Brexit: The End of the Beginning?

This is going to be a shorter Brexit post than I would like, but since the UK and EU are yet again in a jockeying and attempting-to-put-down-markers phase, the speculation to development ratio is high.

You might have missed it between Iran and royals furors, but the Withdrawal Bill passed its third reading in the House on party lines and is expected to sail though Lords.

Even if you have managed to pay attention, so much of what is happening has a ritualized feel that it’s too easy to miss details, and I may be guilty of that. New European Commission President Ursula von der Leyen, with Michel Barnier playing backup, earlier this week played iron fist in velvet glove by yet again telling the UK it won’t be able to negotiate a free trade agreement in its 11 month transition period. Barnier got additional digs in by pointing out the UK will also need to negotiate replacements to about 600 agreements it has through the EU (the total number appears to be higher, but Barnier appears to have been charitable in picking a number for the critical ones).

The deja vu all over again part is in hearing EU representatives have to walk the UK through the implications of what it’s signed up for, as if it doesn’t understand. There would be every reason to see this as patronizing were it not for the various flavors of delusion the UK has manifested throughout this process.

And while von der Leyen’s professionalism will be a valuable asset, I find myself missing Jean-Claude Juncker. He’d been a buffoon during the 2015 Greece bailout negotiations, but Brexit had enabled Juncker to elevate his standing becoming a fool in the Shakespearean sense: the member of the court who both provided comic relief and had license to state uncomfortable truths.

Moreover, some experts are also taking note of an issue that we and others had flagged early on: that services deals take longer than trade deals, so the notion that the UK could conclude a services pact by the end of 2020 is even more removed than the Government’s unrealistic expectations for a trade agreement. From the Prospect:

There is no disputing the importance of services to the UK economy. Goods, from farming products to manufactured wares like car parts, have received far more attention. But services account for 80 per cent of the UK economy and 40 per cent of its trade with the EU, with financial, legal, engineering and tourism services among those exchanged between firms in the UK and different member states….

Ivan Rogers, former UK permanent representative in Brussels, told me we should expect nothing more than “a quick and dirty tariff- and quota-free deal” with Europe. He has written that we are in practice heading for “no deal in services” even if a bare bones agreement is in place.

For Philip Rycroft, former head of the Brexit department, “There is precisely 0 per cent chance that the UK will get as good a deal on services as it has now.” Nick Macpherson, formerly head of the Treasury for ten years, concurred that Brexit’s net impact on services trade “can only be negative.” Any agreement with Europe which excludes them “could do a lot of damage” because “the UK exports more in services to Ireland than to China, India, Brazil, Japan and Australia put together.”

Meanwhile Peter Mandelson, former trade and industry secretary, was willing to predict that the “minimal trade agreement” Johnson seeks “will not cover” services.

Indeed, few free trade agreements do, and that is one of the reasons for disquiet. For countries around the world have struck countless trade deals between them, but these are almost always primarily for goods, the removal of tariffs and quotas and sometimes harmonisation of standards. An equivalent agreement in services is near-unprecedented beyond the EU single market. That means it is very difficult to achieve.

Yet the UK isn’t making its life any easier. It’s already telegraphing that it won’t behave in a good faith manner:

If you read the story or the thread, you’ll see that the new Government moved to create the authority to abolish the Independent Monitoring Authority that it had previously agreed to establish.:

Richard North has further concerns about a more recent Barnier speech in Stockholm. The EU negotiator warned that it would be impossible to come to terms on all the areas set forth in the Political Declaration in a mere 11 months, so the EU and UK must set priorities (and the EU is already well down that path).

Here is where it gets tricky, per North:

Speculation here, from a variety of sources, including this one, has it that the parties will opt for sector-by-sector agreements….

But if that is supposed to be the game plan, there is no hint of it from Barnier. With his feet firmly on the ground, he puts as his first priority new capacity building, setting up mechanisms and institutions that will enables the EU and the UK to work together in the future.

Secondly, he wants to build “a very close security relationship”… This would again suggest that much of the effort will be devoted to capacity building…

Only then does Barnier get to the “economic partnership” and immediately he links this to the “level playing field”….

