Thursday, 19 October 2017

Brexit: the anatomy of failure


Pascal Lamy, former World Trade Organization director-general, has said "The fundamental difference between the UK vision of what this is about and the Franco-German view is that the British still think this is a negotiation. It is not a negotiation. It is a process to be managed to minimise harm. It involves adjusting." Of the UK he said "They still seem to believe they can buy something with the money they have to pay. The truth is there is nothing to discuss. The only question is how much do you owe".

To the uninitiated this may sound belligerent, but in actuality this is smack on target. To even call it a negotiation allows the media to use all the associated lexicon such as ploy, gambit, brinkmanship. It plays well for their agenda of turning everything into a dramatic showdown. That same mentality is one shared by our politicians and that is why we are getting nowhere.

Where the Northern Ireland and citizen's rights are concerned, this is really a matter of joint problem solving. There are only limited options in this so in fact anything that works is what will likely be agreed. The problems start when one side has a limited grasp of how regulatory systems work in practice. Red lines cannot be accommodated and that leads to accusations of intransigence.

On the matter of Northern Ireland, from the outset we are asking the EU for a fudge. The settlement requires an unprecedented relaxation of border controls. Were this to happen inside an FTA then third countries could very well demand the same. That is why the NI agreement has to fall inside a dedicated arrangement as part of the divorce.

In order to safeguard the integrity of the single market, and ensure the settlement is not used as a back door to evade single market controls the UK will not be permitted to substantially diverge from the EU customs regime. Whatever is decided here will have ramifications for the final trade agreement after Article 50 talks.

Being that this government is badly advised, none of their proposals will be workable for the NI settlement or indeed the wider future relationship. To keep customs checks to a minimum it follows that we will have to maintain most single market rules in relation to goods. This is likely to provoke the ire of ultra Brexiteers who believe that the EU can and will grant the UK special dispensation to diverge on standards without coordination or consultation.

This cannot happen. If the UK chooses to depart from the approved practices of the single market then the EU is obliged by its own rules to increase the tempo of inspections. We should also note that conformity to standards alone is insufficient for a light touch customs regime.

The only way we are going to come to an agreement is by recognising the facts on the ground. From there it is a matter of working our the finer details so that we can successfully implement it. There is little room here for ideological red lines without reversing decades of progress. The more we seek to diverge the more red tape we are likely to introduce.

By now we should have the outline of a working template. That much, at least, should have been prepared before triggering Article 50. Instead the government has been unable to offer anything substantive and the issue has all but dropped off the radar. In order to reach agreement the UK contingent must first be patiently trained in the facts of life - which is something they will resist to the last breath. This is where talks are most likely to stall.

On the issue of citizen's rights, this is where we all want the same thing, but we must take care to ensure that any protection of rights does not introduce a parallel legal system that could lead to discrimination or prevent policy autonomy in employment legislation. That is the one area where we can expect the EU will complicate matters. It is easy to see why this is a red line for the UK. Again this is further complicated by Northern Ireland.

One would, therefore, think that the matter of the financial settlement would be the easiest win. Since much of what we agree to pay is that which we would have paid anyway it is difficult to take issue with it, and if we do want to continue a £240bn a year trade relationship then honouring our commitments for the rest seems like a no-brainer. Again though, this is complicated by hard liners who think we owe nothing and that we can trade on WTO rules alone. Penny wise and pound foolish.

Ultimately the only way the UK can get as far as discussing a future relationship is by effectively conceding on most of the issues without complaint. It is in the national interest. This, however, requires a level of understanding that simply isn't there. If the Commission is still having to take the UK contingent through the Janet and John basics with the aid of crayons and fuzzy felt then there is no likelihood of resolving anything inside the two years.

We do not know to what extent progress is being made. It is difficult to separate the politics from the reality in that the politics is in an entirely different universe. Most of the detail is not in the public domain and we can only hope that there is a functioning adult on the UK side. If what is happening behind closed doors is in any way a reflection of what is happening in public then this will drift to the final hour and it will require an extension.

