Brexit: Standoff

If UK reporting is any guide, it appears the EU has finally managed to get through the UK’s fog of delusion and convey that “no means no” on EU red lines, such as the “level playing field,” as in common rules and standards as a condition for a tariff-free pact. The Government has reacted badly to the notion, which the EU has conveyed repeatedly, that the EU wasn’t prepared to budge on the big open issues, save maybe a bit on fishing. Prime Minister Johnson is set to say later today if he plans to continue the talks or pursue a no-deal.

Recall that even if the two sides were to come to an agreement, it would only blunt the pain of Brexit. The timetable is so short that all the EU and UK could settle on would be a thin “no tariffs, no quotas” deal. It would not eliminate most types of trade frictions, such as import-export declarations. We’ve discussed in previous posts that this change would wreck havoc for global supply chains that include the UK, such as automobiles, and will hit small businesses hard.1

The short version of where things are now: The EU just concluded its October Council meeting, which once was the drop dead date for getting an EU-UK trade agreement settled. The EU has since offered to negotiate into November and has pencilled in a tentative November special EU Council session if there was an agreement to ratify.

Normally, if an agreement were nigh, the two sides would enter into a period of intense negotiations which the two parties have called “tunneling” since they also aspire to, and have generally done a reasonably good job at keeping the contents of the back-and-forth out of the press.

The big development of the Council meeting was it removed the draft language about accelerated talks from the version the EU leaders approved. From Bloomberg:

British Prime Minister Boris Johnson will today announce whether he plans to abandon trade negotiations with the EU and pursue a no deal. Last night, the talks were plunged into deep crisis when the U.K. reacted badly to the outcome of leaders’ Brexit discussions at the summit. David Frost, Britain’s chief negotiator, used Twitter to express his dissatisfaction at the absence of the word “intensification” in the conclusions, saying he was “surprised” and “disappointed.” His European counterpart Michel Barnier tried to make amends by promising in his press conference that talks would intensify, but the damage was done and the EU had put the ball firmly in Johnson’s court.

As the longer account in the Guardian described, Macron said the UK needed to make concessions if it wanted a deal, and other EU leaders confirmed that, albeit in a more sugar-coated manner. And Barnier didn’t walk back the EU Council’s position so much as suggest the door could reopen if the UK budged:

Downing Street reacted in dismay as Emmanuel Macron led EU leaders in warning Boris Johnson that he must swallow the bloc’s conditions, in what appeared to be taken as a direct challenge to the British prime minister’s threat to walk out on the talks.

At a summit in Brussels, the EU proposed a further “two to three weeks” of negotiations but Europe’s heads of state and government offered Johnson little succour, demanding that he alone needed to “make the necessary moves to make an agreement possible”.
EU deal still possible, PM to be told, as potential fisheries plan emerges
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The intervention was evidently regarded as incendiary in No 10 as Johnson had said he would make a decision on Friday on whether there were grounds to continue the talks. In September, he had said that without agreement by the time of this summit the government would “move on” to focus on no-deal preparations….

The Dutch prime minister, Mark Rutte, said he remained “cautiously optimistic” that agreement would be found. But he added: “For a breakthrough, movement from UK side is really necessary.”

The Guardian also recapped where the two sides stood on the sticking points:

The outstanding issues in the trade and security talks remain how to hold both sides to the deal, EU access to British fishing waters and the so-called level playing field demands, sought by Brussels to ensure neither side can undercut standards or over-subsidise parts of the economy to give its companies a competitive advantage.

Speaking at the summit, Macron, who faces an election in 2022, had said defending the interests of France’s fishing boats and coastal communities was a priority although he fell short of demanding the EU’s original position of maintaining the status quo….

France is insistent that there is no margin for negotiation over catches in the Channel, where French vessels enjoy 84% of the cod quota. It is understood that Paris is willing to be more flexible about the catches in the Celtic and Scottish seas. Losses to EU hauls there could be compensated for by eating into UK quotas in EU waters.

On level playing field provisions, the UK has agreed on non-regression from current environmental, labour and social standards but Brussels wants a “ratchet” mechanism so that this baseline develops over time.

On controlling domestic subsidies, a number of principles on how each side’s system will work are being written into the deal but there is a dispute about how prescriptive these need to be, with Brussels seeking lengthy sector-by-sector provisions.

RTE provided another sober assessment:

European Union leaders have placed the onus on the UK to unblock stalled post-Brexit trade talks, urging London to “make the necessary moves” to answer their concerns….

Speaking after the briefing from Mr Barnier, Mr [Taoiseach Micheál] Martin said that difficulties and challenges remain in securing an overall agreement and there has not been sufficient movement from the UK on the three outstanding issues – the level playing field, governance and fisheries – to suggest a deal could be done.

The level playing field refers to the aspiration that both sides will adhere to similar standards so as not to undercut the other in trade and investment. Governance refers to a system of resolving disputes between both sides in the future….

“There hasn’t really been sufficient movement on those fronts to at this stage suggest there could be an agreement. There’s a significant challenge there.”