With that, we effectively get a glimpse of the “red lines” that are going to frame the negotiations. “We will insist”, says Barnier, “on making our economic partnership subject to a level playing field on environmental and social standards, state aid and tax matters”. There is no messing here, no equivocation and no room for compromise….

The UK represents nine percent of all EU-27 trade, Barnier concedes. “But more significantly, the EU-27 account for 43 percent of all UK exports and 50 percent of its imports”. So, he says. “it is clear that if we fail to reach a deal, it will be more harmful for the UK than for the EU-27”.

This is all the more so, he adds, “because EU Member States can rely on each other or on the many other partners that the EU has free trade agreements with”. Thus, the EU “will insist on a trade partnership with zero tariffs, zero quotas, but also zero dumping”. Again, we see a remarkable lack of equivocation.

Clearly, this does not speak to talks on sectoral deals, indicating that the EU might be going for nothing more than an over-arching, cross-sectoral trading framework. If we can tack on to that an MRA on conformity assessment, we will probably have to count ourselves as fortunate.

So this feels like a rerun of the Withdrawal Agreement talks. The EU had a clear idea of the shape of the table, meaning what the issues would be and how they’d be sequenced. And aside from squawking about settling the so-called Brexit tab early one, the UK went along. Admittedly, it had missed the significance of some of the guidelines provided by the European Council pursuant to Article 50, which meant the UK really couldn’t do much. Here, both sides can squabble about how to stage the negotiations….as the clock continues to tick.

People like Ivan Rogers who know these ropes much better that your humble blogger does have been sounding alarms all along. And events appear to be falling in line with their forecasts, albeit on a bit more drawn out timetable.

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  1. PlutoniumKun

    The only difference I can see between the WA negotiations and the forthcoming talks is that the EU no longer has any illusions it might persuade the UK to reconsider the exit. The UK will be negotiated with on the same basis as any other trade rival – one in a particularly vulnerable position.

    Issues like Parliament voting down the continuation of the Erasmus scheme hasn’t endeared them to the EU, it seems quite spiteful. As before, I think we will see London seriously overestimate its relative strength in the negotiations.

    Incidentally, an election now looks almost certain in Ireland in the Spring. There is a possibility of Sinn Fein becoming partner in a coalition government, with a new Assembly in the North also dominated by Sinn Fein. This would greatly increase pressure for a border poll, which would no doubt also set off Scotland.

    1. Maff

      I don’t get your logic. You suggest that the EU will pursue tougher negotiation, risking more negative consequences for both parties (predominantly the UK), because reconsideration is now off the table. Surely the EU should make an exit seem most unpleasant to the UK, by being the toughest, before reconsideration is off the table? This applies maximum pressure on wavering Brits to reconsider. After the reconsideration window closes this game theoretic payoff for the EU, offsetting the risk of a harder brexit, is actually reduced, suggesting a softer negotiation stance would be optimal.

  2. vlade

    The big question is – does Johnson care about an EU agreement? Remember his “f*ck business” from before. One thing I’d really not assume about him is that he’d be business-friendly as Tories used to be.

    1. xkeyscored

      I wonder how lack of a services agreement would impact the UK’s offshore banking sector. Might they see such a lack as freeing them from tiresome regulations about money laundering and so on? Would they care if the rest of the UK economy tanked?

    2. Clive

      Yes, I’d agree. No tariffs, no quotas and no dumping is about as good a FTA that the UK government would ever have been hoping to get. It makes the customs hackathon between GB and NI largely disappear. Or at least a heck of a lot easier to implement.

      As for services, even the EU admits the Single Market in services has been a lot less effective than was intended and supposed. There is simply no cross-border services in the vast majority of sectors. Insurance, finance, consulting etc. — all end up setting up local subsidiaries if they are anything above a trivial size. This is because there are still numerous non taiff barriers. No-one will sign a contract of employment with an employer who is not an economic operator in their home country (enforcement would require pursuing legal action outside your home territory). No building owner will rent or lease office space or other commercial premises to a business not registered in the same jurisdiction (same reason — costs and hassles of enforcement of the lease or tenancy agreement). A few niche areas like architecture and some small scale consultants might take advantage of Single Market opportunities but as soon as they get to any scale, they’ll set up a subsidiary to enable them to employ people or have premises.

