Brexit: Running the Clock Down

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On Monday, the Brexit negotiations entered a two-week, supposedly intensive, supposedly very hush-hush phase intended to achieve significant progress. That’s because the gaps between the UK and EU positions are so large that any thing other that a very bare-bones deal would require serious horse-trading.

However, pretty much everyone except readers of the UK press realizes that the odds are close to nil of anything more than such a minimal agreement that it would be functionally only a bit better than a crash-out. No well informed commentator expects the UK to escape having hard borders with the EU, which in turn creates what economists like to call “non-tariff trade barriers” which can really gum up the works.

Remember that participants in talks have strong incentives to play up the notion that the parties are making progress, since a sense of momentum can lead to progress. However, despite some cheery spin, the more substantive accounts underscore that large gaps on fundamental issues like “level playing field” remain. And worse, a new story from the well-connected Tony Connelly of RTE indicates that the differences on another core issue, fishing rights, are if anything widening.

Reuters reported significant progress on “social security rights” and also said the EU had agreed to a longer negotiating runway by allowing them to go until mid-November, as opposed to the earlier end of October cutoff. However, the article also pointed out the biggest issues were still unresolved:

There was no breakthrough in last week’s negotiations on the three most contentious issues – fisheries, fair competition guarantees and ways to settle future disputes – but the prospects of an overall accord looked brighter.

“We seem to be getting closer and closer to a deal, even though the no-deal rhetoric in public might suggest the opposite,” said one of the two sources, both of whom were briefed by the executive European Commission, which is negotiating with Britain on behalf of the 27-nation EU.

Contrast the Reuters account with Bloomberg’s take:

The European Union has no plans to offer concessions to Boris Johnson before next week’s Brexit deadline, betting that the U.K. prime minister won’t make good on threats to walk away from trade negotiations if he doesn’t get what he wants.

The bloc is ready to let U.K. talks drag on into November or December, and even take a chance on Johnson pulling the plug on the deliberations rather than compromise on its red lines, according to a senior EU diplomat. The high-stakes strategy was confirmed by a second EU official…

EU officials say there has been little progress recently and they weren’t impressed by the five compromise text proposals the U.K. submitted last week….

EU officials said they are pessimistic about the chances of a deal because the disagreements between the two sides are about points of principle. For progress to be made, they said, the U.K. will need to change positions rather than necessarily intensify negotiations.

This should come as no surprise to anyone who has been paying attention. Indeed, these leaks amount to the EU saying, “Yes, we’ve never been kidding. Our red lines are our red lines. If anyone is going to give ground, it has to be the UK.”

Bloomberg further claims that Johnson isn’t budging on timetable, and intends to announce in two weeks that there will be no deal if there hasn’t been “significant progress” by then.

One part of the Bloomberg account that seemed surprising was that EU officials supposedly want Johnson to come talk to them:

To break the deadlock, the EU wants Johnson to become more personally involved in the process. There is consternation in European capitals that the prime minister has been largely absent from negotiations so far….

His video call with European Commission President Ursula von der Leyen on Saturday was the first since June and French President Emmanuel Macron is the only major leader he has spoken to since negotiations started in March. One EU official said Johnson would have to hold talks with German Chancellor Angela Merkel before a deal could be done.

The U.K. rejects the idea that it’s up to Johnson to deal with EU capitals, preferring to leave talks to his negotiating team.

This makes no sense. Recall that when Theresa May tried meeting the leaders of various EU countries, it was tolerated even though it was viewed as a breach of protocol. The UK was and is negotiating with the EU, not with heads of state one on one. On top of that, Johnson is loathed in the EU, so having him make the rounds isn’t likely to improve the negotiating dynamics.

So assuming Bloomberg has this right, what is up? Is it that the series of ministers sent to Brussels to represent the UK have all been so hopeless and perhaps unmoored that they have fallen back on getting Johnson as the only formal supervising sort-of adult involved? Is it that some EU leaders (maybe only Merkel, most of the EU seems not to want to spend a lot of cycles on Brexit) feel the need to sit down with Johnson if nothing else so they can tell themselves they did everything they could to prevent a crash-out or super hard Brexit? Or is it that European President von der Leyen wants to syndicate a Brexit negotiation failure?

