Brexit: Running Down the Clock?

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The Brexit front has seemed positively dull compared to the horrors of Covid-19 (the disease proper, the spectacularly bad responses in the US and UK, and the economic fallout), and US protests and rising social tensions. However, the lack of much apparent action, aside from the Groundhog Day sort, is a bit misleading, since letting the clock run has consequences of its own.

Even though you’d not discern it from the tone of the press coverage, with the transition period over on December 31, both sides ought to be in “time is of the essence” mode.

Yet the first face to face negotiating session since March, which took place last week, ended a day early, which was clearly a bad sign. Four big issues remain outstanding: the so-called level playing field (which is shorthand for “if the UK wants advantaged access to EU markets, it has to adhere to EU standards”), fisheries, intelligence and judicial cooperation, and what the press has called “governance”. The last is what I have called a “shape of the table” issue, which ought to take precedence before the others. The UK wants a raft of sector-by-sector mini-deals, like Switzerland, while the EU wants one big deal so that any oversight or enforcement mechanisms operate across all areas.

I hate differing with our Clive, who maintains that the EU will blink at the 11th hour and there will be a deal as there was with the Withdrawal Agreement. That may prove to be true but only in a narrow, technical sense.

A trade agreement is a vastly more complex document than either the Withdrawal Agreement or Political Declaration were. And even then, for Johnson to get to a deal, he edited the agreement Theresa May had struck.

Six months is not enough time to negotiate anything remotely resembling a “normal” trade deal, such as a so-called free trade agreement. And the fact that the UK has a large services sector makes matters worse, since services deals are much more difficult to negotiate than ones involving goods.

And the UK’s pet idea of many little deals is an impossible hill to climb even if the EU were to have a change of heart. One of the big reasons for preferring sector-specific arrangements was to provide for sector-specific provisions on regulatory synchronization and enforcement. It’s hard enough to negotiate even a biggish deal in six months. A bunch of bitty deals is a non-starter.

So the most the UK is likely to be able to cinch in the remaining time is bare bones pact covering tariffs and quotas, and perhaps with some side deals. But the UK will not have frictionless or even low friction trade. UK goods will be subject to border procedures when they go into EU.

Yes, in theory the EU and UK could fudge the year end drop-dead date, and they clearly would if negotiations were almost done but technical matters needed to be cleaned up. The Institute for Government outlines some of the ways the finesse could be achieved:

  • Amend the end date of the transition period in the Withdrawal Agreement

    This could in theory be done at any point after June. But it would almost certainly require the European Court of Justice to give a legal opinion first.

  • Create a new transition period to begin on 1 January 2021

    This would mean striking a new, complex agreement and a lengthy ratification process, alongside future relationship negotiations.

  • Include an implementation phase as part of the future relationship treaty

    This would give businesses time to make investment decisions and adapt supply chains.

  • Create an implementation phase to prepare for a potential no-deal exit

    Agree a temporary deal to allow traders to adapt to a no-deal scenario in the event that talks break down.

Even though Boris “rather die in a ditch” Johnson is famous for walking away from past commitments, he has so lashed himself to the mast of a year end Brexit that even if he were to extend, his fellow travelers will raise a furor about any delay. And recall that Brexit is no longer popular with voters; recent polls have come in at only 40% now supporting it. So a few months is probably the most Johnson would try to sell.

Moreover, the UK has operated in an unserious manner. As Richard North pointed out:

Here, it is not just trade and border administration where detail is lacking. Key policies such as agriculture, regional policy and state aid – plus many more which currently reside within the domain of the EU – have not seen any significant policy activity from the British government, in the context where White Papers should be pouring off the presses.

The lack of activity may in part be the result of the Covid-19 epidemic, which has happened at just the wrong time. The lockdown measures have had a dampening effect on the general Brexit debate, and have suppressed the process of policy-making, not least because so much administrative effort has been devoted to managing the epidemic.

One other significant factor is that the UK has simply lost much of its policy-making skill and capacity. For decades now, the brightest and best have high-tailed it over to Brussels, where the money is so much better and there are real possibilities of seeing policy ideas come to fruition.

There are also signs that the EU believes the ticking clock works to its advantage. Despite Johnson blustering that the UK is prepared to exit on “WTO terms” or now, “Australia terms,” his team has also been browbeating the EU to give ground. While this looks a lot like playing to a domestic audience, it comes off as yet another episode in a too-long-standing pattern of demanding that the EU cross red lines that it has made clear that it regards as existential.

The UK also, curiously, signaled it wanted to close the gap between the two sides relatively quickly when those close to the action said it hadn’t done much to allow that to happen. From Tony Connelly at RTE:

[The UK’s senior negotiator] Mr [David] Frost, however, said the UK still hoped to reach an “early understanding” of the principles underlying an agreement before the end of July….

“We are really trying to find compromises as much as possible bearing in mind our red lines, and we felt the UK wasn’t really engaging on their side,” said one EU source.

