We’ve been neglecting Brexit due to Trump going uber hawkish and the resulting barrage of news stories to sort through. And another reason is that the noise to signal ratio got even higher in the British media around the time Brexit became official.
Formal progress will be virtually nil till late May. The UK and EU have exchanged their opening communiques, with the EU’s a draft of the process for the negotiations, which need to be fleshed out and then approved by all the 27 remaining members of the EU, hopefully by the end of next month.
However, even with the exchange of missives and related snorting and pawing of earth, it is becoming plenty obvious that it is starting to dawn on Theresa May that she is not in a good position. Yet a fresh poll shows that popular approval for Brexit is at a five month high.
I hope readers will fill in any significant issues I have missed. Here are some of the high points from the last few weeks:
May has been retreating by inches. She’s been forced to admit that she’s lost her demand to have trade talks proceed in parallel to exit negotiations, something that the EU nixed from the Brexit vote. Among other reasons, we pointed out it was a non-starter under EU treaties. She’s also had to concede on another hardliner issue, that EU migration will continue during a “transition phase” that she insists on calling an “implementation phase,” as if the rebranding makes a difference.
Notice that this “transition phase” has more strings attached than May appears to have ‘fessed up to. The initial European Council guidelines stipulate that the UK must also adhere to EU laws, accept the jurisdiction of EU courts, and continue to pay EU fees.
Nevertheless, the Brexiteers are still firmly behind May, just as Trump’s supporters remained stalwart (at least initially) as he retreated from some of his major campaign promises.
The EU is almost completely united against the UK. This has happened even faster and more firmly than I expected, and I though I was being unduly dire. I had thought this outcome would come about regardless though how the EU was setting the order of negotiations.
The critical bit was putting the settlement of the financial exit tab first, which the UK depicts as an outrage (this despite the fact that Maggie Thatcher negotiated the UK paying lower dues than other member nations). First, this is one area where Eastern European countries, which on other topics are more predisposed towards the UK, are hardliners. Second, one of the norms of negotiation is to address the less divisive issues first so as to create some early successes and forge decent working relations between the two parties. Putting a fractious issue up front where the EU side is of one mind, and the only divergence among them is how bloody minded, will help cement relations among them to the disadvantage of the UK. 1
We had also stressed, and informed members of the commentariat had confirmed, that the UK had done a plenty to sour relations with Europe well before the Brexit vote. It constantly criticized Brussels, was difficult to work with, made too clear its belief that the English were racially superior to many of the Continentals, and whinged that it was being treated poorly when it had an extremely favorable deal. And then the UK would engage in disrespectful moves on top of that, like electing Nigel Farage to the European Parliament and making Boris Johnson Foreign Minister (I gasped out loud when I first read that).
A Guardian piece last weekend gives some fresh indicators. The opening paragraph is bad enough:
The EU is set to inflict a double humiliation on Theresa May, stripping Britain of its European agencies within weeks, while formally rejecting the prime minister’s calls for early trade talks.
The two agencies are the European Banking Authority and the European Medicines Agency. The Guardian says they not only employ roughly 1000 people in total but serve as a center for other activities.
The article continues to say that despite a charm tour by David Davies, not a single country agreed to support the UK’s pitch to negotiate trade in parallel with the exit talks. This is despite an earlier analysis by Politico indicating that quite a few countries were “soft” on trade with respect to the UK and harder on other issues.
And the UK has no one to blame but itself. From the same article:
Senior EU sources claimed that Britain’s aggressive approach to the talks, including threats of becoming a low-tax, low-regulation state unless it was given a good deal, had backfired. “However realistic the threats were, or not, they were noticed,” one senior EU source said. “The future prosperity of the single market was challenged. That had an impact – it pushed people together.”
Another senior diplomat said initial sympathy with Britain had fallen away in many capitals, due to the approach of Theresa May’s government. “Of course, we want to protect trade with Britain, but maintaining the single market, keeping trade flowing there, is the priority, and so we will work through [the EU’s chief negotiator] Michel Barnier,” the source said. “Britain used to be pragmatic. That doesn’t seem to be the case any more, and we need to protect our interests.”
The EU is also considering other moves that are either sound negotiating measures or snubs, depending on your point of view, such as barring the UK from weekly trade policy discussions.
The UK is still in denial about its leverage with respect to trade. Brexit enthusiasts appear not to have advanced their analysis from the simple-minded “Europe runs a big trade deficit with us, therefore they have a lot to lose.” First this ignores that the EU can and will force the exit of some manufacturing from the UK, staring with Airbus parts, hitting UK exports. Second, when you adjust for the size of GDP, the UK does indeed have more to lose than the EU does.
More refined analyses confirm that high-level take. From Politico in early April:
In Berlin, officials say that, as negotiations begin, they have the upper hand. Brexit may have some limited economic impact on Germany, but the consequences for the U.K. could be far more devastating. And Berlin is sticking to its hard line that doing what it thinks is needed to keep the EU from disintegrating is far more important to its long-term interests than anything it might gain economically by bending to British pressure on trade…
German businesses leaders appear to be behind Merkel when it comes to the integrity of the European Union’s single market. “On the idea that German business might soften the German government’s stance: You can cross that off your list,” is how a German diplomat put it…
While Britain is Germany’s third-largest market for exports, Berlin is quick to point out that the British economy also depends on German companies, which currently employ almost 400,000 workers in Britain. And many of those German companies are already pivoting away from the U.K. According to numbers released by DIHK business association, almost one in every 10 German companies is planning to shift investment away from the U.K. to Germany or other EU countries.
