Sir Ivan Rogers, our former ambassador to the EU (UKREP), has made another intervention on Brexit by way of a public lecture hosted by Policy Scotland at the University of Glasgow. This has been reproduced in Prospect Magazine which you can read HERE. As usual with Sir Ivan it is not short but you will be rewarded by increasing the depth of understanding you have of the issues coming up next year, should Johnson win a majority. Sadly, the opinion polls with just over two weeks to go seem to show this is the most likely outcome.
Rogers' speech is littered with so many insightful comments on the whole current mess we have got ourselves into, that I hardly know where to begin. I decided to pick out parts that I found interesting and quote them under a heading. But I urge you to read the entire speech since it's so well written with a hard-headed clarity that we simply do not see anywhere else.
Incidentally, he thinks that we are on the way to a repetition of the last three and a half years where we fail to think strategically while peddling illusions and delusions about what is possible or even desirable which will lead us to "a poor and deteriorating relationship on multiple things that really matter, economically and strategically."
The EU will say (with justification) that the 'thin' FTA we might get is purely a product of our own red lines and if we change our minds at any time they will be prepared to offer us more. In other words, Brussels will be demonstrating that the coming damage to our economy and influence is a result of the Brexiteers demand for sovereignty and autonomy. It will come with a very large price tag.
Anyway here is my selection of gems...
The illusions about negotiating a FTA
We continue to be offered the prospectus that we can have enjoy autonomy on trade and regulatory policy, on both goods and services, not simply migration, outside the Single Market and Customs Union, but, via a so-called “best in class” Free Trade Agreement, not suffer any downside in terms of market access into easily the biggest market for our goods and services. This is clearly untrue. It does not get any truer through endless repetition.
Remainers
Remainers who think the clock can be put back are, I think, in denial about where mainstream Continental elite opinion is.
The potential for pivots by Johnson
Put bluntly, they [the EU] want to see whether a majority Johnson Government would be strong enough to ditch the “no dealers” and “clean breakers” within and beyond the Tory Party and acknowledge the reality of what the U.K. needs from a comprehensive trade deal with its main trading partners, or whether we are on another course altogether.
The puzzle for them is why the UK decided to turn its back on the Single Market, having been its most enthusiastic advocate, across all Parties, for 3 decades, and why the U.K. elite still seems determined to want to tell the public that a Free Trade Agreement could replicate all we liked about the “Common Market”, when that is patently untrue, and it’s just a matter of time before that becomes obvious to voters.
The 'implementation' period (length of)
The legal texts necessary for detailing and governing that future relationship were always going to be a matter for the period AFTER our legal exit and for a different negotiation under different articles of the Treaty. This stuff is really not rocket science, unless you are intent on not understanding it. Or perhaps intent on the public not understanding what you are doing.
Which is why people like me were tearing our hair out in 2016 about this transition. Knowing that it might last for years, not months. Wondering how, if at all, that could ever be democratically sustainable.
Because – and this is crucial—the legal texts to which I refer will have to be more complex, detailed and lengthy – and fuller of caveats—the further “out” of the European Union we choose to go, and therefore the further we want to go, the longer it will take to negotiate the necessary agreements.
Deregulation
For many, that was, after all, the whole point of exiting. Essentially, I think, because they believe that the main benefits of Brexit are the greater capacity to deregulate. Not that they wish to say that during an election campaign, which currently seems to be about both main Parties making lavish promises to spend money we haven’t got.
That does not suggest to me huge faith that a deregulatory model actually has any real appeal to the great British public.
But that deregulatory purpose is now central—from food hygiene to financial services, from environmental to social regulation to state aids—to the EU perception of what Brexit is all about. Which is a further reason why the next phase will be more difficult, not less.
Why starting with regulatory alignment does not help speed up negotiations
But if you want much greater divergence from your erstwhile model inside the trade bloc you are exiting, it is precisely because you do not intend to meet those obligations any more.
Fair enough. But, by definition, you must then start the negotiation “bottom up” not “top down”.
And the question then becomes, for every sector of the economy, how far, if at all, beyond the baseline of commitments they make into the WTO, are both negotiating parties willing to commit.
And, by definition, this will be much MORE difficult, not less.
Rules of origin
Just the process for calculating rules of origin takes up about 150 pages of the Canada deal, with specific rules covering products from barbeque sauce to soap.
Such is the hugely glamorous content of Free Trade deals.
But this stuff matters enormously to the profitability and hence future location of some of the most competitive advanced businesses in these islands. Incidentally, that is just as much for small and medium-sized fast growing businesses in new tech, as for those incumbent behemoths which I know Ministers tend to view as advocates of the status quo.
Divergence is a lot more complex to manage than convergence. And vastly more unusual. Indeed, unprecedented.
The paradox and perversity of Brexit
As I have commented before, it seems to me to be extraordinarily perverse to be making the case as to why preferential deals are absolutely essential for the U.K. with every major market except easily its largest one: the EU.
Immigration
And if the goal of UK policy is a points-based [immigration] system which makes no distinction between EU and non-EU migration, and focuses on attracting the highly qualified from wherever in the world, fine; but the inevitable EU response is the termination of the obviously linked free movement of services, plus the ending of the current arrangements for the mutual recognition of professional qualifications, which are critical to the cross border mobility of U.K. professionals.
