Michel Barnier Pushing EU to Discuss Trade Relations with UK; Germany and France Opposed

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Last week, we highlighted the fact that the EU’s Brexit negotiator, Michel Barnier, was pressing the EU to approve having the Brexit talks move to include the consideration of the so-called “future relationship,” meaning trade. This is important because it is what we call a “shape of the table” issue, in this case, the order in which issues will be negotiated.

We had seen Barnier’s move as bona fide, since a big job of a negotiator is to try to move his side towards a deal. Readers rejected this idea. It now appears that our interpretation was correct, and Barnier is continuing to push the EU to relent. However, as we’ll discuss, he appears very unlikely to succeed.

Why Does This Wrangle Matter?

The short version is that the UK is certain to suffer at best a “hard Brexit” and at worst, a disorderly Brexit if the Brexit negotiations don’t proceed according to the original tentative plan. That was to start discussing “the future relationship,” meaning trade and/or a transition phase after this October round. The 27 remaining members of the EU need to approve having the negotiations move on to these new issues.

Frankly, I think a hard Brexit is inevitable. The UK side lacks a unified negotiating position, meaning it can’t credibly commit to anything. Even though the UK is so utterly unprepared for any kind of Brexit that it desperately needs a standstill of some sort, the hard Brexiters go to war and whip up the press any time that idea rears its head. They’ve had a go at Phillip Hammond at Treasury who is trying to steer a more moderate course, plus Boris Johnson has threatened a leadership challenge. No one seriously wants him as PM but Johnson has his use as a means of keeping the weak Theresa May in line.

If you read Article 50, Section 2 says:

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.

The European Council published the guidelines at the end of April. They included a section that said the negotiations would be phased, what would be in the first phase, and that the European Council would determine if the negotiations had made enough progress to move to the next phase. This document didn’t set a timetable for the first phase but the hope was that the European Council would approve starting to discuss “the future relationship” issues after the October round.

Note that the original negotiating guidelines, which were approved by the 27 remaining EU members, stipulated that only certain issues would be addressed in the first phase. One point contained general language that meant more to the EU than to me. It was originally deemed to cover the “movement of people” issue, meaning among other things, the rights of EU and UK citizens post Brexit. That point now includes the Irish border issue.

The second “first phase” topic was more clearly stated; it’s the so-called Brexit bill, meaning settling of accounts.

With this background, it’s apparent why the UK was out of line in being muley and effectively refusing to negotiate in August by insisting that it wasn’t going to discuss the financial settlement without discussing “the future relationship” in parallel.

Yes, it is to the EU’s negotiating advantage to proceed in its original order. The EU countries are unified in their desire to have the UK pony up, with the exception of obstructionist Poland and countries particularly dependent on exports to the UK, namely Denmark and the Netherlands.

By contrast, on the issue of trade in isolation, there are more countries that have more UK-friendly inclinations, particularly many of the Eastern European members.

However, had the UK bothered to read Article 50 before it invoked it, it would see clearly that the EU gets to set the guidelines. Their ball, their game.

And it hasn’t helped that the UK is playing poorly:

Why Is Barnier Pushing the UK’s Case?

From our post over the weekend, quoting a Financial Times story:

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 Times today confirmed the Financial Times’ reporting, with a new wrinkle: Treasury’s Hammond has published an article in which he says he is refusing to set aside funds for a hard Brexit planning. He contends that there are indicators that the EU will relent and allow discussions on trade before the Brexit tab is settled. Note this is more important than it might seem because Hammond is due to present his budget next month.

As an aside, Hammond’s stance completely undercuts May’s farcical hard Brexit planning papers that we shellacked yesterday.

The wee problem is that the related story in the Times on Barnier’s efforts to get the EU to relent on its order of battle does not appear that different that the Financial Times’ story over the weekend. First, without specifying the time frame, it appears to be based on the same meeting on which the pink paper reported, that of a presentation by Barnier to EU ambassadors (the Times piece repeatedly mentions diplomats as its sources). In other words, this appears to be a second report on the same meeting.

Second, although the Times’ story gives a picture that that more countries support Barnier than the pink paper indicated, both agreed that France and Germany were opposed to cutting the UK any slack. This is important for two reasons. First, as we’ve regularly indicated, when France and Germany agree on anything, they can usually get the rest of the EU to follow. Their interests are generally opposed, so when they concur, it usually means it can’t be that bad for the smaller countries.