The Financial Times article seemed schizophrenic, taking a position at odds with the EU Council’s conclusion that Johnson needed to fish or cut bait…:

However, the downbeat view in Number 10 will be greeted with raised eyebrows by senior figures in both London and Brussels, where there is a growing belief that a deal is within sight.

…and focusing on UK chief negotiator David Frost’s pique…:

Lord Frost gave a tart response to the EU’s conclusions, saying he had been “surprised” by the suggestion that all future moves needed to come from the UK. “It’s an unusual approach to conducting a negotiation,” he said.

….which even pink paper readers had trouble taking seriously:

Rusholme_Ruffian

Considering Frost has always stated that the EU should be more flexible and realistic in the talks, it’s a bit rich for him to say that the EU asking the UK to more flexible and realistic is an ‘unsual approach in negotiations’.

Needless to say, the talks will all be moot if Johnson decided to pull the plug today. But I’m not sure how many crises he can manage at once. His Government is already listing to its terrible Covid-19 response. Due to all US elections and our own terrible pandemic situation, I have to confess to not following the UK’s botched management as closely as I should have. But given that the UK has a national health service, which provided a mechanism for delivering services all over the country, my impression that the Government has managed the difficult task of having much more open looting, in the form of fat contracts being awarded to incompetents and cronies.

And now the North threatens to defy the new lockdown:

Not Artist Taxi Driver’s best AM rant, but it still shows key headlines:

It’s only October. What shape will Britain be in pandemic-wise come the depths of winter?

And in the meantime, there are more and more reminders of what January 1 might bring. One of the most bizarre comes via CityAM, reporting on the results of a House of Lords study about the consequences of the Government having ignored the services sector in its talks. We pointed out from the very early days of Brexit that services deals are far more difficult to negotiate than trade deals, and therefore typically take longer to conclude. We were skeptical a trade deal could be struck in 24 months, and even more so, a services deal. Nevertheless, it’s yet another proof of how out to lunch the people nominally in charge in the UK are to see a report like this coming out a mere two and a half months before the drop dead date. From CityAM:

Britain’s £225bn professional services industry has been ignored by the government and is under “catastrophic” threat of losing business to the EU post-Brexit, a parliamentary committee has warned.

A House of Lords’ EU services subcommittee report published yesterday said the UK’s accountants, lawyers, recruiters, architects and advertisers are under risk of losing contracts and jobs when Britain formally leaves the bloc in January.

The report accused the government of ignoring the “hugely important sector” — which makes up around 13 per cent of the UK workforce — in trade negotiations with the EU…..

The Lords committee warned that even a “Canada-style” trade deal with the EU, in which the UK would avoid tariffs and quotas, would not be enough to prevent huge restrictions on professional services exports to the continent at the end of the Brexit transition period.

Under Canada’s current trade agreement with the EU — known as Ceta — European countries are permitted to apply “national reservations” to shield their firms from foreign competition.

Reservations can include demands that companies prove local talent is not available, that foreign professionals become residents in certain countries, and that firms adopt domestic corporate structures….

The committee added that Ceta-style reservations “could be catastrophic for the UK’s professional and business services sectors”….

Beyzade Beyzade, head of corporate and employment law at Chancery Lane Law, told City A.M. failure to achieve a tailored trade deal for professional services would wipe out the UK’s legal credibility.

“I’m currently working on a case involving multiple law firms, KPMG, various other accountants and university professors all across the EU — that kind of cooperation is just not going to be possible if you don’t have the same legal systems, the same judgements, the same qualifications after Brexit,” he said.

And there are other poster children on Twitter:

One take on where the UK winds up:

Pick your cliche. Do you like “It isn’t over till the fat lady sings”? Or do you prefer “It’s always darkest before things go completely black”?

___

1 One of many confirmations comes from the Institute of Government:

Some businesses will also have to make import-export declarations for the first time – a change that may affect between 145,000 and 250,000 businesses who conduct their trade solely between the UK and EU27. A further 73,000 businesses, who trade with both EU and non-EU countries, will now have to make declarations for their UK-EU trade in addition to their non-EU trade.

EU member states will require VAT to be paid on importation unless they introduce a deferral mechanism. UK businesses exporting to the EU may need to engage VAT representatives in different countries to comply with EU VAT obligations. Businesses wishing to claim a refund of overseas VAT will no longer have access to the EU VAT Refund Portal, and are likely to face longer waiting periods to be refunded according to Daniel Lyons of Deloitte.

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42 comments

  1. PlutoniumKun

    Some random thoughts:

    1. Barnier has taken to openly mocking the UK stance, which is very undiplomatic to put it mildly and to me indicates that the EU has simply given up on the normal negotiating game – they will (as always) offer some face saving concessions if a deal looks likely, but they have essentially decided to call Johnson’s bluff over his October deadline and have said ‘here is what a deal looks like, take it or leave it’. So the ball is entirely in Johnsons court. It looks like he will once again back down, although its not impossible that he’ll be persuaded by the many Ultras within the cabinet that it would be better to withdraw now and so at least have 2 months for preparations for a no-deal, rather than give out hope and see it all fall apart in December.

