence, a data adequacy decision, wide ranging transport right, and other measures which, taken together, would be as close to single market membership as possible, but without the costs and obligations. In particular, the UK would be free of EU state aid obligations and would be free to subsidise industries as it saw fit.
There have long been Brexiteer voices arguing that the EU would give the UK the deal it wanted because it “was in the EU’s interest to do so”. However, I learnt long ago never to assume that you know what the other party thinks is in their interest. I find that it is generally best to listen carefully to what they have to say and to take them at their word. A failure to do so all too often can lead to serious miscalculations on your part.
Once the negotiations on a trade deal between the EU and the UK opened in 2020 it very quickly became clear that there would be no “cake and eat it” deal on offer from the EU. The more access the UK wanted to the EU’s internal market the more conditions it was going to have to agree to. The course of these negotiations to date have been well documented in previous Brexit Briefings: here
This turn of events created two problems for Johnson and his team. First, it meant that there would be a border in the Irish Sea between Great Britain and Northern Ireland. The provisions of the Withdrawal Agreement would come into effect and not be overtaken by a trade agreement.
However, I believe that the second problem for Johnson is the greater. Whatever deal he now negotiates with the EU will be so much worse than membership of the Single Market and Customs Union that it will cause economic damage for businesses and individuals. When reality bites, there will be a serious reaction. Despite all the claims that he has “got Brexit done”, he actually hasn’t. The economic consequences of Brexit have not yet become evident to the person in the street or, indeed, to most businesses. It will soon become clear that his boast in the Commons in 2017 “There is no plan for no deal because we are going to get a great deal” simply is not going to come through.
So, the “breaking of international law” may well be a “dead cat on the table”, a smokescreen to crash the negotiations and blame the EU for the resultant economic damage. A “dead cat on the table” is a tactic of choice of one of Johnson’s advisors, the Australian consultant Lynton Crosby. He is reputed to have said that whenever you are in political difficulties throw a dead cat of the table. Everyone will then start talking about the dead cat and forget about other issues.
This is also consistent with Johnson remarks at a private dinner in London in 2018:
“Imagine Trump doing Brexit,” Johnson added. “He’d go in bloody hard … There’d be all sorts of breakdowns, all sorts of chaos. Everyone would think he’d gone mad. But actually you might get somewhere. It’s a very, very good thought.”
“All sorts of chaos” is what Johnson now appears to be trying to create. Now, there are many ways you can write about Brexit.
You can explore the British mindset that gave us Brexit, as the Irish writer Fintan O’Toole has done in Heroic Failure: Brexit and the Politics of Pain. Or you can try to analyse the economic and political impact of Brexit as, for example, multiple papers from the thinktank The UK in a Changing Europe has done. No one has written better about Brexit than Chris Grey here.
For our part, we have always tried to understand Brexit through the lens of our own long experience of labour negotiations. When you take such a negotiating perspective what immediately jumps out at you is that this negotiation is unique, sui generis, unprecedented. For two reasons. First, what the UK is demanding in the negotiations with the EU, and second, the deadline which the UK is itself imposing.
Let us start with demands.
Normally, most parties enter into a negotiation to improve on what they have, to be better off at the end of the negotiation than they were before it began.
It is possible that in the long-term the UK may be better off out of the EU than in. At least that is the bet Brexiteers are making. But how long is the long-term? And will the world still be as Brexiteers imagine it to be when the long-term arrives? Who can know? Who anticipated Covid19?
What we do know is that in the short-term there will be pain. A country cannot have been trading freely within a customs union and a single market for many years, leave it and not expect trade to become much more difficult. Building borders creates barriers and barriers are not good for trade in either goods or services. You do not have to take my word for this. Just read the hundreds of notices on the changes that are coming that have been published by the UK government on preparing for Brexit.
In my experience no rational person goes into a negotiation and asks for worse terms than they currently have. “Please, can you reduce my overdraft and increase the interest rate?”, or “We’d like a cut in pay and fewer holidays.” “That reduction in headcount you are proposing is not enough. Could you push up the numbers?”
But that is precisely what the UK negotiators are currently doing, negotiating a deal with the EU that by any objective standards will be immeasurably worse for business that the deal they now have. This is a very difficult thing to do, especially when you are unable to point to any immediate upsides. Trade deals with other countries may deliver some benefits, but that will be in the longterm, not in the here and now. If indeed, those deals are ever actually done here. (Copy and pasting exiting EU deal with other countries does not count as the UK is already covered by these deals).
Certainly, it can be claimed by Brexiteers that the UK in leaving the EU has recovered its lost sovereignty, if it was ever really lost, but ordinary people find it difficult to spend sovereignty in the supermarket.
As the UK’s Environment Secretary, George Eustice, recently acknowledged on Radio 4 “there will be tariffs of 40% or more on exports of British beef in the event of a no-deal Brexit. But it will be a good outcome, in that we will have regained our independence as a country again”. Try convincing British beef farmers of that!