Second, it takes unanimous approval of all 27 EU countries to allow the negotiations to include new issues. Germany and France have no compunctions about voting no even if no one else were to follow (although one can imagine they’d try to persuade others to follow or at worst abstain to improve the optics).

From the Times’ account:

Michel Barnier is pushing European governments to give him permission to begin exploring transition and trade talks with Britain next week in the face of opposition from Germany.

Behind closed doors the EU’s lead negotiator has unexpectedly become Britain’s best hope…

But the German government is pressing hard for Britain to give further guarantees on the financial settlement…

“Germany wants more and it wants it more or less in writing,” said one diplomat. “That is toxic for the British.”

But other European officials don’t sound as accommodating:

Donald Tusk, president of the European Council, will chair talks between Europe’s leaders next Thursday. He said that unless negotiations made progress over the coming weeks then Britain and the EU could be heading for a “no deal” scenario.

“We are negotiating in good faith, and we still hope that the so-called ‘sufficient progress’ will be possible by December,” he said.

“However, if it turns out that the talks continue at a slow pace, and that ‘sufficient progress’ hasn’t been reached, then together with our UK friends we will have to think about where we are heading.”

Note that Tusk is not on the same page as Barnier. The UK and Barnier (and whatever EU members Barnier has managed to get in his corner) want to get a “sufficient progress” approval in October, the original target, and not December. EU sources have been messaging for the last couple of months that approving moving to the next set of issues in October was looking unrealistic and that December was the current fallback date.

Again from the Times:

Mr Barnier first called for his existing negotiating “guidelines”, which rule out transition talks, to be relaxed last Friday and despite having the support of “almost all” countries he was firmly rebuffed by Germany, France and Romania in a decision that requires the consensus of all EU 27 governments.

According to diplomats Mr Barnier suggested that while there was not yet “sufficient progress” on withdrawal negotiations to move on to a formal second phase of trade talks there was enough of a “positive atmosphere” after Mrs May’s concessions to permit analytical work on a transition to begin.

While this is more detailed that the Financial Times’ account, there is a significant difference in the impression given as to how much support Barnier has. Here is how the Financial Times reported on the same meeting:

Germany and France have dashed British hopes of fast-tracking talks on a two-year post-Brexit transition deal, insisting that the UK’s EU divorce bill be resolved first…

But according to European diplomats, a Germany-led group of EU countries has demanded more clarity on the long-term financial commitments Britain will honour…

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.

Now the finer points of the reporting don’t matter much at this juncture, since the opposition of Germany and France alone are enough to scupper having the UK be allowed to talk trade soon. But it seems unlikely that several sources would all say something along the lines of Germany and France represented “a group” if their only ally was Romania.

The other reason I give the Financial Times’ account more weight is that historically it has had far and away the best Brussels desk of all the UK papers. It was heads and shoulders above any English language paper on its reporting on the Trokia’s negotiations with Greece in 2015. By contrast, the Times has a scoop in the form of publishing Hammond’s letter justifying his budget plans. That means its related report runs the risk of being overly dependent on sources aligned with him, which also means aligned with Barnier.

But we get back to the question: Why is Barnier sticking his neck out this way?

We gave one explanation in comments on Saturday:

Barnier has been a highly respected EU negotiator for many years. I see his conduct as consistent with what you’d expect from a professional negotaitor.

One thing that happens in negotiations is that the negotiator is or becomes as loyal to getting a deal done as he is to his principal. Indeed, if you don’t understand that dynamic as a principal it can really bite you.

One of the reasons this dual function matters is that principals inevitably want too much even when they are in the power position. So a key role of the negotiator is to make them accept less than they want. The cliche in dealmaking is a good deal is one where both sides feel bruised.

Barnier thus needs to preserve the best relationship he can with the UK side under the circumstances even with the Brits looking like they are doing their best to poison the well.

That means making a solid case for demands they have that are reasonable. This UK demand isn’t nuts in substance even though they went about it all wrong (as in this is something they should have explored with the EU before triggering Article 50).

Moreover, on a different level Barnier knows his principal would have to do a lot of wrangling on its side and take a lot of procedural steps to indulge the UK (as in they’d need to change his negotiating parameters formally). Given the very high bar for getting the EU to adopt the UK position, he has very little to lose by acting as a fair broker of the UK position. It demonstrates that he has made a good faith effort while knowing full well that the die is pretty much cast and the odds of a course change now are low.