    2. Merkel was making some noises in the past weeks which could be interpreted as trying to put pressure on the fishing nations to prepare for some compromises – but none of them look like they are doing any of the hard political work needed to prepare themselves politically for this, so I don’t see it happening. Martin’s comments indicate to me that there is unanimity among the EU leaders that a united front is more important than anything else, even a deal. The Irish government in their annual Budget this year explicitly built in a no-deal into the assumptions. I think that mentally most of the countries most likely to be affected are now preparing themselves for the crash position. In many ways, Covid helps this as movement and travel is being restricted day by day all over Europe.

    3. I think its correct to say that Covid has undermined Johnsons ability for manoeuvre. Its looking bad all over Europe, but the UK seems worst of all. The situation is almost certainly worse than they are admitting (they are not doing nearly enough testing), and the situation on the ground is in complete chaos. Local authorities should have been leading on track and trace (not the NHS, local authorities in the UK would have been expected to take the lead), but London stopped this in favour of outsourcing, and this has proven to be a complete fiasco, and its probably too late to change course. And now northern cities (and Wales) are refusing to follow London’s lead. There is open rebellion among Tories – Johnson’s authority is crumbling by the day, and the UK is going to have a very nasty winter. I’m not sure he could do a deal now even if he wanted to, but the urgent requirement for one is getting stronger all the time. Even more importantly, its not just Johnson’s authority, its central authority – for the first time we have seen the regions in open revolt. Its not just Scotland now.

    Reply
    1. vlade

      My bet is he’ll give in to the Ultras, as the self-same Ultras are also causing him CV issues (ERG is basically all “Lockdown? Hell no!”). CV is now a bigger issue for him, since it’s there and people see it directly. No-deal Brexit won’t really hit until Jan next year best, and can be (to an extent) hidden under the “It’s all CV’s fault” bit.

      So I’m not optimistic on the outcome today.

      Re fishing – Macron actually gave up a bit, in the sense that he’s now aiming mostly for the Channel watter, with “compromise possible for other fishing grounds”.

      TBH, if the UK just paid the fishermen to go out and land enough fish for a local dinner at most, it would be a better outcome for all, and not even that expensive.

      3) Maybe. W/o CV, the damge would be clearly attributable to Brexit. With CV, it’s more easy to hide it, and when people are scared of CV and consume mostly CV news, Brexit related stuff will get moved to behind. Johnson tried to revert it, and this could actually give him a week or two of “I now delivered Brexit”, which he might think could do something for him (unlikely IMO, but who knows).

      Reply
      1. Yves Smith Post author

        No, on your point 3, both Goldman and other sources (I saw a tweet from an independent party just now, forgive me for not digging it up) have said Covid economic damage and Brexit economic damage will be distinct and identifiable. They’ll hit very different sectors.

        Reply
        1. vlade

          For the economist nerds, yes, but I’m not so sure for the actual people on the ground.

          Yes, definitely for those who work for someone selling mostly to the EU, sort of hard for them not to notice (like a transport company that loses half of its EU business).

          But for an employee of someone who is once removed (not car parts, there it’s pretty obvious, but something similar), it may not be. Or even for a company that is profitable with EU exports, but would be only marginally so w/o them and CV will sink them entirely.

          Reply
          1. AnonyMouse

            In some ways the question is a purely political one in terms of how it is interpreted. We’ve already seen examples of e.g. car companies moving manufacturing away from the UK, where they explicitly attribute their decision to Brexit… and, instead, pro-Brexiteers try to spin it as “the uncertainty surrounding Brexit, which is because the negotiations are taking so long”, or “this was a decision they would’ve made anyway, and they just used Brexit as an excuse.”

            The latter argument is of course hilarious in that it seems to fleetingly recognise the real-economik, if you will, that manufacturing jobs aren’t just going to magically return to the UK when we’re being run into the ground by disaster capitalists. “Gee, you mean corporations aren’t just lining up to flood the zone with jobs in the UK when external trade is made more difficult? Next, you’ll tell me that countries aren’t lining up to offer the UK, as a distressed negotiator, trade deals on much more favourable terms!”

            So politically the question is whether people will attribute their economic misfortune to Brexit, or to COVID and its global economic impact – both will likely affect most sectors to some extent or another, although clearly Brexit will dominate in the minds of businesses that see exports or imports drying up; and then secondarily whether they will attribute the Brexit mess to the government’s handling of it, or “EU intransigence”, or some burgeoning “stabbed-in-the-back” mythology.

            At this point I’m a little despairing of the Starmer resistance, but you feel like there must be some political hay to be made here and now. There is some fraction of Brexit headbangers who you will never win back; but surely there is a constituency who thinks “yes, I voted for Brexit and probably still want to see it happen, but we really have bigger fish to fry than trying to negotiate and implement a totally new trade deal within the midst of the second wave of COVID-19 and all the associated damage. we’ve invoked Article 50 and formally left the EU at this stage, so there is no chance of reversing the decision, and the Tories will be in gov’t for the next four years most likely with a big majority. It’s only sensible to kick the can down the road at least until the present COVID crisis is over.” Could Starmer not try to win them round by pointing out this obvious fact?

