Friday, 25 January 2019

Brexiters need to get real

If you asked someone in the street what their reason for leaving the EU is, many will tell you "Well it's all these rules and regulations". Most people have no concept of what these rules and regulations are for and when challenged, as remainers take great glee in pointing out, struggle to point out which ones they want to get rid of.

But as the nation is gradually waking up to the prospect of no deal, it turns out that much of this regulation exists for the facilitation of trade. Without it you don't have free exchange of goods. And that's a bit of a problem. Those businesses which depend on regulatory certainty don't know which way to jump and have insufficient information to adequately prepare. The messages coming from government are contradictory and much of what we're told is based on assumption and downright lies.

That, though, does not invalidate the wider concern that we are adopting vast tranches of rules via the EU with virtually zero domestic scrutiny. Were it that the EU were just a trade bloc concerning itself with the movement of goods and services then we could afford to be a little more relaxed about it. But it isn't.

As the world becomes more complicated, the issues covered under the remit of trade are ever expanding into other areas from labour rights through to intellectual property. Trade governance then becomes a full spectrum endeavour. Were it that there were constitutional constraints on what the EU can do then perhaps it wouldn't matter so much, but what we see is an entity able to afford itself more control over more areas of life, weakening the influence of national parliaments and diluting the potency of democracy. National politics then becomes an appendage.

Worse still, the integrationist nature of the EU means that the regulation for the governance of trade also comes with social and political agendas which are not openly spoken of. The modus operandi of the EU is to integrate to a level where it is no longer possible for member states to function independently. To a large extent that process is complete. Withdrawing from the EU is set to cause enormous damage precisely because our respective industries have been made dependent on the EU legal ecosystem. Our RO-RO trade only exists to the extent it does because of the single market.

The fly in the ointment for Brexiters, however, is that this is very much an all or nothing proposition. The political agenda is inseparable from the trade agenda. This is the one objection to the EEA that stands. Even the so-called Norway  option comes with appendages not remotely related to trade that require members to align with the EU. If the aim was to "take back control" then for most leavers, EEA is nowhere near Brexity enough.

I could sympathise with that view were we not dealing with people for whom any deal is not brexity enough. For them, only no deal satisfies their definition and failing to appreciate the function of regulation or the nature of modern trade, they are convince trade will carry on as before and there's a whole world of fwee twade just waiting for us come Brexit day.

Nothing I say will disabuse them of this notion. I can patiently explain how the system works but they're not going to take it from me or anyone with a level of expertise. Anyone who doesn't subscribe to the BrexitCentral canon is a heretic.

The grim reality of Brexit is that the EU really does have us by the balls. If we leave without a deal then we become a third country with zero trade preferences - and then we're putting out brush fires all over the shop, bumping into those WTO rules as we go. We then find that we need a level of cooperation from the EU only to find it has demands of its own that Brexiters are not going to like.

The alternative is Mrs May's deal which basically means Northern Ireland stays in the single market unless we can come up with an alternate solution - and the Brexiters know full well what that alternate solution is. Staying in the single market.

Ideally we want to find a way to balance trade and regulatory cooperation but firewall those concerns we view as the sole domain of national democracy. This is not possible. The EU does not allow for national democracy. The very reason it exists is to destroy it. So how then can we resolve this unhappy conundrum? The simple answer... we can't. The ultimatum in front of us is that we can either have national sovereignty or we can have trade. We can't have both.

The best we can really hope for is to restore the political authority over the rules we do adopt. This is roughly what Switzerland and Norway has. Norway has a better system of defences as the EEA framework allows for involvement in the regulatory process and a means of adjustment and if needs be, a veto and safeguard measures. The system recognises the basic reality that regulatory harmonisation is a fact of modern trade.

The Brexiters refusal to acknowledge any of these realities, instead clinging to the liferaft of ERG fantasies is what drives the clamour for no deal. This is why the Brexiters are in for multiple shocks when it becomes apparent that trade does not function normally on Brexit day and the world is not chomping at the bit to do "free trade deals" with us. at best we'll be patching up the bilateral agreements we already had via the EU with suboptimal terms.