A second reason is that the European Commission has long positioned itself as the friend of smaller EU countries, as in a forum that can serve as a counterweight to Germany and France. Juncker tried to play this role ineptly during the Greek negotiations. Right after Syriza took office, before opinions in Europe had hardened against them, Juncker tried acting as the young government’s advocate, only to be slapped down by Germany.

There is a third possible reason, and this is speculative. Recall Theresa May’s speech in Florence on September 22, in which she proposed funding the UK share of the EU budget during a two year transition phase. That funding commitment was seen in the UK as a major sop to the EU, although it was also a clever gambit, since the Eastern European countries who are potential UK allies on trade are also the most eager to see the UK pay up. But that also made the proposal controversial among the hard Brexit camp.

Barnier was initially unreceptive. From the Financial Times two days after her speech:

David Davis, the UK’s Brexit secretary, has been told that Britain’s request to have an EU transition deal will only be discussed once the UK has settled its divorce matters, including its exit bill.

Arriving just ahead of the fourth round of Brexit talks in Brussels today, Michel Barnier, the EU’s negotiating chief, said prime minister Theresa May’s explicit request for a transition deal of around two years after 2019 would only get a hearing in the second phase of talks. To get to this point, the two sides will have to overcome the sticky issue of money.

But the story also included this bit:

Brussels is demanding more detail on the positions laid out in Florence, including the size and scope of the financial settlement and the legal position of EU citizens after withdrawal.

First, is it possible that the UK sounded its most likely allies before the Florence speech? Or perhaps a group of foreign diplomats from countries with significant UK exports pointed out that being willing to write a large interim check could split the united EU position?

Second, the UK might have made enough in the way of additional private assurances to persuade Barnier that the British were more prepared to deal than their public posturing would lead one to believe.

Or it may simply be that Barnier can see that these negotiations are going to be a colossal train wreck, and he is doing everything in his power to make sure that the histories of this sorry affair will hold him blameless.

It would be nice to be more hopeful about the Brexit talks. But I don’t see the hyperventilating stories about Hammand’s hopes for the negotiations as being well founded. It would be better if I were wrong.

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26 comments

  1. a different chris

    I am again a little confused by this:

    >this is something they should have explored with the EU before triggering Article 50

    I was pretty much under the impression that the EU simply would* not talk about anything until A50?

    *I deliberately picked “would”, not “could”, it’s BS to think that pieces of paper mean anything more than the people in power say they mean. Contracts are weapons, which can be left sheathed – in plain sight, but still not in hand – whilst you talk it out. This is true even to the Germans although they are the most loathe to admit it.

    1. Yves Smith Post author

      They would not discuss substance. They didn’t want the UK trying to negotiate Brexit terms when Article 50 requires both parties to negotiate after the exiting country sends in its notification. See my longer comment below. Article 50 was set up to favor the EU over the departing county via the strict timetable. Indulging preliminary talks was not in the EU’s interest.

      By contrast, this is a process issue. Different category. And wouldn’t be a negotiation. This would be “do you take this to mean X or Y?”

      Although in reality, I think the UK managed to miss the significance of the clause I highlighted.

    2. PlutoniumKun

      I would suggest you read a few ECJ judgements if you think the EU does not take an extremely literal approach to laws and rules. One of the striking things about EU law is that in comparison to typical laws in the Anglosphere they are often models of clarity and succinctness. And the ECJ very much tends to follow the northern European legal tradition of giving fairly short shift to vague precedents or semantic parsing – they very much tend to interpret laws and regulations very literally. And yes, most EU member states including Germany do actually tend to abide by ECJ judgements. Article 50 is very clear and easy to understand and I find it quite remarkable that somehow the London government never bothered to read it or take what it said seriously.

      But as Yves says, Article 50 does not preclude formal or informal discussions before the issuing of a notice. For the UK not to have pursued this before it issued the A.50 notice to Brussels amounted to what I think future historians will judge to be criminal and irresponsible negligence.

  2. Anonymous2

    Thank you Yves for your usual intelligent commentary. Love the cartoon.

    It will not be a central consideration but the Commission will probably be pleased to be represented as the softies for a change. They get portrayed as the hard guys a lot of the time when in truth they are just fronting for the Council of Ministers which is where most of the real power still resides.

