Yves here. I beg to differ with Weeks on some of his assumptions. First, his cheery view that a UK trade deal with the EU can be achieved faster than CETA is optimistic. The reason is that what most people loosely call a “trade deal” would in the case of the UK and EU, include a deal on services since financial services are the UK’s biggest export to the EU. Services deals are much more difficult and time consuming than pacts involving physical goods. And on top of that, the Foreign Office has been hollowed out, and woefully undermanned to handle Brexit, let alone the at least 759 other agreements it will need to think about redoing when it departs the EU.
Second, his view that the German view will drive the talks. While Germany is influential, it is less so when it is not writing checks, as it was in the case of the Greek bailout. Each country has a vote on Brexit matters which means in theory any one could lodge a veto. In practice, the EU generally follows when France and Germany agree, because their native interests and inclinations are enough at odds that if they come to a unified position, the other nations conclude it can’t be all that bad. And let us not forget at a critical juncture when the 2015 Greece negotiations had broken down completely and the consensus was to let Greece default, it was Hollande, not Merkel, who got everyone back to the negotiating table.
Nevertheless, even he with his more cheery views generally confirms what we and many others have been saying: that May’s “no deal” talk on Brexit is sheer bluster.
By John Weeks, Professor Emeritus, School of Oriental & African Studies, University of London, and author of ‘Economics of the 1%: How mainstream economics serves the rich, obscures reality and distorts policy‘, Anthem Press. Originally published at Open Democracy
A year ago this month the referendum campaign to leave the European Union ended with victory for the EU leavers. Almost immediately both the winners and the losers embarked on a second campaign, to convince the British public that the process of leaving (“divorce”) would be protracted and expensive, possibly leading to untold disasters.
For the pro-EU side, the “lengthy-and-costly” narrative allowed claims “I told you so” – they told us during the campaign that leaving would devastate the UK economy and, they assert, how right we are. For leavers, Brexit disaster serves their broader interests, especially in the current election campaign. Their narrative also asserts a costly and protracted process that requires a strong and stern leader to stand up to the fickle and vindictive “Europeans”.
In the last days of the election, the Conservatives have placed Brexit disaster at the centre of their campaign with Theresa May billed as our unlikely saviour, telling us she would have “no deal” rather than a “bad deal”. “Unlikely” applies to the prime minister for many reasons, not least her reversal from remainer to leaver and her vacillation on numerous other policy issues.
In practice, however, weak or strong, vacillating or steadfast, are largely irrelevant. I campaigned for remain and strongly regret leaving the European Union, but the exit process will prove difficult only if the British government chooses it to be so. The route to a solution is not difficult to map, and negotiations, while tedious, should not encounter intractable problems.
Reaching an agreement with the European Commission (the body formally representing the European Union) will prove extremely lengthy because of the EU’s ratification procedure, not difficulties in reaching agreement. EU treaties require that all member governments ratify any such agreement. In the case of Belgium, the ratification process devolves to the legislatures of the four regions.
The approval of the Canadian-European Trade Agreement (CETA) demonstrated how long ratification can take. The negotiations began in 2009, ended in 2014, and the treaty ratified in 2017. I would predict that Brexit negotiations need not require five years as with CETA, but ratification would occur no faster.
I reached this decidedly minority opinion – what might be named “easy Brexit” – after a visit to Berlin at the end of April, where I gave evidence to the Committee on the Affairs of the European Union of the Bundestag (described here). The German government, most powerful by far among EU decision-makers, will in practice determine the parameters of the negotiations from the European side.
These parameters will follow from the two central concerns: 1) the Merkel government’s need to resolve the funding problem created by the exit of Britain, and 2) the importance to German business leaders of maintaining its current trade surplus with Britain.
During the period 2015-2016, according to a report of Parliament, the UK government’s net contribution to the EU budget was £10.8 billion or 13-14% of net contributions by the member states (money payments in minus benefits). A report by the European Policy Centre estimates, through 2020, a “post-Brexit” UK contribution of slightly less, about 12%. Rather than a problem, the demand by the European negotiators for these contributions, the infamous “divorce cost”, provides the vehicle for a mutually acceptable and beneficial agreement.
How to cover the UK contribution presents the Merkel government with a serious political problem. Angela Merkel’s perennially close ally, the Bavarian Christian Democratic Union, has rejected additional contributions to the EU budget; i.e., they will oppose the German government increasing its contribution to fully or partially offset the loss of UK contributions. The alternatives are to reduce the already miniscule EU centre budget (1% of EU GDP) or pressure other members to increase their contributions. Both would severely weaken German government influence among the countries receiving net benefits (a majority of members).
Though the UK media has reported that German industry supports Chancellor Merkel’s “tough stance” on negotiations, I came away from Berlin with the opposite impression. Close inspection of the statements of German business leaders, one of whom gave evidence to the Bundestag when I did, indicate more nuanced conclusions.
The position of the German Confederation of Industry, as its director Markus Kerber stressed, is that “it is of utmost importance to reduce the damage [of Brexit] for the German economy” – a view shared by representatives of branches of large industry (summarised here).
Combining the political difficulties for the EU budget and the division of opinion among German business leaders shows the route to agreement. Agreement in principle to pay contributions for the foreseeable future would initiate discussions. This would not represent an important concession by the UK government. Several non-members contribute to the EU budget, for example Norway. Any form of post-Brexit EU association will require such payments.
Making these payments would not be controversial were it not for toxic rhetoric of Brexit ideologues. Post-Brexit contributions to the EU budget should be no more controversial than UK funds for the budget of the World Trade Organization, payments for services in return for benefits.
On the emotive issue of immigration, I gained the impression in Berlin that this will not block reaching agreement. Behind closed doors (where the EU governments manage consensus) an arrangement for the British government to accept three of the four “freedoms” could emerge (unrestricted capital flows, EU rules on trade flows, and cross-border bidding for private and public services).
The aggressive anti-EU rhetoric May’s government makes the coming negotiations appear difficult when they need not be. Should the prime minister return to power after 8 June, a softening of that rhetoric will certainly occur. However, regaining good relations with EU governments will be no easy task for a government full of rampant Brexiteers. Having accused Commission officials of “sabotage” and “threats”, on 19 June she and her negotiators may find it difficult to convince them and European governments that they were “just kidding”.
A Labour victory on 8 June would make a positive approach to negotiations much easier. The new Corbyn government could immediately confirm its intention to make payments to the EU budget, as well as unilaterally granting employment and residency rights to EU citizens now in Britain. This would also undermine the case for a second Scottish independence referendum – a collateral benefit of considerable importance.
In his famous exchange with Rosencrantz and Guildenstern, Hamlet says “for there is nothing either good or bad, but thinking makes it so” (Act 2, Scene 2). In the case of Brexit negotiations, “agreements are neither hard nor easy, but rhetoric makes them so”.