It could simply be that the UK really is just playing the negotiations so as to pin blame for hard Brexit pain on the EU. But there also appears to be a Trump-level ability to deny reality among senior Tories.

After all these years, Government officials seem constitutionally unable to accept that the EU will not compromise the integrity of the single market, or at least not very much. In fact, our Clive has also pointed out that the deal cinched but then lost with Theresa May was actually pretty fudgy as far as the leeway given to Northern Ireland was concerned.

So from the EU’s perspective, it actually made significant concessions on the single market due to the need to accommodate the Good Friday Agreement. And remember, that was as much for Ireland’s benefit as the UK’s. Those were not appreciated by the UK side and now it’s pig-headedly asking for an even more special deal.

An issue we flagged very early on, that the UK customs systems were highly unlikely to be ready to accommodate vastly higher post-Brexit requirements, is still looking true even with the one-year transition grace period. In a speech yesterday, Barnier took up what had been the UK’s mantra, that it was ready for Brexit, including imposing a full on new border regime as of January 1, when the UK has made clear it isn’t ready. From the Telegraph:

The UK announced a gradual three phased implementation of border checks in June after previously insisting that checks would be inevitable. Full border checks will now only apply on EU goods entering the UK from July 2021.

The EU’s chief negotiator [Michel Barnier] told peers that the EU was, in contrast to the UK, ready for Britain to leave the Customs Union and Single Market at the end of the transition period on January 1.

The European Commission official said that every UK product imported into the EU would face checks once the Brexit transition period finished at the end of the year, whether there was a trade deal or not…

“If there is no deal, there would be tariffs and quotas on top of that, which would be very cumbersome and very complicated but we would have to do that.”

Barnier also said the EU had offered the UK a “flextension” which would be a provisional extension if the two sides were negotiating at year end and would terminate when a deal was struck. But the UK doubled down on not extending past December 31.

Even though the EU will take a big hit with Brexit, perhaps bigger than it expects, recall also that when a crash out looked possible, the EU identified sectors in which it would give what amounted to interim waivers of six to nine months to provide more time for adaptation and/or coming up with arrangements in those areas. The EU can always dust off and update those plans. Bear in mind the EU will do this only where it is to its advantage, although clearly it can benefit the UK as an unintended by-product.

Finally, it also bear repeating that the interpersonal dynamics look to be terrible. Yes, Barnier is attempting to maintain the veneer of Eurocrat professionalism. But the reports out of the EU for some time have been that national leaders are sick of Brexit, feel they have bigger priorities, and resent how much of a time since the UK has been and continues to be. That mood was made worse by Johnson’s occupation of No. 10, since he is disliked and mistrusted on the Continent.

The UK posturing regularly displays a lot of anger and what comes off as victimhood, even though it was the UK that chose to trigger Brexit.1 It is as if Brexiteers can’t get over the story they told themselves, that leaving would be easy peasy, and so it must be the EU’s fault that it’s turned out to be complicated and difficult.

In a similar spirit, Richard North today has the first of two posts on the history of the UK’s deal with the EU on fisheries. North paints the EU as having abused the UK and the UK as still harboring deep resentment over how it was had (the extension of territorial rights to 200 miles offshore or the midpoint of competing claims meant the UK would have had the rights to 90% of so of the fish, when it didn’t wind up with anything remotely like that). The wee problem with that spin, which you can see with a not-very-close reading of North’s own account, is that fisherman at the time worked out how the pending outlines of the then-EC deal worked against their interest. They complained to their MPs and were ignored. Heath chose to trade fish for other interests. Yet that is the EU’s fault, that the EC had an aggressive ask (not unusual in negotiations) and the UK didn’t beat that back a bit on its own dodgy merits before then doing other horse trading? Particularly since this was back in the day when the UK had a top notch civil service?

I can’t prove it, but from this remove, it looks like Brexiteers assign blame for the UK’s decline in stature to the EU, when the US is at least as culpable. And Thatcher perversely gets a free pass.

There are a lot of detailed topics, some insanely so like fisheries, that will eventually be resolved somehow. But neither side is yet engaging at that level. And it isn’t clear what it will take for that to happen, particularly since it should already have been underway.

____

1 I’m choosing not to include a new story, of how Scotland intends to contest the UK imposing new, as in lower, as having an impact on the EU/UK talks. Key points per the Financial Times:

Food safety, agriculture and many aspects of the environment are policy areas overseen by the devolved administrations in Edinburgh and Cardiff, but the UK government wants to have the final say on issues previously decided in Brussels…

Edinburgh has warned that it would resist the imposition of a Westminster body outlined in the legislation that could block any Scottish parliament bill that the Westminster government judged would interfere with the internal market.

Scotland can see that chlorinated chicken, GMOs, and other downgrades are in its future and it plans to go to court to try to block that. I don’t see this gambit working save as a political ploy to boost the SNP, which is already leading in the polls.