    1. Anonymous2

      On the question of who voted against a softening of the line, it could be that Tusk stopped taking views once he had established there was significant opposition to any such measure. Germany, France and Romania are probably a blocking minority in their own right (would have to do the sums to be sure but it would be there or thereabouts). He will have known countries’ intentions before the meeting if he is any good at his job.

      1. Yves Smith Post author

        Aha, that makes sense. It also goes a long way towards explaining the differences between the FT and The Times’ reports on how many countries are opposed to cutting the UK a break on talking trade.

  3. Meher Baba

    Yves did you delete yesterdays article, referred to in this piece above? Dated 10th October, discussing the customs controls for trade, and how poorly conceived the submission was. I can’t see it anywhere. Thanks!
    ps it must be a LOT of work running your website!!!!

  4. larry

    Jessica Simor QC wrote an article in the Guardian on the 7th of October that argued that since the invoking of Article 50 is only an *intention* to leave, there is still a possibility until some specified end date for the UK to back out of leaving the EU. Simor is a Remainer so has an interest in Brexit not happening. At the moment, the end date is 29 March 2018, though this could be changed. According to Simor, until that end date is reached or some other specified date at the end of a transition period, from which then there is no escape, the UK can still opt out of leaving. I don’t see any of the UK parties going down this particular road at the present time, that is, retracting the expressed intention to leave.

    Simor said that the government is aware of this as it has had legal advice given to it to that effect. She wants this information to be made public.

    1. Yves Smith Post author

      I see the various news reports this morning. I’m not sure the EU would agree with this legal interpretation, and in the event of a dispute, it would be the ECJ, and not British courts, that would decide. Having said that, I am sure the EU would welcome a formal withdrawal and would find a way to approve it quickly.

      Read Article 50. It is short, the language is very clear, and I don’t see how you can read it the way the lawyers who have leaked to press say you can read it:

      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.

      http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-European-union-and-comments/title-6-final-provisions/137-article-50.html

      You can see it says:

      1. The Member state can notify the EU that it wants to leave after it has gone through its own Constitutionally mandated process.

      2. The State then makes a notification

      3. There are two years in which the parties “shall” as in must, negotiate a withdrawal agreement, but if they don’t succeed, “The Treaties shall cease to apply to the State in question…..two years after the notification referred to in paragraph 2.”

      I don’t see how you can possibly reach the conclusion Simor is arguing in the face of this very clear, terse language. It’s as unambiguous as anything I have ever read. This comes off as desperate lawyering.

      The leaks to the Observer say that the Government received advice that Brexit could be reversed. It is not even clear that this was “advice” from its own lawyers. Moreover, the Government’s position is that Brexit cannot be reversed. This is just a non-starter. The country would tear itself apart if the Government were to go this route. Even proposing a second referendum would be political suicide. Even Labour is on board with Brexit.

      Simor is apparently pursuing a FOI to get the advice released. In the US, that would be a complete non-starter if it were official advice, since that would be attorney-client privileged, which is not subject to disclosure. So the FOI gambit suggests that the “advice” was legal advocacy thrown over the transom.

      To go into details:

      That seems like an extremely strained interpretation. Yes, the referendum was not legally binding:

      Parliament is sovereign and, if Brexit wins, Cameron will not be legally obliged to invoke the Lisbon treaty to start an EU exit

      But Parliament did approve Brexit:

      http://www.politico.eu/article/uk-mps-vote-down-brexit-amendments/

      And not only is the Government’s position that Brexit cannot be reversed, the Europeans are of the same view:

      Article 50 of the union’s treaty was written to discourage nations from leaving. As soon as Theresa May set the article’s two-year clock ticking in March, she conceded the advantage to those sitting on the other side of the table. The prime minister was warned of the danger by her advisers. But that was before she had lost an election and Britain had to confront the hard reality that it cannot have its cake and eat it.

      The problem for Mrs May is that the structural asymmetry written into the treaty — the cost of a no-deal, cliff-edge exit is much higher for the departing nation than for the rest — is being reinforced by the particular circumstances of Brexit…

      To borrow an unfortunate phrase, Ms Merkel’s message to Mrs May is that Brexit means Brexit: Britain cannot leave the EU and expect to escape the consequences.

      https://www.ft.com/content/33f3d722-97d1-11e7-b83c-9588e51488a0

      Finally, I don’t buy the view, commonly touted in the UK press, that the EU has been foot-dragging. It was the UK, not the EU, that wanted to meet only one week a month. I gasped out loud when I read that. There is no way with so many matters to be worked through that the two sides could make enough progress even assuming a better negotiating dynamic with that little face-to-face time.

