Monday, 29 August 2016

The EU needs to tread carefully in negotiating Brexit

The popular narrative seems to be that the EU is intent on giving the UK a rough ride in order to dissuade others from quitting the EU. There is scant evidence to suggest it will other than the bombastic proclamations of politicians. I find it wise to take all such statements with a pinch of salt. The tone can turn on a sixpence as we have already seen.

There is a view that Britain cannot be allowed to pick and choose. But the EU must keep in mind that a lot of the cooperation programmes and decentralised agencies would not function without UK funding and if we were kicked out somebody else would be lumbered with the bill. Moreover, the process of a corporate scale de-merger of EU agencies is likely to bring massive transitional costs - not all of which the UK would be liable for.

It should also be noted that EU member states have a vested interest in maintaining good relations and market access. Then there is Poland which very much values freedom of movement. We are not without allies in the EU. We can also hold up a mirror to the EU and quote back some of their own rhetoric. The EU's neighbourhood policy seeks to achieve "the closest possible political association and the greatest possible degree of economic integration". Setting the EU up for an acrimonious post-Brexit relationship does nobody any favours.

There is also one other largely misunderstood aspect. Britain free of the EU becomes an independent actor on all of the global forums for trade and regulation - and we will be an agile and active participant. We will be free to choose alliances and in so doing, as a powerful economy inside an alliance, our vote becomes a deciding vote for the alliance and subsequently the deciding vote in any global agreements. Australia working through the Cairns Group was able to secure CAP concessions when we couldn't as an EU member.

The short of it is that the EU needs to consider what sort of post-Brexit relationship it wants. Britain can either be an ally or an aggressive competitor. We have more incentive to be the latter if forced to. Not everything in global trade is about market size. It's about what you bring to the table. If Britain is no longer permitted to participate in EU programmes then we can add our resources to competitors.

The EU could take a tough line because it does hold many of the cards but it also has the potential to do a good deal of self-harm in the process. Moreover anything that hurts the UK has the potential to damage Ireland which may very well be holding its own referendum in the near future.

The one thing that ensures we will take what we are given is the time constraint. There are actors on all sides dreaming up new configurations for a post-Brexit world but all of them require considerable consultation and may even require EU treaty change later down the line. Something the EU is in no hurry to do. It seems like the EEA is the one option on the table which doesn't present too many obstacles and presents the fewest opportunities for upstarts to derail what will be a very sensitive process.

This option, though, is the one that remainers routinely underrate as something which does not satisfy the Brexit criteria and lacks any meaningful control over immigration. I need not bore readers of this blog why that is not so. Leavers on the other hand - the hard liners, are fixated on obsolete ideas of regulatory independence and free trade deals. This wilful refusal to examine the EEA is a deliberate ploy to force some other outcome which is neither realistic or practical.

Whether Britain gets a bad deal or not is actually quite subjective though. To my mind a bad deal would be what the Tory right would jump at in a heartbeat. The EEA on the other hand seems to be an entirely adequate basis from which to start the process of leaving. I might even go as far as saying this will be the default option once the fog of misapprehension clears - but this will be more through luck than by judgement.

What we are likely to see is an insistence right up to the wire that there is some other way. There hard liners will rule themselves out of the process with their bogus notions, leaving it to Theresa May to push ahead with an EEA solution, not as a departure lounge but as a risk free means of shelving the matter. That's how a good deal is robbed of its value.

The EEA as a departure lounge would allow the EU to save face and allow us to get going - but if it is the destination of the Brexit process with no further development, the Tory wastrels will have squandered a massive opportunity they will likely never get again. Backbenchers are frittering away their time on fantasies while the opportunity to properly evaluate options and strategies is thrown away.

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