No deal is looking increasingly likely

There was something of a storm in a teacup in the House of Commons on Monday. The Conservative backbencher Jacob Rees-Mogg asked the Prime Minister for an assurance that the European Court of Justice’s writ will not run in the UK after March 29th 2019. Mrs May didn’t oblige. She replied that “That may mean that we will start off with the ECJ governing the rules that we are part of.” This admission that we will “fall under ECJ rules” was all over the papers, but this media frenzy was based on the assumption that the transition period proposed by Mrs May, among others, is a realistic option. In reality, it isn’t.

What seems to be the core of the transition proposals is that we continue for a couple of years as a shadow member state. Having repatriated the acquis into domestic legislation, we would voluntarily apply the rules of the single market and customs union while in exchange, the EU would treat us like a member state for trade purposes and neither impose any tariffs nor apply the usual rules of inspection for a “third country” at the main ports of entry for UK exports, such as Calais due to our regulatory convergence with the EU.

The flaw in the proposal is that it makes the assumption that the EU will bend its own rules for the sake of an ex-member whose vote to leave dealt it a huge political blow. There is every indication that Mrs May’s transitional plan, which so upset Jacob Rees-Mogg, is a non-starter. EU bigwigs have been very courteous but the message has been quite unequivocal – No way to this transitional arrangement, no matter how many times the Prime Minister calls on the EU to show “leadership” and “flexibility.”

So what are we left with? In her speech yesterday, Mrs May raised the possibility of there not being a deal in place – transitional or otherwise – by March 2019. “While I believe it is profoundly in all our interests for the negotiations to succeed, it is also our responsibility as a Government to prepare for every eventuality, so that is exactly what we are doing. These white papers also support that work, including setting out steps to minimise disruption for businesses and travellers”, she said. (The white papers to which she refers cover trade and customs.)

Naturally, the Prime Minister stated that this was not what she wanted, going on to say “We are negotiating a deal. We will not have negotiated that deal until, I suspect, close to the end of that period that’s been set aside for it.” In other words, we will keep on talking and hope for some sort of deal eventually, even if the talks go to the wire.

This is not helpful for businesses, who will not have any guidelines to help them prepare for Brexit and will not even know whether a deal is going to happen until the last minute.  If they were to take the advice of some commentators, it would be to prepare for no deal being struck. For all Mrs May’s calls for flexibility, that word isn’t to be found in the EU’s vocabulary, as David Davis and his team are beginning to discover. We agreed to the EU’s negotiating timetable – in other words, that an agreement (or at least, reasonable progress towards an agreement) – on  the Irish border question, the divorce bill and the rights of EU citizens resident in the UK must come before any talk about trade. We needn’t have done this, but we have and so who can blame the EU for sticking to its guns when there has been very little progress in these three areas?

The repeated rejection of ongoing membership of the European Economic Area, for instance, by re-joining EFTA, has closed off another option and one which has two advantages over the bespoke transitional arrangement which Mrs May is suggesting. Firstly, it is rooted in reality. We would be signing up to an agreement which the EU has already signed. Secondly, there would be no need to accept the supervision of the ECJ or to be part of the EU’s customs union. We would thus be free to strike our own trade deals.

There is also one other intriguing possibility, first raised by George Yarrow of the Regulatory Policy Institute. In his paper,  Brexit and the Single Market, he claims that on Brexit, the UK would remain a member of the EEA by default  He points out that joining the EU does not automatically mean joining the EEA; a separate accession process is required. Likewise, when Austria, Sweden and Finland left EFTA to join the EU in 1995 (by which time the EEA agreement between the EU and EFTA was in place), they did not have to re-apply to join the EEA. They were already members through having been in EFTA. The default position for the UK on departure, therefore, is that it too would remain an EEA member.

Yarrow’s thesis has attracted little attention from either our negotiators or the EU’s team. It raises a number of questions but it might possibly offer some answers. While the EU has no interest in exploring it, it would make life a lot easier for David Davis. We would not be under the power of the ECJ but of the EFTA court (which is limited to “EEA-relevant” matters) and could follow Liechtenstein and apply the same restriction on free movement of people, using Articles 112 and 113 of the EEA agreement. At a stroke, we would be in a better transitional position than under Mrs May’s proposals – to which the EU is not going to agree anyway.

On the other hand, if Yarrow is wrong and leaving the EU means leaving the EEA, it does mean that time is very short – probably already too short – for any satisfactory arrangement  to be in place by March 2019. German manufacturers are being told to prepare for a “very hard Brexit” while the Irish equivalent of HMRC has already reached the conclusion that customs posts will need to be erected between the Republic and Northern Ireland, even though no one on either side wants to see the return of any sort of visible border.

Yarrow’s thesis or an immediate application to re-join EFTA  are thus the only two escape routes from the looming cliff edge which no one wants either. The first option is untried and may not stand up legally while the second has been repeatedly rejected in favour of a chimera – namely Mrs May’s illusory “transitional arrangement”. We are not yet in Private Fraser territory where “we’re all doomed”, but Mrs May and her party could well be unless they engage in some lateral thinking – and quickly.

 

Reasonable or unreasonable?

It will have come as no surprise to many keen observers of the Brexit process that the fourth round of talks ended this week ended with Jean-Claude Juncker, the Commision President, saying that it would take a “miracle” for Brexit talks to progress quickly enough to persuade the EU to start discussing a trade deal any time soon. This follows on from Michel Barnier saying the same thing a day earlier.

It is the usual story. An optimistic David Davis speaking of encouraging progress followed by a more negative slant from the EU side.

The divergence in assessing the state of play goes right back to Davis and his team agreeing to the EU’s negotiating schedule, which demanded that progress had to be made on the rights of EU citizens living in the UK, the Irish border question and the financial settlement, or so-called divorce bill, before the issues of trade would be discussed.