      The UK also lost time due to Theres May’s snap election, which was a major distraction, and by being poorly prepared to the degree it is obvious to a casual reader of the press.

      https://www.theguardian.com/politics/2016/jun/23/eu-referendum-legally-binding-brexit-lisbon-cameron-sovereign-parliament

      1. Strategist

        Here’s a link to the Jessica Simor article:

        What she is saying is that the word “intention” in paragraph 2 is vital. An intention is not binding, so the UK can unilaterally revoke its notification under Article 50. Sounds possibly plausible to me, but what do I know? But “desperate lawyering” – ouch!!

        But what I do agree with is that it probably doesn’t matter which interpretation is right because, if the UK did want to revoke its Article 50 notification and drop Brexit, the EU would agree it anyway – and I believe Juncker has already said this publicly. So the only obstacle to scrapping Brexit is the fall of the current May government and a second referendum to reverse the first referendum.

        Yves, you say, “even proposing a second referendum would be political suicide. Even Labour is on board with Brexit”. I’m not so sure. I could see a scenario in which, if May goes in circumstances of totally unresolved civil war over Brexit, nobody including Corbyn would be unable to form a government without offering a second referendum. MPs would wash their hands of it and say, we’re putting this in the hands of the people.

        It doesn’t seem likely now, but who knows what things will look like after six more months of this utter shambles? At root there is a pro-remain majority in both houses of parliament, but they’ve been going along with the first referendum result out of a laudable respect for that democratic result.

        1. gallam

          I don’t think that it is entirely fair to call the Simor article “desperate lawyering”, which is a magnificent turn of phrase by the way. There is a weight of legal opinion in favour of the ability to withdraw that far exceeds, for example, the support given to the legality of the second Iraq war.

          I expect that we will all agree that if the UK were to take advantage of this option, the ECJ would be involved at some stage. Given that the ECJ would find its power reduced by rejecting the argument and forcing the UK to leave, I think my prediction would be that the ECJ would allow it. I’m not sure that the politics of the ECJ forcing a country to leave the EU against its express wishes would look too good either.

          1. Yves Smith Post author

            The problem with the “weight of legal opinion” argument is that you seem to be assuming a common law system, where precedent carries considerable weight. The opinion of individual lawyers carries no weight with judges. Only rulings by other judges do. At least in the US, judges may also look to the legislative debates (as in by the lawmakers themselves, not opinions of outsiders) in case the law seems ambiguous and understanding the intent of the lawmakers would help inform coming to a decision.

            And I have no idea where you come by your “weight of opinion” claim. This issue has barely been considered by anyone precisely because the Government isn’t interested in it. A handful of anti-Brexit policy entrepreneurs coming up with arguments isn’t anything remotely approaching a meaningful consideration, let alone a consensus. The Brexiteers haven’t bothered considering this issue because they see no need to. And I don’t see any evidence that lawyers on the Continent have either.

            Europe, and therefore the ECJ, is in a civil law system. The practice of jurisprudence there gives vastly more weight to statutory/treaty language than in a common law system. The text here is very clear, and by virtue of being part of a treaty, it was also well scrutinized and approved by every signatory.

            Plus I don’t see any “weight of opinion” here

            If the UK wants to withdraw, it should seek to negotiate for the EU to allow it to back out. The EU would undoubtedly agree, although it would almost certainly exact a price, the most likely one being the cancelation of the break on EU dues that Thatcher obtained.

            That is another reason I think this legal view is strained. Courts do not like parties to litigate when there are other avenues they have not explored. The UK should show up at the ECJ’s doorstep if and only if it has asked to rescind its invocation of Article 50 and the EU has refused to consider the request.

            1. gallam

              Another aspect of the legal discussion that may have escaped the attention of a few of your readers is the question of whether or not the UK remains a part of the EEA after it leaves the EU. There is a good discussion here (apologies if you have already covered it):

              https://www.ft.com/content/16b50be8-161c-38d3-83b8-14b04faa9580?mhq5j=e6

              Unless the UK Government explicitly gives notice of leaving the EEA in March 2018 (12 months notice required), I think we can assume that the EEA is the fall-back position. How that will sit with the die-hard Exiters is an open question, but the cliff-edge may not be quite as steep as it appears to be at the moment.