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39 comments

  1. PlutoniumKun

    On Scotland – there is a very interesting article by Rafael Behr in todays Guardian on Scotland, and how Covid has reinforced the move to independence. I know Independence hardliners like Craig Murray believe that they are being sold out by the SNP leadership – the Alex Salmond affair certainly shows them in a very poor light. But if this article is correct, then there is every indication that Boris’s blunderings will lead to a breakup.

    Downing Street’s Plan A to dampen the clamour for independence was hosing Scotland with public money, but competition for that resource is getting more intense and areas with Conservative MPs are the priority. If there is no sign of a Tory revival north of the border, an even more cynical path might appeal: letting the flames of resentment roar in Scotland, igniting a Johnson-supporting English nationalist backlash. All the better if that sustains the toxic question of whether Labour needs SNP MPs to support a coalition come a general election. It would take an exceptionally irresponsible prime minister on a streak of constitutional pyromania to pursue such tactics. Johnson is qualified.

    I would add to this that NI is in an increasing quandary as it too is nearly Covid free – this is adding to the agony of Unionists who are openly wondering if being so tied to London is such a great idea after all.

    Reply
    1. paul

      I found little to recognise in mr behr’s piece.
      The bit about ‘hosing Scotland(‘s scroungers) with money is fanciful to say the least. Maybe a few bob on feasibility studies for his bridge to Ireland, that’ll be it.

      As for the first minister’s long term strategy, what little is visible looks like a non starter.

      The current westminster administration will happily stonewall them and take back all the powers they like.

      The relief she showed when announcing that constitutional campaigning would halt(along with those pesky jury trials) during the crisis was palpable. Some have cruelly commented that no one would notice the change as far as the SNP go.

      There is the terrible suspicion that the controlling faction is more than happy to be the biggest fish in a shrinking puddle.

      The bit that really boiled my piss was:

      Opinion polls show regular majorities for independence, although that masks a common lack of enthusiasm for re-enacting a referendum battle that divided families and polluted friendships.

      It was an extremely good natured contest, not the american civil war, and one of great memories. If there any riven families over it, I haven’t met them.

      A lot voted no because they decided their bread was buttered with things as they were, not because they opposed independence with any particular passion (a common fear amongst academics was the potential loss of euro funding etc).

      A few years down the road and things are definitely not as they were.

      Reply
      1. vlade

        I’m sorry, but there was a lot of very vocal, and very aggresive Yes campaigners – Milliband has definitely some bad experiences there. I’ve heard (second hand) of people who were scared to put up “vote No” signs on their front lawn, after some verbal agression towards them as known No voters. Solmond shouted down Darling on live TV. Labour MP was throw eggs on and verbally abused etc. etc.

        I’m not saying it was a majority, but claiming it was a well natured and a very nice campaing is not true either.

        What I did notice was that the yes campaigners have the feeling you have – ” an extremely good natured contest, […] and one of great memories. ” while the No proponents I talked to often felt physically unsafe showing their allegiance. And mind you, those are No voters that would most likely vote “Yes” now, so it’s not like they could not be talked around.

        Reply
        1. paul

          Not my experience at all, the only significant trouble was in George Square in Glasgow on the night of the result, and that was all down to a bunch of pissed up, sieg heiling,butcher’s apron waving orange order folk.
          I was at plenty of the mass rallies/marches and it was true that there was a wonderful, optimistic atmosphere at them all.
          If there has been an independence campaign with less trouble and more joy, I’d like to hear about it.
          And as I am honest and was there, it is true.

          Jim ‘henry jackson’ Murphy’s egging was just a stunt to enable him to pack in his increasingly embarassing street campaigning, which was pulling in crowds (of party workers) which often approached double figures.

          Reply
  2. PlutoniumKun

    I think there is an increasingly 1914 feel about Brexit. A feeling of inevitability over a no deal (or a no-deal with a sticking plaster delay to prevent too much damage). Covid has sucked all the urgency out of it – it barely even gets mentioned in the news here in Ireland and I think in Europe its slipped so far down the agenda its hardly even discussed. There will I think be something of a panic over it come the autumn as the economic chickens from the pandemic come home to roost – its one thing to talk about a 5-10% drop in GNP, its quite another to actually experience it, and its later in the year that people will be feeling the full force of it. But what the impact of this would be, I simply don’t know – perhaps the EU would panic into giving the UK what it wants, but I suspect that there simply won’t be enough political energy to drive through a bad deal. What the UK fails to recognise is that Barnier can’t just wave his hands in the air and go ‘ah, you got us, we’ll give you everything you want’. If the EU is to compromise it has to go back to every national capital and get agreement on this. Many will be happy to do so. But there only needs to be a handful unconvinced by this to ensure that it will not happen, even if Barnier and Macron and Merkel want it to happen.