Was it reasonable or unreasonable for the EU to take the initiative in proposing a schedule? Hard to say. After all, they never wanted us to vote to leave. On the other hand, we were not bound under Article 50 to agree to their schedule, but for better or worse, we did.

So what of the three demands? The size of our divorce settlement was always going to be a contentious issue. Some would argue that we shouldn’t pay a penny after Brexit day while others are willing at least to concede that we should honour our obligations up to the end of the EU’s seven-year budget cycle, which takes up up to 2020. There is a even a huge gap between the EU’s demands and the generous figure which Mrs May has indicated she is willing to pay – £50 billion – and this is higher than the carefully-researched study by the Institute of Chartered Accountants of England and Wales, which comes out with a figure of  £28 billion, including  spending which has been authorised but not incurred. The EU is unhappy with our foot-dragging, but given that Mrs May’s alleged offer was a generous gesture to try and unblock talks, if it doesn’t satisfy the EU, they are definitely the side who are being unreasonable.

The most unreasonable of all demands is that any agreement regarding the legal status of EU nationals living in the UK after Brexit includes a role for the European Court of Justice. This is quite frankly absurd.  If the UK insisted on UK law and the UK courts determining any aspect of the lives  of UK expats in, say Saudi Arabia, the Saudis would tell us, to quote Boris Johnson (or was it Philip Hollobone?), to “go whistle”. English Common Law means just that – it gives common treatment to all UK residents including non-nationals. We did make an exception in the Middle Ages, with the clergy subject to Canon Law instead and the general population didn’t like it one little bit, especially as monks and priests were able to get away with crimes for which the rest of the population wold be punished. There is no need to create another exception now. Our legal system is fair, with plenty of checks and balances. No EU citizen living over here should feel they are living in a tyrannical, unjust country

The question of the Irish border, however, is another matter.  The Irish republic joined the EEC, as it was, along with the UK in 1973. The two countries’ economies were – indeed, still are – closely linked and for the Irish to have kept out while we joined the European project would have caused immense problems. When the Irish joined the €uro, they did so in the expectation that we would follow suit. We did not, nor have we abandoned imperial measurements as they have. They have consistently elected governments which are led by EU enthusiasts. By contrast, most of our Prime Ministers since 1973 have been at best lukewarm towards the EU apart from Ted Heath and Tony Blair. In spite of these divergences, however, we share a common language, a common genetic ancestry and several hundred years of common history. More importantly as far as Brexit is concerned, we will soon be sharing the only land border between an independent UK and an EU member state.

It is true that the EU as a whole would suffer proportionately less than the UK from our crashing in March 2019 without a trade deal, but some individual states would take a big hit, with Ireland topping the list. No one wants a “hard border” and everyone wants trade to continue to flow freely between the Republic and Northern Ireland but, as Michel Barnier keeps pointing out, we become a “third country” in 18 months’ time. It is one thing to insist that we cannot go back to the days before the Good Friday Agreement but quite another to come up with a workable arrangement which is acceptable to Dublin and Brussels. So far, the EU negotiators have not head anything from their UK counterparts which provides the basis for a future agreement. Their impression is that, 15 months after Brexit, the UK has not got to grips with the issues involved in striking a deal on the Irish border question.  If this is true, there are good grounds for the EU to say we are being unreasonable.

There are other areas, however, where the EU – or at least, some of its senior figures – is being very unreasonable. The over-the-top reaction to Michael Gove’s denunciation of the 1964 London Fisheries Convention is one good example. Another  is the behaviour of José Margallo, the former Spanish Foreign Minister, who has been ramping up the Gibraltar issue, claiming that  Gibraltar will eventually have to welcome dual sovereignty for Spain and  spreading misleading statements about a proposed meeting with Fabian Picardo, Gibraltar’s Chief minister.

Of course, if, as claimed by one reliable source, staff are quitting the Department for Exiting the European Union “in their droves”, this isn’t getting us any closer to address the issues where some work is obviously needed by the UK side.  There is a good argument to be made that some EU demands are very unreasonable, but equally, a strong case can be made that thus far, our side’s approach to these difficult negotiations has left a lot to be desired.

 

Government “Future Partnership” paper – collaboration on science and innovation

Scientists and the academic world predominantly supported remaining in the EU during last year’s campaign. Some of them are still most reluctant to come to terms with Brexit, fearing that our educational and scientific institutions will be out on a limb, unable to collaborate with their European colleagues while being  denied access to the sources of funding which they enjoyed prior to Brexit.

This latest Government paper, entitled a “Future Partnership” paper as opposed to the “position papers” which came out two weeks ago, attempts to provide some reassurance.

Whether it will succeed is another matter. The paper begins by cataloguing our collaborative ventures and lists some of the non-EU bodies through which collaboration will still be possible on Brexit. Then follows the usual wish list, summarised by Paragraph 13:-

“It is the UK’s ambition to build on its uniquely close relationship with the EU, so that collaboration on science and innovation is not only maintained, but strengthened. Therefore, as part of the new, deep and special partnership, the UK will seek an ambitious science and innovation agreement with the EU that will support and promote science and innovation across Europe both now and in the future.”

Great stuff, but the desire to continue co-operation is nuclear research and the EU’s space programme is just that – a a desire.   It points to non-EU participation in the EU’s Horizon 2020 research programme.  “We want to continue to work closely with these EU bodies” is a repeated message but will the EU want to work closely with us? At the moment, discussions on areas such as this seem a long way off. Recent statements by Michel Barnier, the EU’s Chief negotiator, suggest that until there is some significant movement on resolving the issue of avoiding a “hard” Irish border,  the scope of talks is not going to be broadened.