Article 50, Brussels, Michel Barnier, Negotiating, Theresa May

You Can’t Always Get What You Want #Brexit

Written on Sunday December 17, 2017

Hammond BoJoOn Friday (Dec 15), the EU Council agreed that “sufficient progress” had been made to date to allow the exit talks between the EU and the UK to be expanded to include discussions on the “framework” of the future relationship between the UK and the EU.

This BEERG Brexit Briefing argues that, just as the EU dictated terms in phase 1, it will continue to dictate terms as the process continues because both the dynamics of the process and the hard economic realities favour the EU.

Why? Because as the Dubliners of my youth would have put it: “Beggars can’t be choosers”. In EU terms, it is the UK, and not the EU, that is the “demandeur” and demandeurs “can’t always get what they want”.

Remember, the UK decided to leave the EU. It was not asked to leave nor was it expelled. Generally in life you cannot unilaterally decide to leave a job, business organisation or sporting association, and then try to insist on negotiating the terms under which you will leave. Leave means leave. Leave does not mean “lets compromise and meet in the middle”.

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Brexit, Irish border, Michel Barnier, Northern Ireland

Is the UK’s #Brexit Cheque really in the post…?

This article was written on Nov 12th 2017.

13589652_f520It is becoming increasingly difficult to see Brexit ending well. Indeed, the process could hit the wall within weeks. Why? The complete and utter inability of the UK government to agree what it wants out of Brexit and, as a result, how to conduct the exit process. This should not be surprising given the closeness of the Brexit referendum vote: 52% to 48%, with the 52% only representing 37% of the total electorate.

It would appear that, when it comes to Brexit, the UK electorate roughly breaks down into three, though it is impossible to say exactly what weight to give to each of the three.

1. First, there are those who are totally opposed to Brexit and want to see the decision reversed.

2. At the opposite end of the spectrum are those who want, in the words of arch-Brexiteers, Boris Johnson and Michael Gove, the UK to become “a fully independent self-governing country”, irrespective it would seem, of the costs involved.

3. The third bloc, probably where most pragmatic businesses people are to be found, believe that if Brexit is to go ahead, then the economic disruption should be kept to a minimum, preferable through continued membership of the EU’s single market and the customs union.

On balance, and many of the polls show this, there is probably a majority in the UK who support leaving the political dimension of the EU but remaining within its economic dimension. The problem is that, what we might call the “economic remainers”, are split between the main political parties while the “Britain First” group of Johnson and Gove effectively control the Conservative Party, and thus the government.

Their control is such that within the past few days, the prime minister, Theresa May, has announced that she will bring forward an amendment next week to the European Union Withdrawal Bill which will embed the UK’s decision to leave the European Union at 12:00 midnight, Brussels time, on March 29th, 2019 in law. Irrespective of what happens between now and then.

The fact that there is no internal agreement within the UK as to the meaning of Brexit makes, as we note above, managing the process difficult, if not impossible. How do you get to where you want to go when you can’t decide on your preferred destination?

The first phase in the exit process is the Article 50 negotiations. The essence of Article 50 is found in the following language:

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.

The EU has identified three issues that must be resolved during the A50 discussion with the UK before talks can move to the issue of the “framework for its future relationship with the Union”. They are: settlement of the UK’s outstanding financial commitments with the EU; the rights of EU citizens in the UK and UK citizens in the EU; and issues relating to the island of Ireland, where the only land border between the EU and the UK will exist, post-Brexit.

When it comes to the settlements of the UK’s outstanding financial commitments to the EU the two sides are approaching it from mutually incompatible positions. The EU sees it as a simply a matter of the UK paying what it owes, a settling of accounts. Once outstanding accounts are settled then what happens in the future can be discussed. There can be no future discussion until all outstanding bills are fixed, or at least an agreement is reached on how the bills will be fixed.

The UK see it as a negotiation. We will pay what you say we owe provided we get future benefits for our money. There must be a quid-pro-quo. The UK has made an initial offer of €20 billion and now says that it will not increase that figure until the EU agrees to trade talks. Even then, it would find it politically impossible to increase the figure without an actual trade deal to show for it.

This was the week that EU patience with what it sees as UK gameplaying finally snapped. At a press conference last Friday, after what can only be described as two days on non-negotiations, the EU’s chief negotiator, Michael Barnier, said that the UK has two weeks to make a serious proposal on its outstanding financial commitments, put at roughly €60 billion by the EU, or else he would not be able to report “sufficient progress” to the heads of government of the remaining EU27 member states in December to allow talks to proceed to what the UK insists on calling “trade” but which Article 50 refers to as the “framework for its future relationship with the Union”. A big difference in understanding as to the substance of the next phase of discussions, if the process ever gets to that point.

As of today, it seems extremely unlikely that there is any sort of political consensus with the UK cabinet to do what Barnier asks. On the contrary, in a complete misreading of the EU’s position, there is a belief on the part of many of the “Britain First” grouping that the EU is so desperate for the UK’s money that it will fold and give the UK the trade terms it wants if only the UK would walk away from the negotiating table. David Davis appeared to confirm this when he said in a TV interview Sunday that the EU should not to expect a figure or a formula by which the UK’s obligations would be calculated.

Even if a solution could be found on the money, this week also saw what is probably the most intractable of the three issues, borders on the island of Ireland, take centre stage. A leaked document on Thursday last revealed that Ireland and the EU were demanding that Northern Ireland remain in the single market and the customs union to avoid a hard border between the two parts of the island, a demand immediately rejected by the UK government, which is dependent for its survival on the votes of the Democratic Unionist Party from Northern Ireland.

