Winner of the New Statesman SPERI Prize in Political Economy 2016

Saturday, 23 September 2017

The real obstacle for the Brexit negotiations

I’m not going to say anything about the content of yesterday’s speech: I talked about the likelihood of a transition arrangement that involved us staying in the Customs Union and Single Market back in March. My only uncertainty then was whether May could be pushed to a No Deal outcome, but as the government has done absolutely nothing to prepare for that outcome it now seems an empty threat. As for a two year transition period, its an insider joke. You have to have no idea about trade negotiations to imagine it could be done in that time, but as that includes most Brexiteers it serves its purpose.

Instead I want to talk about is what could be the real obstacle to the negotiations moving on to the next stage, and that is the Irish border issue. Many have noted that putting it as a first stage issue seems illogical, because what happens to the Irish border will depend on future trade arrangements between the UK and the EU. There obvious answer to why the Irish border question got put in the first stage is that the EU want to force the UK into staying in the EU’s Customs Union precisely to avoid recreating a border between the two parts of Ireland.*

The UK’s paper on this question makes it clear that there is no realistic compromise on this issue, as Ian Dunt’s discussion makes clear. There is a third way, which is for Northern Ireland to remain part of the Customs Union while the rest of the UK is not, but the DUP will have none of that. This was a major implication of the election result and May’s bribes to obtain a confidence and supply arrangement with the DUP.

A key political question will therefore be whether the Irish government and the EU will play this card that they have dealt themselves. The Irish government would like to, but I suspect (from past experience) that if they came under pressure from the rest of the EU they would back down. But the EU would also like the UK to remain in the Customs Union to resolve the border issue. Indeed everyone would be better off if the UK committed to staying in the Customs Union on a permanent basis. The only obstacle to this are the fantasies of Brexiteers, personified in the department led by Liam Fox.

I said I was not going to talk about it, but perhaps this was one reason why May gave her speech yesterday. By confirming that there could be a transitional deal (which Richard Baldwin might call a pay, obey but no say period), she hopes to dampen the resolve of the Irish government and the EU to make this a sticking point in the negotiations. Will either party think to itself 2 years will become 5, by which time we will have a different government that is likely to make the transitional permanent, or will they use their dominant position in the negotiations to try and force the UK to stay in the Customs Union to avoid creating a border (and perhaps also force the resignation of Fox and others)? At the moment we do not know, but I suspect once again Mrs. May and her cabinet have misjudged the EU side.

*I've added to this sentence and elsewhere compared to the first version of this post, which might have been construed as implying the border was being used as an instrument to achieving an economic goal. I do not think that is the case.     

13 comments:

  1. If we prepared for no deal and the EU didn't would our preparation help at all?

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  2. The DUP will generally lose influence with time, so a transition period would broadly suit Dublin in that regard.

    Ireland would be perfectly happy to fight a trade war over the issue if necessary, cf the Anglo-Irish trade war.

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    1. «Ireland»

      There is a vital detail here, that matters a great deal to many people in the island of Ireland: the Dublin government, the one that is member of the EU, is considered by many the government of *Eire* (the successor of the Free State), not of Ireland, and indeed it has formally renounced claims to sovereignty over Northern Ireland, which is certainly a region of Ireland.

      There is a government of Ireland, the government of the Irish Republic, which has its own army, the IRA, and it has claimed since 1922 to be the only legitimate government of all of Ireland; that claim is not without historical justification, but the government of Ireland is not internationally recognized, even if it is in effect a party to the truce treaty known as "Good Friday agreement".

      «would be perfectly happy to fight a trade war over the issue if necessary»

      The issue a war could be fought over is not trade, it is the truce treaty between the internationally recognized government of Eire, the self-styled government of Ireland including the IRA, and the government of Great Britain.

      In that truce treaty the vital detail is what was given to the self-styled government of Ireland including the IRA to get it to sign. Their main political aim since 1922 has been the unity of Ireland under the legitimate Irish Republic, where "unity of Ireland" in practice matters more than "Irish Republic".

      The concession they got that allowed them to sell the truce to their cabinet and members was significant: some first steps towards a de-facto bottom-up, quasi-unified Ireland, with the abolition of trade and movement barriers between the regions of Eire and Northern Ireland, and effectively, via EU citizenship, equal citizenship rights for both Eire and Northern Ireland natives across the whole of Ireland.