      And some Member States (Italy is especially bad at this) impose local ownership requirements for employing staff or owning / leasing property so they’re still strongly nudging any service exporter to form local alliances rather than operate cross-border from their “home” territory. The Commission keeps promising to Do Something About It. But progress is glacial and half-hearted at best.

      There’s financial services of course. But it simply makes no sense at all for the UK to agree to dynamic alignment in return for market access. The EU would simply change the rules to try to get the City of London to wither on the vine. Mark Carney said more-or-less the same thing.

      1. Matt

        Hi Clive. Would you mind elaborating on the last paragraph? Particularly the ‘dynamic alignment in return for market access’? I could of course google it. I think you’re referring exclusively to services?

        1. Clive

          von der Leyen’s speech to the LSE covered this principle. In essence, the more closely the alignment between the UK and the EU, the better the UK’s market access. This will apply to both goods and services.

          1. Matt

            Thank you. I follow Brexit a bit, particularly here on NC. Learn a lot from everyone, but some deserve special mention ;) I live in the Netherlands. Can I sell you some fresh vegetables?

          2. Andrew Wilson

            Sorry but you are quite mistaken if you think that Ms Von der Leyen was including a deal in services when she referred to ‘high-quality access’ to the single market.
            She used the term single market only in the sense of geography and linked it to the UK getting a new FTA similar in scope to the recent FTA’s the EU negotiated with Canada and Japan and which don’t include services.
            She was very clear in answer to a question that the days of a current UK bank or insurance company operating in the EU single market from a UK base are ‘over’.

            1. Clive

              She was very clear in answer to a question that the days of a current UK bank or insurance company operating in the EU single market from a UK base are ‘over’.

              Outside of the City of London (which is bespoke, money-centre finance) show me one example of insurance or banking which does that. In retail or commercial markets, insurance, finance, legal services, accounting, the big consultancy shops all operate under local subsidiaries, for the reasons I gave. The Single Market in services is far more theoretical than real. Why do you think that Allianz, for example, which is a big player in Wealth Management and insurance has a UK subsidiary? If the Single Market in services worked as it’s made out to work, this duplication and additional overhead would not be necessary; it would all be run directly out of Munich.

              1. PlutoniumKun

                Not in Ireland, prior to Brexit nearly all the major international Insurance companies ran Irish business out of the UK. All (to my knowledge) have now switched to Dublin or Luxembourg addresses. I was notified of this for two of my policies. What difference this makes operationally, I’ve no idea.

                I should say in respect of services that the one area I’m most familiar with – construction – the UK is a very big player across Europe, and they are already being comprehensively pushed out of contracts. Its considered too big a contractual risk to accept tenders from UK based architects/engineers or direct construction management. Its also highly relevant in IT consulting – my employer stopped inviting tenders from UK consultants (who made up the bulk of our contractors previously) because of contractual risk issues.

                1. Clive

                  Same with the UK — all the banks have segregated UK operations from EU operations. This is only to be expected because it was never anything other than a remote possibility that the UK would remain a member of the Single Market. This was crystallised in October 2019 when Johnson signalled he would seriously toy with the idea of No Deal. It wasn’t a bluff, or if it was, it was done with sufficient conviction to be convincing to those business that needed to be convinced.

                  No business planning that I ever saw was based on an assumption of unrestricted Single Market participation by the UK.

                  So the notion that any moves to dynamic alignment will be a benefit for the UK seems at best to be of marginal benefit; anyone who needed to put legal separation between business units has already done so (I’ve also received loads of emails from various service providers advising that previous Luxembourg-registered economic operators have now become UK-based with a UK-specific trading title and registered address).

                  All of which is grist to them mill that, in terms of negotiating for Single Market access for services, anything that might be offered or arranged is too little, too late. That ship has sailed.

