Article 50, Brexit, David Davis, GDPR, Irish border, Michel Barnier, Theresa May

Still a (very) Long and Winding #Brexit Road Ahead

This Briefing was written on 3rd Dec 2017

7EEC154E-1C26-4BA9-BD46-6E7E326308E2As we write this Briefing, early on Sunday Dec 3, it would appear that the EU and the UK are moving towards a position where the EU Council (heads of government) at its next meeting on December 14/15 will be able to declare “sufficient progress” in the Article 50 discussions to date to allow them to move on to the next stage, which will focus on the “framework” of the UK’s future relationship with the EU.

However, as one diplomat put it, until we see what has been agreed “on paper” rather than “in the papers” it is wise to withhold judgement. But it does seem that the logjam on citizens’ rights has been broken by the UK conceding an ongoing role for the Court of Justice of the European Union (CJEU) in upholding the rights of EU citizens resident in the UK after Brexit.

The UK has also agreed to meet all its outstanding financial obligations to the EU, estimated at around €50 billion net, while accepting that this money does not buy a future trade deal of any type, even if, for the moment, UK cabinet ministers are not exactly making that clear to MPs in the House of Commons. Continue reading

Article 50, Brexit, David Davis, Irish border, Negotiating

#Brexit: “Sometimes it seems like they haven’t thought all this through”

This article was written on 17th Nov 2017

Hammond BoJoAnother week, another seven days that leaves us little wiser as to what happens next. With each passing day it becomes ever clearer that the UK government fundamentally misunderstands the position it has placed itself in as regards exiting the European Union.

This misunderstanding is such that, as of today, there would appear to be only two possibilities open to the UK.

The first is to leave the EU in March 2019 without an agreement as to its future relationship with the EU and, therefore, obliged to conduct trade with the EU within the framework of the World Trade Organisation (WTO) rules.

The second possibility is to accept a free trade agreement modelled on the agreement the EU has recently signed with Canada. That agreement basically covers trade in goods, resulting in a reduction in tariffs of some 98%, and mutual recognition in regulated professions such as architects, accountants and engineers, and easier transfers of company staff and other professionals between the EU and Canada.

However, it has little to say about services, such as financial and legal services. As such services constitute a significant portion of the UK’s trade with the EU the “Canadian model” is of limited value, certainly as compared to the access the UK enjoys today to European markets through membership of the internal (single) market and the customs union.

It is the UK government that has put itself in this position with its decision that Brexit had to mean not only leaving the EU’s political structures but also meant leaving the internal market, the customs union and common commercial policy and putting itself outside the jurisdiction of the Court of Justice of the European Union (CJEU). It didn’t have to be that way but the UK’s prime minister, Theresa May, decided that such an ultra-interpretation of the Brexit referendum vote was the best way to manage the internal politics of the Conservative Party.

As has become clear since, this choice may well have resulted from a complete ignorance of the way the European Union is constituted and how it actually works. Those UK cabinet members actually charged with managing the UK’s exit from the European Union have very little actual experience of dealing with the EU. David Davis, the UK’s chief Brexit negotiator, spent 20 years on the back benches in parliament before being appoint Brexit Secretary in June 2016.

Such was Davis’s lack of understanding of the EU when appointed that one of his first announcements was that he planned a trip to Berlin to negotiate a trade deal with Germany, seemingly unaware that individual EU member states cannot negotiate trade deals with non-EU member states. The EU does that on behalf of all its members.

But Davis’s lack of understanding on trade matters merely speaks to a greater lack of understanding on the part of practically all UK politicians as to the constitutional nature of the EU, not helped by the fact that very few of them speak any European languages. The EU is a rules-based, legal order with complex decision making processes. This is the only way a bloc of 28 member states can work. Politics cannot trump this legal order. Legislation, once enacted, cannot be disregarded for the sake of some short-term political expediency. The CJEU ensures that decisions and legislation conforms to the Union’s legal and constitutional order.

The UK’s concept of parliamentary sovereignty is very different. Whatever parliament decides, it decides. Adverse decisions of the courts can be quickly overturned. A UK government with a solid parliamentary majority can do pretty much anything it wants.

