This is a big week for Brexit, with Theresa May scheduled to present the outlines of her Great Repeal Bill on Thursday. Pressure on May is building as she will finally be forced to abandon grand platitudes and start putting more concrete Brexit positions on the table. And this is taking place as the polls show support for Brexit having fallen to a minority and businesses more and more worried as they realize even a soft Brexit won’t be a good outcome for many of them.
The Government has already had to retreat from its bluster about what it could get from the EU merely by stomping its feet and pouting. May insisted that the UK would negotiate a Brexit only if it could also work on a trade deal in parallel. That went out the window the day the negotiations started. The UK insisted it wouldn’t accept a Brexit tab. That was and remains one of the first items to be settled.
In another major backpedal, flagged by the Financial Times, the Government has now admitted its red line on the European Court of Justice, that the ECJ would have no say after Brexit, which has been an idee fixe of the hard-core Brexiteers, is untenable:
European judges could continue to have sway over Britain for a “limited time” after Brexit, the British government has conceded, in a development that could pave the way for a softer exit with the UK retaining closer ties to the EU..
Many Eurosceptic Conservatives have long argued that the ECJ — which as the bloc’s highest court has sway over the UK legal system on matters of EU law — is an affront to British sovereignty.
However, on Monday Mrs May’s spokesman said: “The transition rules could involve the ECJ for a limited time. That’s a matter for negotiation.”
The ECJ is the arbiter in disputes involving the single market and is the backstop to dozens of EU regulatory bodies covering sectors including nuclear, medicines and aviation, and agreements on security and justice co-operation…
The EU side had meanwhile dismissed the idea of a “bespoke” transition for Britain, making European courts a clear redline. In their Brexit negotiating guidelines, EU leaders insist that any “time-limited prolongation” of EU rules would “would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply”.
While the Government may actually believe the ECJ shift is only a minor concession, in fact, the UK has no way to escape the ECJ continuing to play a significant role in UK affairs. If the UK is to keep selling goods into the EU, its manufacturers will have to comply with EU standards. For the overwhelming majority of goods, having separate products for the EU and UK would be a costly nuisnace. The EU product would be the one also sold in the UK. Likewise, UK financial institutions will have to comply with European banking regs when operating in the EU, just as they have to adhere to US regulations in the US and Japanese regulations in Japan.
Similarly, the EU insists that EU citizens who stay in the UK as part of a Brexit deal continue to have access to the ECJ. While one can see the UK’s point here, that it ought to be able to police people living in its borders, there are two wee problems. One is the UK is economically dependent on many of those EU citizens. We’ve pointed to the fact, for instance, that 10% of NHS doctors come from the EU. And even lower-skilled workers have come to play important roles. As Colonel Smithers reported yesterday:
Further to Brexit, another tidbit from Buckinghamshire: Many families, mainly from Poland, the Czech Republic and Slovakia, are leaving / have left – and have taken / took their children out of school (mainly Catholic primaries) early. Term ends this or next Friday. Some of the parents work on farms, many of which are owned by aristocratic landowners, and are having to be hastily replaced as the harvest nears. A batch of Sri Lankans have arrived with their families in tow.
As we’ve pointed out, the EU may argue that its hands are tied, that EU citizens have rights which includes access to the ECJ and those rights can’t be ceded without changing EU treaties, which is not going to happen. My guess is the best the UK can get would be some sort of special court to handle EU citizens in the UK, which would follow EU law, perhaps with appeals to courts staffed jointly with UK and EU judges, again enforcing EU law. In other words, there would be some optical gestures to make them look like UK courts but they would still run on EU rules. For the UK to get any other solution, I would anticipate it would have to make a large concession to the EU on another front, and it’s over may pay grade to know what if anything could be traded away to get such a break.
And that’s before we get to another elephant in the room: that a big part of the UK elites have suddenly realized that the now 21 month Brexit runway is way too short for them to get everything sorted out, particularly given the dilatory way May has been managing things. So the new magical thinking is that they can negotiate a “transition deal”. This ignores the fact that major elements of the “shape of the table” have already been settled, and either cannot be reopened because they are matters of treaty or trying to reopen them would cause more delay and require that the UK offer a concession to get the relief.
One of the basic parameters is that the UK cannot negotiate any new arrangements on trade until it has concluded its departure. This is a matter of treaty. The EU has agreed to be a bit nice and allow the UK to start negotiating some of the general parameters of its new arrangement with the EU (and conceivably other nations) if and when it’s wrapped up most of the major Brexit issues.