    In Ireland, the new government is just bedding in, but its not likely to change its view, although given that Sinn Fein is now the official opposition, there will be less informal chumminess (Varadkar got on surprisingly well with his SF counterparts). One odd little sub plot is that the Irish Green Party is in power, and the Greens are the only ‘cross-border’ party in power – they are official the same as the Northern Ireland Greens. But the NI Greens were (to the surprise of the Dublin leadership) very hostile to going into government. One reason seems to be that the Northern Ireland Greens are essentially dominated by ‘soft’ Unionists – its a party for Unionists who find the mainstream pro-Union parties far too right wing and traditionalist.

    The new Irish Prime Minister will not change tune from Varadkars stance. He would be inclined to compromise more with London, but his party behind him would be adamantly against this. While Varadkars party is full of anglophiles who showed genuine shock and consternation when they realised just how much the Tories and Unionists had nothing but contempt for them, Martin’s party is full of people who said ‘told you so’.

    I don’t think the new Irish government will get too much support from the EU if they push too hard on a national agenda. I think Merkel will tell them that they had plenty of time to prepare for a hard border and can’t expect anything but cash and moral support from the EU, there will be no question of the EU taking a different line solely to defend Irish interests. The political emphasis will be on persuading NI that a combination of Covid and Brexit means that they need to push London for more flexibility, or they will find themselves tied to a sinking ship. I think many moderate Unionists are very aware that they are facing an existential choice, but the DUP are not moderates.

    Reply
    1. David

      I don’t know about 1914, because war came a a surprise then: – perhaps 1939, rather, when for years there had been a gloomy recognition that another European war was highly probable, but nobody was sure exactly how and where it would start. But I agree that, as in 1939, there seems an element of fatalism around, as people see a car-crash approaching, without any obvious way of stopping it.
      I agree about this dropping out of the media in Europe. Certainly in France, it is seldom if ever mentioned. In the popular mind, it’s completely overshadowed by Covid, as well as all the economic and social implications. The government hasn’t mentioned the subject for ages – Macron is exclusively focused just now on getting re-elected in 2022, and holding off the challenge from the Right.
      More generally, there’s a tendency to unconsciously lump together Brexit with the consequences of Covid and the (very profound) problems of the Eurozone, into a sort of economic apocalypse which will be coming later this year. In a way, Brexit is just too much extra to think about, when the economy is already looking into the abyss.
      That said, it looks as though, even now, the British have still not learned that there’s no point in demanding from people things that they are in no position to grant you. They never did understand how Europe worked, and Johnson and co still seem to think that they can squeeze some kind of last minute concessions out of a single entity called “Europe.” But it’s never been like that: Barnier is stuck where he is because, I suspect , he has no new instructions, because, in turn, the 27 haven’t discussed the situation for ages. For there to be movement, the 27 would first have to agree to discuss the subject, then hammer out a new negotiating position, then work out where the red lines were … all when many other things were clamouring for attention. You can imagine how likely that is.

      Reply
      1. PlutoniumKun

        Maybe I’m getting my history mixed up, I was thinking of the summer period as all the nations aligned themselves for war while the people who should have been trying to stop it just convinced themselves it wouldn’t be so bad. But yes, there was the same sort of drift in 1939 and 1941.

        Reply
      2. vlade

        1914 wasn’t really a surprise, even thought he myth is it was.

        There was a lot of good reasons why people expected the war (there was an arms race going on, and escalating conflits). The Austrians felt like being sidelined from the Great Power status (which they were), and thought a small good war was in order. The Germans paradoxically also felt like slipping behind the UK and France (which was also renewing its friendship with Russia, at the expense of Germany), even if it wasn’t the case, and felt that they had to have a war to compensate before they slipped too much. What no-one expected was a dragged out war, but that’s different.

        Europe’s last summer (David Fromkin) is a good book covering the pre-war escalations and arms race, and German/Austrian reasons to go to war (less so Russia/France. Arguably, the UK was the only one not really interested in the war at the time, being preoccupied by the Empire).

        Reply
        1. David

          1914 was a surprise in the sense that nobody expected the train of events which actually occurred, and everybody’s mind was elsewhere. The Anglo-German naval arms race was essentially over (the Germans conceded) and I don’t think there were any others. There were lots of causes of instability, as you say, but nobody expected or was planning for (no, not even the Germans) a general European war. The point, though, as PK says, is precisely that the people who might have stopped it were preoccupied with other things. My point about the 1930s is that there was an expectation, dating really from the 1920s but getting steadily worse, that there would be another apocalyptic European war, simply because there was no way of avoiding it. The literature of the time is full of glum, passive, defeatist thinking, seeing another war as inevitable. It could be postponed, perhaps, but the underlying tensions, dating really from 1919, could not be resolved. I think Brexit is bit like that, in the sense that there’s a dour, other helpless sense of impending catastrophe, but the dynamic of history (unlike 1914, which was avoidable) rules out any chance of stopping it.

          Reply
          1. vlade

            German Foreign ministry etc. really wanted a war. They expected a war with France and Russia, and were hoping they could keep the UK out of it. The German Foreign office explicitly said they wanted to keep Kaiser on his cruise in case he’d try to keep the Germany out of the war for example.

