Wednesday, 8 April 2020

Brexit: the world in turmoil

I am a leaver, I am more eurosceptic than most, but I don't like the opportunism of kicking the EU when it's down in a situation where it can't win. It seems that those criticising the EU for not doing enough are the same people who already think it has too much power and does things it has no business doing. It's a cheap shot. The truth is that Coronavirus has caught us all with our pants down.

Unfortunately for the EU, it has to respond. It can't afford not to. It will have to gather and marshal all of its limited resources to demonstrate that it does have a role to play. It's in a PR fight for its life. More than a few will be asking what the point of the EU is if it can't make itself useful in these such times. 

The response has been patchy and slow, not least because it doesn't have the authority to order member states logistics assets into action and relies entirely on the good will of member states which is also patchy. As regards to further frontline activities it's going to have to asset strip every programme it has of materials and manpower and it's not clear where the money will come from.  

That, though, is only the beginning of their problems. Once you break up normal operations it's difficult to put them all back together again. Some EU programmes may never again see the light of day in the wake of Corona. 

Europe and the EU will never be quite the same again. We don't know when the dust will settle but we could be in it for the long haul and the after effects will be felt for the next decade. It's difficult to say when normal activities will resume which leaves a massive question mark over Europe's tourism industry. Ski resorts and hotels across Europe are also closing their doors, some for the last time, which will see a wave of internal migration in the EU - which may not even be possible until member states reopen their borders. We shall likely see a return to sectoral and seasonal visas in the interim on the basis of need but freedom of movement as we know it might well be dead.

As to trade, with tourism collapsing and manufacturers shifting focus, with some implementing export bans on vital materials, all the underlying assumptions of trade go in the dustbin. P&O Ferries is fighting for survival bringing into question the sustainability of existing supply chains as costs soar. This is no deal Brexit on steroids. 

Meanwhile, crucial logistics firms in Northern Ireland are facing massive operating losses of up to £150,000 a week, with dozens facing an uncertain future. While some companies are seeing business soar to levels of demand associated with Christmas such as those involved in meat and poultry, others which deliver for firms such as fashion retailers have seen trade plummet as the UK-wide lockdown hits business. Businesses which deliver to Northern Ireland but rely on bringing goods such as returns back to Britain and elsewhere are now "running on empty", but facing the same costs and overheads.

The trade that still exists is running on emergency measures with normal customs enforcement going on the backburner. The Commission says the crisis relating to coronavirus represents an “exceptional and unprecedented” challenge for the capacity of member states to conduct official controls and other official activities in line with EU legislation. There are restrictions in many countries on the movement of people to protect public health. Member states have told the Commission that as a consequence of this, the ability to send staff for official controls has been seriously impacted.

Some nations have expressed difficulties in performing official controls and other activities which require the physical presence of control staff. This includes clinical examination of animals, certain checks on products of animal origin, plant products and on food and feed of non-animal origin, and testing of samples in official laboratories designated by member states. Labs specially designated by authorities can be used where normally used official labs are not available for analyses, testing or diagnoses. With that goes any early warning system.

Much of this is set to last up to four months but this could go on much longer, at a point in time where a great many exporters simply can't hold on that long - and with other pressures ranging from staffing concerns through to cash-flow, the logistics may be something of a moot point. The extent to which temporary measures become permanent throughout remains to be seen.

As regards then to Brexit, with the collapse of air travel and ports, with exports taking a hammering, and supply chain longevity in serious doubt, and observance of regulatory regimes on everything from waste disposal through to airline service out of the window, much of what we feared about no deal is all coming true and the economic impacts are likely to be worse. We're looking at depression over recession, with the only silver lining being that all of Europe faces the same difficulty.

How then the UK can seriously negotiate a new trade relationship with the EU when we don't even know what of the single market will survive even the next six months, I don't know. Non-regression and level playing field provisions seem an abstract debate when member states throughout are abandoning all the state aid rules and taking shortcuts with hiring and firing. That's something else that won't be returning to normal any time soon. FTAs are only as good as your capacity to develop and enforce them. With so much in flux, the new generation EU FTA as we know it may also be going the way fo the Dodo. The EU will have to rethink its own external relations.

As regards to the wider implications, we could be in for a return of the Euro crisis which dwarfs Brexit in the priority stack. If anything, with its attentions divided and resources split over a number of fronts, Brexit could prove to be something of an irritation - an indulgence even. The UK government should really read the room and put the whole thing on ice. Before we can strike a deal we need to know what is left. We need to know what we are dealing with. 

It's going to be at least year before we know what the new normal looks like and possibly two years before we have a handle on Coronavirus. There are lessons to be learned from it that must be built into our trade assumptions along with the new geo-strategic priorities - whatever they may be. By then it should be clear to all but the thickest of Brexiteers that trade with Europe is not something we can afford to neglect.

Any future relationship with the EU has to be built on the underlying certainties but with everything now in flux, with some of the fundamentals subject to permanent changes, any framework rushed through in the next few months will likely need a complete overhaul when the dust settles anyway. For all the talk of a "Canada style deal" it may even be that CETA itself doesn't even survive Corona. As regards to wider notions of "free trade", we may be forced by circumstances to abandon conventions on subsidies and tariffs if only to restart our agriculture and manufacturing. I'm not even sure the WTO system can survive.

The underlying reasons for Brexit are still as pertinent as ever, and in many respects Corona underscores why national sovereignty and regulatory independence matters, but at the same time, intergovernmental cooperation and collaboration on Corona issues is paramount. Our biosecurity is only as good as the weakest health system and our supply chain security is intrinsically linked to those of the EU. Now is not the time to be chasing ideological flights of fancy. The world in which Brexit was born no longer exists. Our next move should be mindful of that. 

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