This leaves UK politicians believing that, in the end, politics will always trump legal considerations. This belief has informed their approach to the EU exit process. They see the process as a classic “give and take” negotiation. I compromise, therefore, you must reciprocate with a compromise.

Davis said as much in a BBC interview on Friday last. He told his interviewer that the UK has “been offering some creative compromises and not always got them back”, insisting that “nothing comes for nothing”. He suggested there needed to be more give-and-take from the other side. “I want them to compromise, surprise, surprise, nothing comes for nothing in this world,” he said. “But so far, in this negotiation, we have made a lot of compromises. On the citizens’ rights front, we have made all the running.”

The problem for Davis is that the EU does not see the UK exit process as a negotiation in the same way as he does. They see it as something to be managed, as damage limitation, as the protection of the legal order.

For example, the UK continues to see the EU’s insistence that it settles its financial obligations, obligations the UK signed up to as a member of the EU, as something to be bargained against a future trade arrangement. The EU sees it as paying what you already owe and will not allow the UK to “double bubble” that money, buying future benefits with money owed from past obligations.

Likewise, when it comes to future trade relations between the EU and the UK. By now, even if they have never said so explicitly, it is clear what the current UK government wants: a trade deal that gives the UK de facto membership of the internal market and the customs union but without the financial and legal obligations that come with membership.

As Davis put it in a speech in Berlin last Thursday night:

“We will be a third country partner like no other. Much closer than Canada, much bigger than Norway, and uniquely integrated on everything from energy networks to services. The key pillar of this will be a deep and comprehensive free trade agreement – the scope of which should beyond any the European Union has agreed before. One that allows for a close economic partnership while holding the UK’s rights and obligations in a new and different balance.

It should, amongst other things, cover goods, agriculture and services, including financial services. Seeking the greatest possible tariff-free trade, with the least friction possible. And it should be supported by continued close cooperation in highly-regulated areas such as transportation, energy and data.”

Where does this “deep and comprehensive free trade agreement” actually differ from membership of the internal market and the customs union? The answer lies in the words about holding the “UK’s rights and obligations in a new and different balance”, code for the UK wanting three of the four freedoms of movement – goods, capital and services – while closing down the free movement of people. Except if you are a banker, for whom Davis has promised to negotiate a special free movement deal (here). Too bad if you are a Polish plumber.

The UK does not just want to cherry pick the single market and the customs union, it is asking for the whole cherry orchard.

Even if the discussions between the UK and the EU get beyond the three Article 50 issues, then the UK is going to have to face the reality that best that will be on offer is a Canadian-style free trade agreement. The EU will not compromise the integrity of the single market and the custom unions for the benefit of a third country, the UK.

To paraphrase some words from Davis’s Berlin speech: the EU will not put EU prosperity at risk for the sake of UK politics. 2018 looks like being a long, slow, steep learning curve for the UK that short-term political choices made in the interest of party management can have long-term adverse economic consequences.

But the discussions may not get beyond the Article 50 issues. Ireland wants a written commitment that there will be no hard border on the island after Brexit. The UK has committed to this but doesn’t know how to deliver on it. As the Irish Taoiseach, Leo Varadkar said on Friday after a meeting with Theresa May: “Sometimes it seems like they haven’t thought all this through”.

Not just on Ireland, but on all things Brexit, that becomes more obvious by the day.

 

 

Brexit, British Government, David Davis, Michel Barnier

My #Brexit Blog: of gold and gorillas

DD9E17AD-FCA5-4574-98B2-7CA25C82D730It was a week when reality bit, and bit very hard. Brexiteer illusions about a world of easy free trade deals beyond EU membership took a heavy hit when the US slapped a 219% tariff on Bombardier, the Canadian plane maker, over alleged illegal state aid, putting 4,000 jobs in Northern Ireland at risk.

Then, on Friday, the economics editor of SKY TV reported that close on 10% of UK exports was made up of gold which was simply recycled through London. As most of this went to non-EU countries, such as Switzerland, India and China, it had the effect of understating the value of UK manufacturing exports to the EU. The figure is closer to 50%, rather than the 44% quoted by the Brexiteers. The UK does not export as much to the rest of the world as it thinks it does.

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