This is ultimately the folly of the more prominent Brexit campaigns. Trade was a particularly foolish hill to die on. If we are looking at Brexit purely in terms of trade then there is scant reason for leaving and the only way to have an independent trade policy while maintaining EU trade is to emulate Norway.

Of course, as this blog would be the first to point out, this is not all all just about trade and GDP. The Brexit question encompasses the full spectrum of economic, social and diplomatic issues. There is no right answer. It's largely a matter of priorities relative to the individual. What is missing, though, is honesty. I have no problem with those who want to take a principled stance but those taking that view tend to be the ones deluding themselves in respect of trade. Trade may very well be a secondary concern but it is not something we can afford to neglect.

By taking the hardline view we are essentially saying, as Boris Johnson has said, "fuck business". To a point  have a great deal of sympathy with that view. I don't see why political decisions should defer to footloose multinationals with no loyalty to any country. But then at the same time, the price for having such principles is the loss of thousands of jobs in every city.

The mistake here is to believe that all of the Brexiter objectives are possible, practical or even desirable. The deregulation fantasies of Brexiters carry no weight in the real world and are not especially popular in the country. There is an assumption that breaking free of the EU sets us lose in an unregulated wild west, when the reality is one of globalised regulation, where much of the regulation we already operate, coming to us via the EU, is in fact part of the global nexus of rules.

While Brexiters have fixated on the European question for all these years, every country on earth is on some level having to reconcile domestic concerns with the need for global convergence. This is the central talking point of any globalisation debate and Brexit brings little remedy to it. Remainers suffer from the same affliction in believing Brussels is the centre of the regulatory universe.

To get anywhere close to a satisfactory Brexit we have to start off with the basic recognition that we won't get everything we want and to recognise that Brexit is really only the beginning of a long process. The entire process thus far has been dogged by a determination to get it all done in one go which was never realistic and the more we try the more damaging Brexit becomes.

This is why I'm none too concerned by Mrs May's deal. Some would call it Brexit in name only, which I do not think is a fair assessment. For sure it does leave the EU with a great deal of residual control over legacy matters - which was only to be expected having been a member for four decades. Eventually, though, these legacy concerns will fade in their direct relevance. But even "BRINO" is not to be sniffed at.

Zooming out on the deal we have to look in more basic terms of what it actually is. It's a withdrawal agreement and once ratified we are no longer in the EU. Our legal status goes from being member to non member. As far as international law goes, that is the new reality. It is therefore an artefact in international relations.

As time goes on we will increasingly bump into the constraints of any deal in terms of the limitations it places on us. Politically that will not stand and any future government will have to use the mechanisms and institutions created by our departure to evolve and modify the relationship. No bilateral relationship with the EU is ever static. The smart thing to do would be to use the existing framework of the EEA but for now that debate is kicked into the long grass.

From the way Brexiters talk, you would think Brexit also means the EU stops existing. If only that were true. One way or another it will be able to exert its soft power over us and will have an influence over our decision making. It is a trade superpower and one with a great deal of political power globally. In any head to head contest, the UK loses. That's what it means to be a smaller fry and the junior in any trade relationship.

The priority, therefore, is for the UK to manage its departure while seeking to minimise the economic impact. The greater the blow now, the weaker our starting position as an independent country. That then forces us into unpalatable compromises we would not otherwise make. The temptation to rip ourselves out of the EU's orbit may well be strong, but the pain of doing so will be deep and long lasting.

I am of the view that it pays to take a longer term strategy with one certainty in mind. that certainty being that the EU is little more than a historical blip. It may last a while longer - possibly even another three decades, but sooner or later it will integrate itself into oblivion and the whole construct comes crashing in on itself. Since we've waited this long to get free and clear of the EU, I don't see the galloping hurry. What matters is that we are making steps in the right direction.

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