            Reply
            1. vlade

              Your last para implies that most people do think like that. Assuming they have time, and they get the facts and help, most of them can think like that.

              But, in times like these, most people have enough trouble as is and they take shortcuts on anything that is not immediately a personal problem.

              All I’m saying is that Johnson is very capable of presenting “the right” shortcuts to them.

              TBH, it’s a long-running problem, because right is happy to use this, while left seems to be less happy to do so even if at the same time they deride the audience of it as “too stupid”.

              Reply
              1. Yves Smith Post author

                But if Johnson is tossed over the side in early 2021, as some expect, there will be every reason to blame him AND put the most blame for an economic ruin on Brexit, since that will have taken place on his watch, and not on Covid, which will continue to be the equivalent of an untreated gunshot wound.

                Reply
                1. vlade

                  Well, maybe – because remember most, if not all, of the current Tory crop MPs voted for it. So unless the Tory party got re-made (again, which means it’s not something we can rule out), it would be hard.

                  The cries of “it’s a Brexit, but not as we wanted it” woudl not cut too much custard with the voters who would much more conveniently forget how they voted five years ago.

                  If I was in the Tory party, I’d actually keep Johnson there as long as possible – May was hated by a large part and lasted years. It would be both fitting punishment for Johnson, as well as allowing him to be scape goat not just for Brexit, but for CV as well.

                  Reply
              2. PlutoniumKun

                Yes – so far as I can tell from people who actually know whats happening on the ground, there is a lot of frustration about Brexit – not from the headbangers, just people who say ‘we voted for it, just get it over and done with’. They really aren’t thinking much beyond this. Even some Remainers I think just want it finished with.

                For a lot of people, its like a having a nasty operation – you don’t want to have it, but if the doctor says you need it, you just want to get it over and done with as quickly as possible so you can look forward to a recovery. I think the Tory strategists know this and so have no interest in extending anything past 2020. And they may see it arriving in the midst of Covid chaos as a benefit, not a minus – its like getting all your bad news done in one go. In their minds, it means a horrible winter, but come the Spring they can shift Johnson out and replace him with a suitable clean skin and face the future with confidence. Or at least, I suspect this is what they are thinking.

                Reply
            2. Clive

              The seed potatoes (my initial reaction was, unfortunately oh, no, not potatoes again, we had all this in the summer when it was first “news”) is a good example of how, regardless of whether there’s a FTA or not, trade is always about realpolitik and realeconomik.

              In the event of no FTA, as in the original post, there will be no automatic certification of seed potatoes for entry into the EU Single Market (the Scottish government advised growers and producers accordingly in July http://www.sasa.gov.uk/eu-exit-guidance/potato-eu-exit-guidance). So no potato exports, then? Of course not, not unless the EU changes its policy and agrees a certification arrangement. This arrangement could come as part of a FTA, but it could equally well be a separate business-as-usual certification granted as would be to any third country.

              Now, for Brexit-as-the-four-horseman-of-the-apocalypse believers, there it is, that’s the end of the matter. The EU will not give any such kind of arrangement. It’s the bigger block, it’s got all the cards, it’s setting the shape of the table etc. etc. etc.

              Which may indeed be true — when viewed as an abstract.

              But when viewed as a set of granular questions, such as potatoes, what is in the EU’s best interests? Given unavoidable geographical and climatic constraints (there’s a reason why a lot of seed potatoes into northern Europe come from Scotland, it’s not because they grow better when listening to bagpipes or like seeing men in tartan skirts — I won’t get into the nitty-gritty but its down to daylight hours at a particular time of the year plus coldness and rainfall patterns) there’s not that many alternatives to Scottish seed potatoes. And because agricultural yields and availability are very variable and you need several different source-of-supply options, the potato-growing arm of agribusiness can’t really afford either financially or for risk-averseness to lessen those options still further by imposing completely artificial restrictions (there’s nothing at the moment to restrict UK seed potatoes on food safety grounds) on the relatively few sources of supply.

              Hence, the Republic of Ireland sounding the alarm as an importer of UK seed potatoes. They would be significantly curtailed https://www.independent.ie/business/farming/tillage/brexit-threatens-irish-potato-crop-for-next-year-37633583.html without this option for getting seed potatoes into the fields at the right time.

              So to deny UK seed potatoes into the EU Single Market (assuming no FTA giving them grandfathered rights) would be the EU cutting off its nose to spite its face. There’s nothing, of course, to stop it from doing just that. But this is the quandary of allowing free trade or, conversely, inhibiting free trade, once you allow politics to enter into the equation.

              Reply
              1. @pe

                True — but trivial by itself.

                The issue isn’t about childish revenge fantasies, at least outside of the UKs exaggerated, hysterical media bubble. It’s about negotiating leverage due to the dynamics of substitutability over realistic time frames in terms of the heterogeneity and scale of the local economy.