Immigration collateral damage already starting. While the plural of anecdote is not data, there are more and more stories of immigrants departing, not just EU migrants but non-EU workers such as Philippines and India passport holders. Some of it is due to the rise in xenophobia; the other is uncertainty.
Proving the thesis is a Polish NHS worker who expressed her views was trolled so aggressively that she took a tweetstorm about her concerns down and turned her Twitter account to “protected”:
— Mike Cormack (@bucketoftongues) April 18, 2017
And a think tank has written that if too many NHS workers from the EU follow her footsteps, the NHS will implode. From the Guardian (hat tip Richard Smith):
The NHS would collapse without its 57,000 workers who are EU nationals and they must be offered free British citizenship so they don’t leave the country after Brexit….
In particular, according to [Craig] Murray [of he Institute of Public Policy Research], the position of EU citizens working in the NHS needs to be safeguarded by making them a “generous citizenship offer”. He added: “There are currently around 57,000 EU nationals working in the English NHS, accounting for 5% of its workforce; one in 10 of the UK’s registered doctors is an EU national. Without them the NHS would collapse.”
Seasonal farm workers are also voting with their feet. From Reuters (hat tip Richard Smith):
For the last 18 years, Jerzy Kwapniewski has left his home in Poland to spend the summer months picking apples and hops on a farm in central England. He plans to look for work in Germany next year.
The 50-year-old seasonal worker is one of many east Europeans who, shaken by the fallout from Britain’s vote to leave the EU, have either left the country early or indicated a reluctance to return next year.
They are being driven away by a sharp fall in the pound that has eroded the value of their wages back home and concern for their safety as the anti-immigration rhetoric which fuelled the vote spills over into racist attacks….
Two employment agencies that bring eastern European workers to British farms told Reuters that in the last two months alone they had failed to find workers to fill 600 positions.
One, Fruitful Jobs, said the number of people contacting their Polish and Bulgarian recruitment offices had fallen by 70 percent since the June 23 referendum, compared with the usual 35 percent drop recorded for the latter stage of the season.
Each year, up to 80,000 seasonal workers come to Britain from the European Union to help with the harvest. Farmers say the loss of such staff threatens the wider food and farming industry which contributes around 7 percent of economic output.
However, Home Secretary Amber Rudd is more worried about baristas. And to add insult to injury, her scheme is cockamamie. From New Statesman:
Amber Rudd has a new wheeze to keep the flow of young workers that Britains’ ageing population needs to keep its shops, care homes, bars and so on open and the economy ticking over – a so-called “barista visa”.
Under the scheme, the Sun reveals, people from the European Union will be able to come to Britain for two years to work in hospitality, retail and other similar industries – but they won’t be able to claim benefits or to stay longer than two years….
It’s not a particularly attractive offer, is it? Come to Britain to work in a coffee shop. If you get promoted? You can’t stay. If you fall in love? You can’t stay. If you set up a new business or establish yourself as a writer while working at a coffee shop? You can’t stay.
Gibraltar could be a big sticking point. I had naively thought that the EU threw in Gibraltar on behalf of Spain as a useful bargaining chip. It is already looking like a much bigger bone of contention. From the EU side, it’s an unnecessary seedy competitor to its other more-savory-looking-but-not-really-so tax haven Luxembourg, which has the good fortune to have its Jean-Claude Juncker as the President of the European Commission.
The hysteria in the UK was way out of proportion to any importance Gibraltar has to Britain. And the Brexit loyalist arguments as to why Spain wouldn’t dare proceed were ludicrious: they might lose 10,000 jobs! Consider the offsets, per the Guardian:
If you imagine that, owing to some ancient treaty, Spain had a base in Dover, from which Russia’s chief spy had repeatedly sneaked into Kent, and smugglers had flooded the country with cheap fags, massively undermining our tax base, we would be pretty cross, too. It’s something of a wonder that Spain has put up with it for so long.
And Gibraltar isn’t any better for the UK:
It is a tribute to Gibraltar’s PR operation that more people in Britain don’t realise what is going on. Gibraltar is not part of the UK, can set its own tax rates and has been using them to aggressively undermine us as much as, if not more than, everyone else. A Gibraltarian growth industry in recent years has been online gambling, with most of the big UK operators – William Hill, Ladbrokes, Bet365 – moving their operations to the Rock….It’s not hard to understand why they’re there: it is considerably more profitable to run UK gambling operations if you don’t have to pay UK taxes and the British Treasury has missed out on millions of pounds as a result.
If all of this isn’t discouraging enough, what passes for leadership in the UK seems preoccupied with feeding the fantasies of tabloid readers rather than getting a grip. For instance, the day after the EU said it was relocating the European Banking Authority and the European Medicines Agency, David Davies made the remarkable and embarrassing show of acting as his protests would change outcomes. Consider the absurdity of this dry extract from the Financial Times:
David Davis, Brexit secretary, does not accept that the two agencies and roughly 1,000 staff will have to move from London’s Canary Wharf, even though the EU is about to run a competition to relocate them….
Mr Davis may simply be putting the agencies into the wider Brexit negotiation in the expectation that they can be traded for a concession elsewhere; EU officials say there is no question they must move.
Help me. The English-speaking world is suffering from an abject shortage of competent leaders when the moment demands great ones. All we can do is hunker down and hope for the best.
1 This is also a case of the UK being hoist on its own petard. The UK was the big proponent of EU expansion, when a good case could be made that the Eastern European entrants were often not advanced enough to integrate well economically into the rest of the EU. And indeed, they found the EU bureaucratic rules more cumbersome and limiting than they anticipated. So some of their eagerness to have the UK pay up is to help reduce the cost to them of EU participation, which all in has been higher than they anticipated.