Sunday, 1 July 2018

Out of time and out of options

I'm now thinking the chances of leaving the EU with a deal are now 50/50. To avoid a major political crisis the government is going to have to do some pretty fast learning. They still do not know what game they are playing. They still think this is a negotiation.

For a multitude of technical and legal reasons the options are limited. There can be no progress until the UK makes a decision between either the EEA or an FTA. There is no a la carte Brexit. This does not seem to be sinking in.

All the chatter would seem to indicate that May will adopt the goods only single market concept. This has already been rejected by Brussels and a formalised proposal will also be rejected. It just can't happen.

The problem is that trade in goods and services is indivisible. EU legislation deals with specific sectors and does not legislate as though services were excluded. That means there is no pre-existing regulatory framework for such a proposal.

To have a goods only single market would require the EU to develop a body of technical law to facilitate this - all for the sole benefit of the UK. This just isn't going to happen. Either you are in the single market or you ain't. If not you're a third country.

That means an FTA with limited customs cooperation but standard third country controls will still apply. It could perhaps go as far as the Switzerland deal but that limitations and is inadequate for the UK. Asking for more will be viewed as cherrypicking.

The EU has been consistent on the cherrypicking point in that it will not violate the integrity of its legals system. The single market is an integrated system and weakening it for the UK is not on the agenda. This is not intransigence. They just can't compromise on this.

As I understand it, the UK is set to go on a charm offensive seeking to back door the Commission, speaking directly to member states about this proposal. That won't get far. Member states would have to rewrite the rules to accommodate UK demands. This is not possible.

This whole initiate is a stillborn and UKGov is wasting time even trying it on. It's just a different permutation of May's Florentine fantasy. Weeks will be wasted before they come to terms with the fact that no means no. May must choose between the available options.

This mess tells us that the UK government doesn't really understand the EU nor the limitations of our predicament. There is a certain sense of entitlement in believing the UK can and should be able to sideline all the principles of the single market.

It appears the UK is winding down the clock in the belief that the Eu can and will fold. This is foolish. There would have to be EU treaty reform to afford the UK the flexibility it asks for. That isn't going to happen. The EU can manage fudges, but not reform.

This to me underscores why we are right to leave. The EU is too rigid and that rigidity stops it responding to genuine democratic concerns. It's what makes the EU deaf to democracy. But all the same, we are where we are and we must confront reality.

That reality is stark. The UK has thirty years worth of trade built inside the framework of the single market and if we don't want to lose that trade and the millions of jobs that depend on it then we have to stay in the EEA. An FTA doesn't even begin to cover the bases.

So now our future all depends on whether the government is capable of this realisation and whether it has the political stomach to admit it. It's not going to be at all popular with leavers but there simply is no intelligent alternative.

There is no "anglophone free trade area" on the table nor is there any realistic scope for reviving the Commonwealth since they all have their own locked in commitments. Global Britain as a concept is threadbare. All the Brexiter trade rhetoric is intellectually barren.

The EEA is far from perfect and in many respects violates my own principles on the subject in that it still trespasses on sovereignty, but not on the things that really matter to us. I'm not going to go to the barricades over food labelling.

There are examples where Norway has been steamrollered into adopting rules they don't want but this is the game globally. Win some, lose some. It should be noted that we are not Norway and have a lot more clout so we can play the system and build up political capital in Efta.

Short of that we are looking at a wafer thin trade agreement with a collection of sector specific bilaterals all of which provide only limited functionality and deny us enhanced permissions to operate in European markets. Trade wise it's suicidal.

Brexiters believe that freedom from EU rules on financial services can make up the losses but they neglect the value of services in general such as engineering services of government contracts. Losing that would be devastating for the regions.

Leaving the EEA would mean exacerbating all the pressures that led to the Brexit vote, putting all the wealth generation in The City, and it's a huge gamble that the City would be better off for leaving the EU regulatory sphere. I don't think it's a sensible gamble.

The longer we prat about, though, the greater the chances of talks collapsing and running out of time. As much as no deal is not viable it should be noted that this cannot be an end state. We will have to negotiate new relations after exit.

We would then find ourselves negotiating with a far weaker hand, looking for emergency patches rather than amicable workable agreements. That will see us as a vassal state with massively diminished trade especially having left a gaping hole in EU budgets. Relations will sour.

More to the point, an FTA will leave NI as an EU customs territory both in the Customs Union and Single Market and will mean a wet border. EEA is the only way to avoid this dismal scenario. For all its faults it answers most of the difficult questions. It's either EEA or a decade long depression.

For all that Brexiters grumble about EEA it's the one avenue that will stop us being dragged into a customs union and ending up adopting EU rules verbatim. Efta is a viable codetermination system made stronger by UK membership. Without it we're on our own and told what to do.

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