                Yes, there are trade bottlenecks that have significant substitution costs — but none of them by themselves give the kind of leverage that causes your opponent to knuckle under. In fact, thank god, because otherwise the whole thing would be a much hotter conflict. We’re not discussing a potato famine.

                But there is, however, a non-trivial and interesting part to this discussion. Scotland isn’t absolutely unique — it has a path dependent advantage in seed potatoes that can’t be instantaneously replaced, but given the scale of EU, there are plenty of places where one could grow seed potatoes which haven’t been used because of the marginal cost. Scotland is part of the North Atlantic / Baltic ecozone. It could take years to replace, require developing new potato variants, significant investments in land and displacement of current profitable crops, of course — but at some time scale and investment level, possible.

                In fact, it’s a variant of the standard question of why bother to invest in replacing a trade good even if you could produce it more cheaply, given the ramp up time.

                So — the non-trivial, interesting part of the question is, who does this situation multiplied over 10s of thousands of trade goods advantage, particularly given how long this divorce has taken? The smaller country which thus has an absolutely smaller diversity in landscape, number of people in various fields, and number of real-world productive factories? Or the larger ex-partner covering 10x the population, moreso in terms of land mass and ecological/climactic variability, and a historical variability including a greater total existing industrial variability and opportunity for expansion?

                The longer this takes, the more the UKs leverage falls in negotiation as the not-totally-mentally-damaged owners of agribusiness and others have time to research and develop substitutes to UK imports, while the reverse would take much longer, and may not even be possible within realistic time frames.

                How many sprocket factories can the UK develop in 4 years without pushing out every other needed development?

                If the 4 horsemen are merely international diplomats, what side are they taking on as the system has time to relax towards a stable state?

                Reply
    2. vlade

      An aside – I took the Barnier mocking as a basically admission of the EU that the negotiations are over, and that there’s little point in trying to clutivate any relationship with Johnson.

      Reply
      1. Mikel

        This.

        The EU has plenty to worry about sans the UK.
        All the arguing over govt subsidies to corporations is amazing to see.
        It hints a bit the major austerity to come for the umconnected.

        Reply
  2. AnonyMouse

    Without wanting to get too far into the personality weeds of it all, it feels to me like Johnson is already a bit of a lame duck. I don’t see any scenario where the Tory party don’t stab him in the back and replace him before the next election – providing they can be absolutely sure that they have muddied him up as much as possible with the blame for COVID and hard brexit and the economic fallout – and so the calculus around deal or no deal becomes different.

    Does Johnson even want to be PM any more? He’s never struck me as a real ideologue who would be motivated by shaping the country in any particular direction; he is clearly just a hollow opportunist. He wanted to play the clown, have the status and reputation of *having been* Prime Minister and he got hit instead with the worst crisis in a century. Much like on the other side of the pond, you wonder if there isn’t a great deal of personal temptation to retire to your lucrative media sinecure and snipe from the sidelines rather than having the difficult job of actually getting blamed for the things that transpire under your watch.

    Reply
    1. Yves Smith Post author

      If Johnson weren’t so loathsome, he could be tragic. He wanted to be Prime Minister no matter what. It’s as if he made a badly formulated wish, like Eos, the Goddess of the Dawn, asking Zeus to make her lover immortal, without also asking for eternal youth.

      Reply
      1. vlade

        I actully would want Johnson to be there for quite a while, and got ditched out only once the going gets easier. Except it’d cause more deaths and suffering.

        Brexit made UK a country where justice to people who brought it on means misery to others.

        Reply
    2. vlade

      Part of the trouble with Trump retiring is that claiming “I was the most successfull president EVER” flies a bit hollow if you could not even get a second term. Not that I believe it would stop him (if he can claim being “extremely young” at his age, wich is pretty objective measure, unlike a sucess of a presidency), but you know, it’d make him even more of a target for ridicule, especially if he was out of WH.

      Johnson, on other hand, always considered being able to take a joke a plus.

      Reply
  3. Clive

    Well, Johnson certainly is taking a “let them eat potatoes” line:

    https://news.sky.com/story/brexit-boris-johnson-says-its-time-to-get-ready-to-prepare-for-no-deal-with-eu-12105527

    Although as Katya Adler tweeted, there is a lot of playing to the gallery going on in all this (as seasoned Brexit-watchers, we know all too well, or should know, how little the public posturing can be related to what parties are willing to consider) https://twitter.com/BBCkatyaadler/status/1317015520818941954

    Reply
  4. The Rev Kev

    My bet is that Boris will do a David Cameron and resign after Brexit kicks in. He will make this self-aggrandizing speech of how through hard work, that he was successfully delivered Brexit to the UK people like he promised and that it is now time for some other person to take the till and guide the UK into a golden future. He will then not only resign from the Prime Ministership but he will also resign his Seat with immediate effect like Cameron did. After that he will leverage his position to be elected to a number of corporate boards, consultancyships, chairmanships, join an international speakers bureau and then perhaps toss in being the head of a charity for a bit of pr. And through his connections he will do what he has done for his entire life and continue to fail up.

