Brexit is certainly a complex thing. However much you read about it and its potential impact on us, there is always something or someone with a a new insight that makes you stop and think. This time its Sam Lowe, a senior reseaarcher at the Centre for European Reform. He has written a short paper which you can read HERE. The central point is that just making the choice to diverge has serious consequences, whether we eventually decide to or not.
The paper: Flexibility does not come for free, is interesting. The issue for Lowe is that, "The moment the UK obtains the right to choose whether it diverges or not from EU rules, it will – in most areas – be treated by the EU as if it has already done so."
"So it matters little that on day one of a new EU-UK FTA, all UK rules and regulations would be the same as the EU’s. Once the UK leaves the EU’s single market rule book and institutions, British exports to the EU will broadly be treated as if they came from any EU FTA partner. The British government claims to have accepted that gaining the freedom to regulate as it sees fit will mean new trade friction. But it is not yet clear that businesses and the public have understood what this means in practice."
One example he chooses is the EU SPS regime for food imports, especially of animal origin. British exports to the EU will face extra checks regardless of whether we continue to abide by EU rules or not. Accepting lower US standards would come at little extra cost of any increase in trade friction. We could be in the bizarre position of rejecting US standards, abiding by EU regulations on food hygiene but still facing paperwork, veterinary certificates, delays and checks. One might say there is no upside for UK farmers whichever way the government chooses to go - once the decision is made to diverge or to have the "flexibility" to diverge.
And the BBC's Faisal Islam then points to another important aspect that may have gone unnoticed.
He refers to comments by Phil Hogan, the new EU Trade Commissioner and the man ultimately responsible for the UK-EU trade deal. Islam notes not just what Hogan says about the USA, but the way he says it:
"We've now had a chance to see the first moves from new EU trade commissioner Phil Hogan after his appearance at an event in Washington. And he's choosing a new way to play the game.
"Whereas here in the UK, the government treads delicately when dealing with the nations it wants to strike trade deals with, Mr Hogan was rather more blunt, talking about the 'bluffing', 'sabre-rattling' and 'short term thinking' of the Trump administration."
Islam contrasts Johnson's carefully dancing around Trump as if he was a hand grenade with the pin pulled out, with Hogan's plain speaking and blunt words. His article is: UK faces an EU that can talk as tough as Trump.
And this surely is the point. To quote: "In the great chess game that is world trade, the pieces are shifting slowly around the board. Only in this game there are three major players not two: the US, China and the European Union"
And this surely is the point. To quote: "In the great chess game that is world trade, the pieces are shifting slowly around the board. Only in this game there are three major players not two: the US, China and the European Union"
The EU can say what it likes in whatever way it wants to China and the USA because it is an equal, one of the three major players in global trade and power - and the only regulatory super-power. Brexiteers still harbour hopes of getting one over the EU in this chess game but it is just another delusion.
Now compare Brexit and all the hype about Britain becoming a megastar of global trade after Brexit alongside the USA and China, with Angela Merkel speaking in Berlin on Wednesday and quoted in a FT article:
"Ms Merkel, a former physicist renowned for her imperturbable, rational manner is a politician programmed for compromise. But today she faces an uncompromising world where liberal principles have been shoved aside by the law of the jungle.
"Her solution is to double down on Europe, Germany’s anchor. 'I see the European Union as our life insurance,' she says. 'Germany is far too small to exert geopolitical influence on its own, and that’s why we need to make use of all the benefits of the single market',"
Germany, the world's most prolific exporter and with an economy 50% larger than ours thinks it's "too small to exert geopolitical influence"
Merkel also says, "....the EU must continue to reform, completing the digital single market, progressing with banking union — a plan to centralise the supervision and crisis management of European banks — and advancing capital markets union to integrate Europe’s fragmented equity and debt markets.
"In what sounds like a new European industrial policy, Ms Merkel also says the EU should identify the technological capabilities it lacks and move fast to fill in the gaps. 'I believe that chips should be manufactured in the European Union, that Europe should have its own hyperscalers and that it should be possible to produce battery cells,' she says. It must also have the confidence to set the new global digital standards. She cites the example of the General Data Protection Regulation, which supporters see as a gold standard for privacy and proof that the EU can become a rulemaker, rather than a rule taker, when it comes to the digital economy. Europe can offer an alternative to the US and Chinese approach to data. 'I firmly believe that personal data does not belong to the state or to companies,' she says. 'It must be ensured that the individual has sovereignty over their own data and can decide with whom and for what purpose they share it'.”
Merkel also says, "....the EU must continue to reform, completing the digital single market, progressing with banking union — a plan to centralise the supervision and crisis management of European banks — and advancing capital markets union to integrate Europe’s fragmented equity and debt markets.
"In what sounds like a new European industrial policy, Ms Merkel also says the EU should identify the technological capabilities it lacks and move fast to fill in the gaps. 'I believe that chips should be manufactured in the European Union, that Europe should have its own hyperscalers and that it should be possible to produce battery cells,' she says. It must also have the confidence to set the new global digital standards. She cites the example of the General Data Protection Regulation, which supporters see as a gold standard for privacy and proof that the EU can become a rulemaker, rather than a rule taker, when it comes to the digital economy. Europe can offer an alternative to the US and Chinese approach to data. 'I firmly believe that personal data does not belong to the state or to companies,' she says. 'It must be ensured that the individual has sovereignty over their own data and can decide with whom and for what purpose they share it'.”
The Germans are the most coolly rational and logical people in Europe, in my opinion. The British, at least at the political level, are the least. Don't worry Brexit is just a passing thing. The reality must hit home sooner or later.