Reciprocity works both ways, as the U.K. is about to find out.
The implications of this for U.K. services firms, above all, is one of many dogs which has yet properly to bark in this process. But bark it will, when it becomes apparent to the private sector that continuities they wrongly thought were close to laws of nature will disappear at the end of 2020.
I find that firms are only now just waking up to the huge implications on professional mobility.
A Canada style FTA
If we truly only wanted even something along the lines of—though better than —Canada-style deal, because we cannot live with anything more than Canadian-level obligations, it will be laborious to get there. And it will end with a painfully long, complicated legal text, which has to be negotiated issue by issue, sector by sector, exemption by exemption, but still be ratified as a single text in every national Parliament, and some regional ones, of the EU.
It will in other words be harder, not easier, to do Johnson’s Brexit deal than May’s.
How the EU will play the future negotiations
But that, because we are under immense time pressure, and known to be desperate to “escape vassalage” by the end of 2020 – something to which the Prime Minister daily keeps committing, and the Tory manifesto commits – the EU side just sees a huge open goal opportunity and repeats its playbook from the Article 50 process.
After all, it thinks it worked really rather well. It’s rather hard to argue that tactically it didn’t…
So it entirely dictates the contents and pace of what does get done, runs the clock down towards the next cliff edge, and confronts a desperate U.K. Prime Minister with a binary choice between a highly asymmetrical thin deal on its terms, and “no deal” towards the end of next year.
Extending the transition period after 1st July next year
The EU is acutely conscious that, in order to have more than the 9 months or so I described in which to negotiate, the UK Prime Minister would have to decide he needed an extension of the transition period by no later than July 1st, 2020.
This date is in the Withdrawal Treaty. So it’s not a date which can be shifted except by a Treaty change. There is no serious prospect of any such Treaty change, as that too would require national ratifications.
Johnson as a tool of the EU
But I think the EU collectively concludes from this [Johnson's ability to 'sell' a worse deal than May's to the Spartans] that, come the end of 2020, the same story will play out, and that he can be induced to sell a deal stacked in their favour as a U.K. negotiating triumph, if only in order to have done with the issue politically. Or to find a different way to extend purgatory.
The political difficulties in extending the transition period
But on the question of whether to extend, he surely is most unlikely, just 3 months after the potential start of negotiations, already to have reached the conclusion by June that the following 6 months will not suffice.
He also knows that the moment he extends, he will be straight into a new budgetary negotiation about the U.K’s contribution over the 1 or 2 years of an extension. Which might involve eating lots of words. He further knows that the Right, which will have been strengthened inside his Party if he has won the election, will decry an extension as an intolerable prolongation of vassalage.
Implications for business - an example from the chemicals industry
First: It’s obviously your sovereign right not to align in industrial sectors, which the previous Prime Minister said she intended to—and others, like the Swiss, who want better access to our market, do.
(To be clear, the words “as close as possible relationship in goods” inserted by Mrs May in the Political Declaration were deliberately removed at the request of Mr Johnson. As I say, he wants divergence, not alignment.)
But it’s our sovereign right to set the rules under which firms can export into our market, and we are not changing those rules just because you have left.
So, let’s take chemicals as one example (there are legions more): the third country rules under REACH (the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation) are going to apply to you unaltered.
So your exporters will have to find an importer in the 27 who is prepared to take responsibility that their products meet EU requirements; because EU rules will be unenforceable directly in the UK. They will have to make 2 filings, one with our Regulator, one with yours, even if the rules remain precisely the same. And those filings are seriously complex. But that again was your choice, guys: you can’t live with supranational jurisdiction, remember. This disadvantages UK firms, and encourages them to relocate plants, but tough. And over time, if your regulatory decisions and ours diverge, that’s also just tough I am afraid: you want market access, you meet our rules.
The fishing industry
Third: fish. We just won’t do zero/zero deal [tariffs and quotas] at all unless we sort out a fisheries deal as part of the trade deal, which protects our boats’ access to your waters and replicates what we currently get on fish stocks and catches. And because your fish processing industry relies very largely on exporting into our market, if we do not give you duty free access, we can probably close a large chunk of your industry down. But you can forget any chance of a zero/zero trade deal flying in the Parliaments of our fishing member states, unless we sort this.
Now, let’s be clear. These are negotiating positions. And you stick them in print—early—in your mandate partly to demonstrate to the other side you are serious and have precious little room for manoeuvre. It’s called trade negotiations.
The dynamics of next year
I look at the likely dynamics of next year if we face this approach [taking a hard line] from the EU, as I believe we shall within about 3 months, and I am really not sure I see how or why any deal gets done.
We would end up with what exactly? A very thin, Canada minus minus deal with zero tariffs and quotas, but only with extensive “level playing field” permanent conditionality.
And only provided we do a deal on fish in which it is very hard to see why the 8 fishing member states will be prepared to see any losses as a result of Brexit in what is a pretty zero sum game sector. Or of they did, why the deal would pass their legislatures. Their moment of maximum leverage on fish is next year, and they know it.
Wee for the fishermen.....