                2. Ignacio

                  Construction. I guess infrastructure and industrial construction because residential, even commercial is mainly done by SMEs and it must be complicated to keep updated with the various evolving national building codes as well as local development rules.

              2. Susan the other

                Is Boris’ idea of free trade all finance and “fuck business”? Makes me think he’s interested only in the source of all happiness. International banking and finance as it has always been. The connection to the UK’s present engagement, along with Israel and the USA, in middle east oil is too logical. Oil is pure money for a good monopolist. Is Boris beginning to look like the Wizard of Oz? Or is it just me? Singapore on the Thames? Underwater and all, no doubt. Is this why the UK is so extremely anti-Russia while Germany is pro? Am I asking no-brainer questions?

                1. paul

                  You are asking perfectly reasonable questions.

                  We (in the uk) are about to experience student level misanthropy.

                  let all the poisons come out

                  as claudius said on the bbc all those years ago

              3. Andrew Wilson

                The difference is that after exiting the SM any and all UK based companies are no longer ‘domestic’ in terms of EU law. At present a UK service company may well do business in another EU nation via a local subsidiary but it’s still a ‘UK’ business responding to direction from the UK HQ and the bulk of taxes paid in the UK under UK regime.
                Once the UK is a third party then to carry on doing business in an EU 27 nation any UK company has to become majority (>55%) owned by EU citizens and with its real HQ in an EU nation (no proxy HQ) and it’s taxes paid in the country of the HQ.
                This is why Easy Jet is now a very large Austrian airline (>700 routes) based out of Vienna and a separate much smaller UK airline based out of London. The net loss to the UK in terms of tax revenue, jobs, opportunity for UK citizens is enormous.

    3. PlutoniumKun

      Its obviously a bit of a mugs game to try to guess which direction Boris will take, but it should be remembered that he was a One Nation Tory for longer than he was a darling of the right wing.

      My guess is that once they get past the immediate exit he will declare job done (apparently, the word ‘Brexit’ has already been banned in Civil Service circles) and move on to cement his popularity with middle England, his new working class supporters especially. This will mean ending austerity, focusing on core public services like the NHS (while cutting anything that helps the poorest 10% or so), and being generally pro-business, but very anti immigration.

    4. Mattski

      Having taken a step back from this for some weeks what strikes me at the moment regards Barnier’s “capacity building,” because–as with Trump–I’m not sure that on the English side it’s there, esp. with the civil service so depleted after decades of cuts and dumbing down. How do you get to an agreement on one side you have a highly articulated bureaucracy primed for what’s necessary at technical level and on the other a threadbarren, wary, and beleaguered corps of far less capable apartchiks with an utterly obtuse and hostile ideologues breathing down their necks? Britain isn’t up for the task it’s very clumsily set for itself.

  3. Peter

    And while von der Leyen’s professionalism will be a valuable asset,

    I do not know what your assessment is based on – just ask the German Bundeswehr for a rather different opinion.

    Ursula von der Leyen…she might be the true representative of the EU in her utter incompetence she demonstrated during her time in Germany as the Minister of Defence:

    Von der Leyen is no stranger to scandal: she’s currently undergoing a parliamentary inquiry over claims of nepotism and incompetence at the Ministry of Defence. She’s also been accused of plagiarising some of her doctoral thesis, and making errors in it.

    A woman of true privilege with nary a clue what she was doing heading a ministry as the leader of the Commission responsible for Brexit really does not bode well.

    “Von der Leyen is our weakest minister. That’s apparently enough to become Commission president,” former European Parliament President Martin Schulz seethed in a tweet Tuesday evening.

    Though Schulz is a Social Democrat, his analysis of the minister’s record is shared by many of von der Leyen’s fellow Christian Democrats, though most are reluctant to criticize her publicly. Instead, they point to the state of the German military.
    “The Bundeswehr’s condition is catastrophic,” Rupert Scholz, who served as defense minister under Helmut Kohl, wrote last week before von der Leyen was nominated to the EU’s top post. “The entire defense capability of the Federal Republic is suffering, which is totally irresponsible.”