So, how do you think yourself into a position where you can conduct a negotiation where what you are asking for will leave you worse off than you are now? You obviously need to indulge in some mental gymnastics to be able to persuade yourself that asking for a worse deal than you now have is a rational course of action.
Denial is the only possible stratagem. “We have left the EU and are now an independent, sovereign country. Forget about the past forty years. Pretend they never happened. Just think of us as another third country seeking to negotiate an agreement with the EU, similar to the agreements the EU has negotiated with other countries.” Deny history.
As one Brexiteer put it a week or so ago:
The UK isn’t asking for any special treatment here, just to be treated like any other sovereign, independent nation state that the EU has trade agreements with.
But history and reality cannot be denied. As of today, the UK is still an economic member of the EU, availing of all the benefits of the Single Market and the Customs Union. Quite frankly, Brexit has not yet happened in practice, even if it has happened in theory.
Of course, there has already been Brexit pain, but it has been invisible pain, less growth than there might otherwise have been and, as my late mother used to say, what you never had you never missed. (See here for the data).
Which brings us to the second issue: time and deadlines
There are always deadlines in negotiations. For example, in the US, a collective bargaining agreement runs out at midnight on a particular date. A new agreement needs to be concluded before midnight or a strike or lockout could happen.
You need to renegotiate your bank loan before the end of the month, or you could find yourself liable for repaying it immediately. A house deal has to be closed or you will lose the house.
In most negotiations the weaker party will seek to avoid the stronger party imposing a deadline to have more time and space to manoeuvre. If I can’t repay my bank loan by the due date, I will try to convince the bank to roll it over and give me more time.
Would any rational person go to their bank manager and say: “Look, I am not in a position to repay my loan. So, I am giving you until the end of this month to roll it over or else we will have no deal. You will be responsible for what happens after that.”
But this is what the UK is doing, more or less. In an interview in the Mail on Sunday, the UK’s Brexit negotiator, David Frost, is quoted as saying:
‘Let’s hope that the end of the year concentrates minds for them, because that is a hard deadline. I think the EU is used to being in negotiations where they can go on endlessly where there is no fixed deadline, they stick to a position and it is really for the other side to move.
‘What we want, which is the restoration of our own sovereignty and freedom as a country, happens whether the EU likes it or not at the end of the year. They are not used to doing that sort of negotiation.”
Of course, Frost is right. The EU is not used to negotiating with a party who imposes unreasonably deadlines on themselves.
Since early 2019 I have become increasingly sceptical about the possibility of a final deal between the EU and the UK. Early on I thought that if Theresa May’s government succeeded in delivering “political Brexit” through the Withdrawal Agreement she might then pivot and seek a quasi-single market and customs union agreement with the EU. This would minimise the damage to the British economy and ensure the continuity of trans-European supply chains, so vital for so many of the companies with whom we in BEERG work.
She did try to do this with her “Chequers proposals” but by then it had become clear that anything less the complete exit of the UK from all EU political and economic institutions would not satisfy “true” Brexiteers.
For true Brexiteers, over the four years since the 2016 referendum, the meaning of Brexit has come down to one thing: sovereignty. “Take back control” means re-establishing the unfettered sovereignty of the British government to take any policy decisions it so wishes, without being constrained by the EU in any way.
If that is the choice of the British government, then that is a choice it is entirely free to make. But choices have consequences when it comes to negotiating agreements with other sovereign partners. That becomes even truer when the choices the newly sovereign British government intends to make across a wide area of policy fields remain unclear, especially when those policy choices have implications for trading relations with the EU, which accounts for about 50% of all the UK’s imports and exports.
The EU is not going to do a deal with a country which refuses to say what rules it intends to play by when those rules have implications for “fair trade” between the two.
That is where we are. On state aid, for example, the EU is asking the UK to set out what it plans to do so the EU can assess what that will mean for its own internal market and tailor any offer it makes to the UK accordingly. Why would the EU offer the UK unconditional tariff free and quota free access if the UK intends to subsidise industries to compete within the EU market? In any negotiation, you need to know what you are dealing with before you can make an offer.
The UK has responded by saying that its future state aid policy is for it, and it alone, to decide. It would appear, according to an article in the Times by the well-connected political editor of the Spectator, James Forsyth, that Johnson and his team want to be able to use state aid to turbo charge, new, emerging technology companies:
But the real sticking point isn’t about car manufacturing or other traditional industries, but technology. The Johnson government wants to use the power of the state to mould and develop what it sees as the industries of the future. One figure with intimate knowledge of the negotiations and how they link to domestic policy tells me “state aid is critical if you are going to try and shape markets in technology”.
Forsyth further writes:
But the EU views state aid as a key part of the level playing field. If Britain is going to use it to try to spur the creation of domestic technology sectors that can compete on a global level, that has implications for them. This is what makes the impasse unlike other moments when the Brexit talks have seemed doomed only for everything to come right in the end. This time the problem isn’t that the two sides are talking past each other, but that they understand each other too well.
No deal beckons. The damage will be significant. If you can’t deliver the “cake and eat it deal” voters were promised in 2016, why not throw a dead Irish cat on table to distract attention?