Allowing the UK to negotiate a “transition deal” (whatever that means) isn’t in the order of negotiating priorities that Brussels presented to the 27 remaining member nations and has had approved. May’s ministers have to know that if they’ve been paying attention (a dubious proposition, I grant you).
Moreover, as much as UK businesses may want a “transition deal” as preferable to the feared “crashing out” scenario, they can’t possibly want to have one set of arrangements (the “transition”) then followed by whatever the final deal would supposedly be. Two (perhaps even more) sets of changes is a lot of disruption, particularly when the shape and timing of later arrangements will be one of those nasty uncertainties that businessmen like to whinge about. And on top of that, it isn’t clear to me that negotiating a “transition” deal, even if the EU would relent, would be all that much easier than negotiating permanent arrangements. Operationally, I’m at a loss to see how the approvals on the EU end would be any different.
Another big fly in the ointment may come from the UK side if Parliament refuses to cede as much authority to the Government as the Tories want. The Times discussed this issue over the weekend; perhaps I missed it elsewhere, but the matter of the so-called Henry VIII rules does not seem to have received the attention it warrants. An impasse could mean a Brexit dead end:
Ministers have been warned by government lawyers that the most vulnerable part of the bill, which transfers European law into British law, are clauses setting up so-called Henry VIII powers. These are meant to enable ministers to nod through hundreds of tweaks to existing laws without making them subject to primary legislation.
“If the powers are watered down, we’ll have to change each and every law on the floor of the House. It could take years,” said one source who helped draw up the Repeal Bill. Another source said: “Unless you make the changes, a huge chunk of British law ceases to function. If that’s the case, Brexit can’t happen.”
Rebel MPs and peers confirm they have the Henry VIII powers in their sights. They will also seek to amend the Repeal Bill to force the government to seek a four-year transitional deal with the EU. “There will be amendments on that and then an amendment to try to stay in the customs union while that’s happening,” a former minister said.
From what I can tell, no one in the Government has broached the “four-year transitional deal” fantasy with the EU, and for good reason. The EU has a simple answer, which as Lambert would say, has the great merit of being true. “The only way out of the EU is the Article 50 process. You set that in motion and that becomes final regardless of whether we reach an agreement or not. There is no alternative path out, as you must understand. All we can do for you now is perhaps let you revoke Article 50, which some EU leaders have said they’d be prepared to entertain but would now be a big ask, given that they’ve spent time and money pursuing the exit you said you wanted.” That basically means the UK could back out of Article 50 at a price, which I anticipate would be sacrificing the budget contribution break that Maggie Thatcher won and getting current on budget arrearages.
That is a precondition for doing anything else procedurally. And having done that, the EU has absolutely no reason to then let the UK have a customized exit process. The whole point of the EU’s negotiation stance was to demonstrate that leaving the EU would come at a very high cost. They have no incentive whatsoever to make it easier for the UK to depart.
Having said that, I don’t see how the UK leadership backs itself out of the Brexit corner even if it what the EU has been saying since the Brexit vote finally starts to sink in. And if it happens at all, it would be such a big reversal that it could not happen quickly. However, the Great Repeal Bill is set to be debated in the House in September and in the House of Lords closer to year end. So that process is also far from speedy.
Perhaps readers can come up with other scenarios, but the only one I can dream up with is a drawn out Tory leadership battle that leads to new elections that produce the last thing they want, a Labour victory. If that happens and if and only if Brexit keeps falling in popularity in the polls (as in support falls to below 45% and stays there), then Corbyn could call for a new referendum. But that’s all pretty remote. And even if something like that were to happen, it would mean Brexit negotiations are pretty much stalled while the Article 50 clock keeps ticking.
In the meantime, Brexit boosters keep grasping at straws. For instance, Theresa May made much of the idea that Trump said he could do a trade deal with the UK quickly. That falls in the category of “Be careful what you wish for.” US bilateral deals do get stitched up quickly because they aren’t negotiated. The US pretty much dictates terms. And a UK desperate to tout a trade deal, regardless of whether it was any good or not, means the US could get even more favorable terms than usual. The president of the Confederation of British Industry, Paul Drechsler, confirmed our assessment. From Politico:
On the subject of striking a free-trade deal with the U.S., Drechsler warned of rushing into a “bear hug” too quickly with one of the “best negotiating teams in the world” for trade deals. “A trade deal is a dog eat dog activity, it’s not a diplomatic activity,” said Drechsler.
