This EU Won't Work

Writing in the Daily Telegraph on 9 May, Daniel Korski asks us not to panic, or to get too pessimistic about the outcome of the forthcoming Brexit negotiations. 

“For all this heat belies the positive progress that has been made over the last six months or so. Working quietly and with none of this week’s fireworks, May’s Government has actually made headway in its talks with the Commission and European governments. The steps have been small and the journey ahead is still long, but Team GB has not stood still or been outclassed, as some have feared.”

While the article is thin on details, Korski (who worked for David Cameron, as deputy head of the No. 10 Policy Unit and attended many EU summit meetings, so can be expected to understand the nuances of recent communications) offers a few examples of progress to date. 

“What we learnt is that success comes in increments – a change of tone, a shift in language, a place holder in a communique. These may appear negligible to the diplomatically untrained eye, but they are important…”

“And a number of such successes stand out in the process so far. The first is the fact that Europeans now accept, in a way they did not previously, that is in everyone’s interest, to…accept the need for some sort of temporary arrangement to be in place from the minute that Britain leaves the EU…until a new permanent UK-EU trade deal comes into effect. It was not long ago that European diplomats were adamant that there would be no transitional arrangement. The deal would be the deal.”

The withdrawal deal, we assume he means. We wonder if this infusion of realism was helped along by the hard line that the British Government has held to so far, or if the EU’s earlier hard line was just pre-negotiation posturing. 

“Then there is the considerable leeway achieved in the EU’s formulation about whether or not the deal to leave the EU can be negotiated in parallel with the future UK-EU trade deal.”

This may be wishful thinking as the EU’s position, from draft Guidelines to formal Directives has been consistent on this point. It seems unlikely that “Mrs May has managed to get Europeans to agree on…” more flexible language. The demand that trade talks can begin only “when sufficient progress” has been made on the withdrawal agreement has been there since Article 50 was triggered in late March. Korski argues that “You could drive a lorry through that particular formulation”, which may be true but there is no indication in published documents that the EU position has changed. 

“This [a final status strategic partnership agreement] will be a new kind of relationship for the EU – none of its existing relationships with a third country or a group of states – such as the EEA – is nearly as substantive as the partnership will be. …. Everyone now accepts that, but it wasn’t always so…”

He doesn’t support his claim that there will be such a substantive agreement; he says only that the EU and the UK need to establish an agreement. Both sides have indeed made relevant noises but they appear to mean quite different things as yet, which is to be expected before negotiations proper begin. Indeed the EU has consistently maintained that there will be no discussions prior to the formal negotiations, so we wonder on what basis Korski makes this claim. 

We would agree that “Many – indeed most – issues remain unresolved. And the risk of a no-deal scenario is medium to high.”

The day before, 8 May, Roger Bootle, chairman of Capital Economics, also had an article on Brexit in the Daily Telegraph. His opening paragraph illustrates the pessimism that Korski advises against.

“The Prime Minister has said that no deal with the EU is better than a bad deal. The importance of this judgement has recently increased as the possibility of securing any deal, let alone a good one, seems to have receded.”

He notes that the EU expects that the UK will: face a large divorce bill, agree to the continuing jurisdiction of the European Court of Justice, and accept the free movement of people, “before the EU will even discuss a future trading arrangement with the UK”. 

He argues that with “a viable Plan B…we are more likely to succeed with Plan A”, where Plan A seeks a “bold and ambitious” free trade agreement (Theresa May) and Plan B, in case that fails, as seems more likely than not, would be “to walk away, not in fear and trepidation, but with a reasonable degree of confidence about our future…”. If EU leaders see that the UK has a credible alternative then they may be more willing to give ground in discussions of Plan A.

Bootle points out that every country in the world has access to the EU’s single market. “It is just a matter of having to pay the EU’s tariffs and abiding by its various rules and regulations governing product quality, for example, just as we have to when we sell into any market in the world. That’s why countries all around the world that are not members of the single market have managed to export into it so successfully.”

He notes that the UK helped to set up the WTO but has had to leave its seat vacant because its trade policy “has been run by the EU. On leaving the EU we would simply take up our seat once again”.

“Yet this simply means trading with countries without having an FTA and using WTO rules to govern trading practices. As part of the EU, the UK already trades under WTO rules with over 100 countries around the world, including the United States (our largest single export market)…” 

Calling this “the American option” does not sound so threatening as the “WTO-only option”.

In sum, Korski argues that because favourable discussions have already reduced some threats, we do not need to be pessimistic, while Bootle argues that if the UK establishes a back-up plan it can achieve a more satisfactory result than it would otherwise. Both believe that the UK can go into the Brexit negotiations with some confidence, and disregard those who already expect a disastrous outcome. We’ll see.