    Reply
  5. Basil Pesto

    I wonder if I might ask the learned commentariat (particularly PK, vlade, David, Clive) what the UK might look like in 2021, with Covid and sans deal. I know predictions of such a broad scope are a mug’s game but I’m curious to get a sense of what the consequences could possibly be and how they might handle them.

    Reply
    1. Clive

      For my notions, which are little better than anyone else’s guesswork, there are simply too many variables for anyone to calculate the net impact, let alone specific sectors.

      In some ways, COVID-19 is something of a red herring. If there’s a viable vaccine in the next six to twelve months, this will have a stabilising effect. But if not, the U.K. — like everywhere — is adopting a “live with it” strategy. Anything short of total lockdowns for at least a month at a time, probably two months are needed, is a “live with it” mode. Measures like curfews, hospitality closures, out-of-area movement restrictions and so on are just tweaking round the edges. And there’s carve outs for family support, work, essential services and so on so even fairly drastic-sounding steps aren’t really that drastic compared with what was tried in March. There’s no political appetite for that again, let alone popular support. So the COVID-19 impact will be limited to the hospitality, lodging and some narrow areas of retail like spas, theatre, cinemas and so on. I wish it were possible to have a more mature societal discussion on this, but every variable has as been turned into a third-rail, so there’s little point in trying now, it’s “live with it” plus a load of waffle and gesture politics.

      Long term, deglobalisation is I think the biggest determining factor. COVID-19 has given that a hearty shove, Brexit will add to that for the U.K. too. But this is a long-standing trend and didn’t really need any more encouragement.

      Reply
    2. Anonymous 2

      One very likely development is a big win for the SNP in the Scottish elections, which would put the likely break-up of the UK firmly on the agenda. Otherwise I am with Clive – unwise to try to predict much in detail but I expect it to be a pretty unhappy place, at least by its standards.

      Reply
    3. David

      Consequences … I think the British political system will revert to childhood, because the actual position will be too scary to contemplate. The PM is, after all, an overgrown schoolboy, and political discourse in Britain is now largely limited to the exchange of political insults, seldom rising above (and sometimes falling below) what you see in the average school playground. The same will be true of the media, who will avoid the really important issues (too complicated) and feature articles by interns on the latest society or political scandal, the latest IdPol crusade or the latest sports controversy. Few media outlets are now staffed to do anything else. You can see signs of this already. The Guardian (OK, I still read it) has largely given up reporting real news, and now reads like the in-house magazine of the PMC. The newsfeed a couple of days ago was headed by a story about a crisis brewing in English Rugby because black players didn’t think they were getting enough visibility.I didn’t read the rest of the stories.

      By the middle of next year, Britain is going to join a lot of other countries, from Afghanistan to Lebanon to Zimbabwe, where everyone accepts that the government is simply incapable of dealing with the problems facing the country, and that’s it. And the populace will scream at each other and turn up the volume on the TV.

      Reply
    4. PlutoniumKun

      Predictions are a bit of a mugs game, but its particularly hard to say in 2020. Who would have thought back in January what a mess we’d be in now.

      For what its worth, I don’t think 2021 will look very different from now. If there is a no deal there will be very severe disruption, but it will ultimately be ‘manageable’. The real economic damage will be longer term, not some sort if immediate collapse. I think the EU will maintain a blind eye for as long as it can to breaches of law so as not to make things worse for everyone.

      I don’t think there will be an immediate crisis in Scotland or Northern Ireland, because I think the Covid situation will make everyone too reluctant to push things too far. Scottish politics is beyond my pay scale, but I think there are lots of internal problems going on on Holyrood which will likely mean the SNP won’t try to push too hard for a referendum, its all too unpredictable, and politicians like Sturgeon hate things they can’t control. Likewise, I think Sinn Fein in Northern Ireland will want to cool things down along the border, they don’t like the idea of a premature border poll. Loyalists have been very quiet, mostly I think because I think they know they’ve screwed up strategically and they are hoping that if they keep their gobs shut, nobody will notice.

      My guess is that Johnson will go in the Spring. i don’t think his heart is in it, and I think he’s suffered a catastrophic loss of confidence among the Tory party. When a bluffers bluff is called, he can rarely do it a second time. I think he will claim Brexit has his big victory and shuffle off to a lucrative writing career for the Telegraph, or maybe even America, always the last resort for upper class English bullshitters.

      It may well be that after a really bad winter, a bit of good weather in early summer and a new Tory leader might actually make things look like its calming down, especially if they select a relative grown up (if there are any left in the party). People will be craving a bit of normality, and if nothing goes horribly wrong, I could see 2021 and 2022 as being essentially threading water years. But so much economic damage will have been done that the chickens will eventually start roosting, and eventually I think Scotland and Northern Ireland will start boiling over in one way or another. I think that too many bonds have been weakened and cut, and things will have to change fundamentally.

