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Brexit: Running Down the Clock?

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Brexit: Running Down the Clock?

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The Brexit front has seemed positively dull compared to the horrors of Covid-19 (the disease proper, the spectacularly bad responses in the US and UK, and the economic fallout), and US protests and rising social tensions. However, the lack of much apparent action, aside from the Groundhog Day sort, is a bit misleading, since letting the clock run has consequences of its own.

Even though you’d not discern it from the tone of the press coverage, with the transition period over on December 31, both sides ought to be in “time is of the essence” mode.

Yet the first face to face negotiating session since March, which took place last week, ended a day early, which was clearly a bad sign. Four big issues remain outstanding: the so-called level playing field (which is shorthand for “if the UK wants advantaged access to EU markets, it has to adhere to EU standards”), fisheries, intelligence and judicial cooperation, and what the press has called “governance”. The last is what I have called a “shape of the table” issue, which ought to take precedence before the others. The UK wants a raft of sector-by-sector mini-deals, like Switzerland, while the EU wants one big deal so that any oversight or enforcement mechanisms operate across all areas.

I hate differing with our Clive, who maintains that the EU will blink at the 11th hour and there will be a deal as there was with the Withdrawal Agreement. That may prove to be true but only in a narrow, technical sense.

A trade agreement is a vastly more complex document than either the Withdrawal Agreement or Political Declaration were. And even then, for Johnson to get to a deal, he edited the agreement Theresa May had struck.

Six months is not enough time to negotiate anything remotely resembling a “normal” trade deal, such as a so-called free trade agreement. And the fact that the UK has a large services sector makes matters worse, since services deals are much more difficult to negotiate than ones involving goods.

And the UK’s pet idea of many little deals is an impossible hill to climb even if the EU were to have a change of heart. One of the big reasons for preferring sector-specific arrangements was to provide for sector-specific provisions on regulatory synchronization and enforcement. It’s hard enough to negotiate even a biggish deal in six months. A bunch of bitty deals is a non-starter.

So the most the UK is likely to be able to cinch in the remaining time is bare bones pact covering tariffs and quotas, and perhaps with some side deals. But the UK will not have frictionless or even low friction trade. UK goods will be subject to border procedures when they go into EU.

Yes, in theory the EU and UK could fudge the year end drop-dead date, and they clearly would if negotiations were almost done but technical matters needed to be cleaned up. The Institute for Government outlines some of the ways the finesse could be achieved:

  • Amend the end date of the transition period in the Withdrawal Agreement

    This could in theory be done at any point after June. But it would almost certainly require the European Court of Justice to give a legal opinion first.

  • Create a new transition period to begin on 1 January 2021

    This would mean striking a new, complex agreement and a lengthy ratification process, alongside future relationship negotiations.

  • Include an implementation phase as part of the future relationship treaty

    This would give businesses time to make investment decisions and adapt supply chains.

  • Create an implementation phase to prepare for a potential no-deal exit

    Agree a temporary deal to allow traders to adapt to a no-deal scenario in the event that talks break down.

Even though Boris “rather die in a ditch” Johnson is famous for walking away from past commitments, he has so lashed himself to the mast of a year end Brexit that even if he were to extend, his fellow travelers will raise a furor about any delay. And recall that Brexit is no longer popular with voters; recent polls have come in at only 40% now supporting it. So a few months is probably the most Johnson would try to sell.

Moreover, the UK has operated in an unserious manner. As Richard North pointed out:

Here, it is not just trade and border administration where detail is lacking. Key policies such as agriculture, regional policy and state aid – plus many more which currently reside within the domain of the EU – have not seen any significant policy activity from the British government, in the context where White Papers should be pouring off the presses.

The lack of activity may in part be the result of the Covid-19 epidemic, which has happened at just the wrong time. The lockdown measures have had a dampening effect on the general Brexit debate, and have suppressed the process of policy-making, not least because so much administrative effort has been devoted to managing the epidemic.

One other significant factor is that the UK has simply lost much of its policy-making skill and capacity. For decades now, the brightest and best have high-tailed it over to Brussels, where the money is so much better and there are real possibilities of seeing policy ideas come to fruition.

There are also signs that the EU believes the ticking clock works to its advantage. Despite Johnson blustering that the UK is prepared to exit on “WTO terms” or now, “Australia terms,” his team has also been browbeating the EU to give ground. While this looks a lot like playing to a domestic audience, it comes off as yet another episode in a too-long-standing pattern of demanding that the EU cross red lines that it has made clear that it regards as existential.

The UK also, curiously, signaled it wanted to close the gap between the two sides relatively quickly when those close to the action said it hadn’t done much to allow that to happen. From Tony Connelly at RTE:

[The UK’s senior negotiator] Mr [David] Frost, however, said the UK still hoped to reach an “early understanding” of the principles underlying an agreement before the end of July….

“We are really trying to find compromises as much as possible bearing in mind our red lines, and we felt the UK wasn’t really engaging on their side,” said one EU source.

