07 November 2016

Paul Goldschmidt: The Brexit negotiations

[...]whatever priorities and scope for compromise, advocated by Brexiteers with regard to repatriating the elements of sovereignty previously ceded to the EU, the paramount concern to which all other objectives are subordinated, is the preservation of the territorial integrity of the United Kingdom. [...]
 
Similarly, whatever the desires of some Member States to find specific – but different -  compromises with the U.K., the necessity of presenting a united front is the only position that can prevent the Union from splintering. The refusal of the 27 to engage in discussions prior to the Art. 50 notification is a promising omen.
 
From England’s point of view, there are only two possible strategies that can guarantee the integrity of the U.K.:
 

• Abandoning Brexit: this appears quasi impossible after the declarations of the Prime Minister (Brexit means Brexit). However, the recent decision handed down by the High Court, requiring Parliament to have a vote prior to initiating Art 50, opens new possibilities in this respect, in particular if new elections become necessary to grant or deny the government the requisite powers to initiate the withdrawal procedure.  
• Aiming for the implosion of the EU: such an objective cannot be openly advocated (or proposed to Parliament) but could be carried out covertly under the guise of negotiating a “soft Brexit”. The strategy would have as undisclosed aim the purpose of obtaining sufficient concessions so as to entice other member States in turn to claim similar advantages and thus weaken the Union irreparably. Several prominent Brexiteers have already justified their attitude based on the inevitable collapse of the EU.

 
In developing its strategy, the EU must subordinate the success of Brexit negotiations to its overarching objective of maintaining the EU’s unity. This implies:
 

• To make EU reform its absolute priority without any consideration for the consequences (positive or negative) it might have on Brexit. In light of the new uncertainties surrounding the triggering of Art. 50, negotiations among the 27 should be initiated rapidly (some have already) on the topics of immigration, external border controls, defense as well as on the delayed deepening of EMU and its extension – imbedded in the Treaty – to all non-participating countries.  The negotiations should include an institutional agenda to rationalize the incoherencies that block currently the smooth functioning of the Union, as was demonstrated recently, for example, by the imbroglio surrounding the signature of the CETA with Canada. It should also address the ratification procedures for treaty modifications which should be subject to a double qualified majority vote (States and population) giving dissenters the choice between yielding and withdrawing from the EU. 
• To exclude from any Brexit agreement, any clause that would restrain the future capacity of the Union to reform or to enact/modify its Directives or Regulations. For example, if the Union granted to the U.K. privileges of “equivalence” which would exist prima facie at the time of withdrawal (before the U.K. modifies unilaterally its legislation/regulation), it should be up to the UK to align itself on any future modifications enacted by the EU.

 
Great Britain must, however, face up to another problem: if the EU implodes, the purpose of negotiating Brexit disappears. While the country would be shielded from the additional difficulties endured by countries having adopted the €, it would nevertheless face the full force of the global repercussions of such an event. The reinstatement of even temporary but inescapable foreign exchange controls would impact the City of London far more profoundly than the loss of “passporting” rights or “equivalency” resulting from Brexit. A single example makes this clear: the disappearance of the € would kill the entire € clearing business costing tens of thousands of jobs and all related revenues. But, more importantly, it is the entire spectrum of the exceptional high quality services that the City of London offers its continental partners that would be jeopardized by a collapse of the demand (rather than the relocation of the providers), resulting from the fragmentation of the markets subsequent to the re-emergence of “sovereign” independent Nation-States.
 
From the EU’s standpoint, if it reforms while preserving the unity of its 27 members, it will have surmounted a major challenge that few observes, including the writer, believe it is capable of. In the event, however, the likelihood of the dismembering of the U.K. increases exponentially. This leads me to conclude that preserving simultaneously the integrity of the EU and the UK can only be achieved if the latter remains part of the EU. [...]

Full article on Paul Goldschmidt website

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