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Brexit: Yet More Chicken

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Brexit: Yet More Chicken

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While you were busy paying attention to Covid-19, the Brexit negotiations, such as they are, have been predictably going not well. Sir Ivan Rogers warned last year that it was possible that talks could break down entirely in the post March period as the Government came to grips with what would be required to complete a trade agreement. Mind you, that hasn’t happened, but EU negotiator Michel Barnier warned he didn’t expect last week’s talks, the third round this year, to go well. Both sides harrumphed last Friday that the other side had to yield for a deal to get done.

The Financial Times’ recap:

The time for a political intervention in the EU and UK’s future relationship talks is fast approaching.

After publicly knocking lumps out of each other on Friday, the two sides will spend this week separately trying to work out where to go from here. In effect, the EU and UK have handed each other ultimatums saying they need to shift position or the talks will rapidly reach stalemate….

“The round that we have just had is disappointing, very disappointing,” EU chief negotiator Michel Barnier said on Friday, after a week of video talks between his team and UK officials. “I hope the next round in June and the one after in July will be more positive.” 

Um, I’d like to know where this deus ex machina of a “political intervention” is supposed to come from. That assumes that Barnier and his UK interlocutor, David Frost, aren’t representing the views of their principals accurately. But Boris Johnson and his Brexiteer allies seem to believe genuinely that if they just hold firm, the EU will blink, and if not, they don’t need them that much anyhow.

On the EU side, Barnier staked out an extreme position on fisheries, which far more important politically than economically, and has gotten testy more often than in earlier stages of the negotiations. But again, he may simply be reflecting the views on his side of the table.

Remember some boundary conditions. The UK leaves the EU at the end of this year unless it asks for a single one or two year extension by June 30 and the EU approves it (the EU would of course approve it). Boris Johnson and his senior ministers have painted themselves into a “there will be no extension” corner. As Politico put it:

The Brexit timetable now looks more difficult than ever.

The EU seems to have accepted that the U.K. won’t seek an extension of the transition period, which ends December 31. That means June — the original deadline for an extension request — is no longer an important cut-off date, and leaves just a couple of months to negotiate a deal which has to be ready by October in order for both sides to ratify it in time.

Admittedly, this is the same Johnson who said he’d sooner die in a ditch than miss his Halloween Brexit, and then wound up having it go until January 31. So some are trying to dream up another UK face saving fudge, since concluding a deal by October seems exceedingly unlikely, and that’s another limit given the need to work and and agree on detailed language (there’s a reason that trade deals take a bare minimum of five years unless one side dictates terms, and services deals take even longer). From an op ed in Politico by Raoul Ruparel, the prime minister’s special adviser on Europe who worked on Brexit for three years under Theresa May:

Thanks to this impasse and massive disruption caused by COVID-19, those arguing for an extension to the transition have been vocal about why one is needed. Similarly, the U.K. government has publicly set out some of the reasons why it doesn’t want one….

I believe there is a way to tread this fine line — namely a conditional extension, which creates time to allow everyone to prepare for any deal reached. If it needs a Whitehall acronym, as these things generally do, I’d suggest Preparation, Ratification and Engagement Period (PREP).

This time would be used for U.K. and EU governments to engage with business on how to implement the deal, for all involved to prepare for the coming changes and for the final ratification steps to be taken. Such time to prepare is common for big legal changes, from new financial regulations to free-trade agreements, often via a phase-in period.

The PREP would see the U.K. and the EU agree, before June 30, 2020, that the transition period will be extended for a set period — say six or nine months (though that would still be up for negotiation) — if an initial agreement has been reached by a certain point later this year. Crucially, this PREP time wouldn’t create more time for negotiating, simply more time to implement whatever had been agreed in the existing negotiating period.

This is all very sensible-sounding, but I don’t see how this gets mooted. The EU has set it up that the UK is to request any extension and the options have already been defined. With both sides in “who blinks first” mode, for either side to float a trial balloon would be seen as a sign of weakness. And I don’t see Ruparel acting as a plausibly-deniable Friend of Whitehall; there’s way too much antipathy in the current government for anything from the Theresa May regime.

But having said that, I could see a fudge like this being worked out if a deal in principle had been struck say by October when both sides could depict a mini-extension as necessary to tidy loose ends up.