It could simply be that the UK really is just playing the negotiations so as to pin blame for hard Brexit pain on the EU. But there also appears to be a Trump-level ability to deny reality among senior Tories.

After all these years, Government officials seem constitutionally unable to accept that the EU will not compromise the integrity of the single market, or at least not very much. In fact, our Clive has also pointed out that the deal cinched but then lost with Theresa May was actually pretty fudgy as far as the leeway given to Northern Ireland was concerned.

So from the EU’s perspective, it actually made significant concessions on the single market due to the need to accommodate the Good Friday Agreement. And remember, that was as much for Ireland’s benefit as the UK’s. Those were not appreciated by the UK side and now it’s pig-headedly asking for an even more special deal.

An issue we flagged very early on, that the UK customs systems were highly unlikely to be ready to accommodate vastly higher post-Brexit requirements, is still looking true even with the one-year transition grace period. In a speech yesterday, Barnier took up what had been the UK’s mantra, that it was ready for Brexit, including imposing a full on new border regime as of January 1, when the UK has made clear it isn’t ready. From the Telegraph:

The UK announced a gradual three phased implementation of border checks in June after previously insisting that checks would be inevitable. Full border checks will now only apply on EU goods entering the UK from July 2021.

The EU’s chief negotiator [Michel Barnier] told peers that the EU was, in contrast to the UK, ready for Britain to leave the Customs Union and Single Market at the end of the transition period on January 1.

The European Commission official said that every UK product imported into the EU would face checks once the Brexit transition period finished at the end of the year, whether there was a trade deal or not…

“If there is no deal, there would be tariffs and quotas on top of that, which would be very cumbersome and very complicated but we would have to do that.”

Barnier also said the EU had offered the UK a “flextension” which would be a provisional extension if the two sides were negotiating at year end and would terminate when a deal was struck. But the UK doubled down on not extending past December 31.

Even though the EU will take a big hit with Brexit, perhaps bigger than it expects, recall also that when a crash out looked possible, the EU identified sectors in which it would give what amounted to interim waivers of six to nine months to provide more time for adaptation and/or coming up with arrangements in those areas. The EU can always dust off and update those plans. Bear in mind the EU will do this only where it is to its advantage, although clearly it can benefit the UK as an unintended by-product.

Finally, it also bear repeating that the interpersonal dynamics look to be terrible. Yes, Barnier is attempting to maintain the veneer of Eurocrat professionalism. But the reports out of the EU for some time have been that national leaders are sick of Brexit, feel they have bigger priorities, and resent how much of a time since the UK has been and continues to be. That mood was made worse by Johnson’s occupation of No. 10, since he is disliked and mistrusted on the Continent.

The UK posturing regularly displays a lot of anger and what comes off as victimhood, even though it was the UK that chose to trigger Brexit.1 It is as if Brexiteers can’t get over the story they told themselves, that leaving would be easy peasy, and so it must be the EU’s fault that it’s turned out to be complicated and difficult.

In a similar spirit, Richard North today has the first of two posts on the history of the UK’s deal with the EU on fisheries. North paints the EU as having abused the UK and the UK as still harboring deep resentment over how it was had (the extension of territorial rights to 200 miles offshore or the midpoint of competing claims meant the UK would have had the rights to 90% of so of the fish, when it didn’t wind up with anything remotely like that). The wee problem with that spin, which you can see with a not-very-close reading of North’s own account, is that fisherman at the time worked out how the pending outlines of the then-EC deal worked against their interest. They complained to their MPs and were ignored. Heath chose to trade fish for other interests. Yet that is the EU’s fault, that the EC had an aggressive ask (not unusual in negotiations) and the UK didn’t beat that back a bit on its own dodgy merits before then doing other horse trading? Particularly since this was back in the day when the UK had a top notch civil service?

I can’t prove it, but from this remove, it looks like Brexiteers assign blame for the UK’s decline in stature to the EU, when the US is at least as culpable. And Thatcher perversely gets a free pass.

There are a lot of detailed topics, some insanely so like fisheries, that will eventually be resolved somehow. But neither side is yet engaging at that level. And it isn’t clear what it will take for that to happen, particularly since it should already have been underway.

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1 I’m choosing not to include a new story, of how Scotland intends to contest the UK imposing new, as in lower, as having an impact on the EU/UK talks. Key points per the Financial Times:

Food safety, agriculture and many aspects of the environment are policy areas overseen by the devolved administrations in Edinburgh and Cardiff, but the UK government wants to have the final say on issues previously decided in Brussels…

Edinburgh has warned that it would resist the imposition of a Westminster body outlined in the legislation that could block any Scottish parliament bill that the Westminster government judged would interfere with the internal market.

Scotland can see that chlorinated chicken, GMOs, and other downgrades are in its future and it plans to go to court to try to block that. I don’t see this gambit working save as a political ploy to boost the SNP, which is already leading in the polls.

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