Brexit: Wheels Coming Off
We’ve been quiet about Brexit because so many things have been happening on other fronts, and truth be told, because reporting has been thin. That isn’t necessarily due to a lack of newsworthy developments but that getting a good picture would involve things like interviewing haulers and farmers or at least their trade associations, and that means developing new sources, which equals work. But even adverse outcomes for the City are getting surprisingly little notice. Some of that may be Brexit fatigue. But many UK businesses are making surprisingly little noise relative to the pain they are suffering. Is that because they recognize or have been told that the Government simply is not going to petition the EU for waivers any time soon, so they are not wasting the few chips they have?
We are therefore even more than usually dependent on our Brexit brain trust and Twitter. And we will stick to very broad strokes.
The Brexit Deal Was a Triumph for the EU
I have to confess to completely misreading the EU continuing to extend negotiating deadlines. I lacked the imagination to realize that it was because the EU had already settled many issues lopsidedly in its favor, and the UK was so clueless as to what the agreed sections of the pending deal that the EU had every reason to press on, that they had very good odds of doing well on the contested points. The notion that the EU kept extending its deadlines….for what? for fear of not getting a deal? for a desire to establish for history and maybe for smaller EU states that it had been more than fair didn’t seem sufficient reasons to go past the December EU Council meeting and into the Christmas holiday period. The lack of adequate reasons for the EU to be so indulgent nagged at me, but I didn’t have an alternate theory.
And the EU also gets kudos for being totally poker faced. Barnier regularly briefed the EU ambassadors who are an extremely leaky bunch. I would very much like to know how Barnier and his team kept from letting on how much ground they had taken. Perhaps they kept their updated to high level issues, where the degree to which they EU had secured advantages was evident only in the detail….which the ambassadors would see, but only when they received the final text as part of the approval process.
As PlutoniumKun said:
Everything I’ve read over the past week or so shows the agreement is full of little tripwires for British businesses or foreign businesses operating there. I’ve no idea if this was a deliberate strategy by the Commission – it would well be simply the inevitable outcome of a negotiation in which only one side was serious about details.
I think we’ll see if it was deliberate or accidental over the next few months by how the EU reacts to UK attempts to renegotiate details to fix the problems.
I think it’s deliberate in the sense that the EU, which has had hundreds of specialists working on the detail, without being distracted by elections, Covid and so on, did what any sensible negotiating team does, and built negotiating fat into each of its positions. The normal assumption is that the other side turns up in much the same state, and during the negotiations you trade bits of your negotiating fat for bits of the other guy’s, and you arrive at a situation you can both live with. But of course the UK was a hopeless negotiating partner, and was exclusively fixated on a small number of politically visible issues. It’s not clear to me whether the UK never read large chunks of the Commission draft, or just didn’t care. But the effect was a 19-1 victory for the EU, rather than a 10-10 draw or something similar, which is what negotiating theory would have predicted between two teams who knew what they were doing. There are, as you say, all sorts of nasty surprises which would normally have been spotted and challenged, and in some cases negotiated away or neutered.
This is not necessarily a good thing, even for the EU. There’s a situation (it’s been called the Versailles syndrome) where one side is comprehensively shafted and everybody knows it. At that point, the legitimacy of the process itself starts to be questioned, and the hunt is on for “traitors” who “betrayed” the people. My impression from today’s news is that that process is now starting.
The Versailles Syndrome may explain the remarkable silence of European politicians on the situation. For the Irish government, it was a triumph – they got pretty much everything they wanted (only a few fishing ports complained, but even that was half hearted). Arguably, they got more than they wanted, because so far as I can work out, the application of the phytosanitary provisions will give a clear advantage to Irish dairy interests over British ones in trade. But they haven’t said anything in public, apart from the usual welcomes for the deals. I can only explain this by an informal agreement among EU leaders to expressly avoid any triumphal statements, or even anything that could be interpreted as inflammatory.
Many (Too Many) UK Businesses Unprepared
Mind you, a certain amount of failing about and initial gear-grinding would have been inevitable for many player, given how late the deal was concluded. At a minimum, exporters would/should have prepared for a “no deal, so tariffs and quotas” and “thin deal, no tariffs and quotas” outcome. The Government was unhelpful by failing to prepare much in the way of guides, particularly on documentation….but where were the industry associations? Why weren’t they stepping up?
