This is Naked Capitalism fundraising week. 1022 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, or PayPal. Read about why we’re doing this fundraiser, what we’ve accomplished in the last year and our current goal, funding our guest bloggers.
It may seem mean-spirited to criticize the UK’s shambolic performance in the Brexit negotiations when British citizens have so much at stake. But we’ve had UK leaders yet again offering citizens and business leaders false hope, and having the press barons amplify their fantasies as if they had a good chance of becoming reality. Moreover, the outcome was entirely predictable, as shown by the fact that this humble blog predicted it.
Readers may recall that the UK wanted to talk about what it calls “the future relationship,” meaning the outlines, and perhaps even the details, of its trade and services deal with the EU in parallel with the negotiation of the other issues now on the table: the so-called exit bill, movement of people, and the Irish border.
We stressed that this demand amounted to renegotiating the shape of the table, as in the basic parameters of negotiations. This sort of thing is simply not done in negotiations that are already underway. And there were other reasons to expect this push to be rejected:
Under EU treaties, the UK cannot negotiate new trade deals until it is out of the EU. The EU has already made a concession (without demanding anything in return, as in a “free concession” which is generous) by being willing to enter into preliminary talks before the UK exit
The UK is acting as if it does not understand that the EU’s chief negotiator, Michel Barnier, is operating under parameters that were approved by all 27 EU members. He does not have the latitude to go outside that without going back and getting their approval
EU leaders made clear what the order of negotiations would be. Whether the UK likes it or not, the EU has all the leverage since the alternative is a disorderly Brexit, which is far more damaging to the UK than the EU
The EU made an additional free concession to the UK in moving the Irish border issue forward into the first set of issues to be considered
The UK has done nothing to earn the good will of EU leaders or negotiators since the talks have started. UK official have not only continued their pattern of being hostile, often based on claims that show ignorance or deliberate misrepresentation, but have also ignored clear and consistent messages from EU leaders and continue to be shockingly unprepared for negotiations
The EU made clear it was unreceptive to the UK’s push at the September round of negotiations, which virtually ground to a halt. Various EU leaders, either in their own name or via leaks, made clear afterwards that the EU was very unlikely to decide, as the UK had hoped, that the EU would decide in October that enough progress had been made on important Brexit issues so as to start talking about “the future relationship”.
Put it more simply: virtually nothing has been settled. How could the Brits fantasize that the EU would roll over? So what if Theresa May gave a speech in Florence outlining a 50,000 foot idea of what a transition deal might look like? That doesn’t mean the EU is prepared to entertain it now. And that’s before you get to the fact, as European officials point out, UK leadership is so divided over Brexit that they don’t appear able to enter into any commitments. Or to hoist a label applied first to the US:
The Russians expressed their total disgust and outrage at this attack and openly began saying that the Americans were “недоговороспособны”. What the word means is literally “not-agreement-capable” or unable to make and then abide by an agreement. What that word means is literally “not-agreement-capable” or unable to make and then abide by an agreement. While polite, this expression is also extremely strong as it implies not so much a deliberate deception as the lack of the very ability to make a deal and abide by it.
Now unlike the US, UK leaders might overcome their internal dissent and be able to negotiate in a reasonable manner. But that isn’t where they are now.
The situation is so stark that it’s not hard to read between the lines of a report in the Financial Times, Germany rejects May’s Brexit transition hopes. Some key observations:
The EU’s chief negotiator, Michel Barnier, made a good faith effort to get a waiver for the UK. But predictably, EU officials were not moved:
The uncompromising positions in Berlin and Paris emerged on Friday as ambassadors from the remaining 27 EU members held their first debate on the union’s approach to transition talks, including the option of approving exploratory negotiations at an October summit.
Michel Barnier, the EU’s chief negotiator, outlined the potential benefits of opening talks on a transition deal at the meeting. He argued that they could create space to resolve the big outstanding issues on a Brexit bill, as well as recognise Britain’s recent more accommodative stance.
But this option was firmly rejected by a group of countries led by Germany and France, which took a stricter view on the sequence of negotiations, according to several diplomats briefed on the meeting.
The article tries to depict Germany as the heavy, but the opposition to the UK’s stance is broad based. As a rough and ready rule, when Germany and France agree on anything, the rest of the EU generally follows precisely because the two countries typically have very different interests and priorities. Here, we have not just France and Germany in a united stance, but Germany supposedly leading a block of other countries too. It is hardly a secret that most if not all of the Eastern European countries (whose entry the UK ironically promoted aggressively, to weaken the position of Germany and France) are particularly hard line about having the UK settle its so-called exit tab first. And recall further that the exit arrangements require unanimous approval of all 27 remaining members.
The EU is expecting the worst. It was obvious from early on that the EU, in its cold fury over the Brexit vote, did the equivalent psychologically of marking to market, as in accepting that they’d take large economic losses. For instance:
The stalemate comes as Germany’s biggest business lobby has warned members to prepare for a “very hard Brexit” because Britain lacks a clear strategy.
So they can approach the negotiations from the perspective of “This is a given, how do we make the best of this bad situation?” And on most issues, what is best for them is not at all good for the UK.
On top of it, the UK is making own goals like this:
The UK’s two main negotiators are battling each other for staff and resources days before the fifth round of Brexit talks begin next week. According to an internal email seen by the Financial Times, Olly Robbins, who left his job as head of the Department for Exiting the EU last month to set up a rival “Europe Unit” in Downing Street, is openly trying to poach his former colleagues from David Davis, the Brexit secretary.
The Foreign Office has been hollowed out thanks to Thatcherite budget-slashing. But even at its higher manning levels of decades ago, Brexit would have been an overwhelming task. And now we have infighting making the far-too-few professionals dedicated to this initiative even less effective.
Worse, way too many people in the UK, and most important, its political leaders and its press barons, think that there is economic upside that will just fall in their laps if Glorious Brexit rolls forward, and they are doing nothing even remotely approaching the level of war-level industrial planning and operational preparation to keep Brexit from being chaotic and extremely damaging. So the Brits are regularly miffed and confused when the EU does what they should expect: look out for its own interest. Here is yet more confirmation of how the UK is only waking up now to how serious its downside is:
If a delayed timetable were adopted at the summit in October it would be a serious blow to British business, which is warning ministers that an end-of-year deal on a transition period is essential to avoid a wave of companies decamping operations to the continent because of uncertainty
Despite all of this, the EU is not taking maximum advantage of the horrible position the UK has put itself in:
As a gesture to recognise progress, the EU is considering starting an internal “scoping” exercise on a transition deal, where the EU27 would prepare for talks with the UK at a later stage. While an advance of sorts, this falls well short of London’s hopes that talks would begin after the summit in October.
But in general, as our readers have pointed out, the EU has psychologically come to grips with Brexit, while the UK is still sleepwalking. And it needs to wake up, pronto. The worst-case scenario is now looking troublingly likely. The take below isn’t even so much a dire forecast as a linear extrapolation, since despite the appearance of two sides still talking, the stalemate as of last month was the functional equivalent of a breakdown:
While Conservative MPs argue about Theresa May, EU diplomats are quietly preparing for a collapse in Brexit talks. https://t.co/M1am45kX76
— Peter Thal Larsen (@peter_tl) October 7, 2017