Bloomberg’s sources gave even more negative takes:
“The U.K. must be absolutely desperate to demonstrate that it’s able to get something from the United States,” said Peter Holmes, an economist at the Trade Policy Observatory, a research group. “The U.S. will make demands that even a desperate British government won’t be able to accede to.”…
“You can see a Trump administration coming to the U.K. and demanding a loosening of sanitary regulations on food, demanding that the U.K. allow hormone-treated beef to be sold in the U.K. and for the U.K. to accept GM crops,” he said. “There will be quite a reaction against it.”
Similarly, we have Brexit Central, a bastion of Brexit boosterism, misrepresenting Australia. Here is how FastFT reported on the prospects of an Aussie deal:
The Australian prime minister, Malcolm Turnbull, has said he is determined to sign a trade deal with the UK as soon as it is lawfully able to sign one on leaving the EU – but said his country is seeking a similar deal with the European Union even before the UK leaves.
The EU’s position is that the UK cannot negotiate new trade deals until it is out of the EU. Turnbull is not going to jeopardize his higher-priority in magnitude and timing pact with the EU by violating their rules.
By contrast, what is the subject line on today’s Brexit Central daily e-mail? “Australia wants trade deal ASAP.” And from the text:
After attending the weekend’s G20 summit in Germany, the Australian Prime Minister, Malcolm Turnbull, has been in London and had talks with the Prime Minister at Downing Street yesterday morning. After a working lunch, they gave a joint press conference in which Turnbull reminded us that he had been first on the phone to offer a free trade deal after the referendum and pledged to speedily conclude such an agreement.
Now in fairness, the e-mail later says:
Theresa May also explained how she had used the opportunity to meet with a number of her counterparts wanting to forge ambitious bilateral trade deals after Brexit.
But you’d have to not be suffering from pro-Brexit confirmation bias to appreciate what it means to negotiate trade deals “after Brexit”. That means the process starts only after the UK has been cut loose. And while one-sided pacts with the US that don’t involve services (services agreements take much longer to work out) can be agreed in under two years, let us not forget it took seven years to negotiate a Canada-EU deal, and the approvals took longer than anticipated. And it’s not as if there were hotly contested issues in that negotiation.
Gideon Rachman describes likely end-games for the UK in the Financial Times today, none of them pretty:
Things are going badly wrong in Brexit-land. The UK government is weak and divided. The EU is confident and uncompromising. The negotiation clock is ticking and only the wilfully deluded now believe that a “cake-and-eat-it” Brexit is on offer. Instead, Britain appears to face a choice between three different types of humiliation.
The first humiliating outcome is that Britain becomes so desperate for a trade deal that it is forced to accept the EU’s terms, more or less in their entirety. That will mean that Britain agrees to pay a bill of up to €100bn in gross terms, merely to get trade negotiations going. To then secure access to the single market, Britain would have to make further humbling concessions — accepting free movement of people and the jurisdiction of the European Court of Justice.
An alternative humiliating outcome would involve Britain refusing to make an agreement on these terms and crashing out of the EU without a deal in March 2019. British goods and lorries would then stack up at the Channel ports, as they hit new trade and customs barriers — amid general sniggering on the other side of the channel. Job losses would mount in manufacturing and a range of service industries, from finance to pharma. And as investment was diverted to continental Europe, the economy would take a permanent hit…
The third humiliating outcome involves Britain realising that there is no good Brexit on offer and abandoning the whole idea and returning meekly to the EU fold. Even to secure agreement to this outcome from the EU27, Britain might have to give up its cherished budget rebate.
Rachman spends the rest of his column looking at other national humiliations and trying to assess what they imply for the UK. I’m not quite sure I agree that all fall in the same category, since the second scenario, of the UK crashing out and the disastrous knock-on consequences, would be hard to blame on anyone other than the feckless Tories, while scenarios one and three could and probably would produce even more resentment of the EU.
The reality is that many UK citizens haven’t adapted to the reality that England no longer has an empire, and even though English is still the lingua franca, the UK is not a significant power. It doesn’t even matter enough to its biggest trade partners to get special concessions from them beyond the ones it already had garnered as a member of the EU and deemed to be not good enough. But the forced recognition of Britain’s diminished stature may indeed result in a festering wound to the national psyche, particularly after the Tories and UKIP shamelessly played on national ego and stoked the unrealistic vision of a glorious Brexit.