  5. vlade

    A year or so ago, I had a bit of a tongue-in-the-cheek suggestion that the UK’s brexit contribution should be to scoop say 50bln EUR in Greek gov’t bonds.

    I suspect that would buy it a few friends in EU, while at the same time it need not be presented as a “cost” to the UK public anytime soon..

  6. George Phillies

    “in light of the guidelines’ The sentences reads as though there should be another one in front of it. ‘guideline’ often has a softer interpretation than the one you are putting on it. Also, the opening clause can be read as the reasonable statement that the European Council will supply directives to the EU negotiators as to how the EU wishes to negotiate, with no implication that the EU can tell the departing member how it is to negotiate.

    At the moment the departure process appears to be somewhat like the original Electoral college process for electing a President; it was not thought out very clearly in terms of how it might work in practice.

  7. PlutoniumKun

    Or it may simply be that Barnier can see that these negotiations are going to be a colossal train wreck, and he is doing everything in his power to make sure that the histories of this sorry affair will hold him blameless.

    This post took a bit of digesting, but in truth I think the above is the simple answer. Barnier is a very ambitious man and I think he already has his exit strategy worked out as he knows full well an agreement in time is unlikely. He doesn’t want to appear to be Merkels enforcer, so its logical that he would go out of his way to be seen to be trying to explore every possible opening. He may also be using this as a way of communicating to the UK delegation (and public) that its not he personally who is the obstacle – that they are simply wasting their time if they insist on trying to re-arrange the table while negotiating.

    I don’t, incidentally, think its likely that the British have managed to make quiet side deals with smaller EU members by promising to settle up generously. Ireland would be an obvious ‘weak link’ from the point of view of London, yet everything I’ve heard and read indicates that the Irish government is deeply frustrated by the failure of the UK to make any sort of sensible proposal on border issues. The Irish PM has essentially banned the civil service from exploring customs and border controls on the basis that this is the UK’s problem, and its up to them to solve it (i.e. come up with a workable solution). I think the Florence speech was nothing more than a very clumsy attempt to split the EU which would not have been necessary if there had been quiet discussions on the side.

  8. NT

    I don’t think the average Brit really cares if there is a hard or soft brexit. We will just stop buying Germany cars etc and buy more British Stuff.
    German goods have been underpriced by about 40% compared to if they still had kept their own Deutschmark which is unfair.
    British people have got german cars 40% cheaper than they should have paid for the last 10 years.
    Time to return to “Buy British” or maybe “Made in Britain” or even “assembled in Britain”

    1. Anonymous2

      They will object if they get ‘train crash Brexit’ – disruption to foreign travel, food supplies, job losses. This is why the UK have to deal. And that means the UK has to dance to the EU’s tune. They will not enjoy it but, as the Psalm says, ‘it is good, Lord, that you have humiliated me’.

      Here is a problem for the Tories though………….

      I think a problem may anyway be looming over the border with Ireland. The UK have said that they do not want a hard border with the Republic. But if they leave the customs union it seems pretty clear that is what will happen. The Tories may have to choose,risk being brought down by the DUP if the latter cannot live with the outcome.

      Then maybe you get a Corbyn government.

    2. templar555510

      Quite . There being two sides to every coin, post Article 50 we are in the land of negotiating deals . Unlike the Greeks – locked into the wretched Euro – we can still play hardball with the Germans who dominate the EU let’s at least be clear about that . But it’s their Mercedes and BMW’s that they want to sell here . So behind the scenes of all this Euro wrangling deals of one sort or another will emerge ; the only question is when the dust settles who will turn out to have had the better negotiators . And as we do not know the names of the civil servants involved ( and never will ) we will have to make our own judgement as to the individual merits of the results. Everything else is second guessing . Our government maybe obsessed by Brexit for impurely political reasons , but we the people are more concerned with the state of our National Health Service and the depredations being wreaked upon it by the government falsely claiming it is some sort of market and a patient is a ‘ customer ‘ as in ‘ hey I just fancy a week in hospital ‘ as opposed to a beach in Hawaii , or wherever . Fortunately there are enough sensible Brits to realise this is all a scam by politicians and their connections to big business to cave in and if we have to eat a little cake along the way then so be it. As we the people have no influence over Brexit it has perforce, to be a case of let the chips fall where they may

      1. Yves Smith Post author

        You both are deluded. German industry, including German automakers, are backing Merkel.