      Just to cover myself like any good horoscope writer, I’d not overlook the possibility of things simply running out of control early in the year, economically and politically. I’ve no idea what that would look like, but we may end up looking at a government unable to govern, and a country no longer willing to be governed from London. Its not just the Celtic fringes, there is a lot of unhappiness up north and in Wales as well. Perhaps the UK will end up looking like Belgium, a country pretty much ungovernable at its highest level that somehow seems to keep plodding along without any great problem. But Belgium has never inflicted a wound on itself like Brexit.

      Reply
      1. Anonymous 2

        ‘there are lots of internal problems going on on Holyrood which will likely mean the SNP won’t try to push too hard for a referendum, its all too unpredictable, and politicians like Sturgeon hate things they can’t control.’

        Thank you PK. Interesting thoughts as always. I do not claim expertise in Scottish politics but as a Scot living in Southern England I try to keep in touch with developments North of the Border.

        If the SNP get a majority in the 2021 Scottish Parliament, I think it will be very difficult for them to avoid pushing for a referendum on independence. After all, Scottish independence is the principal raison d’etre of the SNP. At present, as they do not have a majority in the Parliament, they can justify not pushing for a referendum on the grounds that they doubt their ability to get legislation through the Parliament. And of course COVID provides cover.

        However, if they get a majority next year (pretty likely at present), that would give them until 2026 to introduce legislation and COVID will presumably be less of an excuse by 2022. Given support for independence running at 58% in recent polls, and on the assumption this is maintained, if the SNP does not go for a referendum during the term 2021 to 2026 it will provoke charges that they are not sincere about wanting independence which could cause the creation of a breakaway party (the ‘Real SNP?). It may be the case, as has been suggested, that some SNP politicians are quite content with the current situation which gives them Government jobs with considerable security and they may worry what their future might be if Scotland does go independent and economic considerations again become dominant in Scottish politics- what is the purpose of an independence party once it has achieved its objective? However, I think they will have to bite the bullet. Majorities in the Parliament are hard to obtain, because of the ‘sort of proportional’ voting system. It could be a long time before they got one again.

        I am very happy to hear from those more expert and no doubt time will tell quite soon now. The Scottish elections are due to take place in May.

        Reply
  6. David

    A couple of points on dynamics.
    The worst kind of negotiation to be in is on behalf of, or in opposition to, a group states or interests. All national negotiating positions are compromises to some extent (which we tend to forget) and reflect tensions within governments and countries. Multinational negotiating positions are an order of magnitude worse, and by definition change very … slowly ….and often at the speed that the slowest wants to go. In the present case, the UK (let’s be charitable and assume it’s single actor for this purpose) is negotiating not just with Barnier, but with 27 states and the Commission, and each state has a collective agenda, an agenda with the UK and a whole series of agendas with each other, that overlap with , but are not confined to, the present negotiation. Not only is a consensus incredibly difficult, and changing one even worse, but individual states can and do hold consensus hostage against other objectives: I hope this is an imaginary example, but Greece could, theoretically, hold a modification to the EU position hostage to a statement about Turkey for example (they’ve done similar things before). Barnier is perfectly well are of this, and, if he’s switching off, it’s because he knows that there simply isn’t any time for the EU to alter its position, and any movement will have to come from the UK.

    All this should be obvious to the British government. But London has never been particularly interested in understanding or working with the EU – the priority has been across the Atlantic. And whilst there were plenty of capable people who did know their way around Brussels, they’ve largely retired or been pushed out, and their successors are responding to a different, domestic agenda. We now have a government machine made up of inexperienced and ignorant political leaders supported by a demoralised and de-skilled Civil Service. Clever, that.

    So I think the British are in a state of nervous collapse. An ineffective and incompetent government is having to deal with the biggest collection of crises in almost a century. Indeed, apart from the period after the two world wars, and the few years surrounding the end of the Cold War, I can’t think of a period in history that compares with the present. I was around for the last of those, and the sheer volume, speed and interconnectedness of the multiple crises strained even the most capable European states. The smaller ones were reduced to sitting and watching with their mouths agape. But of course government machines (and not only in the UK) were an order of magnitude more capable then. The current British government by contrast, resembles a batch of rabbits caught in the headlights. Unable to cope with the complexity of the situation, they wind up, in the end, half-anaesthetised, watching helplessly and unable to decide what to do.

    Briefly on Macron, he is currently looking for votes from the Right, which is the complexion of many of the coastal areas where the fishing industry is based. He can’t afford to let them go, but his other constituency – the PMC – is rabidly pro-Brussels, and he can’t alienate them either. He has somehow to defend the cause of French fishermen without being the man who wrecked the UK-EU deal. Difficult, but then that’s the job he signed up for, even if he wishes it wasn’t.

    Reply
    1. PlutoniumKun

      Thanks for this David – I think your broad point is one that demonstrates clearly that anyone who thinks there is some sort of long term strategic thinking going on in London is simply wrong. As you so eloquently explain, getting the EU27 to agree on anything is a nightmare, which means that any negotiation with it will be long and tortuous and, most importantly, time has to be given if you expect a significant compromise to be made. Its simply the nature of the beast, and any responsible third party would have been working as early as possible to grease the runway for any difficult issues. And it hardly takes a high level official to realise that fishing would be a serious sticking point. I think its taken some time for it to sink in with Brussels that really, London is not playing some sort of multidimensional chess. They really are this clueless. Hence the thinly veiled contempt shown by Barnier.