The UK accepts that there should be no return to a hard border in Ireland, which would put the peace process at enormous risk. But it can offer no concrete solutions as to how this can be done outside the customs union and the single market. “We’ll find other ways around that”, was all that the UK’s Brexit negotiator, David Davis, could offer when asked in the same TV program mentioned above.

However, the reality is that there is no way around it. If Northern Ireland is outside the customs union and the single market then a hard border is inevitable if the EU is to protect the integrity of its internal market from goods being smuggled from Northern Ireland into Ireland, and onwards into the rest of the EU. Magical thinking and as yet undiscovered technological solutions are not going to solve the problem.

Conservative politicians and sympathetic commentators were quick to assert that the “newly hardened” Irish position, as they deemed it, was the result of Sin Fein/IRA pressure on the Irish government. No such thing.

This has been the Irish position all along. It is just that, as with other matters, the UK government has not been paying attention to what the Irish have being saying, just as they have not been paying attention to what the European Parliament is saying on citizens’ rights.

The Irish don’t have a veto on the final Article 50 agreement, if ever one is reached. But they do have a veto on whether or not “sufficient progress” has been made in the Article 50 discussions to allow the process to move on to the discuss the “future framework”.

They are not about to throw that leverage away.

The Irish position is simple: with its extreme definition of what Brexit means, out of the EU, the single market and the customs union, the UK created the problem. If it wants the process to move forward, it had better solve it now.

Post-dated commitments that it will be solved in future trade discussions will not be accepted. Like post-dated cheques, post-dated commitments too often bounce.

Indeed, that might be a useful metaphor for where we are. The EU (and Ireland) wants guaranteed, certified cheques now if the process is to progress. But all the UK is offering is post-dated cheques, with the figures to be filled in a later date.

Article 50, Brexit, British Government, Negotiating, Theresa May

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

This article was written on Oct 29, 2017.

Sir-Ivan-Rogers-776583If 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?

Article 50, Brexit, Divorce, Negotiating, Theresa May

On #Brexit: You can’t always get what you want…

This BEERG Brexit Briefing (#16) was written on Sat Oct 21, 2017

Hammond BoJoWords and phrases can shape reality.

How we describe an issue or event can determines how that issue or event is to be understood. Such “framing” can be particularly important when we are dealing with some something unique, something that has never happened before. How do you describe the unknown? How do you explain the unprecedented?

One way of doing so is to compare the unknown to something known and familiar. This, in the UK at any rate, is what many journalists, commentators and academics have done when writing about Brexit, an unprecedented and unknown event. They have taken to describing the Article 50 discussions between the EU and the UK as being akin to divorce proceedings, with the key argument being about money: how much will the UK have to pay the EU as part of the “divorce settlement”?

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Article 50, Brexit, British Government, Irish border, Negotiating

Breaking up is so very hard to do #brexit

Brexit4Over the past number of years, I have been involved, on the management side, in many European-level labour negotiations. But one particularly comes to mind.

The employees’ representatives on the other side had cancelled an agreement that had been in place for close on 20 years. It wasn’t a perfect agreement, it had drawbacks for both parties, but it worked reasonably well in practice.

Further, it was always possible to negotiate small, but important, changes to the agreement as circumstances evolved, old provisions became outdated and new issues and organisational changes needed to be taken into consideration.

In other words, the other side did not need to cancel the agreement but could, instead, have worked on improving it. But they were advised that negotiating a new agreement would be easy and that it would be a lot better than what they then had. Five years on, a replacement is not yet in place.

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Article 50, Brexit, British Government

“Repeal and Replace”: Difficult to do on both sides of the Atlantic #Brexit

Written Sunday September 3rd 2017:

Capture“Repeal and replace” makes for a great political slogan. For Republicans in the US, who minted the phrase, it meant repealing and replacing the Affordable Care Act (“Obamacare”). In January of this year, President Trump told ABC news that “he wanted “good coverage at much less cost” and “a much better healthcare plan at much less money.” Over recent months President Trump has found that while “repealing” might possibly be easy, replacing is a lot harder. To date, the Act has been neither repealed nor replaced.

Now, Brexiters in the UK never used the phrase “repeal and replace”, but that is what they meant.

“Repeal” the UK’s membership of the European Union and “replace” it with a relationship with the EU at much less cost and with much better benefits.

That is, in effect, the prospectus they offered the people of the UK. As Boris Johnson, now the Foreign Secretary, put it, the UK “could have its cake and eat it”.

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Brexit, British Government, Negotiating, UK Labour Party

#BREXIT: All Changed, Changed Utterly

Written on August 28th 2017:

Commenting on the Irish insurrection against the UK in 1916, the poet W.B. Yeats penned the words:

All is changed, changed utterly
A terrible beauty is born

StarmerThe announcement on Sunday August 27, by way of an article in The Observer, that the Labour Party now backed a transition arrangement for the UK after it leaves the EU in March 2019 changes everything, utterly.

Writing in The Observer, Keir Starmer (photo), the Labour spokesperson on Brexit said:

Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU. That means we would seek to remain in a customs union with the EU and within the single market during this period. It means we would abide by the common rules of both.

If Labour can push this through it restores for business the vital prospect of greater stability in trading terms with the EU and labour market free movement for at least 3 or 4 years ahead.

How this is to be achieved is not stated but if it involves the complete acceptance of all EU rules, including free movement and the jurisdiction of the European Court of Justice, then finding a way to do this should not be that difficult. The full article can be found here. Presumably, Labour also accepts that after 2019 the UK will no longer have any involvement in EU governance, no commissioner, no MEPs and no European court judge.

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