      The self-styled government of Ireland in effect thinks that the truce treaty nearly creates a situation in which the government of Eire and the executive of Northern Ireland are regional authorities part of quasi-united Ireland, a bit like Wallonia and Flanders in Belgium, or Scotland, Wales and England in Great Britain.
      The crucial link that has allowed the squaring of the circle is common EU membership.

      The english and welsh vote, that will result in Northern Ireland being a member only of the United Kingdom, will shatter that, no longer allowing Eire and Northern Ireland to act as if they were regions of a single virtual Ireland within the EU.

      From the point of view of the government of Ireland a lot of lives have been sacrificed by soldiers of the army of the Irish Republic to achieve a large degree of effective quasi-unification as "one island two systems"; if those sacrifices are nullified the war of irish independence and unification (against the secessionist government of the Free State/Eire and the colonial executive of Northern Ireland) could resume.

      Probably the most critical aspect is not even customs-free trade, it is likely to be free movement and common citizenship and rights between the Eire and Northern Ireland regions of Ireland; it may be the right of Eire and Northern Ireland citizens to settle and work and live without any formality within the whole of Ireland that really matters to maintain the truce treaty of the Good Friday agreement.

      PS BTW my personal "creative" suggestion to square several circles as to the irish situation would be to eventually recognize the existence since 1922 of the Irish Republic as a confederal entity constituted by the largely self-governing regions of Eire and Northern Ireland, and with Northern Ireland also being an "associate member" of the UK, and even keeping (for a while) the Sovereign of the Kingdom of Great Britain (or what may become the United Kingdom of England and the Principality of Wales) as its own head of state.
      Weirder arrangements have been made.

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    2. Several errors here. While the IRA has sometimes killed people since the "ceasefire" began (about a dozen) they cannot restart the campaign without destroying Sinn Féin at the polls. The Good Friday Agreement means a united Ireland can't happen without a referendum. They would lose one even though Brexit will harm the economy. Keeping Northern Ireland in the UK, outside the EU, and with customs posts on the border that nationalists grumble about, is the least "weird" outcome.

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  3. It seems to me that the problem here is that the Leave Campaign promised a unicorn. If the government got their act together they could probably deliver a pony. A Thoroughbred, no, but a Pony, maybe. If we're lucky with this shower in charge we might end up with a donkey.

    Ok, I won't stretch the analogy any further but I heard more nonsense on the radio today about 'respecting the will of the people' and all that tosh. The problem remains that the government is promising a Unicorn. The impossible. Either they are ignorant or dishonest. Essentially for many people the referendum was posed as follows: "Do you want all the benefits of EU membership without any of the drawbacks?" Of course, the only rational answer to such a question is "Yes." Now, granted, some people wanted to leave regardless of cost but nowhere near a majority. It is deeply ironic that the drawbacks described in the campaign were mainly nothing of the sort and the real issues of the EU (such as sorting out the Common Agricultural Policy) were hardly mentioned. However the point remains that the Leave campaign was basically promising the impossible. I have no doubt if you took a vote in Ukraine right now on whether you wanted the Russians out of Crimea, it would be a majority Yes. How the Ukrainian government might deliver that is another matter entirely.

    We are so mired in this mess because HM Government either cannot or will not admit that they cannot deliver on their promises.

    AFZ

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    1. «Now, granted, some people wanted to leave regardless of cost but nowhere near a majority.»

      I suspect that right now a majority would accept "Leave" even with the cost indicated by the BoE and our blogger, which is significantly slower growth over several years, just to get rid of the issue.

      «HM Government either cannot or will not admit that they cannot deliver on their promises.»

      HM government actually promised catastrophe in case of "Leave" winning.
      It was the "Vote Leave" campaign that promised "unicorn immediately", not any government. Instead "Leave.EU" people had usually more realistic post-exit expectations.
      However it is the "Vote Leave" leaders who now are in the cabinet, so there is an indirect link.

      The real problem that the present government has is that it badly needs a notice extension to avoid "hard exit", but a formal article 50 notice extension would make several Conservative MPs vote against their government, and the EU27 have no intention to help with a "creative" disguising of a notice extension as something else.

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  4. Hi, I'm a Remainer. Why would the EU give any kind of priority to the border? There was a customs frontier there before 1973 EEC membership and checks until the completion of the single market in 1993. Yeah, it's hard to enforce (and today is used for smuggling due to fuel duty).

    I suggest the EU talks up the issue to scare the UK into making concessions for fear that the border will cause a political nightmare. That's incorrect. Dissident republican terrorists are not going to grow based on them having a new target of customs posts when killing only a few policemen and soldiers in the last two decades has got them no support. And polling shows no unionists whatsoever have started supporting a united Ireland to get out of Brexit.