    Among friends and foes alike, von der Leyen’s stewardship of the defense ministry, which she has headed since 2014, is regarded as a failure.

  4. Boomka

    One thing which remained a mystery to me through all this is why has the pound been holding up so well. With Tories now given free reign to implement their hard(est) version of Brexit, and with Jan-2021 cliff edge as much in play as ever, why so much faith in pound…
    10y chart of GBPEUR shows a relatively flat picture with average rate about 1.15, other than a brief spike in 2015 – and that is still where the rate sits.

    1. Clive

      Because even if there was absolutely no UK/EU FTA in any shape or form, the total tariff costs for all UK exports to the EU are around £6bn. Most of that is in the agricultural sector (c. 40 percent of all tariffs). The UK government could simply cover the cost of all tariff payments if it wanted to. It would amount to a rounding error in the overall government finances.

      That’s a worse-case scenario.

      Therefore I simply ignore any so-called analysis on this topic where the writer uses any of the phrases “disastrous” “decimating” “chaotic cliff edge crash out” or similar. It shows they have no concept of materiality of the costs in play. And that the Withdrawal Agreement settled a lot of the potentially divisive non-trade issues. The ForEX markets understand this, even if people who comment in the Guardian (or, more than that, even the people who write opinion pieces in the Guardian) don’t.

      Of course, it’s not quite as simple as that — non tariff barriers can be as big a cost as tariffs. Some agreement on mutual standards recognition, on-shore certification and data sharing, country of origin rules and so on would be of great benefit to UK exporters. The same, of course, holds true for EU exporters to the UK, especially in agriculture.

      1. Andrew Wilson

        It’s hilarious that you think that tariffs are the only real issue that UK Agri exports will face on leaving the single market.
        The CAP is a single market function and the protected quota, tariff, inspection free seamless borderless access the UK farmers have to the EU single market stops and instead the UK must now compete directly head to head with nations like the US, Aus, NZ for a slice of the EU market allowed to third parties. These nations can get high quality produce to the EU cheaper than it costs to produce in the UK …and that with the single subsidy.

        1. Clive

          That is kind-of the point of Brexit, though, isn’t it? You might not like it, you might not think it’s the correct approach. But removing the EU-induced market distortions — especially in agriculture — is an aim. What you’re effectively arguing for in what you say above, in one respect, is protectionism. Now, there is certainly a case to be made for protectionism. But there is also a case to be made against it, too. But rather than just arguing for protectionism, which you can certainly do, you’re also arguing for a specific set of circumstances with which you attempt to legitimise that protectionism — to borrow a phrase UK readers will be familiar with “this isn’t any old protectionism, it’s EU protectionism”.

          But saying you approve of the protectionism because you like the idea of the EU leads to very muddled thinking about whether you’re approving of and supporting what is quite a controversial concept (i.e. protectionism) or whether you’re not keen on protectionism (or are as a minimum ambivalent about it ) but are still willing nonetheless to endorse protectionism, because the EU mandates through its Treaties protectionism, so you are therefore compelled to support it as otherwise you’d have to reject the EU.

    2. Anonymous2

      It all depends what benchmark you use for comparison. The sterling/euro rate in May 2015 when Cameron confirmed the referendum would take place was 1.40.

      In the 10 years prior to your averaged period the pound had been over 1.60 to the euro before the GFC if I recall correctly.

      Which is the right benchmark? One could have a long and detailed discussion.

  5. He's just this guy

    Curious why the EU is being so bloody polite instead of just calling it for what it is.
    A small group of high net worth individuals snookered the populace into giving them tax loopholes that the EU was not going for. Remember the peak of web searches for “what is brexit” after the low turnout vote.

  6. paul

    Ans in the background, Westminster is relieving Scotland of devolved powers in 118 areas, (the ones devolved from the EU) and has tacked on the power to bring Holyrood to heel.

    “On this issue, the UK Government’s Delegated Powers Memorandum states that in respect of most of the powers set out below, whilst the UK Government can use these powers in areas of devolved competence, it will not normally do so without the agreement of the devolved administrations.

