Saturday, 10 September 2016

The Brexit script is writing itself

Some things about Brexit are uncertain. More often than not though, when an FT hack says "it is uncertain" they mean "I am uncertain" because chances are if you work for the Financial Times you are criminal waste of oxygen and you're wasting everyone's time just by existing.

Brexit is most certainly fraught with complexity and technical challenges. That, though, does not mean there are not solutions even if the remainer hack-o-sphere would rather not acknowledge them. For their own entertainment they like to make a horror story of just about everything - and nothing swells their tickle-button quite like a Brexit horror story. But this is quite common in human psychology.

While much is the subject of Bicycle Shed Syndrome, much of it is down to sheer boredom. Mrs May is not giving anything away, not much is happening and there's only really the day to day theatricals to report on. If you've ever worked in any corporate environment you are well aware of how a completely insignificant issue becomes the subject of meeting after meeting just in order to fill the day. Brexit is no different.

Amidst all the hyperventilation it seems that the entire media has suspended its critical faculties. Yesterday the Guardian breathlessly tells us Emmanuel Macron, the likely progressive left candidate for the French presidency says that that British-based financial institutions must be prevented post-Brexit from selling their services in the eurozone.

Macron, currently the best prospect of preventing a rightwing victory in next year’s presidential election, added he could not see how the UK could be granted a financial passport unless it contributed to the EU budget in the same way as Switzerland and Norway.

Macron insisted: “The financial passport is part of full access to the EU market and a precondition for that is the contribution to the EU budget. That has been the case in Norway and in Switzerland. That is clear.” The proposal would be rejected outright by British Eurosceptics.

This has all the makings of a tickle-button Brexit story but really we can write it off for what it is. Noise. Firstly, these are signals for the French domestic audience in the run up to the elections and secondly, Mrs May has made it quite clear now that "British Eurosceptics" can reject what they like but that has no influence on her decision making.

Reading the signals from the City the message is clear. Passporting is one of their red lines. And when you add up all the other complications, such as the Authorised Economic Operators system as highlighted by the Japanese government this week, the message is glaringly obvious. Hard Brexit is such a profoundly stupid idea that it's not going to happen.

As much as it would be damaging to the UK it has other world leaders deeply concerned as it could be enough to tip an already fragile global economy into a bigger slide. Obama's reiteration of his "back of the queue" message is a warning shot. The subtext being "do not leave the single market".

We have already seen Mrs May kick the notion of a points based immigration system into touch and the government is committed to it's non-committal stance on everything else. Consequently the script is writing itself. Day by day the signals tighten the noose and close down the options. Britain would have to be singular suicidal to seek a hard Brexit and Mrs May now knows this. Not a single economist giving evidence to select committees has advocated the WTO option and has expressly cautioned against it.

So our negotiating strategy is clear. Britain will want maximum continuity of trade, maximum market access and passporting rights ring-fenced. There is every reason to believe that we will get that. The only question is on what terms. In this we simply have to wait for more signals to come in. The Japanese government has made issue of the European Medicines Agency where management and voting rights some into question which tends to suggest we will need continued participation. There will be more of these such issues to follow. We are just waiting for the media to catch up.

Once the list of things we want to keep is finalised it will look so much like single market membership that it might as well be single market membership. It is then up to the government to decide if the EEA is the right mechanism and if not, what it is prepared to concede to the EU in order for them to spend years negotiating a bespoke but largely similar arrangement. The EU will exact a price for such and you can't blame them either. It will take years. If the government opts for something other than the EEA they will need a seriously good reason and as far as I can see there isn't one.

When you add to the Brexit to-do list the transitional arrangements on CAP and CFP along with grandfathering rights and the WTO subsidy schedules there is more than enough work and little point in creating more.

So now the job for the government is more exception management. Mrs May is not going to have an easy time from the press having to sell a deal that means roughly the same budget payments as before (and a Brexit surcharge) and one that means only limited scope for curtailing freedom of movement. This will be where the Brexiteers spit their dummies out while the remainer mob whinge that their precious NHS isn't going to get its £350m a week. They're going to have to suck it up. In order to appease the unappeasable we would have to commit ourselves to the single biggest act of economic self-harm ever known.

This is no longer a matter of "project fear" and Brexit scares. We are not even speaking of uncertainties. The loss of critical preferential customs agreements categorically will lead to business relocations, a collapse of foreign investment and major job losses. Leaving the single market is simply not an option - and when developments in global regulatory frameworks mean the regime is the same wherever you go, there is increasingly little point. As Ben Chu in the Independent notes, we would be adding a considerable about of red tape for no commercial advantage.

And this is why I'm not getting carried away with the Brexit catastrophisation. The intellectual bankruptcy of the Tory right is beginning to show (as if it wasn't already apparent), the UK's negotiating position is weak and only a fool would stray from the obvious path. And Mrs May is not foolish even if her Brexit cabinet are.

The strategy for Mrs May must be damage limitation and maximum business continuity. She will need to be steadfast in refuting the nonsense of Brexiteers. That though, should not prove difficult when the facts are all on her side. What we need from Article 50 talks is a deal that changes as little as possible but breaks the constraints so that we can evolve our way out of the EU at our own pace. That's why we need the EEA agreement. It's designed so we can do exactly that...

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