            Germans thought that AH was good enough to keep the Russia at least occupied until they dealt with the French, so that they (Germans) would not have to fight two front war, which was really what they didn’t want. Unfortunately, it turned out AH was really a not a Great Power anymore and could not effectively deal with the Russia.

            The naval race with German concession was over in 1912, so only two years before the war. And the concession was a large part in supporting the notion of German inferiority and “we have to have a war before they run even further away from us”.

            I do not really think that once AH and Germany had the excuses, there was anyone who could have easily stopped it – because they both really wanted their wars. As I said, I don’t believe they wanted the war they ended up with, but that’s a differnet story, people rarely end up with what they want, especially with wars or revolutions.

            Reply
            1. Anonymous 2

              ‘I do not really think that once AH and Germany had the excuses, there was anyone who could have easily stopped it – because they both really wanted their wars.’

              The Tsar was proposing to stop Russian mobilisation as requested by Germany until Sasonov met him and persuaded him to change his mind. If Sasonov had failed then there would probably just have been a small war in the Balkans.

              Some argue that war would have come anyway but if Civil War had broken out in Ireland as might well have happened, would France and Russia subsequently have been as confident about UK support?

              The great unknowns of history. I am not really a great fan of inevitability as a theory. What if the Archduke’s driver had not driven up the wrong road and delivered him up to Princip?

              Reply
    2. John A

      I think there is an increasingly 1914 feel about Brexit.

      Yes, but now I think Lord Grey’s remark that “the lamps are going out all over Europe, we shall not see them lit again in our life-time”, should be updated to the lamps going out all round Britain.

      Reply
    1. Yves Smith Post author

      You are implicitly misrepresenting my point. It is that the UK appears to resent the EU, but not the US, or at least not much, for its reduced standing. This is bizarre since if anything its joining the EU was a reflection that it was no longer in its best interests to go it alone.

      While I agree that the UK botched opportunities it had in the post war period, IMHO you missed that the US has already stacked the cards against the UK by then.

      The UK had substantial war debts to the US, by design. Roosevelt was deliberate in using Lend-Lease and other measures to topple the UK as the leading Western international power and have the US assume that role. By contrast, Germany’s debts were wiped out in its reconstruction.

      In addition, it isn’t well enough recognized that the Marshall Plan was recycling capital that had fled from the UK and Europe during the war.

      Reply
      1. PlutoniumKun

        The 1959 British film ‘The Mouse that Roared‘ with Peter Sellars was a comedy with a subtext that underlined this well. It was based on the notion that the best way a small European country could thrive long term was to be military defeated by the US and so receive some largesse in compensation for its active submission.

        The UK made the mistake that thinking that allying with the US along with maintaining a strong military was the best strategic option – in reality it meant the US was more likely to see it as a competitor. It has always amazed me at how reluctant the UK establishment was to recognise how little it got out of the ‘special relationship’. The Japanese saw the relationship with greater clarity, hence the Yoshida Doctrine, which proved far more successful, albeit at the expense of a lot of national self respect.

        Reply
        1. Alex Cox

          Fascinating! I had never heard of the Yoshida Doctrine. Wonder how things would have turned out if the English had gone for it. We could have got rid of the nukes and rented Faslane and the air bases to the Americans, instead of buying the subs and missiles and planes from them. Airstrip One! But England wouldn’t have needed to develop its own, expensive, redundant, and distabilizing military.

          Reply
          1. PlutoniumKun

            Yup, although its quite a bit more complex than set out in that link, not least because it was never formalised as policy, as is typical in Japan. I’m no expert on the period, but the one book I read about post-war Japanese policy said that it was a common joke at the time that the Yoshida doctrine was in fact a declaration of economic war on the US, its just that it was expressed so nicely the US didn’t realise it. It was seen by the Japanese establishment as a tactical withdrawal, not an admission of defeat.

            I think that what for Japan and German what was less important than the waste of resources represented by weapons expenditure (both did in fact spend a lot of money in the Cold War) was that swallowing their pride gave them headspace to focus on economic regeneration and not worry too much about their role in the worlds pecking order. The French also wasted vast resources on trying to fly their flag around the world, but at least they never suffered any delusions about their relationship with the US. The UK establishments view of the US has always struck me as like a battered wife, who for years insists that her husband still loves and respects her, despite all the visible bruises.

            Reply
    2. David

      I’d be a bit careful with the “postwar decline” argument: David Edgerton has recently savaged it quite effectively. The real decline didn’t set in until the Thatcher years, by which time the Empire was long gone (it was almost completely gone by 1965 anyway) and was indeed allowed to go precisely because it was too expensive to maintain. Britain in the 50s and 60s was a successful modern state with an aerospace industry, an electronics industry, a shipbuilding industry, an automobile industry and R and D as good as any in the world, not to mention probably the world’s best health service, and free education up to university level. The British military meanwhile was much smaller than that of France and Germany, and its defence budget was comparable, or even smaller, depending on how you measure it. To a large extent, the “decline” was relative until the 1980s, simply because countries that had been knocked to pieces in WW2 started to get back into the game, and proved to be better than the UK at a number of things.