The two sides have been squabbling about process as well as substance, never a good sign. For instance, the EU has complained that the UK has refused to publish draft positions, but those are finally coming this week.

And while the EU is arguably unduly formal due to its 27 nation structure, the flip side is the UK hasn’t had to negotiate a trade deal for decades. So although I can’t prove it, I suspect some of the EU’s frustration is that the UK wants to deviate from well-esablished practices for how to handle these talks, and this “wanting it our way” comes off (and perhaps often is) as high handed to seasoned trade negotiators. A different manifestation of this syndrome: the UK also believed it was so special that it would be able to stitch up agreements quickly with other countries. With the exception of South Korea and Switzerland, its agreements so far are not with any significant economies. And since distance matters in trade pacts (and likely even more so post Covid-19), the South Korea agreement won’t produce much lift.

The Sticking Points

There are no doubt other bones of contention but I’m not sure it even makes sense to go down a long list, since the “level playing field” issue is fundamental and it’s hard to see how to square this circle.

The EU wants the UK to uphold EU standards in order to be able to trade with it on a privileged basis. That’s not crazy; most countries are sensitive about having importers adhere to food and product safety standards, for instance. And this Government even agreed to the idea when it signed the Political Declaration and the Conservative Party reaffirmed it in Parliament this January.

Johnson as is his wont, shortly reversed himself. The new UK position is that all that the UK wants is a deal like other countries have, you know, like Canada, which doesn’t have those meanie level playing field provisions. Oddly, the EU didn’t dispute that point even though it is false. Perhaps they don’t think it’s worth arguing with Government talking point aimed at a domestic audience, or perhaps they simply wanted to hammer their point, that the UK is in a unique position so don’t try cherry-picking other people’s deals. As we wrote in February:

The EU predictably rejected the UK demands and neither side has budged. The UK insists all it wants is a “Canada” style deal. In fact, CETA, the Canada-EU trade pact, does require a lot of harmonization, plus the UK agreed to what amounts to level playing field provisions with the US in its draft framework.

But in a sign of the EU not being willing to say more than it needs to, Ireland’s then Prime Minister, Leo Varadkar, said the UK couldn’t expect to get Canada provisions because smuggling because the UK was too close to and too enmeshed with the EU. Michel Barnier made more or less the same point, with an uncharacteristic lack of finesse. One might conclude that the EU is tiring of the ritual of explaining its red lines.

As an aside, Richard North’s son Pete North pointed out that “Canada” doesn’t even mean what the UK seems to think it means. Specifically, the two sides left some parts fuzzy. This is a manifestation of a point Sir Ivan Rogers has made repeatedly: all past trade deal presuppose the two parties want to get closer. Among other things, that helps increase the likelihood of good faith dealing. The fact that the UK was an obstreperous member of the EU and is taking an even more high-handed posture means the EU isn’t going to be keen about going fudgy on anything important (Irish border matters being a potential exception because no one had a good idea about what to do). From North the younger:

Were we to secure a CETA style deal, it is likely to be only the scaffolding without much of the brickwork. (CETA) is a living agreement. In more specific terms, as the Ecologic report has it;

CETA is a living agreement. This means that CETA is designed as a dynamic agreement that allows the Parties to respond to changing circumstances and needs. To fulfil these objectives, CETA establishes a new and comprehensive institutional framework for cooperation between Canada and the EU and sets primarily procedural obligations. In many cases, CETA does not set detailed and hard obligations that predetermine a specific outcome. This also applies to regulatory cooperation, where CETA introduces various procedural obligations (e.g. obligation to exchange information and to consult) but no hard obligations on substance. CETA also establishes a new institutional framework for regulatory cooperation which consists of the Joint Committee (JC) and the Regulatory Cooperation Forum (RCF).

Personally I don’t think a direct copy out of the institutional framework, done in a hurry, is a particularly good idea, and in all likelihood, not doable in time. But to make it more than a mixture of trade facilitation instruments and vague aspirations, there would need to be a far longer transition with more detailed talks.

Back to the current post. Chris Grey sees the UK position as not the result of a reasoned project, but hijacking by ideologues due to the lack of planning:

David Frost, the UK’s Chief Negotiator, has reportedly briefed the cabinet to the effect that the EU are still refusing to grant the same deals that it has done with other independent countries. In other words, the flawed logic of ‘sovereign equals’ discussed in my recent post continues to guide the UK’s approach. As noted there, it is an approach that almost guarantees that the negotiations will fail..

As always it’s worth recalling, as the 2016 Referendum retreats into history, that the current situation grows organically out of the fact that the Brexiters never had an agreed plan for how Brexit should be done, despite the fact that they had spent years scheming and dreaming for it to happen. Since then, at every stage, the hardest of Brexiters have driven the meaning of Brexit in an ever-harder direction. Thus we have arrived at the present point when virtually any kind of deal is ruled out by red lines that have now turned the deepest crimson.

Yet this does not mean, as unworldly cynics often claim, that no deal was ‘the plan all along’. It’s far worse than that: the central truth about Brexit is that there was no plan all along. It’s true, no doubt, that there are some Brexiters who have always wanted a no deal outcome. But there are plenty of others who genuinely harbour the fantasy that it should be quick and easy to do a deal, and that Britain ‘holds all the cards’. They didn’t for the most part cynically deceive the voters, they naively deceived themselves. And, moreover, the current UK negotiators are almost certainly fully and genuinely in sway to the theology of the Brexit Ultras that, if met with sufficiently firm resolve, the EU will break its own red lines.

This is not inconsistent with having no plan for Brexit. On the contrary, it is one of the reasons for having no plan, since the assumption is that all that is needed is sufficient determination and, no doubt, ‘bulldog spirit’ for all obstacles to disappear. Such reasoning ought to have been discredited by May’s government’s initial attempt – led by David Davis – to negotiate in just that spirit.

But in the circular logic of Brexiters, the failure of their claims invariably proves that they were right all along. For example, this week Douglas Carswell argued that the EU “constantly failed to make the concessions they ought to have made” (my emphasis) and so “administered to Theresa May the equivalent of a punishment beating”. On this analysis, all would have been well had May not – with the Chequers Proposal that saw the resignations of Davis and Johnson – blinked in the face of EU pressure (rather than belatedly, and partially, recognized the economic damage of the original approach).

Johnson maintains that if they two sides aren’t well along to an agreement by the June EU summit, the UK will go its own way and prepare to deal on a WTO basis. This is the functional equivalent of a crash out. Admittedly, the last time it looked like that was a real possibility, the EU identified a series of key areas in which it would allow the UK a limited continuation of EU privileges (they were time limited as well as in some case being substantively less permissive than current arrangements). In other words, the EU would set up some waivers to cushion the impact for its benefit. Those would presumably help the UK but that’s an unintended consequence.

And yes, sports fans, no deal Brexit is baack! From RTE:

Tánaiste Simon Coveney has said that a no-deal Brexit is now a real risk because the UK is looking for something different to what was committed in the Political Declaration….

“Until the UK changes its approach in the context of giving the EU assurance that they are not going to effectively deregulate their economy while expecting free access in the EU single market, I think we’re going to continue to be in real difficulty in these talks,” he added.

And Politico:

Brussels is not budging, and sees this as key to avoiding a race-to-the bottom competitor on the EU’s doorstep. “We are not going to bargain away our European values to the benefit of the British economy,” the EU’s chief negotiator Michel Barnier said. “Economic and trade fair play is not for sale. It is not a ‘nice to have,’ it is a ‘must have.’”

The EU27 also underlined its intention to follow what Brussels sees as the letter of the law by on Thursday launching disciplinary proceedings against the U.K. for violating the EU’s freedom of movement requirements….

But if neither side is willing to move, the chicken game risks leading to a car crash — a no-deal exit from the Brexit transition period.

London has always stressed it’s willing to take that risk…

More and more this looks like a risk the EU is also more willing to take than to give in on its core issues. …

The bloc even seems ready to move to the side of the road and watch the U.K. drive itself off the cliff.

This same Politico piece did highlight a bit of movement on some issues and rhetoric, but it’s awfully modest. An impressively detailed RTE story earlier this month described more constructive talks on the Northern Ireland Withdrawal Agreement issues, but even so, the UK seems unwilling to take measures to their logical conclusion. For instance, it’s planning to hire more vets for live animal inspections, but isn’t willing to build the needed infrastructure at ports that need it, with the reluctance apparently being bad optics.

So here we are, almost full circle. If coronavirus retreats far enough over the summer, we may get what will feel like a Brexit rerun.

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