    ‘normally’ is not particularly associated with cummings’ level of triumphalist student politics.

    1. paul

      You can begin to see why alexander was the second choice of his cohort, cameron had, at most, the sense to deep six cummings and hilton.

  7. David

    I suspect that Johnson’ objectives here are pretty much totally political. That is to say he hopes to repeat his successful trick of persuading the British public that he has rapidly solved the whole of the EU problem, and then burying the subject for all time. (I don’t say he would succeed, just that he may think he can do it). This implies agreeing to virtually any deal, no matter how limited, and no matter how unfavorable to the UK, so that at the end of the year he can claim “job done.” In any event, to the extent that reality impinges on Boris, he must realize that the EU holds nearly all the cards, and that in essence any agreement in the time-scale he envisages will mean taking what he’s given.
    On the IMA point, I agree it’s silly and clumsy, but there is an element of reciprocity here that needs to be borne in mind. Before we criticize HMG too much (and Ian Dunt was having a meltdown about this yesterday) recall that EU states are not going out of their way to make things especially easy for UK nationals. In France, for example, they have only 6 months to apply for permanent resident status, and have to supply documentary evidence of date of arrival , as well as proof of financial independence and membership of one of the organizations of the French Social Security System. In other words, it’s basically as for any non-EU national with the proviso that you get a permanent residence permit, rather than an annual one. It’s worth adding, though, that administrative law systems (which most EU states have) provide some protection for the citizen which is often absent in the UK in such cases.

    1. paul

      It’s like Edward Deming’s observation, set a target and do anything to achieve it,including the destruction of the enterprise.

      With his magnificent majority he could do a BrINO.

      But he will not.

      He will,in his squalid,decadent way, march everyone else into the ditch he, augustinally chose, to die in.

    2. Clive

      Re: the IMA

      Yes, and I do have to ask the question “who’s fault is that, then?” — it’s no use Ian Dunt turning the Twitter airwaves blue with his f-word tirade. To recap, in the 2017 electorate, the electorate signalled that they had no wish to see an Ultra-style Hard Brexit enacted. So they denied May a majority and, in effect, asked the political establishment to work out a compromise soft-ish (or at least middling) Brexit. It might not have been quite as transactional as that, politics, polices and the voters’ intentions is a blunt instrument, but that was the direction of travel which seemed to be the mood of the country.

      This is what May, in her Withdrawal Agreement delivered.

      But then what happened? Did Remain accept this compromise and centrism? Did it acquiesce to losing the referendum and appreciate that May’s deal was a fair and balanced interpretation of a fairly divisive issue? No. Having realised that the Remain block in parliament — along with the application of some law-fare, a blatantly partisan Speaker and some friendly media — could effectively impede any functioning government, it then over-reached itself and attempted to roll back Brexit. This was not the policy platform the vast majority of MPs had stood on. The voters were, to a large degree, aghast at the attempt to bog down any Withdrawal Agreement and pursue a stitch-up second referendum (“you can Remain, or you can have a BINO that’s Remain by another name”) — while holding the entire country’s political (and, to a degree, economic) functioning hostage until it got what it wanted.

      In the December 2019 election, the voters signalled that they’d had quite enough of that sort of nonsense. So, we have the Johnson administration, which is leveraging the power it has been given.

      Politico, the Guardian, Peter Mandelson, the People’s Vote backers etc. etc. etc. can complain all they like. But what if the country could wave a magic wand and, in response to the whinging and virtue signalling about IMA (and ERASMUS, for that matter), suddenly put those pundits and political forces back in the position of power they had until the election just gone? Would they use that power to right the wrongs they say they are complaining about? Or would they simply pick up where they left off, trying to thwart Brexit by any means they could wrangle?

      The answer is pretty obvious. So there’s no way that gang is ever going to be allowed to get its hands on the levers of power (or impose gridlock) again. Oh, and no-one believes they really care about EU citizens rights, unaccompanied minors or the cultural enrichment of the youth of Europe through educational opportunities. They don’t give a stuff about those things. All they want is to prevail in an argument they’ve repeatedly lost. They’re not fooling anyone. Least of all the voters.

