Monday, 9 January 2017

Where we are on the Brexit continuum

Now the many horrors of 2016 are behind us, the world is waking up to the horrors that await in 2017. In particular, the UK is bracing itself for the triggering of Article 50 of the Lisbon Treaty marking the formal notification of Britain’s intention to leave the European Union.

In and of itself, there is no great significance attached to the event. It marks the start of the two year mandated negotiation period, after which either both sides will have reached some sort of agreement, there is a unanimous vote to extend negotiations or Britain is unceremoniously dumped out of the EU and into WTO rules.

Well, that’s a 2019 problem which we’ll have to deal with when we get there. In 2017, the problem facing the UK government is twofold: How to come up with a negotiating platform that leaves open the possibility of a non-disastrous settlement for the UK and how to keep those who voted to Leave onside as the inevitable compromises get struck.

Ah, you’ll hear some say, Prime Minister Theresa May has made clear what her platform is – it’s only desperate Europhile commentators and analysts who are unwilling to listen. She has, these wise heads claim, already stated that she will prioritise control over immigration above membership of Europe’s Single Market and won’t accept anything less than full sovereignty over UK law and regulations.

As she told Sky News over the weekend:

“Often people talk in terms as if somehow we’re leaving the EU but we still want to keep bits of membership of the EU. We’re leaving, we’re coming out, we’re not going to be a member of the EU…We will be able to have control of our borders, control of our laws. This is what people were voting for on June 23rd.”

Given the rest of the EU’s implacable opposition to compromising on the four principle freedoms of capital, goods, services and people it appears the two sides have reached an impasse even before discussions have begun. So is a so-called “hard Brexit” inevitable?

There are a couple of important points worth raising at this juncture that should educate our thinking on the likely stance of UK in Brexit negotiations:
  • Firstly, I think it’s abundantly clear at this point that May’s public discussion of her “red lines”– at least since her speech to the Conservative Party conference last October – are aimed at maintaining the support of the Leave voting constituencies in both the country and her party. This is in no small part to correct the impression that, as a (lukewarm) supporter of the Remain campaign, she was somehow a cuckoo in the nest just waiting for her opportunity to undermine the referendum result. That doesn’t mean she’s not serious, only that it’s an exercise in demonstrating adherence to the principle that says little, if anything, about the process.
  • More importantly, the negotiations are *at a minimum* going to take her up to the end of March 2019 with an election legally required to be called in May 2020 – giving her little time to sell the deal before facing the voters. As such, dressing up awkward compromises – the possible economic hit from losing Single Market membership – as part of her tough negotiating stance rather than the inevitable consequence of the internal inconsistencies of the government’s position (that the “best deal for Britain” may be significantly worse than the one we’re giving up) is a trick worth preparing her audience for.
  • At any rate, whatever “plan” May is putting forward it’s more than likely to be almost entirely irrelevant to the final deal since the UK can’t set the terms of a compromise position. And actually we should make a stronger point here – if the aims are to ensure full control of Britain’s border and the laws and regulations to which the country is subject, then the position is pure fantasy. Sovereignty here would be more accurately defined not by the ability of the UK to set terms of trade and movement of peoples, but as the ability to choose the degree to which it is willing to compromise on those things in order to achieve the Leave camp’s much promised Free Trade Agreements.
  • The reason that Remain voters tend to favour remaining a member of the Single Market is not that they’re na├»ve to the political costs, nor that most would seek to use it as a backdoor route to return to the EU fold, but simply that it offers the type of already existing off-the-shelf framework for a transitional deal. May is correct to say we need to stop discussing Brexit in terms of binary “soft” vs “hard” outcomes – it is a spectrum on which these are simply two points (and neither necessarily the most likely). And we know that the UK is almost certain to require some sort of transitional deal, which a qualified majority of EU member states would have to agree to. It would be a huge ask to begin substantive negotiations on both the long term future of UK-EU relations and complete a bespoke transitional arrangement within the two year timeframe provided by Article 50.
  • Where the Leave camp favouring “hard Brexit” may be right is that it remains entirely unclear whether any deal that seeks to atomise UK-EU relations on a point-by-point basis is even possible. A carve out of freedom of movement for the UK would almost certainly invite similar requests from other member states, with the threat of further withdrawals as the bargaining chip. That is the very last thing EU institutions want to be throwing into the mix with populist nationalism springing up across the region.

So back to the original dilemma – is it conceivable that the Prime Minister could simultaneously maintain the support of her party and voter base as well as providing sufficient compromises to make a non-disastrous deal with the EU?

Sure it is. However, that says nothing of its likelihood. While it is a fair (even necessary) inference of May’s announced position to date that control of EU migration is a “red line” and that the EU would never accept such a demand from any member of the Single Market, it is significant that she would not explicitly state this – despite numerous invitations from Sky’s Sophy Ridge to do just that.

I tend to agree with David Allen Green here; the reason May is reticent in formally declaring willingness to sacrifice Single Market membership is that it is simply not in her gift to make that call (absent not triggering Article 50). Rather, as with most of the key decisions during the negotiations, it is solely a matter of EU discretion. Yet soon it could be incumbent on parliament to vote on whether or not to trigger Article 50 and this question could get asked again…and again…and again.

I don’t think it unhelpful that such pressure be applied in order for there to be proper scrutiny of the process and I think it speaks to the importance of the legal case currently in front of the Supreme Court. The key here is likely not to be the end point of repatriating powers over migration or removing EUCJ oversight, but the route taken to get there. As we have learned from IMF programmes of recent years, the most important thing for major economic adjustments is not only to have the right goals but to ensure that the timing of reforms (be they regulatory, legal or economic) is done in a way that avoids damaging the underlying economy as far as possible.

After the end of March the Prime Minister will inevitably turn her attention away from her domestic audience and towards Brussels, where Sir Tim Barrow is highly unlikely to find his negotiating partners any more generous or the government’s approach any less “muddled” than his predecessor. If, at that point, the best May can offer is “Brexit means Brexit” then I’d suggest the UK is in for a bumpy landing indeed - and all of those who vote in favour of whatever plan is ultimately presented to parliament will be implicated in the result as much as the executive.

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