Tony Connelly is the bearer of more sobering Brexit tidings. Fisheries, once seen as an issue where sensible minds would find a compromise, is looking even more intractable. From RTE:

Fisheries officials from eight coastal member states yesterday agreed unanimously that the EU’s chief negotiator Michel Barnier should take a tougher line in the talks, which are entering a critical phase.

Under the terms of the future relationship negotiations, there can be no overall free trade agreement unless there has been a deal on fisheries.

The UK wants a much greater share of fish quotas from stocks which straddle British and EU waters, and to be able to reduce the level of access European vessels enjoy in British waters.

The EU has sought to maintain as far as possible the quota share and access rights which evolved through the Common Fisheries Policy (CFP)….

Following the ninth round of trade negotiations in Brussels last week, the UK’s chief negotiator David Frost also said: “On fisheries the gap between us is unfortunately very large and, without further realism and flexibility from the EU, risks being impossible to bridge. These issues are fundamental to our future status as an independent country.”…

Sources close to the issue say coastal states are coordinating their position and taking a hard line.

“We don’t see why there should be any concessions,” says one source familiar with developments.

Note the eight coastal states include France and Germany, so they aren’t about to be muscled by other EU nations.

Ireland’s foreign minister Simon Coveney effectively confirmed the Tony Connelly account. From Reuters:

Ireland’s Foreign Minister Simon Coveney on Wednesday warned that it was difficult to envisage a landing zone for agreement on fisheries, a key stumbling block in trade talks between Britain and the European Union.

The current British position “creates a very difficult negotiation and a landing zone that is quite hard to envisage, quite frankly, for now”, Coveney told a parliamentary committee.

However, the UK would be able to claim something of a victory if it at least got to a “no tariffs” agreement. Consider some of the alternatives, per Automotive News:

Toyota and Nissan will ask for reimbursement from Britain if the UK government fails to agree on a trade deal with the European Union, the Nikkei financial daily reported on Monday.

The Japanese automakers are bracing for a 10 percent tariff on cars exported from the UK to the EU and are demanding that the government pay extra costs, the Nikkei reported on Monday.

British Prime Minister Boris Johnson said on Sunday that he did not particularly wish for a Brexit transition period to end without a new trade deal in place but that Britain could live with such an outcome….

Toyota builds the Corolla and the related Suzuki Swace compact cars at its plant in Burnaston, central England. It also produces engines at a factory in Wales.

Nissan operates Britain’s biggest car factory in Sunderland, northeast England. The plant’s production includes the Qashqai, Juke and Leaf. Honda also builds the Civic in Swindon, near London, but the company is closing the factory next year.

The plant would be “unsustainable” if Britain leaves the EU without a trade deal, Nissan said in June.

Europe and the UK’s car industries last month said a disorderly Brexit would cost the sector 110 billion euros ($130 billion) in lost trade over the next five years.

Richard North has repeatedly warned that the UK’s live animal farmers would be devastated under a no-deal scenario, and the Guardian took up the impact on lamb farmers:

Sheep farmers are likely to be among the worst hit if the UK leaves the EU without a deal, farmers have said, with estimates showing that as many as 2 million lamb carcasses could go to waste and thousands of farmers could go out of business.

The EU is the UK’s biggest export market for lamb with no other farming sectors as reliant on that market, making it the most exposed to economic harm if tariffs are imposed. While about 82% of annual beef exports from the UK are sold in the rest of Europe, along with about 78% of the dairy produce not consumed in the UK, 90% of all lamb and other sheep meat exports go to the EU.

Estimates by the Country Land and Business Assocation show that if exports remain around the same level as last year, but tariffs are imposed, about 3 million lamb carcasses normally destined for export to the EU would not find a market there.

Sarah Hendry, the director general of the CLA, which represents 30,000 UK landowners and rural businesses, said many farmers could be forced to give up their livelihoods if tariffs followed a no-deal Brexit.

Note that the article doesn’t consider the trade-reducing impact of physiosanitary checks, but presumably that’s less bad than that plus tariffs.