      Reply
      1. vlade

        I’d argue that the decline started in 60s. In late 60s, most of the industries you name were in decline, with electronics being the one revived in 80s.

        For example, aerospace, which the UK was leader of the world in 1940s.
        Comet (which was the first passenger jet in service) could have been a great plane, way better than Boeing – but the airframe problems were just a bust, and the UK could not deal with it. Never mind the stupid idea of hanging engine pods of frames (stupid from the aerodynamic, genius from operating perspective and ability to put ever more massive engines on) Boeing had and the UK aerospace resisted.

        And dont’ get me started on most of mass produced UK’s car from late 60s early 70s (which was, TBH, really not the designers problem, but a massive management problem).

        IMO, a lot of the UK’s problems and decline was actually captured in those car industry problems – it was often not problems of the underlying stuff, but totally incompetent and hidebound management. I’d argue that the electronics revival in 1980s was due to some new blood managers, not because the Brits got suddenly so much better in electronics.

        Reply
  3. paul

    I don’t see that the SNP can do anything about the latest power grab.
    A devolved power is a power retained as Enoch Powell observed.
    What is more worrying is that they do not seem to want to do anything significant.
    Westminster has been ramping up its presence in Scotland in preparation for withdrawing powers without any response from them.

    Tha party has few external problems, its streets ahead in the polls (not that that helps that much with the d’hondt electoral system), but it is unwilling to do the one thing that can oppose these changes.

    The considerable internal problems of the SNP are are put across well by George Kerevan here:

    SNP at the crossroads

    Reply
  4. Clive

    You have to give credit where it’s due, Barnier knows how to play the diplomacy game and to deliver a message which is sometimes very far-reaching and critical but all couched in very suave tones and phrasing that only the French can really pull off.

    He delivered a real bouquet of barbed wire at his recent Eurofi conference speech. I wish it had got more coverage (what coverage there was was partial and edited down his words so they lost a lot of the important implications). The full text is here https://ec.europa.eu/info/sites/info/files/speech-barnier-eurofi-30062020_en.pdf (I’m sure Europa is 100% accurate as a transcript, unlike the press reporting).

    I’d urge everyone with an interest to read it in full. There was the usual exasperation at the UK government (the feeling is, I’m afraid to say, mutual). But with Barnier, it’s always a good idea to consider who his audience — or audiences — might have been intended to be. Here’s a real show-stopper of a finish:

    However – especially in the context of Europe’s economic recovery – we must look beyond short-term adaptation and fragmentation costs, to our long-term interests:

     Building our Capital Markets Union. This means strengthening our independence when it comes to financial market infrastructures;
     Further deepening the Banking Union and;
     Fostering the international role of the euro.

    And so, we will only grant equivalences in those areas where it is clearly in the interest of the EU; of our financial stability; our investors and our consumers.

    What does this mean in practice?

    It means that you need to get ready for 1 January 2021!
     We now know that the transition period will not be extended.
     The EU was open to an extension. But the UK refused. It is the UK’s choice.

    So, 1 January 2021 will bring big changes.

    UK firms will lose the benefit of the financial services passports.

    This should not come as a surprise to you. We have been warning about this for the past 3 years.

    Furthermore, as you know well, in some areas – such as insurance, commercial bank lending or deposit-taking – EU law does not provide for the possibility to award equivalences that would grant market access to third-country firms. In these areas, if British firms want to provide services in the EU, they must ask for an authorisation in the EU. Or comply with all the relevant national regimes of those EU Member States where they want to continue to be active. Nothing in the agreement that we are negotiating will change this! These are automatic, mechanical consequences of Brexit. If you are not yet ready for these broad changes that will take place – whatever happens – on 1 January 2021, I can only urge you to speed up preparations and take all necessary precautionary measures!

    And what was the UK’s reaction? Meh, that’s pretty much what it was. I could write half a book on why that was and what the risks are of it for the UK financial services industry.

    As always, as I alluded to though, with Barnier, there’s often a subtext. Here, I think it is that yes, the UK is lumbering forward as only the UK does with our usual “oh, well, we’ll fix that if it happens” mentality. Barnier has lost the will to fight that anymore, but full marks to him for trying anyway.

    What he hasn’t given up on is that, while yes, UK financial services providers will lose passporting, that cuts both ways. Read this bit again:

    […] comply with all the relevant national regimes of those EU Member States where they want to continue to be active

    Pay close attention to the vocabulary (Barnier is very precise). “relevant regimes of those EU Member States…” I’m of the opinion that while two-thirds of Barnier’s speech was for a UK audience (a shame they turned a deaf ear to it, they had a lot they could learn). But a third of it was to an EU27 audience. What Barnier is pointing out there is that it will be up to the regulatory bodies of the Member States to determine UK financial services firms’ access to their market. But Barnier will expect them — and will pursue through enforcement of the applicable Directives — to adhere to the EU’s regulatory regime for financial services.

