Monday, 21 January 2019

Britain's choice paralysis


I do not think leaving without a deal is a good idea. We will very rapidly slide in the economic rankings, we will lose all of our formal trade relations including those with non-EU countries and it will take the better part of a decade to restore them. The WTO is not a basis for trade continuity and facing the full brunt of third country controls with lead to a major drop off in exports as exporters are hit with delays, red tape and tariffs. This is unarguable.

We cannot say with any accuracy the full extent of the damage but we cannot expect to pull out of forty years of technical and legal cooperation, fundamentally changing the existing business model without major and lasting consequences. There are then two basic avenues open to us both of which require that we sign the withdrawal agreement as is. It's either going to be EEA or an FTA.

Since the EU is not going to drop the backstop our only avenue to prevent it is to ensure the future relationship provides adequate cover to ensure it doesn't. An FTA with various add ons with maximum facilitation is unlikely to satisfy the EU. We therefore need to be looking in the EEA Efta ballpark.

But then there's a problem with this. The EEA option is massively unpopular among Brexiters, and the ultra remainers won't wear it at this stage. Their opposition may soften when remaining is entirely off the table so the question of the future relationship as laid down in the political declaration is one best kicked into the long grass. That is why the political declaration is vague.

Should we sign the withdrawal agreement we then pass go and enter into the transition where we must have that argument before proceeding. Those who then argue against the EEA are pretty much arguing for the backstop which then brings in a massively suboptimal customs arrangement for the whole of the UK. The further problem in is that if we do decide to go down the EEA path then this parliament will probably ensnare us in a full customs union too. Brexiters are going to hate it either way.

Being that both destinations are unpalatable, Brexiters have now convinced themselves that it's worth taking the hit or tell us that there is no cliff edge at all. Should we end up leaving without a deal they are in for a big shock.

Being that parliament cannot agree on a way forward and with only the political declaration being open for renegotiation, the no dealers have a strong chance of having it their way. What we could see, though, is a last minute face saving fudge on the political declaration and with the threat of no deal hanging over their heads, MPs might very well cave in and ratify it.

Here it comes down to your personal bent as to the right way forward. I accepted early on that any deal was going to be suboptimal. I have over the course of this blog convinced myself that the EEA is a good working arrangement but I can still see why to many it is not Brexity enough. It still basically underpins the current economic model and if you wanted radical economic and societal change then there are good reasons to oppose it. And there is certainly a strong argument for radical economic and social change.

The problem, though, is that while Brexiters work themselves into a lather over the fact that EEA still entails adopting EU directives, they ignore the fact that most of them in some way enact global conventions and rules we would be signatories to in our own right. That they come to us via the EU is to a large extent neither here nor there. We can wail about EU directives on renewable energy targets but much of them come from international agreements and a directive is just a common approach to implementation. This is the "double coffin lid" that the whole Brexit debate has failed to acknowledge.

In respect of that we actually need a government that will shelve their own eco-narcissism and stop ratifying these global accords - which I don't see happening any time soon. What we actually need is a great deal more direct democracy to ensure these binding global treaties are put to a referendum and to ensure that we never sign multilateral agreements unless they have safeguard measures and waivers.

Here we come back to the same old point that Brexit of itself doesn't actually accomplish much on its own. In terms of the reforms we need, Brexit is only a starter for ten. Then, assuming we were to leave the single market, the freedoms we gain in terms of what and how we can regulate domestic affairs are only as good as the government we have - which is not going to improve any time soon.

Then we must remember that our future relationship with the EU is going to be a continuum so whatever is agreed during the transition is going to change over time. What matters is our long term strategy for evolving it. This is where Efta makes the most sense since we can work with Efta to strengthen it thereby weakening the dominance of the EU over the EEA.

Though leaving the single market would certainly create a number of opportunities to overhaul domestic governance in a way soft Brexit would not, the economic costs of doing so are not easily compensated for. From a trade perspective, hard Brexit simply isn't a winning proposition. The value comes from having sole political authority over our trade but the decision to take full control over it means suboptimal trade for a long time to come.

The conflicts here are a matter of principles versus pragmatism. Here we find that principles are bloody expensive whereas pragmatism is to some extent self-defeating. There were never any easy answers. My heart says give Brussels the two-fingered salute while my head says sign the bloody deal.

The appeal of the so-called WTO option is its simplicity. Overnight we are no longer enmeshed in the machinery of the EU, but we create a tangled mess of our own and create a political crisis on just about every front and souring relations with our nearest allies. It may be the factory reset that some are hankering after but it is by far from a "clean Brexit". We will be dealing with the fallout for years and we will somehow have to rebuilt trade relations with the EU which will undoubted come with binding commitments on less favourable terms.

I suppose the folly here on the part of leavers was to ever expect a remain establishment to have the necessary vision and ambition to make a good go of Brexit. But then at the same time, the leave movement allowed itself to be co-opted by similarly visionless Tory drongos. A well executed Brexit was never on the cards.

Ultimately we need a principled vision but one informed by all of the technical and political realities which is far beyond the ken of our politics. Our politics is at the fag end of its useful life, and there is no sense of national purpose which is why our politicians prefer to simply resign ourselves to EU membership. Moreover, the electorate have been gradually demoralised to the point where national self-hatred is all too common.

Ultimately we either leave with a deal or we don't. With a deal we have a chance of salvaging the mess we have made. We will still have some leverage to reform the relationship over time and and the economic damage is sufficiently contained to ensure that at some point we can recoup the losses of Brexit. Should we leave without a deal with we are looking at long term economic and political instability, and a slide in living standards.

Part of me suspects this might well be necessary since our politics is too broken to limp on, and such a period of turmoil might very well go some way toward repairing the cultural malaise Britain has experience over the last thirty years. That, though, is a massive gamble. It would be the ultimate revolutionary act - and there is nothing at all predictable about revolutions of that magnitude.

If we're absolutely honest with ourselves nobody has a clue. We have set in motion a chain of events which are impossible to predict and forces beyond our control. We either choose to play it safe or go all in on the flip of a coin. All we can guarantee is major change. We cannot promise it is change for the better, but ultimately the majority did vote for change. From the chaos will emerge opportunities and threats in equal measure.

The real opportunity either way is the opportunity for meaningful political change and a window for democratic reforms. That is not an automatic benefit of Brexit but it does create demand for new ideas and new approaches. If we want a new democracy then the people themselves will have to build it.

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