Now it is possible that our reading is unduly downbeat and the EU side has it right, that Boris Johnson will blink. With Brexit now polling as unpopular, one would think he could sell a softer deal to Parliament and quell a revolt by the Ultras, but I am not on top of the party split. Either way, expect more theatrics before year end.

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  1. PlutoniumKun

    Its very difficult to really read the tealeaves right now – you would expect a gradual ramping up of activity at this stage and constant dripping of strategic leaks, but there seems to be nothing but a mix of stasis and confusion.

    I suspect that a key issue – not often commented upon, possibly because nobody in the EU wants to be direct about it, is that the Brexit negotiations are being led by true believers, not the usual footsoldier diplomats. I think this has somewhat confused and confounded EU negotiators who went in assuming that there would be an element of camaraderie among even opposing sides in discussions like this – but have instead facing down people who have no real interest in the usual semi-friendly tug of war of diplomatic discussions. Perhaps this is why its been suggested that Johnson becomes directly involved – they may believe that the only person who can break through this and break the logjam is Johnson himself. Perhaps its suspected that his strategy all along was to allow things to deadlock, and he would present himself at the last moment as the saviour of the day, and in effect the EU is leaving the door open to him to do this.

    On fisheries – its always baffled urbanites as to how fishing disputes always seem to be so important in the EU, when its a minuscule part of the economy. Its a simple matter of electoral logic – in many of the seaborne countries, especially France, Spain and Portugal, fishing communities have significant clout because of their geographic concentration. If those countries are expected to stand down their objections, Germany and other major powers have to in effect bribe them or face them down to reach a compromise (they usually do compromise, but the political leaders must do their public dance to show that they care for those poor fishermen). The fact that nobody seems to be doing the background work to do this shows I think that there is no willingness within the EU to go an extra mile for a deal. Another point on fisheries – for anyone who thinks that Britain will benefit if it gets to keep all its fishing grounds, the problem they face is that they are major exporters of fish to the EU. So in a no deal, Europe will find fish more expensive in its shops, but in Britain there will be an unsaleable surplus. The only winners are likely to be the fish. And I don’t see that as a bad thing.

    The ban on live sales for livestock is probably pretty good for animals and the environment too, just bad news for lovers of lamb chops. I very much hope it leads to a reduction in grazing in UK uplands. But more likely the Tories will turn them all into grouse moors.

  2. AnonyMouse

    One problem I forsee from my vantage point here in the UK is that the very people who form part of the Johnson “base” – Telegraph and Daily Mail readers – are already extremely pissed off at the government’s handling of COVID-19. They would like to see restrictions lifted almost immediately, and dissatisfaction with Boris is growing. I feel that there will be a temptation to tack towards these people by continuing to play hard politics with a Brexit deal.

    However, this might not matter too much. The reality is that the public are so ill-informed about the details of Brexit, and the debate has been so childish and lacking in nuance and detail throughout, that they are perfectly likely to be able to spin whatever deal (or lack of a deal) that comes through as a glorious negotiating success. See also the grim spectacle of the Withdrawal Agreement, sold to the public as an “oven-ready deal” by Boris in December, which now, chameleon-like, becomes a “betrayal of Brexit” to the ultras. As Ivan Rogers said, the revolution eats its own children.

    I think that perhaps the Brexiteers may be naive enough to hope that the economic damage of a hard Brexit – which, for Johnson, was only ever a ladder to personal power and profit, and for the ideologues around him an opportunity to implement whatever ghastly disaster capitalism they want to see – will be swept under the COVID-19 rug. Given the evidence of their incompetence in handling COVID, it will not be a shock if all these grim prognostications about Jan 1st come true. Meanwhile the opposition, so limp in the face of their electoral defeat, so unwilling to actually distinguish themselves from the government, won’t even point out these consequences until it’s too late for fear of antagonising the public’s Brexit fatigue. I wish I didn’t have to live here. If I’d moved to Germany while freedom of movement was still free, I could’ve revelled in some apposite schadenfreude.

    1. PlutoniumKun

      Yes, there seems to have been a very sudden shift in mood among the Tories against Johnson, and this is an additional dynamic to add to the whole thing – Johnson will be desperate for a ‘win’ and those who have tied themselves to Boris ship will be wondering how to secure their futures if he is disposed/resigns in the Spring. If some of the reports are right, Cummings in particular could find himself without a job very quickly if Johnson goes.