    Have, Barnier is I think asking there, each and every EU Member State reviewed what happens when come the 1st January and UK financial services providers are not able to automatically provide their services legally in the EU? Have they impact assessed this eventuality? Have they made the systems and procedural changes they need to make to move to intra-EU providers? Tested them? Secured non-€ liquidity pools to draw on where needed? Made domestic legislative changes? On-boarded Staffing? Premises?

    If not, then don’t expect him (Barnier) and the Commission to do anything other than enforce the rules. They have a legal obligation to do just that. If the Member States are not completely confident across all aspects of their own financial services ecosystems, they need to think about changing Barnier’s mandate.

    I, after far too many years spent saving my own skin and covering my own behind, recognise when someone is up to the same tricks as I have to get up to.

    Yves is absolutely correct, everyone is fed up with Brexit. This represents a time of greatest risks — when everyone has taken their eye off the ball. You wonder what nasties there are lurking in various woodsheds.

    Reply
    1. Ignacio

      So, there should be a window for UK financial services in a country-by-country basis. It would be good to know about particular moves in this sense.

      Apart from that I have come to the idea that, diluted in Covid effects, no-deal brexit could go it’s way more easily as everybody at both sides will feel less responsible about the potential effects. It should be re-examined how entry-exit ports in UK and the EU are being prepared or not for this.

      I foresee a lot of smuggling as in the good old times, hahahahahaha!

      Reply
    2. Marshall Auerback

      Clive,
      I confess that I find both sides to be demonstrating rank hypocrisy on the question of financial services. They seem to be forgetting the damage created by the finance community in 2008, and countries like France & Germany are aggressively bidding to have these socially polluting activities take place under their aegis. I wonder if that’s a good idea, given what an appalling job Germany’s own financial regulator, BaFin, has done most recently on Wirecard, but even more so on a pathologically criminal bank like Deutsche Bank (to say nothing of the sleaze pit that are the Landesbanken).

      And what does Brussels plan to do if there is a derivatives meltdown because the EU holds tight on refusing to sustain UK passport privileges? Or vice versa?

      I suspect when push comes to shove, Big Finance, as always, will find a way to carve up exemptions here, but I am skeptical that Barnier’s tough-sounding words can be taken seriously.

      Reply
  5. bjg

    Good article here https://beergbrexit.blog/2020/07/06/no-deal-becoming-a-real-possibility/

    I see no reason to believe that HM Government has any interest in a real deal. Very few of HM Ministers know enough about trade or economics to understand the drawbacks of having no deal (other than a bare-bones “We’re off: see you later”) and none of them is likely to be able to knock sense into Boris.

    On the postwar decline, it seems to me that Britain’s chief problem is its inability to face the fact that it was defeated in the second world war: defeated by the USA. Since the war (and to some extent since the Kaiser’s war) Britain has lived in a fantasy-land and politicians have been incapable of telling Britons the truth. This may explain Britain’s success in the creative industries — accountancy, tax planning, law — where the requirement is for the construction of plausible-sounding fictions.

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  6. John Jones

    To give a bit more context on Dr North’s points about the “scandal” and “deceit” of the Common Fisheries Policy -Richard is currently rewriting and editing his tome about The Great Deception about the UK and EU relationship – we get more hard edged truths of the CFP tomorrow – Richard’s overarching point being that Heath’s lies and deceit ( including Wilson ) ,Major and other UK government’s were bound to come out in the end and Brexit is but correcting an anomoly practiced on the UK public .

    On the matter of current negotiaitions it is very hard to see which way they are going let alone know how they will end up. The non extension of transition , a bit like Brexit itself, was a genuine surprise to many in the EU plus it has likely hardened attitudes to either secure a deal or to royaly “shaft ” the Brits for having the temerity to be close to being out of the EUs much prized regulatory orbit.

    It is this regulatory orbit upon which hangs level playing fields, state aid ,intelligence and financial services – even the EU is “rowing back ” on its CFP recognising too late in my view , that the Brits once bitten were unlikely to fall for the same trap again.

    In summary , we need to find a “landing space /volume ” in which to agree minimum adherence to some good things in the EU regulatory orbit plus the City ,like the sacred EU internal market needs a better level of certainty than the pathetic one month of equivalence currently on offer.

    Common sense , a large dose of fudge of EU treacle ought to make a de minimus deal feasible – Barnier is a clever , dapper and intelligent french man – to go down as the man who a) enabled Brexit and the WA is one thing b) to be the man who enabled Brexit with a no deal cliff edge and the ensuing chaos is unforgivable.