        Did you miss that there are no more UK automakers? Foreigners will shift production for foreign markets out of the UK. They’ll just leave end production for the UK in the UK. You think you are going to win with that?

        The odds of starting a new UK automaker is zero. Pray tell, what do you propose, going back to carts and oxen?

        More generally, read this and stop kidding yourself. Here’s an extract:

        The reality of no-deal is worse than most members of the public could ever imagine. For most people, no-deal sounds like the status quo, just with no special benefits. That’s why the phrase ‘no deal is better than a bad deal’ was so seductive. But in truth, no-deal is much, much worse than the status quo.

        This is Brian Strutton, general secretary of the British Airline Pilots Association (Balpa) on no-deal. You’ll note he is less sanguine about it than Tory MPs or right-wing bloggers.

        “The entire UK aviation sector which employs nearly a million people and carries more than 250 million passengers per annum would be devastated by a Brexit ‘no deal’. UK airlines could find they have to stop flying – it’s that serious. It is utter madness for anyone to think that a Brexit ‘no deal’ would be anything but a total disaster for our world leading UK aviation sector and beyond. After all, without air cargo we will not be able to export or import freely.”

        Pulling out of the EU aviation system without a stop-gap arrangement would mean air carriers can only fly between the UK and their country of origin. UK airlines would lose their ability to fly between other EU member states. And that’s not even to mention the legal requirements by third parties, like the US demand for passenger data ahead of flights, which is currently under an EU umbrella. Unless there is a deal on that, there will be no flights from the UK to the US either.

        A no-deal outcome means a border in Ireland. The British can claim they would not set one up – and they can mean it – but someone is going to take the Republic of Ireland to the ECJ because it is allowing a massive open channel into the single market by a third party state, and they are going to win that case. Then, as point of law, a border will have to be built. This is the reality.

        No-deal means that punishing tariffs will be imposed on agricultural goods. British food producers will lose competitive access to their largest export market, so they will try to raise their domestic prices to make up for it. Most will go out of business. In manufacturing, products will soar in price. It’s not just the ten per cent tariff on the finished car, but the tariffs on the component parts too. In addition, there are heavy bureaucratic costs to the country-of-origin checks manufacturers will have to undertake. The cost of the product will rise steeply. Fewer will be sold. Businesses will go bust. As Brexiter Peter North wrote yesterday:

        “In the first year or so we are going to lose a lot of manufacturing. Virtually all JIT export manufacturing will fold inside a year.”

        http://www.politics.co.uk/comment-analysis/2017/10/11/no-deal-is-political-disaster-porn-for-brexit-extremists

        1. H. Alexander Ivey

          Thank you for those words from the British Airline Pilot Association. I’ve been predicting a no fly zone into Heathrow in 2019 for those stated reasons.

          And thanks too for the comment ‘no deal is not the status quo’. Quite right!

        2. Strategist

          The people who are still saying stuff like, they need us to sell their Mercedes to, are indeed deluded. Not sure they are worth wasting too much time on, but an impressive riposte all the same.
          “German industry, including German automakers, are backing Merkel.” That’s what most Brits don’t get. They have deep pockets and are willing to spend a few bucks to give us the kicking we have asked for. Unbelievably, we managed to forget that Germany can be rather ruthless to the defenceless.
          About the English, I hate to say it, but the Joris Luyendijk piece another commenter linked to the other day really said it all.

          1. PlutoniumKun

            When I was very little, I remember visiting a Ford car factory in Ireland. It didn’t employ many people. It was simply a final assembly plant, where a pre-welded and painted shell was fitted out with components which arrived in a box. Its purpose was to avoid import tarrifs on finished products, and the factory closed down within a year or two of Irelands full membership of the Common Market as everyone called it then.

            This is most likely the future of the British car industry.

          2. vlade

            I think it was (suprisingly) Torygraph which run an article earlier this year asking May to explicitly acknowledge (for the benefit of domestic audience though) that the EU states are entitled to look after their interests in this.

            The fact that this has to be told to the UK domestic audience is just beyond pale. If it wasn’t for the enormous suffering – across the UK, but as usual most of it being concentrated to those who can afford it least – I would say bring on hardest of hard brexits, as it could get the UK grow up. Finally. Maybe, just maybe.

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