Friday, 15 April 2016

The flawed assumptions of CER

I will have to say this until I am blue in the face. Everything you read about Brexit consequences is true. In certain circumstances. Most of them remote. And so when looking at this report from the Centre for European Reform my eyes start to glaze over.

It contains some interesting factoids, many of which are probably true, but facts are often problematic. Everything in the world is either a potato or not a potato. That is a verifiable fact. But like many facts, it is useless without context or application.

There aren't enough hours in the day to sift the entire report, but we can examine the assumptions they make in their reading of the facts. Take a look at this sample. 
The EU would not become an illiberal, protectionist bloc without the UK, but it would no doubt be an uncompromising negotiating partner for a newly exited Britain. The EU would be wary of making too many concessions, for fear of establishing a precedent that other countries might want to emulate. As a result, the UK would not be offered unimpeded access to the EU’s single market unless it agreed to continue to abide by the acquis communautaire, including freedom of movement, and to make contributions to the EU budget. The EU would also insist that the European Court of Justice continued to enforce the single market’s rules in Britain.
If, as seems likely, the UK were to balk at such an arrangement, it would face a lengthy negotiation to secure a free trade deal with the EU. The best on offer would likely be something equivalent to the deal done with Canada, which will eventually eliminate around 98 per cent of tariffs on manufactured goods. However, the EU-Canada deal provides much more limited access to services markets, including financial services, than does EU membership.
The first flawed assumption is that the UK would be "an uncompromising negotiating partner". While the politicians maybe children, their civil servants and advisers will be shoving facts under their noses. They will look at any number of sources as to why a Canadian style agreement doesn't even begin to cover all the basis and doesn't address any of the parallel cooperation agreements which are of far greater consequence than mere tariffs and customs procedures. Just about everyone on the Remain side says this and also many voices pushing to Leave.

Experienced negotiators will make it quite clear that opening up all the different boxes for negotiation will take years, would not likely reach a satisfactory conclusion and would likely stall Article 50 talks. It is for that reason, and all the other reasons outlined by the Remain camp; that the consequences of a messy withdrawal are unthinkable, that the UK very much will swallow the lot and take what is on offer. Not least because the UK government of any stripe will not actually want to leave the single market.

Even if an idiot like Boris Johnson is in charge, the political realities dictate the shape the negotiations will take, all of which will be known beforehand by way of a scoping exercise - before the Article 50 notification is even submitted.

The UK will be presented with a stark choice. Maintain current trading conditions with no disruption or risk it all falling through. Since the risk is high we will see the government fold and take what is on offer. To smooth ruffled feathers at home we will see a degree of political pantomime to make it look better than it is. Just like they did for Mr Cameron. What this means is next to nothing changes for business and consequently the rest of the fluff in the report is just noise.

The reality is we are not going to start unbundling forty years of political and economic integration in Article 50 negotiations. All the talks will really accomplish is a declaration that on paper we are out of the EU. The peripherals, for example Erasmus, will be addressed in talks later down the line, probably as they come up for reform or renewal or if there is a new applicant. The point is, there is no rush to get it all done in one hit. As impossible as it is, it is not desirable for either, not least since the EU will not seek to devote its entire diplomatic run time to Brexit. It does have other concerns.

And so what we are looking at is a very gradual parting of ways, where continuity for trade is assured while we take years and months to uncouple. What that does mean is that we won't be slamming the borders shut, we won't be making any savings but we will no longer be a subordinate of the EU and are free to make our own choices in subsequent regional and global agreements. Which is a huge part of the reason to leave.

Many have unrealistic expectations of Brexit based on a superficial understanding of just how comprehensive EU integration is. And that's not limited to the Leave side, This very report is labouring under the same misapprehension that a Canadian style agreement even touches the sides. So while we have a report crammed full of facts and figures, it all hinges on certain key assumptions which in this case I believe to be deliberately disingenuous to make the case for remaining.

Both sides are obsessed with the idea that it all has to be done in one go and it will all be settled at the end of Article 50 talks however long they take. This is wholly unrealistic - and less so since the Remain camp are about right when they say the negotiation period will be the cause of uncertainty. That is why we will seek to scope out the agreement before talks begin in order to keep the official negotiation as short as possible - and anything that can be deferred to a less time sensitive session will be.

In that regard, because the pace of change will be glacial, it will cause no more uncertainty than that of a general election or the usual background noise of cooperation agreements which few in business ever pay attention to.

The reality is that Brexit is a process, not an event - and if we have to swallow the lot in order for a safe transition then that is exactly what this or any other government would do. It means few immediate gains and few immediate losses. But as EUreferendum has it "this is not important. We are not proposing to leave for the money, and the benefits that will accrue will come from our ability to act again as an independent state". This is why the message of Vote Leave is profoundly wrong, but as it would appear, the Remain crowd haven't got the first clue either.

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