    The Republic's government can do nothing; if they attempt to veto a transition deal, it will ensure a hard Brexit, causing as much economic harm as possible to themselves. It will also guarantee customs checks, as if anyone cared.

    Their alternative is to use the Irish Sea as a border, but they trade far more with GB than with NI, so that is the worst option. It would also apply to everything going to and from Ireland and the continent to prevent customs evasion, which would ruin their single market membership.

    The Taoiseach already suggested the EU and UK could have a customs union with each other. A free trade agreement with the EU and Ukraine has just entered into force, with no free movement of people. If that's not done, or Brexit isn't stopped, he'll accept a customs border in Ireland.

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  5. Simon thanks
    you have correctly identified the issues and it will be fascinating to see how the Irish question plays out. I'm a Dubliner but have lived in the UK since '81. I have zero faith in the Tories. As Edward Carson, the founding father of Northern Ireland, said in his later years “What a fool I was. I was only a puppet, and so was Ulster, and so was Ireland, in the political game that was to get the Conservative Party into power.” some further discussion here with Chris Kendall http://www.progressivepulse.org/brexit/brexit-negotiations-how-is-the-uk-doing/

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  6. "When Brussels decided to end tax avoiding practices within its member states, Britain decided to leave the EU"

    Read the above article at:

    https://nolanjazimreg.wordpress.com/2017/05/22/tories-gruesome-brexit-deception/

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  7. "Many have noted that putting it as a first stage issue seems illogical, because what happens to the Irish border will depend on future trade arrangements between the UK and the EU."

    This is precisely why Irish people want the border issue to be resolved up front. While the nature of the trade arrangements will be hugely consequential for Ireland, the border is even more so, for both economic and non-economic reasons. We would not be comfortable having the details of the border arrangement be determined by a trade agreement that had not taken the impact it would have on the border into account.

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    1. "The border is even more so"? False. RoI's trade with GB is many times larger than its trade with NI, so trading arrangements are more important than the border.

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  8. Perhaps our blogger has some inside information, but I have a completely reading of the Florence speech, and it is:

    * Before the speech the only two probable outcomes were hard-exit March 2019 or else an extension of the notice period under the article 50, which means full EU membership continuing, because clean-exit happens automatically, and article 50 extension requires only the unanimous asset of all EU governments.

    * A third possibility was only possible if the english government settled pretty much immediately the 3 exit matters and indicated right now what kind of post-exit deal it wanted, because any third possibility involves a new set of treaties, or amendment of the Lisbon Treaties, between EU27 and England, and they need to be negotiated, drafted and ratified by all EU members, and there is very little time left.

    * An extension of the notice period under article 50 with formal continuation of EU membership would lead most likely 50-60 and perhaps as many as 100 Conservative MPs to vote no confidence in the Conservative PM and cabinet, but "hard exit" would greatly upset the sponsors of the Conservative party.

    * The Florence speech contained as a third possibility
    a demand by T May for a "creative" solution, that is effectively an extension of the article 50 notice period, but under a different name to help avoid Conservative MPs voting no confidence; the "creative" solution would however require a new transitional trade treaty between UK and EU27, to be negotiated before the 3 exit topics are sorted.

    In practice T May is asking the 27 other EU governments for a colossal political and economic concession, including reneging their commitment to define the 3 exit issues first, to help her party political strategy, and to help her win the 2022 election, in exchange of absolutely nothing, and at maximum possible speed, dropping everything else, and at the same time proving that member states that choose to leave the EU get whatever they want for free to make exit as smooth as possible for them.

    T May must know that such a demand is utterly unrealistic, therefore it must have been made purely for domestic political purposes, to set up EU27 "intransigence" to blame for "hard exit".

    Since no realistic alternative to "hard exit" has been even proposed, never mind hinted at, by the english government at this late point, and an article 50 extension is inconceivable so far, any business with common sense at this point *must* assume that the final outcome will be "hard exit", and that the english government is either resigned to that and doing damage-limiting bluster, or aiming for that, and doing obfuscatory bluster.

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  9. There is an argument used by Brexiteers that can be summarised as:

    “No British exit from the EU can be allowed to be seen to be successful in order to discourage other member states from following suit.”

    So, in other words, if Brexit is unsuccessful it’s still the fault of the EU !

    Thank God the 2008 great financial crash was caused by Labour over-spending and not by greedy under-regulated bankers.

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