      1. Andrew Wilson

        Sorry but it’s nonsense that May’s WA was anything less than a hard Brexit. A soft Brexit means staying under the remit of EU law via EFTA membership – the so called ‘Norway’ deal. May’s WA did not offer this at all, rather it envisaged the UK staying inside the EU customs union and even this was supposedly only for a limited time while the NI border was sorted out.
        The customs union is not in any way a substitute for single market membership and would require the UK follow all EU law and directives with no input whatsoever nor any leeway in international trade relations

  8. Clive

    That is kind-of the point of Brexit, though, isn’t it? You might not like it, you might not thing its the correct approach. But removing the EU-induced market distortions — especially in agriculture — is an aim. What you’re effectively arguing for in what you say above, in one respect, is protectionism. Now, there is certainly a case to be made for protectionism. But there is also a case to be made against it, too. But rather than just arguing for protectionism, which you can certainly do, you’re also arguing for a specific set of circumstances with which you attempt to legitimise that protectionism — to borrow a phrase UK readers will be familiar with “this isn’t any old protectionism, it’s EU protectionism”. But saying you approve of the protectionism because you like the idea of the EU leads to very muddled thinking about whether you’re approving of and supporting what is quite a controversial concept (i.e. protectionism).

  9. Ignacio

    Clara Martínez Arberola who served as Head of Juncker’s Cabinet will now be number 2 on Barniers team. She is a civil servant and almost all her career has been in EU institutions. This means that on the EU side experience and knowledge are being selected.

    As a reply to Clive, I would say that services by UK companies are somehow important (no numbers, sorry) in the Mediterranean coast of Spain where some many UKers live (and from my anecdotical experience do not plan to go back). I don’t think Johnson would like a disruption in those services that could influence UK based voters who are relatives of the many retirees enjoying the warm mediterranean winter.

    1. Clive

      Yes, I’ve tried to find accurate numbers, one way or the other. As services are, of course, delivered at the point of sale, rather than “delivered”, it is virtually impossible to get decent data. For southern Spain, the question will be whether the service providers are local operations (thus negating the notion that the Single Market in services brings much to the party) or a UK-based operation selling the services remotely (thereby proving the worth in the Single Market for services).

      There’s simply too much phoniness in the Single Market for services to accurately determine the true net contribution. For example, much of the “services” the UK “deals with” in the Republic of Ireland is trading brand licencing, for instance Starbucks or Apple. But this of course is nothing but the old favourable tax jurisdiction malarkey (the brands “sell” their brand licencing out of the Republic in to the UK which reduces the net earning of the UK subsidiaries and books the income instead in low-tax Ireland). Luxembourg plays similar games. The numbers are big, but there is zero real economic value-add behind any of it.

      This isn’t to say, of course, there isn’t some genuine benefits accruing from the Single Market in services.

      1. Ignacio

        I think those services ar not important measured in pounds or euros but may be very relevant in terms of… well, in terms of service!

  10. Mael Colium

    The UK is the third largest economy in the EU. The Conservative win and subsequent passing of legislation rearranged the circumstances of the withdrawal of the UK from the EU. There is no uncertainty, it is going to happen one way or another. None of the gloomy predictions of the Brexit deniers have eventuated.