But then, as much as the technical issues make agreement unlikely, it is increasingly likely that the politics will derail talks. In Theresa May's Florence speech she committed the UK to sticking to the current financial framework until we have formally left the EU. This was the fullest extent of the financial offer. In no way does it cover in any honest sense the full obligations. Deliberately so.

May's speech was designed to forward a proposal to be negotiated within the framework of Article 50. A deep and comprehensive relationship. This is entirely in abstract to the sequence of Article 50 talks and was a deliberate attempt to abandon the sequence of current talks.

The ploy is to get the EU to skip the details of the exit settlement and jump ahead to matters of the future relationship. The Article 50 sequence, however, is not plucked out of the air. There are certain formalities which must be observed before talks can progress. No substantive talks on trade will happen until we have formally left the EU. That was always the case and was never going to change.

The Tories are now spinning this by saying the EU is engaged in extortion by turning down May's "reasonable" offer - and is refusing to talk about trade until we agree to part with more money. This is the essential dishonesty of the Tory ploy. The Florence proposal was a deeply cynical ambush to which the EU cannot agree and has already refused. So long as the Tories can keep massaging the "extortion" and "intransigence" narrative, they can manufacture consent to do that which they have been itching to do from the beginning. Walk away.

This works because most observers cannot see why we should pay any amount and are routinely being told that we can trade just as easily on WTO terms alone. Being it politics they are happy to lie about this. You only need fool some of the people some of the time.

What makes this worse is that the media, through some misguided obligation for balance, is unable to categorically say that WTO rules in no way facilitate the kind of frictionless trade upon which much of our industry depends. The media is also unable to understand the basic sequence of the exit process and so they are looking for signs that the EU will open up to talk about trade.

This precipitates a torrent of speculation, building up a parallel universe that has no relation to what is happening in reality. This adds drama to what is essentially a stalemate until the Tories get to grips with reality. With ministers, MPs and journalists all believing in this false reality, there is no coherence and the falsehoods that the Tories depend on take root.

At best the EU is only able to discuss an interim agreement which is likely to be membership in all but name to cover the period from the date of exit until a newly agreed relationship begins. Talks over future relationship will not happen inside Article 50 talks.

Should the EU expand Barnier's mandate to talk about interim agreements, the Tories are in for a shock in that will will not permit any substantial divergence from the EU and will be on their terms alone. The UK will likely still be bound by the Common Commercial Policy and there will be no new third country free trade deals signed in that period. This arrangement, though, will not be signed off unless the three phase one issues of northern Ireland, Citizen's rights and the financial settlement have been agreed.

With that in mind there is precisely zero value in the Tories attempting to change the sequence. There is nothing to be gained by it. There is no avoiding any of it so they have only two options. They can get to grips with reality and properly engage or they can walk out and leave all of the talks to collapse. It will most likely be the latter because with a media as hopeless as ours, and with so little comprehension in government, it is difficult to see how it could go any other way. The only thing left to do is try to gauge how and when it fails.

In this, your guess is as good as mine. They might conclude that they cannot agree and then agree to not have an agreement, instead focussing on doing the bare minimum to prepare for a no deal scenario. There may be an implementation period to make the necessary adjustments, but I don't see that happening unless the UK agrees to pay something at least. I do not envisage this being the case since any hint that this is happening will likely bring down May and her government.

It may be that all sides agree to an immediate and early termination of talks, but this would have to bypass parliament entirely, so again I don't see that happening. More than likely we will go the full two years and drop out by default. There is nothing that compels the government to ask for an extension.

Right now I do not see any chance of these talks concluding successfully. As much as we are short on competence I do not get the impression that the government is acting in good faith and with so many deliberate lies being fed to the public about the viability of leaving without a deal, it rather looks like we are being pushed over the cliff - whether we want it or not.

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