      On the issue of knowledge of the workings of the EU, when I first moved to the UK I found myself working for an agency that had quite a few EU links – but what struck me is that even professionals working in sectors very closely linked to the EU were surprisingly ignorant of its inner workings. ‘Brussels’ seemed to so many to be some sort of abstract concept, a mysterious place where occasionally some sort of poorly understood rule or wad of cash would arise from. There certainly were some very capable UK officials working within Brussels, but I always got the impression they didn’t have quite the prestige among their colleagues in London as, for example, those working in Washington.

      Just one anecdote – when the Brexit vote came in I personally know a UK citizen (although he holds more than one EU citizenship) who had many years very high level legal experience in Brussels – he had served in two of the very highest legal posts possible, and had a long academic background in European law. So far as I’m aware only one other UK citizen would come even close to his stature and background in EU law and internal procedures, and he is now retired. As it happened, he was looking for a role at the time as his 7 year period had come up. He sent out feelers to contacts in Whitehall, essentially offering his services. Much to his chagrin, he didn’t even get a reply. It simply didn’t seem to occur to anyone that maybe he would be useful. I honestly don’t know if that was negligence or arrogance. But I do know he is now working – at a very high level – in the EU, now on the other side of the table. He doesn’t mention his UK citizenship anymore (in fact, I think he’s probably dropped it).

      Reply
    2. @pe

      Except that the unsaid “over the Atlantic” issue is that for the US just looking at the problem as a pure trade issue, the EU is a much bigger whale than the UK. It would be irrational for the US not to sell out the UK in exchange for deals with the EU. And if you consider it fully geopolitically, it becomes even more so.

      So the UKs priority across the Atlantic involves a breath-taking level of delusion about the nature of reality, which I would propose is what the entire ongoing mess reflects — a number of elites, particularly in the UK, but also across the Anglosphere, who have lost basic contact with reality.

      Reply
      1. David

        No, this has never been about trade. The UK has, in fact, been very keen on inter-EU trade. The problem is that the British elites never saw the relationship with the EU as being about anything except trade, and completely failed to understand the wider political agenda shared by pretty much everyone else. The UK was worried about closer EU integration on political and security issues in case that undermined NATO, which was, and remains the centre of British policy and the main mechanism for trying to influence the US. So the UK spent thirty years trying to sabotage such initiatives. If it had devoted a fraction of that effort to understanding and working with other EU nations, the worst of this mess might have been avoided.

        Reply
  7. stan6566

    Comments above so far, with maybe a couple exceptions, sound like comments in Moon of Alabama which is obviously the world central congruation of experts in war activities, especially the upcoming wars between USA and China and Russia.

    All of them of course utterly clueless about what they are talking about, but very eager to unravel numerous very detailed technical scenarios as to how exactly the war(s) will be fought, where from, with what weapons and what manpower.

    There, commentariat mainly hate USA, here, they mainly hate U.K..

    Both sets of commentators equally happy to dress their deep personal feelings into “highly intelligent commentary heavily peppered with dollops of inside information “.

    Funny, that.

    Reply
    1. Yves Smith Post author

      This has nothing to do with sentiments about the UK. And you can’t mount a substantive rebuttal to anything here or in the comments, so you fall back on a ad hominem attack, a violation of our site Policies, and engage in a separate violation, an attack on the site and its readers.

      Our post and the comment have been entirely about what Brexit means for the UK. The fact that you can’t handle that emotionally is your problem, not ours. And how do you explain comments like the one from the head of Chancery Lane’s corporate practice that his business will go into the toilet?

      Reply
    2. Yves Smith Post author

      And I must add, you have a peculiar notion of what it means to support a nation. From Fredrick Douglass:

      So long as my voice can be heard on this or the other side of the Atlantic, I will hold up America to the lightning scorn of moral indignation. In doing this, I shall feel myself discharging the duty of a true patriot; for he is a lover of his country who rebukes and does not excuse its sins. It is righteousness that exalteth a nation while sin is a reproach to any people.

      In the case of Brexit, the UK’s Government is guilty of the deadly sins of pride and sloth. Or you can subscribe to the canon of Oscar Wilde: “There is no sin except stupidity.”

      Reply
      1. Synoia

        Yes, but Boris and the top Conservatives are in no way stupid.

        Venal, possibly; stupid, no; overweening ambition, yes; trapped by events, yes.

        Trapped by events because I can see no path other than leave for Boris and the conservatives.

        Reply
    1. Synoia

      I’d take that as a plus if it included a strong program for local, in USA, manufacturing. However, even with Trump’s assault on China, I believe companies have moved factories (normally withing striking distance of China’s supply lines), and new factories N America appear to be built and staffed in Mexico – Not the US.

      Reply

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