    The power that the deluded EU negotiators presumed they possessed has been shown to be the bluff that it always was now that everyone’s cards are on the table. The UK services sector is of vital concern to the EU so why would the UK be even bothered to negotiate terms when they hold all the aces? The services sector is their lever to establish a reasonable trade goods deal with the EU and that advantage will be utilised to full extent despite the bluff and bluster from the new EU president. Barnier and his negotiators shot themselves in the foot by holding a gun to May’s and then Johnson’s head and this fact won’t be forgotten anytime soon. The parlous state of the EU economy allows little wriggle room for them to frig around, but this probably won’t stop the theatrics playing out over insignificant issues on the way to the trade deal. This is the end of the EU as we all know it, so their future won’t be business as usual despite all the waffling about how bad Brexit will be for the UK. People seem to forget that the UK is a stand alone economy with it’s own currency whereas the EU elites are used to kicking the shite out of their member states with the common currency. The UK economy is far stronger than the cobbled together EU mismatch which needs to be propped up by rule bending from France and Germany to keep the whole shebang afloat. Germany has seen the light and now trades more with the US and China than it does with the EU and France is just an agricultural subset of the German economy. The other EU states are forced into the rules that these two viable nations dictate and they can’t see any way out of their dilemma. When you compare the UK issues with Ireland and Scotland, it pales into insignificance compared to the meal that the EU has laid out for itself and will now be forced to eat. It’s called humble pie and I hope they enjoy every morsel.

    Hypotheticals about the Irish border and Scottish independence are side issues which will fall out of the clutter of Brexit and the ensuing trade deal. The insistent jabber of how disastrous Brexit will be for the UK is just more noise and will go on for decades even well after the event. The UK will take care of Brexit, but who will take care of the EU? The EU elites seem incapable of doing so and that’s where the discussion should be directed. Johnson hit the off switch to the noise when his party won the election. The EU (and virulent commentators) need to get over it.

    1. AbateMagicThinking But Not Money

      Call security!

      One of the various delusions that the Tories seem to have is to think that you can drop membership of any club* and still retain access to the bar, changing rooms and influence of rules commitee. Retaining what limited access an associate member might retain is probably always contingent on not bad-mouthing the club management.


      * In the UK, prior to joining, the EEC was widely referred to as being a rich man’s club (way back in the early ’70s).

    2. c_heale

      I think the true situation is almost the precise opposite to this comment. The predictions of the Remainers (Brexit deniers in your comment) have been and are being ‘eventuated’.

      Johnson has far from hit the off switch. In fact he has probably just ramped up the volume to maximum, by saying he’s gonna leave in short order.

  11. Roland

    The EU needs to keep an eye towards future re-integration, say in 20 or 30 years. Don’t drive a hard bargain. Wish Brexit every success.

    Human nature being what it is, a failed Brexit would as likely be blamed on Brussels as on London.

    EU leaders might come to regret not having given May a bit more face.

    1. fajensen


      The Murdoch Media and All The Politicians were running the “Just Blame Brussels”-script for the last 40 years. They are never going to stop the re-running and refining of that script, whatever “Brussels” does or says.

      Remember, Brexit is in ‘2020+10 years’! Which means that the current crop of top- and upcoming middle-tier EU leaders involved with ‘closing’ the Brexit negotiations will have sold their books and be retired those 20 to 30 years after Brexit, in 2050 – 2060.

      If someone were to blame those EU leaders for whatever failure Brexit may turn out to be, those same leaders will be either dead, retired or indifferent (because they will get blamed regardless).

      There is no gain for them in making any special efforts, except for “their own side”. The risk is rather that of looking weak, setting of yet another round of reinterpretations of Brexit by the UK-side and much scorn from the EU-side.

  12. Becklon

    A trade deal with the EU is not really the post-Brexit issue. And given the Brex itters capacity for self-delusion any debate on the subject is a bit sterile.

    The real issue is how disadvantageous to the UK will be any trade deal with the US. Trump’s tweet gives the answer: “This deal has the potential to be far bigger and more lucrative than any deal that could be made with the EU,” I’m pretty sure he’s not talking about the disUK.

    1. Yves Smith Post author

      Huh? The US will never in a million years come close to delivering the UK the export volumes it has with the EU. Go look at a list of what the UK exports to the rest of the EU and get back to me.

      1. Anonymous 2

        It will be lucrative for some in the US.

        But no, you are right, the UK will not benefit from a deal with the US in any degree that will compensate it for the loss of business with the EU.

        However I expect US companies will show their gratitude to the English politicians who improve US companies access to UK markets.

        The whole thing is likely turning out to be a huge scandal. But the English newspapers will distract the attention of their readers to other matters – stories about the Royal Family?

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