There was very little lobbying by business about Brexit, or even much pressure in the form of comments to the press about possible damage. The noteworthy exception was the Japanese automakers, who were early to speak up and uncharacteristically blunt. It was hard to fathom the lack of self protective action. Our experts believe that whether it was actually the case, many companies believed that if they spoke out, the Government would find a way to make their lives miserable.
The City did ask for what it wanted, equivalence, and kept nattering on about that even after the EU had said “nein” very early on. The whole spectacle of the City’s lobbyists occasionally nattering to the press when they had no seat at the table (services issues weren’t part of these negotiations, and services deals are vastly more complicated than trade deals and generally take years more to conclude) was bizarre. It was awfully reminiscent of the Monty Python King Arthur sketches, where the King gallumphs around Britain only to find no one has much respect for his rule. This appears to be due to neglect. As Colonel Smithers wrote:
The support, including funding and campaigning, for the Tories from the traditional City (shorthand for banks, insurers and fund managers and firms based in the square mile) has weakened since the turn of the century, especially as foreign firms have become more prominent and the founding families cashed out.
Much of the money for the Tories now comes from investment firms, often based in Mayfair, so not the square mile, and overseas or goes to proxies / allies like the Tufton Street think tanks. In some cases, the investment firms have employed think tank employees, e.g. Matthew Elliott, for political analysis, a cover to advance their interests.
Americans by contrast, recognize that if you want politicians to stay bought, you have to keep buying them.
But the reason many businesses were caught flat-footed is that they didn’t understand what getting a deal meant. They believed in cakeism, that the UK could leave the EU yet still enjoy no/low friction trade. This is rank incompetence.
To illustrate that there is no excuse for having been caught flat-footed. Speaking of the Japanese:
Japanese companies in the UK who have moved their product distribution hub to the EU in anticipation of what is now happening. One in a long thread, just to make a point that *some* companies have been preparing for worst case Brexit for years 1/13
— Pernille Rudlin/Rudlin Consulting (@pernilleru) January 8, 2021
And in a sign of potential trouble ahead, he said he’d received multiple calls from businesses today who thought they didn’t need any new paperwork to cross the border, because the free-trade deal meant they could continue as normal (😱) 5/
— Joe Mayes (@Joe_Mayes) January 4, 2021
So first the problem: its a tad complicated but basically goods that are imported into UK and then ‘hubbed’ onwards into Ireland or other parts of the EU are facing full EU tariffs – this is particularly bad for food stuffs, which attract high tariffs. Why is this? /2
— Peter Foster (@pmdfoster) January 6, 2021
The brilliant @AnnaJerzewska does a better job than me of explaining, but the important thing is that this is a nightmare for companies that ‘hub’ /distribute products through the UK – and that’s both EU and UK companies /4 pic.twitter.com/EMk9eKrVWK
— Peter Foster (@pmdfoster) January 6, 2021
From a policy person:
The bit I did not know well is that this TRACES process creates a Common Health Entry Document – filling in the ‘CHED’ correctly is one of the key live problems – it has to be done 100% right. Ensuring the CHED is right has proved to be a key priority issue for border officials. pic.twitter.com/IYfiCjIy2I
— Shane Brennan (@ColdChainShane) January 14, 2021
Also pre-empting the pile on to say ‘how ridiculous’ and ‘we can do it better’ tweets remember THEIR BORDER, THEIR RULES.
Also there is genuine amazement EU side that we did not know that this is what they require, it’s what they do for all 3rd countries (and so should we BTW)
— Shane Brennan (@ColdChainShane) January 14, 2021
You get the picture.
Brexit Pain Is Underreported
Mind you, there has been some bleating. But what is noteworthy is that the noise on Twitter isn’t much making it through to the press. For instance:
Ok, it’s time to blow the bloody doors off the notion that Brexit is somehow benign… It is already HURTING large numbers of companies.
Here are 140+ examples of firms in the UK and the EU who have had to drastically change their plans because of Brexit.https://t.co/34XaTQuQpE
— Edwin Hayward 🦄 🗡 (@uk_domain_names) January 3, 2021
This is odd because journalists are all over Twitter. It’s now acceptable to integrate tweets directly into article or mine their quotes. And if you want to look like you did more in the way of reporting, you can contact the tweeter and get more detail and contacts.
Admittedly, there have been some exceptions. From the Guardian last week: