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Brexit: Huge Spanner in the Works – Negotiation of New UK Trade Deals Verboten Till Exit Complete

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The BBC has a bombshell report that has not yet gotten the attention it warrants.

As we have stated, there was a big timing issue with a Brexit even based on a superficial look at the mechanics. As President of the European Council Donald Tusk made clear, the UK would be able to complete the steps necessary to leave the EU in two years. That matters because once the UK invokes Article 50, a two year clock starts running. If the departing country has not negotiated its exodus with the rest of the EU, it is out by default. While the two years can be extended, it would take a unanimous vote of all 27 remaining members. Give the lack of good will towards the UK, and the desire of the remaining members to use their negotiating leverage, it would be extremely dangerous for Britain to assume it could get additional time.

Mind you, the process of unwinding the current relationship between the UK and the EU is a tall order. Then the UK also has to enter into new arrangements not just with the EU but other trade partners, since most of those relationships were not bi-lateral but through the EU. Hence Obama’s threat, that the UK would go to the back of the line in negotiating a new relationship if it left the EU, was a serious matter.

Experts estimated the bare minimum amount of time for negotiating and consummating new trade deals was five years, and that that would be very unlikely to be achieved in practice. Moreover, trade negotiations can fail, which means there is a a possibility of it taking much longer.

So the UK was already faced with a gap of at least three years, and more likely longer than that, between when it left the EU and had a new trade regime in place, particularly with its most important trading partners on the Continent.

But the BBC interview with the EU’s most senior trade official reveals it’s even worse than that. The negotiations of the UK’s departure from the EU and new EU trade arrangements cannot take place in parallel. They must be sequential. No new deal talks with the EU until the exit is completed.

And the EU Trade Commissioner, Cecilia Malmstrom, also said the closest analogue was the negotiations with Canada (and recall that Canada is held out as one of the models for a post-Brexit relationship), took seven years to negotiate and will take an additional one or two years to ratify.

From the BBC (emphasis ours):

The European Union’s top trade official says the UK cannot begin negotiating terms for doing business with the bloc until after it has left.

“First you exit then you negotiate,” Cecilia Malmstrom told BBC Newsnight.

After Brexit, the UK would become a “third country” in EU terms, she said – meaning trade would be carried out based on World Trade Organisation rules until a new deal was complete…

WTO rules restrict the circumstances in which countries discriminate in favour of each other in trade. Otherwise, they must apply to each other the tariffs they apply against the rest of the world….

There is concern in the City that having to do business for years under WTO rules could be disastrous for the UK’s service industries.

Asked whether sticking to such a process wouldn’t harm the economies of all EU members, Ms Malmstrom replied: “Yes, but the vote was very clear.”…

Under EU law, the bloc cannot negotiate a separate trade deal with one of its own members, hence the commissioner’s insistence that the UK must first leave.

It is also against EU law for a member to negotiate its own trade deals with outsiders, which means the UK cannot start doing this until after it has left the EU.

Taken at face value, these rules mean the UK cannot conduct its own trade talks for up to two years – a fearsome challenge to any prime minister trying to deliver Brexit…

But even a Norway-style single market access deal, they caution, could take years to negotiate, leaving the UK trading on WTO terms in the meantime.

Even worse, the article mistakenly depicts WTO rules as an automatic default. That is not the case. The Director-General of the WTO has separately stated that the UK would also need to negotiate new arrangements with the WTO, and the process would be fraught. And recall the issue we boldfaced above: as long as it is a member of the EU, the UK cannot negotiate other trade pacts. So it can’t begin negotiating with the WTO during its Article 50 departure process. From a Financial Times article in Mayk (emphasis ours):

Britain joined the WTO under the auspices of the EU and its terms of membership have been shaped by two decades of negotiations led by Brussels. If Britain voted to leave the EU it would not be allowed to simply “cut and paste” those terms, Mr Azevêdo said.

Britain would have to strike a deal on everything from the thousands of tariff lines covering its entire trade portfolio to quotas on agricultural exports, subsidies to British farmers and the access to other markets that banks and other UK services companies now enjoy.

“Pretty much all of the UK’s trade [with the world] would somehow have to be negotiated,” he said.

The WTO had never gone through such discussions with an existing member, he said, and even the procedures for doing so remained unclear. But the likely complexity of such talks, Mr [Roberto] Azevêdo [Director-General of the World Trade Organization] said, made them akin to the tortuous “accession” negotiations countries go through to join the WTO. Even a small economy such as Liberia, which last year became the WTO’s 162nd member, took years to agree the terms of membership.

The implications are ugly. Again from the pink paper:

An exit from the EU, for example, would cause the UK to lose the preferential access to other markets covered by 36 trade agreements with 58 countries negotiated by the EU. As a result, to remain compliant with WTO rules the UK would have to impose higher “most favoured nation” tariffs on imports from those 58 countries, while they would have to levy their own surcharges on British exports, Mr Azevêdo said.

A WTO analysis had calculated the cost of the additional tariffs on goods imports to British consumers at £9bn, while British merchandise exports would be subject to a further £5.5bn in tariffs at their destination.

“The consumer in the UK will have to pay those duties. The UK is not in a position to decide ‘I’m not charging duties here’. That is impossible. That is illegal,” Mr Azevêdo said.

The only other option available to the UK would be removing all barriers for all WTO members, effectively turning its economy into a duty-free one like Singapore and lifting the protections politically sensitive domestic industries enjoy under the EU. “That is possible. But that is also very unlikely,” he said.

Azevêdo issued similar warnings in the Guardian in June. He stressed he had not been asked by anyone in the Remain campaign to weigh in, but he felt compelled to speak up to correct misinformation. He also stressed that the UK had no seasoned trade negotiatiors and recruiting the team would also take time. From the article:

Azevêdo said this would be an all-or-nothing approach: “If you are a duty-free country, you can’t be selectively duty-free. If you want to go duty-free, you have to go duty-free across the board. There can be no tariffs on anything, including agriculture and steel.”…

Noting that only Macau and Hong Kong adopted a complete duty-free approach, Azevêdo said: “I recognise reality for what it is. I think it is very unlikely it (a duty-free world) is going to come to pass.”..

“It is very difficult to predict. Russia’s accession to the WTO took 20 years. Other negotiations happened faster. It will be a very high risk bet to hope that negotiations would be quickly completed and that negotiations would be uneventful,” he said.

Presumably, the reason for rejecting the Hong Kong option is that Britain has more in the way of domestic companies that need the shield of WTO rules than potential exporters that would gain. Recall how keen China was to become a member of the WTO. In addition, the UK will likely lose more on its financial services “exports” to Europe if it cannot negotiate deals that give advantaged access to its customers to European exporters (ie, the Singapore “no barriers” option throws away a critically important bargaining chip).

The Leave campaigners had no idea what they were advocating. If the Government has any comprehension of what a Brexit really entails, they are certain to work to find a way to ignore the referendum results while minimizing the political fallout.

In some ways, the fix the UK is in is analogous to the big impediment we discussed at length to Greece leaving the Eurozone. Setting up a new currency has very long lead times. It took eight years of planning and three years of execution for the launch of the euro to go smoothly. The big obstacle is not the introduction of physical currency, which would take the better part of a year. It is all of the IT systems work, the overwhelming majority of which is not under Greece’s control but that of many other parties, such as the very fragmented members of the electronic point of sale industry. As we’ve had to stress, much of the code in bank payment systems is in Cobol or even older formats, where every line of possibly relevant code has to be inspected manually and substitutions made manually, and coders of different sub-systems in banks often used different designations of key data items.

Here, the analogy to the millions of lines of clunky code is the density and complexity of the trade agreements, and the labor-intensiveness of striking new deals. And as Azevêdo warned in the Financial Times:

“It is extremely difficult and complex to negotiate these trade agreements. And slow as well,” he said. “Even if you are in a position to negotiate quickly with all these other members it doesn’t mean that they will be in a position to negotiate with you because they have their own priorities.

No wonder Johnson was defenestrated and Brexit true believer Gove perhaps duped into being the hatchet man, which if you believe the reports in the Torygraph, has severely damaged his odds of becoming Prime Minister. The Conservatives’ coup has moved two of the most determined Leave advocates out of the running. This big change in who is a serious PM candidate does not prove that the Tories are groping for a way to back out of Brexit, but it is a necessary condition.

So if the current prognostications are correct, and Theresa May is indeed “coronated” as Prime Minister (which rings hollow to US ears, given how well similar plans worked for Hillary Clinton), it looks to be a classic example of a woman being handed the reins because no sensible man would want the job.

Even if the new Prime Minister and her allies recognize that a Brexit is virtually unworkable in practice, it’s not clear how they extricate themselves at an acceptable political cost. 58% of their voters backed Remain. The party risks a backlash not just from them but also from Remain voters who made up their minds right before going to the polls, meaning they were not strongly committed, and take offense at the will of the public being ignored. Going through any process to relitigate the issue (a second referendum, having a Labour stooge in a pocket district demand Parliamentary approval) would tear the country apart and risks reconfirming the Leave decision.

One option would be inertia: do nothing and hope voter support cools. But the EU, IMF and other parties are not willing to let the matter pend. European Commission president Jean-Claude Juncker said a new PM who backed Leave should invoke Article 50 the day he assumes office; one who supported Remain should do so within his first two weeks in office.

Juncker was not speaking on behalf of the EU, but his words reflect the keen desire of European officials for the UK to stop faffing about. Given the strenuous EU insistence that the UK act soon, a new PM could give some excuses regarding the need for further delay. But the danger with that is the credible-seeming pretexts, like needing to sort out what the UK’s preferred post-Brexit relationship would be, and the need to recruit, qualify, and hire trade negotiators, are all consistent with Brexit being on track. That works against the domestic imperative, of softening up Leave voters for ignoring the referendum results.

And remember, as Clive warned, the EU is unlikely to sit pat if its officials perceive the new government to be stringing them along about a Brexit. They no doubt have bureaucratic tortures of various sorts they can inflict (strict enforcement of inconvenient rules that are normally not enforced is a stating point) and one can expect them to start applying them in an escalating manner.

Perhaps May can manage Leave expectations down before she becomes PM. But since she and the other short-listed candidate need to win the approval of the 150,000 grass roots members, I doubt she can go very far in that direction.

The upside is that the Tories have served up a dog’s breakfast and they will have to eat their own cooking. So expect lots of schadenfreude in the coming months. It couldn’t happen to a nicer bunch.

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91 comments

  1. Pavel

    Wow, Yves, that is a bombshell indeed. We see now what David and Boris’s Little Adventure has gotten the UK into… or rather between — a rock and a hard place. Or Scylla and Charybdis as the classically-minded Boris would no doubt put it, in the original Greek no less.

    Kidding aside: I don’t see how Brexit can go ahead, for the reasons you discuss here — if only because of the global logistical nightmare it would create. So some Tory politician will have to take the bullet; Teresa May, it seems. She is a horrid, authoritarian woman, but the world has turned upside down to the point where she is better than the alternative (Michael Gove, horrid in his own unique way).

    Apart from anything else, there is the “opportunity cost” to all this: political time and energy and capital that could be dealing with those trivial matters like global warming will be wasted on Brexit matters.

    Just about every month I wonder, How could things possibly get any worse…? And each month somehow they do. What a world. And that’s not even considering the future US president!

    Kudos for the “Torygraph” usage!

  2. ambrit

    Wouldn’t an extended period of totally “free market” trade be a Neo-Liberal paradise? Opponents could frame it as an “acid test” for Neo-Liberalism and let the cold hard facts convince the UK electorate to jettison the Neos. As body builders say; “No pain, no gain.”
    The other, extreme option would be direct rule from Buckingham Palace. Establish a government of National Unity and revert to Englands’ historical policy concerning The Continent; Divide and Rule, or at least, Influence.
    Remember, the “nation of shopkeepers” has had a long history of ‘muddling through.’ What I see as the big lesson to be learned from the Brexit vote is that Nationalism is alive and well. Europe playing ‘hard ball’ will probably have a counter intuitive effect. The harder “they” push, the harder the ‘commons’ will resist. A well run Leftist party could manage that.

    1. nobody

      Revert?

      “The Foreign Office is pro-Europe because it is really anti-Europe. The civil service was united in its desire to make sure that the Common Market didn’t work. That’s why we went into it… Britain has had the same foreign policy objective for at least the last 500 years: to create a disunited Europe. In that cause we have fought with the Dutch against the Spanish, with the Germans against the French, with the French and Italians against the Germans, and with the French against the Germans and Italians. Divide and rule, you see. Why should we change now, when it’s worked so well?… We had to break the whole thing up, so we had to get inside. We tried to break it up from the outside, but that wouldn’t work. Now that we’re inside we can make a complete pig’s breakfast of the whole thing.”

      https://twitter.com/sushantsareen/status/746704593367797760

      1. vlade

        (for the US audience) This is a quote from Yes Prime Minister. Which doesn’t make some of the sentiments untrue, but still should be recognized for what it is.

        With that in mind:

        Bernard Woolley: Well the party have had an opinion poll done and it seems all the voters are in favour of bringing back National Service.

        Sir Humphrey: Well have another opinion poll done to show that they’re against bringing back National Service.

        Bernard Woolley: They can’t be for and against

        Sir Humphrey: Oh, of course they can Bernard! Have you ever been surveyed?

  3. Fazal Majid

    Not sure the prohibition would apply to informal talks, but in any case Britain’s trade-negotiating talent pool has atrophied since the EU took over those responsibilities. There are no doubt Britons currently working for the EU that could form the nucleus of a British trade team, notably those who worked for Leon Brittan, but just getting them up to speed will be a significant undertaking.

    1. Yves Smith Post author

      The EU has made clear they won’t entertain informal talks on the exit, and the cold shoulder from both the EU trade commissioner and the WTO director-general are consistent. The WTO director-general in particular stressed that the various counterparties to these deals have their own sets of priorities. Even if the UK is potentially an important market, no one is going to devote all that much in the way of resources to “preliminary” talks, Moreover, given how long they take, it seems there is a tremendous amount of devil in the details. So even if you are correct, it would also appear that “preliminary” talks would not shorten the overall timetable by very much.

      And look how long it took Russia to win WTO entry! 20 years! Admittedly it may have been smaller on a relative basis then, but 2013 data shows the Russian economy at roughly at $2.1 trillion GDP versus $2.6 trillion for the UK. But the delay probably was not due to perceived importance but issues like sticking points, or Russia (like the UK now) lacking a large cadre of seasoned trade negotiators.

      1. C.Raghavan

        The relevant part of the EU treaty on withdrawal is cited below. Art. 50.2, makes clear once notice is recd, the Union “shall negotiate and conclude an agreement”. The use of “shall” makes it mandatory. It further sets out the content of that arrangement as “setting out the arrangements for its withdrawal. While article 50 envisages no agreement may be reached at end of 2 years, once it is invoked, and in that event, there will be separation without any agreement, it requires as part of the negotiations to reach an agreement is “the framework for its future relationship with the Union.” If the UK has no arrangement for trade with the Union, the Union will have none either! As for WTO, the legal issues will be decided thru a dispute settlement system and the appellate body, not the DG or his views on June 7 London statement, nor the top EU officials or BBC. In terms of Art XI.1 of the WTO treaty, the UK is a founding member, and will be after any separation. As member it has all rights and obligations from texts of the agreement, and rights from schedules of commitments of other members. If DG is correct, after separation, it will end up with all Rights and no obligations. Visavis UK as WTO member, EU will have obligations, including EU tariff schedules, but no Rights!
        Art 50 of the EU treaty is below:

        1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

        2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

        3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

        4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

        A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

        5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.
        raghavan

        1. Yves Smith Post author

          “Framework” not a completed arrangement. It simply means that the withdrawal proposal should not be inconsistent with its future desired arrangement.

      2. Sunny129

        Bottom line question:

        Who is going to get HURT more, by UK not triggering Article 50. My guess both get hurt but by prolonging, the detrimental effect on the European and Global Banking, wiil be apparent as the weeks go by?

        The continued instability, uncertainty. volatility are NOT conducive to the Global Economy/Commerce, although Mkts is acting as if nothing matters!

      3. John Wilson

        Much has been discussed about the real difficulties faced by the UK in acheiving “brexit” , while little emphasis has been placed on the total weakness within the EU itself. Major nations have their own substantial minorities demanding exit strategies while EU bureaucrats are pushing for measures to make it impossible for other nations to leave. Add in the the budding financial debt implosion in the EU and one could argue that no matter how leaky the brexit lifeboat might be , it’s still wiser than actually staying on board the Titanic. In the long run the UK will be much better off simply walking away.

  4. vlade

    It’s worse. Basically, everyone and their dog talks about tariffs. That’s “just” a cost to be added on the top of the import price, but relatively straightforward. The real problem is accreditation – basically saying “yes, your goods are good enough for our regulation (which is set by us, not you, thank you very much)”. W/o that, you get hit by having EVERY container shipped in inspected and tested on a sample, which can take a week easily. That’s both cost in terms of money, but even more importantly, cost in terms of time.

    There are treaties to deal with it, called MRA (Mutual Recognition Agreements). They run in tens or hundreds of pages, and those well known countries that have no WTO tariffs agreements with EU – such as Australia – still have tens of MRAs running collectively in hundreds to thousands of pages. Which need to be negotiated and signed. It’s worse with EU for animals trades (basically, you need to designate Border Inspection Ports, and set them up, which takes time).

    Basically, since no-one at UK had to negotiate a deal for two generations, they forgot not only how to do
    it, but also what does it actually mean (how they look like). As in there are both tariff and non-tariff (technical) barriers to trade. Just about everyone I talked to was talking about tariffs, but few if any about NTB. And all it would take is to look at Japan (which knows how to use NTB very very skillfully).

    Trade-wise, we’re royally screwed.

    Disentangling Lehman’s mess starts looking like a walk in the park compared to Brexit.

    1. vlade

      and I’m excluding from the consideration MRA agreements related to financial regulators. That’s going to be feed lawyers for years to come.

  5. Richard

    I totally understand the implications here. But when all is said and done, you can’t prevent a country leaving the union just because of the complicated logistics involved. That would be absurd. You can’t subject a country to the roach motel syndrome which, in effect, is what is happening here. Or have the technocrats in Brussels understood this all along, which would explain their arrogance and self-confidence at every turn? This reminds me of the Articles of Association of the 13 original colonies which were promised the option of seceding at any time. Reality, of course, showed otherwise and the Civil War was the ultimate ‘reminder’ that this was not to be the case (the red herring of ‘slavery’ notwithstanding).

    1. vlade

      The problem with what you call “logistic” is that it in effect kills the economy – it has a potential to be much worse than 2008 crisis, all it takes is for one party to show bad will. And since I haven’t seen any good will on either side, the probability of this ending Greek-style-tragedy is extremely high.

      As Yves says, this has large similarities with Greek EUR-xit. Yes, it would be best for Greece. Even for EU. Yes, Greeks voted for it (despite everyone expecting them not to). But in the end EU made the cost so high, that if you consider what’s going in Greece now is bad, it’s still MUCH MUCH better than what would happen if they went out (basically, I expect they would run out of food pretty damn quick). And I say this even as I disagree with Yves on the length of the new currency adoption (if it’s in Cobol, and has hard-coded currency stuff, it has Drachma by definition too, but never mind).

      To take your “logistic” metaphor – U-boat war almost sunk the unsinkable British Island. Because of logistics. We live in much more complicated world than even 50 years ago.

      1. Left in Wisconsin

        We live in much more complicated world than even 50 years ago. I am not competent to challenge any of your claims about the costs of Brexit (or Yves’ claims about the costs of Grexit) but this is how things go: regimes get instituted, they become more complex, the world changes and that complexity becomes both more essential and more problematic, at some point rupture.

        IMO the issue isn’t complexity or even cost/benefit. The EU has a major problems with a) democracy and b) providing decent employment. For whatever reason, residents of “advanced” countries in the 21st century still tend to fetishize these things. Either the EU “improves” or its days are numbered.

  6. Expat

    I don’t understand why this is shocking or even surprising. The UK has decided to leave the EU. But before making the final step, they want all kinds of privileges and guarantees. This is both illegal and anathema to the concept of the union, not to mention a terrible potential precedent.

    If the UK thinks being outside of the EU is so wonderful, they should hasten their departure and then come back to negotiate like any outside country would. Frankly, they should also not be surprised if the EU is particularly harsh and even vindictive. Britain has spent the last sixty years mocking and insulting the EU. They have been tepid members at best as they tried to pretend they were superior to the Continent and therefore apart from it.

    If they like, they can apply to become a protectorate of the US! We can trade the UK for Puerto Rico plus a territory or state to be named later.

    1. DarkMatters

      This isn’t about “wonderful”; it’s about popular will (with the electoral margins as they are). But along with you I’m expecting “harsh and vindictive”. With any respect for democracy and attempt at managerial competence, the UK and EU governments at this point should be working to implement the separation as painlessly as it is possible all around. Even if your description about the UK is accurate, to the EU, this represents not only a chance to rid themselves of a gadfly, but to demonstrate their vaunted managerial skills to the world. Transparent discussions should be going on about what options exist, about which parties will be hurt and which will benefit, and which plans would work to widest advantage. That would be the kind of EU performance that would earn global respect. But that level of competence and good intention is beyond the EU’s reach. Just like the case in Greece, the EU will do its best to engineer a punitive humanitarian catastrophe. The irony is, the original selling point for the EU was to transcend exactly this sort of destructive pettiness, and we now find them its greatest practitioner.

  7. windsock

    Malmstrom is the one pushing TTIP and responsible for it within the EU. Presumably she wants UK to sign it as an EU member because it will be more difficult to impose it on us when we are out, if it has not gone ahead and we have a JC government (unlikely, but there is a percentage chance). It will also be more difficult to escape if we have already signed it.

    I don’t get the logic. How can we negotiate exit terms if we don’t know what the trade terms will subsequently be? Aren’t they part and parcel of the same thing? (Forgive my ignorance. I’m just an economic and political layman.)

  8. BruceNY

    This is exactly the pretext the new PM needs to push back invoking article 50: “they wont negotiate with us.” The EU cant force the Brits to invoke Article 50, so if the EU does retaliate, the Brits can both retaliate on imports, and tie things up in courts. More importantly, they can try and paint the EU as a giant bully, which might encourage other secession movements.

    Whether the Brits have the leadership and the stomach for such a protracted fight, I have no idea.

    1. Jim Haygood

      “First you exit then you negotiate,” Cecilia Malmstrom told BBC Newsnight.

      How incredibly silly. Malmstrom is a poster child of the kind of self-important, obstructionist EU bureaucrat that prompted Brexit.

      “No bathroom visit for you — you don’t have a hall pass.”

      1. Dan

        No she is making sense from an EU point of view in is in,out is out.

        Once out trying to agree some form of trade deal makes sense but that is dependant on agreement of 27 nations and the EUCO and EUParl it will probably happen but it might not.

        If you are not willing to be fully out with no halfway house why are you pretending you are.

  9. rentokil

    Does this mean that in an interconnected world that we are slaves to the status quo? Are the short term costs too high for anyone to dare change the rules?

    I really pray that is not true.

    UK may have its share of chavs, but I am always struck by the general quality of human capital in the UK. Does this count for nothing as if its potential can only be realised by treaties and governance?

    I will weather the short and medium term costs in the belief that things will be better in 10 years, and more so in a generation.

    UK is not at all like Greece. Specifically we have our own currency, and geopolitical relationships outside Europe. Our empire has gone, but everyone knows who we are (and btw that isn’t the case for some of the Eastern states of the 28). There is also some (small) element of MAD between us and EU.

    I feel for the Dutch. Inside the Eurozone, they will never get out.

    1. Seb

      The Dutch will be fine. In fact Amsterdam stands as the most likely preferred place of relocation for the UK’s services industry. As per today’s links.

      1. ambrit

        Yes. Both sit in ex-swamps which would be the first to go under when the sea level rises to any significant degree.

      2. rentokil

        Amsterdam may benefit from eating London’s lunch but they are a city, and like in the UK referendum, the cities are the beneficiaries of EU trade. The peasants vote too as we found out in the UK, and where is their gold?

        As far as I can tell, the Dutch are freaking out about immigration. Of course, the government has done the same as what happened in UK, pretending it isn’t an issue… until a new party steps up to represent their pent up anger…

        As an aside, I find it hilarious that Hollande is seeking to create jobs by ‘stealing’ UK EUR clearing business. He’s fighting the last war: as margins rapidly shrink in traditional financial business the big prizes are in Fintech, CNH trading, etc.. It’s typical EU behaviour, belief in top down allocation of jobs (selflessly targetted into Paris!), with no thought given to the idea of bottom up disruption. No wonder EU lags the world in growth.

  10. Synoia

    There are two choices, stay (most likely option) or leave.

    Stay will result in a political upheaval, but is possible. The referendum is non-binding, and now the costs are becoming clear. We know that the EU will make leaving as difficult as possible, and staying as punitive as possible (Hell hath no fury).

    Leaving mean one may have to run a closed economy. Possibly turning one’s back on the WTO in addition.

    Sooner or later this trade regime (one ring to rule them all) need to be broken, because we know the result of keeping it is continued misery.

    The question becomes do we suffer on our own, with our own sovereignty, or do we suffer under this trade regime? Neither option is good for the common person.

    1. James Levy

      I’m not clear on what you mean by “a closed economy.” Britain would starve and its factories cease functioning for lack of raw materials if Britain were a “closed” economy. It would have to somehow arrange barter deals (giving what for essentials is a good question) or get other states to accept the pound rather than dollars or euros for imports, because access to those dollars sloshing through the city is going to be in short supply and Britain doesn’t earn enough on exports to pay for her imports.

      Britain is better off in the long run if 1) they follow through on Brexit and 2) they elect governments with the best interests of the mass of the people at heart. Doing 1 without 2 gets you nowhere, as the costs of Brexit will simply be transferred to the 90% of the population who aren’t essential or well enough connected to the 1% who own and run the place.

      1. templar555510

        Oh hooray someone in America gets it ( sort of ) . Some of us who voted Leave believe that your 1) and 2) maybe about to happen. As I type this Osborne has abandoned Austerity and his absurd idea of turning the deficit into a surplus . Only a few weeks ago he pronounced an emergency budget cranking up the pain. Now the peasants have show some muscle and frankly by voting Leave the risk looks like it was worth taking. On a more general note I can’t believe all the Americans writing on here who bemoan like crazy the oligarchs and predators et al and yet think Brexit a bad thing. No gain without pain. And perhaps we’ll all stop buying Mercedes and BMW’s . Now who do you think that would piss off – big time.

        1. MyLessThanPrimeBeef

          No pain no gain.

          We know what the ‘other side’ does, always.

          They don’t give up…NAFTA rejected? Try again. The same with bank bailout, and will be with TPP and all the other deals.

          TPP will involve lots of work, a great deal of negotiation, many, many years, with many, many nations.

          But ‘they’ are not deterred, but persist, see money go (lose money – to you and me, that would be pain) without instant success.

          How can we do less?

          If you want anything in life, you have to take it.

          No one is going to give it to you.

  11. Stefan

    They are going to have to find a way to walk this thing back, and it may fall to the Queen to be the one to explain it to her people.

      1. ambrit

        Low blow. He’ll never make it to the throne. If he does, I’d give odds on a Regency.

  12. theeuwillcollapse

    Well this is only politics. If the EU went directly th the Germans, and not just the German government, and pointed out the huge German exports to the UK, this would move things right along. The UK could also now directly negotiate in the Anglosphere if it wanted to. If fact, the Aussies and the Kiwis have already made openings. It is true that the current nitwit government in Canada might be bought by the EU, but it is just a matter of time before that buffoonish government fails.

    What we are seeing are delaying tactics by the Tory “leadership”; they no doubt hope that they can cow the electorate. Time will tell if the globalists have their way or not. Even if they do, it will be short lived.

    The Eurocrats are essentially incompetent and not a little insane, judging by the antic of Junker the other day, and the bail out deal with Italian banks.

    And of course, Junker WAS “speaking for the EU” in an actual if not “legal” sense. He was speaking for the EU Nomenklatura, which is the true constituency of the EU bureaucracy.

    Lastly, the BBC is a propaganda arm of the Establishment Left and the NWO they are trying to foist on the world. It cannot and will not have “bombshell reports”. It issues propaganda and agitprop, and its employees hate the actual, real and historical UK. Moreover, without government support they would all be hard pressed to make a living.

    Oh and it is not true that “The Leave campaigners had no idea what they were advocating.” 1) They are no longer “campaigning”–there has been a vote–and what a grand vote for freedom it is, and 2) they know that there is more to a nation than a “custom house”. You are actually placing the destruction of one of the great peoples, nations and races (that is right, races) against some short term commercial interests. It is you that are misguided, not the Leave crowd. You should really sit back and reflect on that.

    You people here rail against “the banksters” and yet you at the same time sheer them on in their attempt to destroy Europe, and strip mine it.
    Shame on you.

    The truth about “May”, BTW, is that Boris and Grove saw the trap tat they are in. whoever steps into the PM role is committing political suicide” no matter what they do, a large group of the electorate will despise them. Comically, they hung it on the power grubbing ambitions of a feminist, and even more comically, she bit. May is a Eurocrat, and she will do her part to try to overturn the referendum. Those of you here mindlessly cheering on the Remain crowd, and wishing for the destruction of what remnants there are of democracy left in the UK are the one that have “no idea what they were advocating.”

    It shocks to see just how mindlessly brainwashed the people here are. The EU [project will end as a disaster–let us hope that it does not permanently destroy Europe and the European peoples. The real citizens of the UK–that is, those outside the corrupt elites and their Nomenklatura and thrid world clients–have made the right choice. If you actually cared about the UK, which you most manifestly do not–then you would cheer them on.

    1. m-ga

      It’s possible to speculate on events without endorsing any side.

      In fact, it’s more useful to do so. Allowing partisan feelings to influence one’s analysis of events is likely to introduce flaws into that analysis.

    2. Moneta

      Those in the remain are quick to say that those who vote for Leave do not know what they are voting for… assuming they are more enlightened. LOL!

    3. James Levy

      Your “real Britons” versus “third world clients” and crack about feminists kinda gave you away.

    4. Yves Smith Post author

      It is very easy for arm chair revolutionaries like you to advocate for going to the barricades when you are not on the front lines. When you are prepared to take a bullet, maybe we’ll take your brave talk more seriously.

      I have paid a large economic cost for betraying my class interest, I sincerely doubt you have done anything even remotely comparable. So stop acting as if you have any claim to moral superiority.

    5. Clive

      There are absolutely no winners here. I voted Leave on the basis of the wilful, borderline-vindictive destruction wrought on Greece (and, to a lesser extent Spain and Portugal) by the EU, plus the recklessly risky proxy war in the Ukraine which was a joint EU-US adventure. But not for one single second did I believe that Brexit was the black-and-white winner-or-loser dichotomy you’ve just made it out to be. There’s no buyer’s remorse here, I’d do the same again even with our new 20-20 hindsight, however, I’d have it completely wrong if I assumed there won’t be collateral damage. There will. And there’ll be a lot of it to go around.

      As usual, those who are least able to withstand it (the working class, those who’s lives are precarious at best) will suffer the greatest impact. Those like me who are fairly well insulated will suffer the least. You’ve not said, but I have a hunch you might be more aligned to the latter than the former. Regardless, you’ve lost all sense of proportions — not to mention human decency — if you trot out dismal old tropes like “the sacrifice you’ll be making is worth it in the end” when it’s not likely to be you that’s doing the sacrificing. I wish I was as comfortable in throwing some sections of the “great peoples, nations and races” under the bus as you seem to be. A modicum of soul-searching is in order, not the easy certainties that the only down side will be to “short term commercial interests”.

      Let’s list a few things that are now no longer a given: Environmental protection, labour rights, human rights, consumer protection, a steadfast defence of food standards, data protection, competition / anti monopoly enforcement, potable water quality standards, vehicle emission controls… that is just an off-the-top-of the-head list. Are you seriously telling us that all these — and many more equally or more important to “progressives” — are now perfectly safe in the hands of the crackpot combination of UKIP-affiliated Tory MPs or the Socialist In Name Only Labour parliamentary representatives?

      If so, I’ll have some of what you’re smoking, it’s obviously good stuff. Given the very real potential for utter disaster, you might need some more of it to get through the next few years. You may be new to this blog. In which case, allow me to advise you of a couple of important house rules.

      1) One-sided analysis the chooses to ignore negative outcomes while only putting up hoped-for positives will get you comprehensively shredded.

      2) Handwaving away other’s suffering because It Is For The Greater Good is not usually seen as being a good enough argument.

      In short, Rebecca of Sunnybrook Farm was only a fictional story and not a policy document for a post-Brexit UK.

      1. A52percenter

        Like Clive, I voted Leave primarily due to the awful, treatment of the 99% across many parts of Europe (southern Europe in particular) and, it turns out, the 52% here in the UK. I too knew it was never going to be plain sailing and I guessed it might probably be against my own private interest: I told my friends I was 60:40 in favour of BREXIT and so would vote Leave. My friends – middle class, many of whom I was at a top university with, were horrified. I endured awkward silences, an unspoken questioning as to whether I’d lost my mind. Before the vote, one, just one friend (who happened also to come from a working class background) acknowledged that maybe our group had lost touch with a majority of Brits. However, despite clawing my way up from a working class family and via an Oxbridge degree, PhD, City jobs, I ended up sliding back down the ladder again. I end up thinking, if I can’t make it with that, what hope do others have? Yes BREXIT is likely to hurt the working class, but I understand the anger. The 52% don’t have much to lose anymore.

        I’ve tried again. I run a small business and export services. Who knows what it will do for me? I ended up in this position by default, after (as I said) sliding back down the ladder: the “establishment” and elites forced me out of academia for (1) pretty much whistle-blowing and (2) generally being awkward and publishing papers that showed that a lot of the work in my field was self-serving and not true science serving the public interest. So I decided a sick family (and indeed poor mental health associated with my circumstances) means I must effectively “privatise” my services: use previously publicly funded knowledge to help me sell people stuff. I have no other choice other than give up and get a shop job. And I’m not (yet) ready to do that.

        Two issues more specifically pertinent to this post:

        (1) My belief was that London is the main port of entry for a lot of stuff coming into and going out of the EU? It certainly was for moving my furniture across the globe in the ultimately vain hope of getting up the ladder. Border checks on content might not be so “new” as the article makes out?

        (2) As I say, I’m under no illusions as to what’s coming politically. However, I decided there was NO hope of killing neoliberalism whilst we were part of the EU. There is SOME, however small, hope we can by being out, given what we know of Corbyn. Perhaps a fool’s hope, but then again I have repeatedly chosen options that showed a belief in us going forward…..maybe that’s my mistake….maybe I should just acknowledge people are not nice, suck up to the system and get the house, cars and pensions (none of which I have, except some small in real terms pensions) that all my uni friends got. It’s all profoundly depressing.

        1. Clive

          I’m acutely aware that it is only by a lot of luck that I aren’t in a lot more straightened circumstances due to choices that I felt compelled to make because they seemed right to me but were definitely not in the go along to get along line of thinking. The whole system is designed to reward those who are prepared to sell out, take the path of least resistance and punish those who don’t or won’t.

            1. Synoia

              I understand your situation. I emigrated, from the UK twice.

              I have paid a large economic cost for betraying my class interest,

              Yes. True. That happens.

              I am here at my niece’s wedding sampling views on Brexit. So for I have discussed sovereignty, and compared the further loss of Sovereignty under TPP and TTIP with that lost under the EU, to a complete silence and look of shock, as in “I had not though of that.”

              I had a further discuss about the similarities of South Africa’s apartheid system and the UK’s class system, to further looks of shock. I asserted that is little practical difference for the mechanisms of apartheid, except the measurement technique, color in South Africa and class in the UK

              Such efforts are why I am where I am. I’m never sure my hypothesizes are correct, but I am willing to advance them for testing, and will acknowledge when they fail tests.

              Silence is not a test. It is typically an initial denial, leading to a possible discussion, and what follows is sometimes a grudging acceptation.

              My question on Brexit is simple: How much concrete must be applied to the Channel Tunnel for Brexit to succeed?

  13. Older & Wiser

    So, both Britons and the EU now have to pick their poison at neck-breaking speed (surprise, surprise)

    Poison # 1 = REMAIN (despite the referendum results) and face un-manageable political upheaval of epic proportions –Britons are NOT Greeks, mind you– both in the UK and in the EU for which neither one is prepared

    Poison # 2 = Singabritain (or Great Kong) and foot the disastrous impact upon the UK economy, the GBP… and the Euro… and the world financial system as we know it.
    Poison # 2 is quick & dirty, thus with better chances.

    Skeptics be reminded that Poison # 3 is uncertainty, something the system just can´t digest

    magister dixit

  14. Synoia

    Here, the analogy to the millions of lines of clunky code is the density and complexity of the trade agreements, and the labor-intensiveness of striking new deals. And as Azevêdo warned in the Financial Times:

    “It is extremely difficult and complex to negotiate these trade agreements. And slow as well,” he said. “Even if you are in a position to negotiate quickly with all these other members it doesn’t mean that they will be in a position to negotiate with you because they have their own priorities.

    I have no doubt the Etherium people could knock up the rules in a couple of weeks….

  15. digi_owl

    Welcome to Hotel Europe. You can check out any time you like, but you can never leave…

    1. Pookah Harvey

      It seems more as if: You can check out any time you like but the EU hotel staff will then throw you out in a wheel chair after having broken both your knees

    2. Quentin

      Yes. 52 % of those who voted chose to leave but no one knows how to find the exit. What an extraordinarily frightening dilemma: a cross between Huis Clos and Waiting for Godot. No lights, no signs, no instructions. A vacuum.

      1. ambrit

        From the Americas it looks sort of like “M. Hulots’ Vacation at Fawlty Towers.”
        The saving grace in all this is that the “vacuum” you mention was at the heart of the ‘system’ all along. To fill that vacuum is the task now.
        My money is still on a ‘Government of National Unity’ muddling through.

  16. Moneta

    Without Brexit or any other popular revolt, we keep on moving toward the endgame which is a small group owning everything and the rest living in shantytowns… Today, we still have 10-20% with money but we are moving towards pension cuts, negative rates and private equity are leading us there.

    Those in the remain group are either:
    – out of touch because they are on the currently winning side
    – convinced things will all work out despite indications of gross mismanagement all around
    – hoping the unraveling will continue at a slow pace so they are long gone before it happens and someone else pays for their free lunch.

    I’m not saying Brexit won’t be a disaster. I’m just saying that most of those in remain group were just happy to pretend there was no elephant in the room.

    There was a Brexit vote because there are HUGE issues!

  17. m-ga

    It’s possible to read current events as if the Tories are stage managing them.

    Those who voted for Leave will reasonably expect Johnson or Gove to deliver. Johnson has removed himself from the political scene, with a plausible cover story. It’s almost immaterial whether the “betrayal by Gove” is genuine or not – whatever the case, Johnson could have stood against Gove in the leadership competition if he’d wanted to. It seems likely that Johnson didn’t actually want the PM job, at least not just now.

    This leaves the less charismatic Gove as the Leave contender for the Tory leadership. Gove has just given a speech, in which he promises lots of things the Leave campaign said it would deliver. Notably, there is £100m per week for the NHS (about as near as is feasible to the promised £350m), and an Australian-style points system for immigration.

    The next move would be Gove’s defeat in the Tory leadership contest. Leave voters are thwarted, but with little recourse, especially if the victor (most likely May) has also campaigned on a Brexit platform. This would be a relatively clean way for the Tories to row back on the Leave campaign pledges, whilst honouring (or appearing to honour) the referendum result.

    Polling published today indicate that there’s already some swing away from Brexit among the UK public:

    http://ourinsight.opinium.co.uk/survey-results/voters-react-post-referendum-world

    If this poll is correct, then the referendum would go the other way if it was called again. With a strong government steer, the UK press may influence sentiment further away from Brexit over the next few months. It may be that “Project Fear”, which was so ineffective as a pre-referendum campaign, actually works well in the post-referendum period.

    The trillion £sterling question, of course, is how Brexit could be obviated in a way that’s acceptable to the public. I’ve speculated previously in comments here that reconfiguring the UK, to a federal system, is a possible route. Scotland and Northern Ireland voted to remain. A new Prime Minister could tell the public that it is important to respect the wishes of Scottish and NI voters. It will therefore be necessary, as a precursor to Brexit, to reconfigure the UK such that Scotland and NI may reapply to the EU. Setting up this system will take around five years. The new Prime Minister must reluctantly delay the triggering of Article 50 until such a time that the UK is prepared for Brexit.

    I think this explanation would be acceptable to the British public. The very real prospect of the UK breaking up will be traumatic, and in itself is likely to tip public opinion against Brexit. For the pro-Brexiters, though, it will look like immediate moves towards Brexit are being made.

    There would simultaneously be clear signalling to the rest of the world that the UK is remaining in the EU, for at least the short- and probably for the medium-term. Governments and investors reading between the lines could ascertain that Brexit is likely to be delayed indefinitely. The move gives the UK even more of a half in, half out EU status (e.g. it can put in motion a plan to leave, at any time, without needing to gain the support of the electorate). This could be strategically useful as the Eurozone goes through its own crises.

    This isn’t an ideal plan. But, it might be the best available.

    There’s a bit on the UK Constitutional Law blog about the implications of the referendum vote on devolution within the UK:

    https://ukconstitutionallaw.org/2016/06/28/jo-murkens-brexit-the-devolution-dimension/

    The issues aren’t insubstantial, and any UK government will have to cope with them alongside the Brexit predicament. The path of least resistance might be to prioritise the UK’s internal issues, and signal both domestically and internationally that Brexit will have to wait until the UK is ready for it.

    1. efschumacher

      Your reconfiguration leaves out the real question that it is England-ex-London that voted to leave. Thus you can’t just leave it at squaring away Scotland and Northern Ireland. The rest of England would seem to have been long subsidising them, at the will of an over-centralizing Westminster. A “Federal” Britain will have to give power back to England, either under the existing County and local authority arrangements, or under Mercia/Northumbria/Wessex like super regions – which were already rejected by the English under John Prescott’s go-nowhere scheme from 10 years ago.

      1. m-ga

        The intended result of the plan I’ve outlined would be for Brexit never to happen.

        It would take 5-10 years to put in place the changes needed for a federal system. At that time, a new prime minister could call for a new referendum on English exit, or could simply abandon the Brexit idea entirely. Conditions will be very different.

        The existence of the regional assemblies plans drawn up by Prescott is an advantage. This is because there’s no need to now commission the work – it has already been done. The Tories can tweak it however they see fit, to retain their power base.

    2. Quentin

      You talk as if the EU is not an active player and the UK holds all the cards. Do you really think that the EU will tolerate the UK’s hiding behind the threat to invoke Article 50 at any moment and let the UK at the same time act like any other EU member, which it would officially be until Article 50 is involved? I don’t think so. There is not so much love lost between the UK and the EU, as the slimy Jean-Claude Juncker pointed out, correctly, without saying that most of the venom came for the UK starting with inimitable Maggie Thatcher (with her purse!).

      1. m-ga

        The UK decides when to trigger Article 50, not the rest of the EU. In addition, the referendum held by the UK was advisory, rather than binding. The rest of the EU would be meddling in UK domestic affairs if it interpreted the referendum result as clear intent to leave.

        That said, the rest of the EU is stomping its feet over the referendum result. And understandably so, since Brexit poses an existential threat to the European Union. It would be irresponsible of the UK to leave the matter hanging. Cameron’s first action, following the result, was to obtain a time out for the UK by resigning, and deferring the matter to his successor. Cameron originally aimed for three months, but this has since been reduced to two. IIRC, Merkel has said that a couple of weeks more may be allowed for the new British PM to trigger Article 50. But that’s about as far as it can go diplomatically.

        The exception would be if the UK can find reasonable grounds on which Brexit can be postponed. I think this is possible. The reason is that, even with a UK government intent on the earliest possible Brexit, two issues are outstanding:

        1. In the 2014 Scottish independence referendum, Scotland voted to remain in the UK by a margin of 55-45. However, in the 2015 UK general election, the Scottish National Party (SNP) won by a landslide – a rise from 6 seats to 56 (out of 59 total), and 50% of the popular vote. The SNP famously has a manifesto pledge for an independent Scotland. In the Brexit referendum, Scotland voted to remain in the EU. Scotland is clearly on a path to independence, and does not wish for a future outside the EU.

        2. There is a history of armed struggle concerning the border between Northern and Southern Ireland. A ceasefire was brokered in 1997. An important feature of the ceasefire is that Northern and Southern Ireland are borderless. However, Southern Ireland is in the EU. If Northern Ireland was to leave the EU, it would be necessary to introduce border controls. This is likely to result in a return to hostilities. In the Brexit referendum, Northern Ireland voted to remain in the EU. Post-Brexit, this can only be achieved by breaking away from the UK. Doing so would be worthwhile if only to stop the violence. Not unrelatedly, the strongest alliances (e.g. in trade and movement of people) of Northern Ireland are with Southern Ireland and Scotland. Given that Southern Ireland is in the EU, and that (see above) Scotland is also likely to be an EU member, it would be clearly disadvantageous to Northern Ireland to leave the EU.

        The UK government has a responsibility for Scotland and Northern Ireland, and not just England and Wales.

        In respecting the wishes of Scottish and Northern Irish voters, the UK government has a duty to ease their transition to independence from the UK. This would be best achieved by setting up Scotland’s and Northern Ireland’s exit from the UK prior to the UK’s exit from the EU.

        The above argument would hold even if the UK government is intent on implementing Brexit as quickly as possible, and is inclined to uncomplainingly cooperate with the diktats of the rest of the EU. In the actual situation – in which the UK government regrets the Brexit referendum outcome – it offers a delaying tactic.

        The rest of the EU may not like the move. But, there is very little they could do without being seen to interfere in the domestic politics of a member of the EU.

        Summary: the UK leaving the EU is simultaneous with the break-up of the UK. If this argument is accepted, then it can be further argued that the UK government would be right to prioritise arrangements for the break-up of the UK, and the post break-up success of the UK’s former constituents, above the departure of the UK from the EU. In practical terms, this means that Brexit would have to wait until the UK is ready for Brexit. Politicians elsewhere in the EU may not like the situation, but they couldn’t criticise the reasons given without also insisting that the UK government interprets the referendum result against the interests of UK citizens.

  18. Inert_Bert

    Great article Yves,

    I had been expecting the kinds of timescales you set out for the contours of Britain’s new trade-relations to become clear but I hadn’t fully grasped the consequences or the legal considerations.

    The first thing I considered is how the UK would even be able to negotiate meaningful trade deals before its new relationship with the EU is clear. Wouldn’t the UK’s negotiating position be largely dependent on the extent it has access to the common market for its products and services?

    A country like China or Canada would have very different things to say to a Boris-style UK inside the EEA and with passporting for its Banks than it would to the isolated, diminished rump that might emerge from the exit talks if it failed to secure any new agreement with the EU at all. I assume most potential trading partners will wait until it becomes clear where on that spectrum the UK is going to fall before they start any formal negotiations.

    The quote from Malmstrom does once again make clear that the EU is not about to pull any punches here and you make clear just how painful this is going to be.

    I wonder if British politicians will at some point conclude that if Brexit cannot be avoided and they cannot get a stupid-good deal either, it would be in their interest if the EU were to collapse entirely. They might reason that global chaos could at least give them opportunities to assert themselves, whereas isolation is certain to cause the kind of harm that ends careers and taints legacies. I don’t know what they could do to “help” the EU along at this point, and even if they could and would, it is very much a case of “you come at the king, you best not miss”.

    1. Sunny129

      Bottom line question, not clearly addressed!

      Who is going to get HURT more, by UK not triggering Article 50. My guess both get hurt but by prolonging, the detrimental effect on the European and Global Banking, wiil be apparent as the weeks go by?

      The continued instability, uncertainty. volatility are NOT conducive to the Global Economy/Commerce, although Mkts is acting as if nothing matters!

  19. a different chris

    >It is also against EU law for a member to negotiate its own trade deals with outsiders, which means the UK cannot start doing this until after it has left the EU.

    Haha … what are they gonna do? And if I have a conversation with the auto dealership saying “I think your car is worth x and I think my car is worth y… and he says well I kind of see it as (blah blah)” and until we sign an agreement on the car what the frell can anybody do about that conversation?

    The EU is so stupid, if what I’m reading is true. Inflexibility means brittleness – if you are dumb enough to think you can tell everybody “you can’t even talk about post-EU actions until you are out” you are going to be the one eventually screwed. Sure a rule that you can’t sign anything is reasonable if probably not enforceable, but telling people not to talk just makes them talk behind your back.

    They’re both going down as Britain is equally stupid. People do realize that we are talking about a total of 400 million people out of 7 billion? There are *lots* of adult options for both sides – aka an amicable divorce – but nope all we get is idiocy.

    PS: they are both going down together b/c Brexit just isn’t gonna happen, btw.

    1. Bill Smith

      Agree with this. The UK would just do ‘unofficial’ talks where an understanding is reached or all but reached and then start from there after they exit.

      There are lots of problems but this isn’t one of the biggest.

      But I’m with the not actually going to leave side.

  20. EmilianoZ

    Yeah, but the US will put enormous pressure on the EU to deal nicely with the Brits. Kerry has even said the Brexit could be walked back. The EU will have no other choice but to comply. It’s gonna be a Brexit in name only. Everything will go on as before. Maybe there’ll be an additional layer of administrative paperwork, is all. The markets have already shrugged it off. They know better.

    Everything’s gonna be all right.

  21. APC

    …it looks to be a classic example of a woman being handed the reins because no sensible man would want the job.

    Funny how that reminded me of when they appointed Carney, (a Canadian) as governor of the Bank of England. Thought how no one in their right mind would take that on were she/he British.

  22. Matthew Saroff

    First, let me state that I am playing Devil’s advocate here: I do not think that the Brexit will ever happen.

    That being said, if Britain finds itself isolated from the WTO, etc. as a result of a Brexit, various sorts of barriers will be raised ON BOTH SIDES.

    In that case, as the single outlyer, particularly one with a significant oil holdings, there is a possibility that the UK might thrive.

    This development would likely favor indigenous manufacturing over the international banking in the City of London, in any case.

    I do not think that this is going to happen, because I do not think that the UK will pull the trigger on Brexit article 50, but it is an interesting thought experiment.

    1. cirsium

      Over 90% of the UK’s oil is in Scottish territorial waters. With Brexit and Scottish independence, EWNI (England, Wales, Northern Ireland) would not have significant oil holdings. Another reason for the UK government not pulling the Article 50 trigger?

  23. John

    This doesn’t take into consideration that EU and national government/players may also, change. Would a new set of national political leaders more friendly to an EU breakup create issues for the EU trade positions?

  24. mpr

    Sorry, but this post strikes me as somewhat chicken littlelike.

    While it may be true that the EU won’t engage in informal negotiations they can’t stop the UK from engaging in informal negotiations with other countries, whether this is technically allowed by treaties or not.

    Moreover the five or seven year periods cited as typical for trade agreements involve trade agreements negotiated de novo, or at least cases where the parties wanted a significant change in their trading arrangement. In this case there is nothing to stop non-EU countries agreeing to leave in place with the UK the arrangements they already have with the EU, perhaps with some minor tweaks when necessary.

    1. m-ga

      I’m not sure how far informal negotiations could go. Once you’ve had a couple of informal meetings, the negotiations all of a sudden start to look formal. There doesn’t seem too much wiggle room via the attempt to redefine the word “formal”.

      Even before the vote, it was clear that it wouldn’t be possible to “cut and paste” text from the extant trade agreements:

      Warning that it would be impossible for the UK to “cut and paste” its old EU trade deals into new agreements, Azevêdo said the UK would be starting from scratch without the institutional machinery necessary to negotiate trade deals.

      https://www.theguardian.com/business/2016/jun/07/wto-chief-brexit-trade-talks-start-scratch-eu-referendum

      It would have been helpful if the Leave side had acknowledged this difficulty during their campaign. Or, if the Remain side had highlighted the issue.

      1. mpr

        Thanks, this is interesting, but he doesn’t really explain what the problem with cutting and pasting is.
        I suspect Azevedo is going at this from a rather technocratic point of view. In reality both Britain and its trading partners will have incentives to hammer this out. It would likely be of the form that the previous EU agreements controls unless there is a specific bilateral change.

        As for formal vs informal, I definitely think there isn’t much to that. Eurozone rules prohibit deficits > 3% of GDP, but all the big countries run them whenever they want. The Brits will negotiate as they see fit.

        1. m-ga

          You’re remarkably sanguine about all of this!

          An anecdote might help. I once wanted to sublet a flat. I’ve a friend who is an estate agent, and I asked him if he could provide the necessary contracts. He did so, with the advice that all I needed to do was to check identity and add the client’s name. Oh, and to remove any references to his company and don’t tell anyone he’d given me the contracts ;-)

          One of the prospective tenants was keen to rent, but was concerned about clauses in the contract. She was right to be concerned, since much of the contract was boilerplate which had no relevance to the sublet (e.g. there were references to a garden, and my flat doesn’t have a garden). The advice I’d received from the estate agent was that I shouldn’t change anything in the contract. I was sympathetic to the prospective tenant though, and removed some of the clauses for her.

          This went on for a while. I noticed that the prospective tenant had begun to ask me to alter some clauses which protected me. The contract was in general biased in my favour, and again I was sympathetic, but I began to think that the tenant might be trouble. The final straw came when she asked for a reduction in rent, going back on a verbal agreement we’d already made, and citing the time taken to complete the contract negotiations as a contributing factor.

          These negotiations, over what should have been a straightforward sublet, broke down over a few months. I’d suggest that a highly complex topic, such as trade agreements, would break down over years. This is most likely why 10 year estimates are given for the UK to set up its own trade agreements. What’s worse is, the UK doesn’t even have the expertise to do this – it’s long outsourced the work to negotiating teams elsewhere in the EU. (Which, ironically, undercuts yet another of the arguments of Leave campaigners – the payments the UK made to the EU, which were something like 1 per cent of the UK’s GDP, resulted in a greater range of benefits than are widely understood).

          It’s not just trade that’s a problem, by the way. Leaving the EU also means that the UK must rewrite much of its legislation:

          http://www.lrb.co.uk/v38/n12/francis-fitzgibbon/if-we-leave

          There are estimates of around 10 years for rewriting the legislation as well.

          So, to summarise, there are substantial costs to the UK in both rewriting its trade agreements, and its legislation, in order to effect an exit from the EU. The UK is in a position to hire in the expertise to do this. But, even if the UK assembles good teams for both trade and legislation, it is looking at 10 years before it has trade agreements and a legal framework in place. It’s not clear how the UK continues to function ex-EU in the meantime. This is especially true if the rest of the EU is disinclined to help.

          The situation for the UK is nowhere near bad as for Greece. But this appears to be solely because the UK is a richer country which controls its own currency. Despite the UK’s advantages, it appears that membership of the EU is a one way ticket. There’s a lot for UK citizens to dislike about the situation.

  25. Mike

    The EU can’t afford to play hardball. First, losing exports to the UK or financial contributions from the UK would be a disaster for countries like Germany. Secondly, the EU is in such financial and political turmoil internally that they can’t afford to behave like a bully; they need stability and confidence.

    Most likely, the UK will likely quickly transition into EFTA status and leave it there. That’s not the outcome the voters wanted, but it is a political fig leaf.

    If UK politicians are serious about implementing the will of the voters, they will come up with a staged withdrawal, meaning EFTA-like status (like Switzerland) for a few years, followed by a customs union for an indefinite number of years (like Turkey), followed by a separately negotiated free trade deal.

    1. Yves Smith Post author

      I don’t know what you are smoking but it is very strong. If the EU, which has already allowed the UK to get a very preferential deal with the EU, makes concessions to the UK, it will encourage separatists, the intransigent right wing leader of Poland, and Marine Le Pen. Further split in the EU would be massively destructive and the departure of a member of the eurozone would set off a global financial crisis.

      Stopping that takes priority. The ultimate economic costs of letting the UK get a favorable deal are higher, in their view, than being tough. And BTW “being tough” means the EU would make financial contributions. Various commentators have pointed out that several of the more distant types of deal that the UK is contemplating would still result in them paying the EU

      The Europeans have for years since the crisis making political decisions (standing tough on austerity, refusing to go to a proper banking union) that put political priorities over economic outcomes, at high cost.

      You are really misreading the power dynamics, who has the cards and what the EU regards as most important. The leaders made it very clear the day after the European Parliament that they will not cut the UK slack if it invokes Article 50. The message could not be more firm Yet you are doing the equivalent of putting fingers in your ears and saying “nyah nyah nyah”.

      From the EU’s perspective, a Brexit is like having gangrene in their foot. No, they don’t like amputating their foot at all. But if they let the gangrene spread, they’ll lose their leg or even die. So they have accepted the fact that they may have to do an amputation if the UK does not relent.

      During the Greek negotiations, the Trokia was similarly clear with Greece and Greece thought they would not dare risk a Grexit. And I must point out that many Euroskeptic UK commentators, in particular Ambrose Evans-Pritchard, argued Greece had the better hand and the Troika would relent. How did that work out?

      1. mpr

        Full credit for your spot on call re the Greece negotiations.

        But I think the pressures here may be different. The German Chamber of Commerce has already called for a continuation of free trade with the UK. What’s your take on that ?

        Still, after the Greece fiasco I don’t underestimate the EU’s potential for self inflicted damage.

        Taking a step back, its becoming inconceivable to me that the EU will survive in its current form much longer. What does it say when your ‘club’ has to resort to severely beating anyone who tries to leave ? Then its not a club but a ‘cage’, as Marine Le Pen says in her NYT op ed. When the fascist in the room is the one making the most sense, things have gone badly off the rails.

  26. That Which Sees

    German and EU staffers are trying to adopt a stance they presumably learned from Palestinians such as Arafat and Abbas…… Requiring major concessions as the price to begin negotiations. Israel and the UK respond to this type of unreasonable and immoral demand by stating clearly, “We need face to face talks with no preconditions”.

    So the key question is, “What is Germany’s next move?”, when the UK:
    — Refuses to accept Preconditions
    — Begins taking unilateral actions against German interests to punish them for “immoral refusal to negotiate”. Auto imports from Germany are potential target….. I can envision this (in more British verbiage) proclamation by the next PM on the floor in the House of Commons:

    “Having been caught red handed, VW now admits that they falsified records and put polluting diesel autos on UK roads. It is now critical to protect the citizens of this great nation from from the perfidy and other, as yet, undiscovered frauds by VW and German auto manufacturers. Therefore, this government is introducing a new Programme. At manufacturer expense, each German auto being imported shall be individually tested at the docks to ensure that it meets pollution standards before it can be permitted entry. Preventing our children from being poisoned by German autos is our first priority as UK leaders and legislators” {queue agreeable “Hear Hear” shouts from MP backbenches}

    Also, I have little doubt that less reputable UK publications will begin photshopping red armbands onto German and EU officials as part of their cover art to drum up sales. Even though the number of people who read (if that the correct term) these rags is small, this will begin to influence the UK public via repeated exposure at every news stand.

    Remember, Germany is saddled with the EuroZone, and any giant fight between the UK and Germany will harm *both* EUR and GBP. Italian banks are already struggling. Because, the UK has the much stronger position and also moral authority, Germany will have to pick one of these options:
    . 1) Refuse to negotiate — Intentionally and with malice of forethought damaging EUR as a currency resulting banking issues possibly failures in EZ countries such as Italy and Spain.
    . 2) Withdraw their ultimatum and begin negotiations without preconditions.

    _____________

    The real risk here is that both UK and Germany believe that they have the “Facts on the Ground” on their side, which is how escalation spirals happen. You can see that in microcosm here:

    — As you can tell from the above, I am firmly convinced that the UK has the strongest position morally, politically, economically, and if necessary militarily. Morally being the most important, as UK leaders can use that to brazenly disobey “Immoral German Rules”.

    — Our host Yves is equally convinced that Germany will be able to keep the big EU nations together and impose strict enforcement of EU Rules.
    ___________________

    The next time certain opportunity for forward progress will be the German elections taking place in 2017. A change of government would allow Merkel’s successor to honorably take a more rational and conciliatory stance towards the UK. If that new leader wants to continue a fight that Germany cannot possibly win, the escalation spiral will continue.

  27. golf2016

    if you out you are out short and clear message for good start of divorce …. means no more kiss no more bum bum thanks to “democratic” kamikaze referendum of drunken idiots

  28. Jesper

    So Malmström has discovered a big wedge between the interests of the EU and its nation-states and has decided to show it for everyone to see….
    The nation-states of the EU has an interest in making sure trade continues with UK while it seems that the priority for Malmström and other EU-officials has an interest in making the opposite happen – their (personal?) power is apparently more worth than a good relationship with an important neighbour.
    The treaties are not written on stone, the treaties relating to an exit can be changed. But Malmström, the civil servant, is apparently unaware of that?

  29. econoclasm

    Hah! A right British cock-up. At last I am beginning to feel some national pride in these events.

    NC back to its best.

  30. Patrick

    I’m confused. At points you’re saying that the UK would be constrained by WTO rules, but at other points you’re saying that the UK wouldn’t be a WTO member after exiting. At the very least, it seems like they should be able to avoid this “worst of both worlds”.

  31. George Phillies

    It appears to me that a more firm-minded English government would simply ignore European complaints and neglect, e.g. to impose higher tariffs on its imports, or would negotiate new trade arrangements with third parties, whether the Europeans liked it or not.

  32. George Phillies

    It appears to me that a more firm-minded English government would simply ignore European complaints and neglect, e.g. to impose higher tariffs on its imports, or would negotiate new trade arrangements with third parties, whether the Europeans liked it or not.

    Unlike the Greeks, the UK already has its own currency, so the odder threats against the Greeks are of less effect.

  33. Irrational

    Great article as usual, Yves.
    To pick up on Jesper’s point: changing treaties is a pain, but there is plenty of room for interpretation of existing texts once the dust has settled a bit. It requires political will. Malmström is not in a position to signal that.
    Right now there is a lot of posturing and marking the territory without that necessarily being reflective of how negotiations will take place under a new UK PM.

    1. Yves Smith Post author

      As we’ve indicated before, that is more of an Anglo approach. Brussels is very much of the “by the book” school, partly because that is the legal tradition in most of the countries on the Continent, and partly because it is also perceived to be important to adhere to the rules for a big group of diverse countries to live together.

      So if the treaty language about “the UK can’t negotiate trade deals on its own as a member state of the EU” is as clearly stated as the BBC interview suggests, the Eurocrats are not going to engage in permissive interpretations.

  34. Epistrophy

    Yves,

    I have been surprised at the tone and content of your articles since the Brexit. I will continue to be a reader of your work as I have been for years but your writings on the potential Brexit/EU difficulties, and there will be many, are not among your best works. I sense a lot of emotion in your words.

    The simple facts are these: When British people voted to join the common market in the 1970’s it was the right thing to do. When they voted to leave the EU on June 23 it was the right thing to do.

    The EU today is in no way the same benign trading block that the British initially agreed to join. It has by stealth become an anti-democratic entity and that cannot be disputed. Today there is a stasis in Brussels/Strasbourg and certain key European capitals that is destroying the very foundations of European civilization. The British people are well aware of this fact and see no future there as a consequence.

    The EU has now reached a juncture where there will be only three possible directions for it: 1) an anti-Democratic super-state, 2) a more democratic and more loosely connected group of trading nations built around a strong central core, or 3) remain as it is, as a anti-democratic quagmire, that as we all know cannot survive in the longer term.

    When PM Cameron announced the Brexit referendum there was only one optimal outcome for the British people. They had to vote for Brexit because to vote for Remain would have locked Britain and Europe into either options (1) or (3) and would have killed option (2) which, in my view, is the only satisfactory, peaceful and viable longer-term outcome for the European people and their truly marvelous civilization. Let’s be real here: history teaches that option (1) is only forged by war and option (3) will lead to violent revolution – we are seeing the elements of this ultimate destination coming together now across many European nations.

    You are quoting a lot of Brussels bureaucrats in your work. I have no confidence in what these people are spouting. They are not the rulers of the world, at least not yet. It makes sense that the existing trading agreements with Europe must hold for some time however before post Brexit terms are discussed. Germany, France, Italy, the Czechs etc will not want to lose their British auto market overnight and I suspect that this feature of the trade negotiations for a post Brexit world will be the best place for the British to start discussions. I recall that during the 2008 crisis Europe and the United States went to extraordinary lengths to save their auto industries and Whitehall should take note of this as a means to pry open trade discussions. Everything else will unfold from here.

    Nonetheless, I am not at all certain that the Parliament has the will to proceed with the Brexit, but waiting and prevaricating is not an option either. On this Juncker is correct.

    Britain has fought with the European people to save European democracy twice in the last 100 years. Yet the sweep of time is moving Europe towards another juncture, that could lead to war or dark ages if left to fester. Brussels seems to be completely deaf to this political clamber.

    On this note it is important to say that Britain will not leave Europe, but she must leave the EU. There is no other viable option. On this logic the die is cast and it is now up to the British people and their democratically elected representatives to do what is necessary to take back their country and the democratic principles that are the source of their strength and their future.

    1. m-ga

      There aren’t really any “simple facts” about Britain’s relationship with the rest of the EU. Or Britain’s relationship with Ireland. Or, indeed, much of Britain’s history.

      The complications of the current situation date at least to the second world war, following which Britain could have joined the EU immediately, but instead chose to wait until the 1970s and as a result joined under a less preferential agreement. All of this is mixed up with the decline of Britain’s worldwide empire, a decline which was underway as early as 1870, and perhaps earlier, even though the empire would continue to expand until around 1900.

      There are several points missing in your analysis:

      1. The EU is in many ways more of a friend to UK citizens than the UK government. For example, the EU ensures worker and human rights protections which the UK government would shred. It also provides financing for regeneration projects outside London, which the UK government would defund. And it provides funding for business and universities, which the UK government would fail to match.

      2. You suggest that “British people and their democratically elected representatives” will take back control of the country. The suggestion is laughable – British people and their representatives do not think or operate in tandem. The Leave vote was carried in large part as a protest by the British public against the actions of British governments over the last 30 years (i.e. going back to the Thatcher era). This protest has been successful in the short term, since the political and business classes are now the ones suffering.

      3. A side effect of the vote is deterioration in the social fabric of Britain. There is a rise in anti-immigrant racism, and there is tension and bad feeling between friends and family as a result of the referendum. The vote exposed divides in the country along class, race and age lines. Regardless of any eventual positive outcomes of the referendum, this is a highly unpleasant development. Britain isn’t a very nice place just now.

      4. Related to point (3), there may well be a tilt towards the extreme right in British politics.

      5. The bad feeling will continue, as it’s difficult to forge a policy which will satisfy both the 48% who chose to Remain, and the 52% who chose to leave.

      6. It may not even be possible to leave. The barriers to rewriting trade agreements and legislation may be so great that the UK government (even a government which wants to leave) may choose to remain in the EU. Meaning that all the exercise will have achieved is disunity, both in the UK itself and in the EU more widely.

      You’ve suggested, correctly in my opinion, that the EU is becoming an undemocratic superstate. But I think you’ve failed to understand the motivations of those in Brussels, even though these motivations have been signposted clearly just a year ago with the handling of the attempted Grexit, and have been signposted again in both the run-up to, and the aftermath of, the Brexit referendum.

      Also, your point about the euro car market exports to the UK appears wrong-footed. The UK also stands to lose, since car plants currently in the UK can be shuttered and production moved to the continent. The UK is frankly not in a good position, having shut down its home-grown manufacturing in the 1980s, and shifted exports to financial services.

      1. Epistropy

        As to your point one, I too am concerned about the human rights issue, and initially I do not see any change to this legislation. In fact Ms May, who looks to be the next PM, has already said that Parliament does not have any appetite to make changes, and I doubt there will ever be any changes. What will happen is that the final arbiter will be the British courts, not the EU courts. As to the issue of consumer rights, having recently successfully prosecuted a claim on the basis of new consumer legislation (many new Acts from 2008 to 2015), the bulk of this excellent legislation came from the British Parliament, not Europe. There is already substantial case precedent in this area, so I do not share your concerns on these matters.

        I do share your concern about the British University system – this could be a serious issue, but the money is not ‘given’ to Britain, it comes from that money that is already paid in to the EU. The influence of the EU has been the decision to spend the funds there – no doubt there is some political reasoning behind this EU decision – it is not altruistic. Nothing in politics is altruistic.

        As to your point two, no political system is perfect, but the important issue is that the democratically elected representatives remain close to the electorate. As the EU takes more power from the Member states by treaty (often not agreed by the member states), the power becomes more centralized and less representative. One can only look at the example of the United States to see where this leads. I do not believe that European citizens want to be another United States, but I do agree with your point that the elected representatives are often out of step with the electorate in Britain.

        As to your point three, there is real pressure on British services, British institutions and British culture from the immigration issue. Not all of this comes from Europe; much comes from United Nations treaty (something that was ignored by both sides in this election). Nonetheless, when the British people see the open door policy of Merkel, which has the potential to destroy German society, they are no doubt alarmed by it. This is to be expected. This is in no way racist. Many of the persons who voted for Brexit are immigrants themselves, or children of immigrants. Many have family members who have married into other immigrant families – yet they still voted for Brexit. There are, however, as you have rightly indicated, unpleasant aspects of society but these elements were already there, the Brexit has not been the cause of it. The Brexit has simply exposed it.

        As to your point four, the Remain camp received twice as much funding as the Brexit camp, around GBP 14 million – most of this was from the City, British Industrialists, Russian and American sources. These are not left wing supporters. I do not know what shape British politics will take, but it could swing left, as much of the support for Brexit came from the left (outside London) as Corbyn well knows. However, I would prefer to see a balance of interests.

        As to point five, this is not something I can comment on widely – I personally have not encountered this bad feeling but no doubt it could become an issue, especially if the matter is allowed to fester. For this reason I prefer a quick decision on Article 50.

        For point six, Britain can leave if it has the will to do so. This is going to be tested in the coming months – so we will see. I am not confident that the will exists amongst the current Members of Parliament and we could see calls for a General Election.

        I mentioned the car import market because Britain is a significant importer of EU manufactured cars – far more than is exported there. I understand that since the EU was formed, Britain’s exports there have declined consistently year by year, whereas this year there is a record trade deficit with Europe. Were this trade to stop, Europe would experience huge job losses, whereas British production of cars, for example, would have to grow, creating more jobs and investment here over time. For these reasons I believe that Britain can bring to the EU negotiating table German, French, Italian manufacturers who want to see their markets, jobs and profits protected. I am not pessimistic on this matter.

        I agree that there is more uncertainty (at the moment) and the potential for a General Election (that I believe is remote but possible) is adding to this situation. It will be important for Parliament to do what they can in the shorter term to calm this situation.

        1. m-ga

          Hi Epistropy, glad you came back to continue the discussion :-)

          I’ll follow your course of replying in point form.

          1. Theresa May has recently said she wants to take the UK out of the European Court of Human Rights:

          http://www.conservativehome.com/parliament/2016/04/theresa-mays-speech-on-brexit-full-text.html

          In making this move, she mistakenly thought it was possible to leave the ECHR whilst remaining in the EU (it isn’t). May (perhaps bizarrely) backtracked on her pledge a couple of days ago, at the same time she announced she would run for PM on a platform of Brexit:

          http://www.express.co.uk/news/uk/685158/Theresa-May-ditches-plans-Britain-out-European-Convention-Human-Rights-Tory

          It’s not clear whether this is posturing, or a genuine and continued misapprehension of exactly what the UK is committed to. Whatever the case, there is little indication that May intends to preserve the ECHR legislation. In the kindest possible reading, her approach is a muddle.

          The EU money in the UK university system is there at the behest of the EU. The UK Government has defunded its education commitment in the full knowledge that the EU will make up at least some of the shortfall. This has been a rapid change. Until the mid 1990s, UK citizens not only didn’t pay tuition fees, but were funded for living expenses (i.e. including accommodation and food) even when they were studying at undergraduate level. The strategy since then has been to sell off university places, for example to Asian students, whilst UK students are saddled with increasingly unaffordable loans. Every indication is that this will continue. Witness the prioritisation, across the Russell Group, of an expansion programme of flashy real estate development which looks great in prospectus photos, but is useless for actual research.

          What’s more, it is now very difficult for the British to gain funding to study at PhD level. UK Government funding, via Research Councils UK (RCUK), shrinks every year – in a recent competition at my university, the ESRC was able to offer just 50 funded PhD places pooled across three Russell Group universities, and this is across every subject area the ESRC (Economic and Social Research Council) covers! It’s similar for MRC and EPSRC. This is pathetic. Individual departments can barely count on a single RCUK funded PhD student per year. I recently spoke to a senior academic at Oxford who told me she’d supervised just one RCUK funded PhD in her entire 15 years at the university.

          I think it is incredibly unlikely that exiting the EU would somehow improve this situation. Already, the vice chancellor of my university has written to reassure staff that we should hold onto the Horizon 2020 (massive EU project) funding, but the route after that isn’t clear. After 2020, I’d imagine there will be even more of a pivot to students from East Asia in order to cover the university running costs.

          2. The democratically elected representatives already aren’t close to the electorate, and are becoming less so (recall the tragic headlines from just a few weeks ago). This is nothing to do with the EU at all. No-one cares where laws were created. What’s more, the UK remains a sovereign country – following the EU law is optional, and can be overruled by the UK parliament at any time. You don’t need to believe the misinformation pumped out by the UK press. It’s not EU rules which are screwing up UK democracy, and it never has been.

          3. You’re trying to perpetuate a myth in which the NHS is over-run by EU patients, when the actuality is that recruitment from the EU has been vital to keep the NHS running. It would be helpful to stop feeding this misapprehension. Other than that – yes, the cultural dilution issues are genuine. Welcome to the 20th century. Name me a country in which cultural dilution isn’t a problem – I travelled to the Yucutan Peninsula and Havana recently and, believe me, the tourist trade pandering to perceived Western preferences was creating havoc for local customs.

          I’d agree with your observation that Brexit has exposed, and to some degree made acceptable, long-present unpleasant aspects of society. I’m sure you’ll agree, this is not something to celebrate.

          4. There’s an interesting observation in a piece by Peter Mandelson for the FT this morning, which is worth reading in full (Mandelson worked on the Remain campaign). He says that in the early stages of the Remain campaign, the argument was over economics and there was a widespread agreement that Remain had won. The press wanted to move onto immigration. This move coincided with the purdah period, in which the machinery of government couldn’t back Remain. At the same time, the British press swung entirely behind Leave. Cameron was left to singlehandedly counter the mud thrown at him.

          We all know the result. In your calculation of the funding for Remain and Leave campaigns, you have overlooked the role of the UK press. The press coverage which Leave received dwarves the value of the coverage that Remain could fund. An identical dynamic is in play with the Trump campaign in the US.

          I think you’re inaccurate in the supposition that a lot of support for Brexit came from the left. I’ve not seen any evidence of this.

          5. It’s much easier to advocate a course of action for a group of people when you are remote from them.

          6. We don’t know how easy it is for Britain to leave. I’ve little doubt that the UK government, and the Conservative party in particular, is testing various scenarios. We’ll find out what their conclusions are in September.

          I can’t see the car industry as a big factor in how any of this plays out – rich people will get their import model regardless. The stakes in Brexit are considerably higher than just the market for cars.

    2. BruceK

      From Epistrophy: ‘The simple facts are these: When British people voted to join the common market in the 1970’s it was the right thing to do. When they voted to leave the EU on June 23 it was the right thing to do.

      This is just your opinion. There are plenty of well informed people who disagree, so how can it be considered a ‘simple fact’?

      You write that Parliament may not have ‘the will to proceed with Brexit’. That alone suggests that it is not a ‘simple fact’ that leaving the EU is the right thing to do, and casts doubt on your view that there is no viable option other than leaving.

      ‘You are quoting a lot of Brussels bureaucrats in your work. I have no confidence in what these people are spouting. ‘
      That doesn’t mean they can just be ignored.

      Yves is talking about the world as it is now. We need to do the same, not just go misty-eyed about the Battle of Britain.

      1. juliania

        No one is getting misty-eyed, though if anyone is, it is those who set obstacles in the way of the Brexit which has been voted for in a majority referendum. This was not, as Greece’s Oxi vote was, shrouded in the mysteries of what really was being voted for – this was plain and simple and it made sense.

        It strikes me that those obstacles appear very similar to what would be presented by a corporation to a client wishing to, say, remove him or herself from an onerous agreement to pay for the combination of telephone and computer service, because said client no longer can afford to keep both. Hypothetically speaking, said corporation then tells client Oh, sorry – your phone bill will be hiked if you do this.

        Is that situation ethical? The client is nearly broke, without funds. He/she can afford the phone service, at the original fee that was in place before the add-on computer service. And the client has remained with the corporation the required amount of time to give said corporation plenty of profitable years in the relationship.

        I agree with epistrophy above. There are ethical matters to consider here, as there were in the travesty that occurred in Greece. If something is not right, it is not right, contract or by-laws or prevarications notwithstanding.

        The only way forward is for Brexit to be accomplished with minimal objection and with compassion. The people can take no more of this, and they shouldn’t have to.

      2. Epistrophy

        The Remain campaign had twice the money while being girded by the overwhelming support of the British Parliament from the Prime Minister to backbenchers. Yet the Leave campaign still garnered the support of 17.4 million of the electorate.

        Iceland withdrew its application to join the EU a year ago, and Switzerland has elected to withdraw their long standing application (24 years) about a month ago with an overwhelming Parliamentary majority (126 to 46).

        There is nothing misty eyed about these facts; this is about the future of Britain and democratic accountability, nothing more. As illustrated above, Britain does not stand alone in expressing these concerns.

        1. m-ga

          You’re wrong about the campaign spends.

          Leave had the full support of the UK press in the final weeks of the campaign. At the same time, Remain couldn’t use the machinery of government, because it was in the purdah period. When you include the press coverage, the Leave campaign spend dwarfed anything that Remain could manage.

          The dynamic was similar to the Trump campaign in the US.

  35. Bimbo

    Reading the comments I stress this part of one comment:

    The EU is so stupid

    And again I read it:

    The EU is so stupid

    This is way nobody is sad with the Brexit outside the UK and they are relieved with the results of the Referendum.

    It is strange how this people think about themselves and the British bargaining power.

    Just after the results came to the light of the day, we read the British opinion makers debating among themselves which kind of trade the UK should embrace. Norwegian style, Swiss style and so on. What we never read in these comments was this: which kind of agreement can we reach with the EU? Never. What is strange. The UK leaves the marriage and dictates the terms of the divorce? Is that possible? Can the UK impose the terms of the divorce and future relationship? No, it can not. No, depends of the EU too and they will fight for theirs side and do not care about the side of the UK and the existential crisis of the UK.

    This Brexit is a mess, we all agree. But the majority of the Brexit supporters do not have idea how to exit and doing it, how to avoid a painful divorce for both parts. At least the EU has a common position with just few divergences among them. In the UK, each monkey has his desired tree and bananas.

    Interesting times indeed.

    Ciao

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