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  7. The Rev Kev

    After reading these comments, could it be that the British are adopting a Crash or Crash Through model? I don’t know about the UK but you get mention of this phrase with Australian Prime Ministers. Either things turn sweet or else you are left with a right dog’s breakfast. Boris must know that he is playing with a weak hand so perhaps he is just trying to bluster his way through as his options appear to be limited. Personally I would note that he has proved that not only is it impossible to ‘muddle through’ a pandemic but it is also impossible to ‘muddle through’ Brexit.

    Reply
    1. fajensen

      Brexit has by now become a religion – at this point one is arguing with Religious People, true believers in The Glory of Brexit and The Holy Brexit Scriptures. As everyone knows is never productive to argue with religious people! Better leave them be!!

      I think Boris Johnson was barely capable of putting in a sustained effort in his prime and his episode of Covid-19 has clearly taken a big piece out of him. He is running on fumes, his “effort for the day” being getting out of bed and not getting visible drunk before lunch. Dominick Cummings – a man of many delusions – is running the show.

      Reply
  8. sam

    Maybe the UK does have a strategy: to use Ireland and the land bridge as leverage, as in ‘Give me what I want or your friend gets it’?

    Reply
    1. d

      i suspect its more run out the clock, as i dont see any reason for any more talks, neither will give, so why bother?

      Reply
    2. SamHartford

      Well, that works both ways. The ECMT lorry permit system will seriously harm UK ro-ro traffic. I think, unless the EU member states play ball, the UK has no other choice but to allow EU lorries to service its markets unilaterally. In case of no deal, the UK ports need cranes for container traffic. The no deal preparedness notices on road haulage said that in case of no deal, the EU has no legal means of providing for access for UK lorries into the EU market and encouraged member states to assure the sufficient ECMT permits were available under the Convention. Russia is a party to the Convention.

      Reply
  9. Marshall Auerback

    A raft of sector-by-sector mini-deals, like Switzerland, WOULD take a lot of time. But this is the first agreement whereby a country is withdrawing from a free trade zone. In theory, it could be done fairly quickly if the 2 sides were able to agree starting from the status quo but reserving the right for the EU to impose punitive tariffs in specific areas in the event of violation. This could be done after both sides submitted to a 3rd party international tribunal (i.e. not the ECJ or the UK courts, but a neutral body). If this could be agreed upon, I don’t see why a deal could not be ratified fairly quickly.

    The state aid question is difficult because it has become abundantly clear that the EU itself is likely to abandon many of the rules that it has had in place for its own member states. Has anybody been listening to what the French gov’t has been saying recently? In that sense, asking the UK to advance examples is a bit unreasonable on the part of Brussels.

    Reply
    1. fajensen

      This could be done after both sides submitted to a 3rd party international tribunal (i.e. not the ECJ or the UK courts, but a neutral body).

      Can’t happen. The EU knows that its mortal enemy, the USA, would somehow infiltrate* that tribunal and take control over the proceedings to its disadvantage. This is an existential question for the EU, whereas the eventual status of the UK are degrees of inconvenience.

      *) With the Trump regime, this means Bully and Sanction in public – so they have to do something about it.

      Reply
    2. John Jones

      Agh but the EU is a rules based organisation – it is judge , jury and executioner.

      As to third party party tribunal er, whilst it might be an intellectual good idea , I suspect that the zealots /pharisees in the EU will have all sorts of emotional trauma at the idea that the CJEU is being invigilated by a “3rd party ” which will have to be seen to act in an independent manner rather than the overtly political and integrationist /activist CJEU. Perhaps the political genie of the CJEU has to be allowed to escape.

      Reply
    3. John Jones

      Just look at what has happened to the Lufthansa – not only have they been given €9bn , their CEO has been explicitly told to use the additional money to acquire weaker rivals so as to create an even bigger national airline champion.

      You have to give the Germans points for state aid chutzpah but it kind of undermines the spirit and intent of so calked state aid laws.

      The good news is that the faux act is out there for all to see and act upon.

      Reply
  10. Anonymous 2

    Thank you for the article and the comments.

    I confess I am unpersuaded that there is much intelligent thinking going on in London. Johnson looks as though he is no longer in control, if he ever was. Cummings looks to be the man who is calling the shots and he seems hellbent on a scorched earth policy – attack the civil service, attack the judges, attack the BBC, attack exporters. What lies behind this is an interesting question. I have just finished Catherine Belton’s deeply troubling book ‘Putin’s People’. Is it the case, as her book clearly implies, that the UK Conservative Party has been bought up by hostile foreign interests?

    Before anybody says ‘Russia, Russia, Russia!’, read Belton’s book and remember that the UK government is still sitting on a report on alleged Russian interference in UK politics that was due for publication last year.

    Reply
    1. d

      probably cause the EU and the UK combined are a large part of the worlds economy. and while the US is large, we cant avoid the impact of a hard Brexit.

      Reply
    2. ChrisPacific

      Paraphrasing Roger Zelazny from the Amber books, we don’t want them to die because they might bleed on our favorite rug.

      Reply

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