      But I’ve no idea what way they will decide is best for them (they clearly don’t give a damn about the country or anyone else). My guess is that they may bank on a no-deal giving them a ‘we’ve delivered’ bump, while they can blame Covid and the EU for the chaos that ensues. However, its also possible that Johnson may panic and gamble that he can sell concessions to the EU as a sign of him being a grown up Statesman.

      But I think one problem is that in an odd way Project Fear hasn’t been strong enough – I think there would not be enough political capital to be made from avoiding a hard Brexit to make any Tory, least of all Johnson, feel that he could ride above the Ultras outrage. If he does patch together a last minute deal to stop 2021 chaos, nobody will really thank him for it.

      So all in all, I think the political dynamic points to a no-deal, with the political imperative within the UK and EU being to ensure someone else is to blame.

      1. AnonyMouse

        Indeed – and you’re right that the lack of scrutiny this is getting amidst COVID chaos does, in some ways, reduce the political capital for actually getting a deal.

        Personally, when it comes to internal Tory party machinations, it seems pretty obvious to me what will happen there. There won’t be any move made against him until whatever happens with Brexit and COVID is out of the way. He has not yet reached his political nadir, which is likely to come at the start of next year. The Tories have a precedent for giving their leaders a poison chalice and knifing them at precisely the right moment – it’s what they did with the last one.

        Rishi Sunak in particular, who is currently posting pointed Instagram shots of him “waiting in the wings” at a theatre, would surely want to wait until they can absolutely pin the entirety of the COVID clustershambles and the No-Deal Brexit clustershambles on Johnson before he’s dumped. But I think he will certainly be dumped prior to the 2024 General Election, barring some kind of miracle recovery in the polls. The political capital they could easily get by throwing Johnson and Cummings under the bus is going to be too irresistible to pass up.

        So I think you’re right to say that at least politically, there’s very little motivation to get anything beyond the barest minimum face-saving deal, and very probably no deal at all. And, like Richard North (who I disagree with on a lot of things, but who knows his Brexit), I genuinely think that these people do not care a jot about what it will do to the country, the people who live here, etc. A combination of dismissing doomy prognostications as Project Fear and genuinely not giving a fuck what happens, feeling secure in their bubble, will propel them on to continue to utterly botch this process… much as the White House thought it was immune from COVID

    2. Anonymous 2

      Thank you Yves, PK and AnonyMouse. I think I agree with pretty much everything you write.

      One interesting question is whether Johnson is the ultimate decision maker or whether it is one or more of the puppet-masters who are thought to be at work behind the scenes who will make the call.

      A recent Freedom of Information request reportedly established that, in the preceding 12 months, the UK government had met News International staff 100 times. You have to ask yourself what they were meeting to discuss. Judging from comments from recent Australian prime ministers, as well as other evidence, the price for the support of Murdoch’s newspapers is to give them a major say in the government’s decision making. Working on this basis merely strengthens the argument IMO that the outcome will be no deal. Reportedly Gove, who is Murdoch’s creature, wants a deal but this could be a bluff. Murdoch is said to hate the English so no-deal must be on the cards as it is likely the most damaging form of Brexit (it will probably destroy the UK).

      Another candidate as a possible puppet-master seems to be Putin. Catherine Belton’s recent book suggests he has bought significant influence in the UK (so that is why there are so many Russian oligarchs in London). Before anyone shouts ‘Russia! Russia!, please read her book. I am in two minds about it myself but it certainly merits a read.

      Neither of these nor the other (largely US) billionaires said to be seeking to influence matters behind the scenes have the UK’s interests at heart IMO so the outlook has to be bleak.

  3. Andrew Thomas

    I cannot tell you how much I have enjoyed and been edified by Yves’ posts and the comments of PK and others on these issues. A very sincere thank you to all.

    1. Tom Bradford

      Hear hear. As an ex-Brit now living at the other side of the world I have absolutely no doubt that thanks to Yves and the articles pointed at in ‘Links’ I am better informed as to the shambles that is Brexit than the friends and relatives in the Old Country I still correspond with. In fact I often refer them to NC in an attempt to open their eyes.

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