21 July 2019

Paul Goldschmidt: “Brexit”: “No deal is now practically unavoidable

Recent declarations by both European and British politicians alike, make a “no deal” Brexit outcome more and more likely, whether it comes about by default, following the absence of a request to extend the UK’s membership, or by a refusal of the EU to grant such a request, laments Goldschmidt.

[...]Let us start by examining the EU Commission President-designate, Ursula von der Leyen’s recent speech in front of the European Parliament in which she indicated her willingness to consider an extension of the UK’s membership beyond October 31st “if there was a plausible reason”. This has been interpreted, mainly by hard Brexeteers, as a sign that the EU was prepared to compromise and that there was room to negotiate, comforting their blind support for the next PM. Other interpretations assume that a decision to call an election or a second referendum in the UK would constitute an acceptable “plausible reason” to grant an extension request.

At closer inspection, Ursula vdL’s statement remains, however, firmly within the framework of the EU’s current mandate to its negotiating team (which remains in place until Oct.31st): “there is no question of reopening the Withdrawal Agreement signed by the EU with the British Government”. Thus, any extension would only aim at permitting:

a) The carrying out of elections or a referendum in the UK.
b) The prolongation of the period during which the UK is allowed to revoke unilaterally its Art.50 notification (meaning remain, if elections or a referendum delivered such a mandate – implicitly or explicitly – to the House of Commons),
c) Further negotiations on the “political declaration” appended to the W/A (specifying the type of “future relationship” and possibly extending the transition period).

Such a scenario is however highly unlikely:

a) A request based on organizing an election can be practically ruled out because it means going to the country without having first resolved the Brexit question. This would be disastrous for the Conservative party who would lose votes on both its “leave” and “remain” wings to the “Brexit “party of Nigel Farage and the Lib-Dems respectively, as happened recently during the European Parliamentary elections (or to the SNP in Scotland). Fearing such a fate, it is even possible that the PM could not secure a parliamentary majority to call an election (needed under the fixed term Parliament rules), all the more that the Labor party is also embroiled in internal strife over both Brexit and its handling of antisemitism within its ranks, and is far from keen to fight an election at short notice. Furthermore, far from resolving the Brexit question, the result of the election could render the country ungovernable leading to a constitutional crisis and endangering the very survival of the Great Britain as a Union.
b) A call for a referendum seems even less likely if, as expected, Boris Johnson becomes PM, because it would represent a total reversal of commitments made to his supporter and constitute a self-inflicted deep personal humiliation.
c) Should the request nevertheless be made, based solely on seeking additional time to negotiate, it is far from evident that the required unanimity of the EU 27 would be forthcoming, leading to a “no deal “ exit by default.

Other declarations seem also farfetched, bordering often on the “fake news” syndrome that Donald Trump has accustomed has followers to. Falling into this category are the competing budgetary consequences resulting from a “no deal” ranging from an annual “benefit of £80 billon” (Rees-Mogg) or a “vanishingly small impact” (Boris Johnson), to an annual “20 billion cost” (Office of Budgetary Responsibility on a mild Brexit scenario) culminating at a “90 billion cost” (Phillip Hammond)! Other “dreams” include concluding a rapid trade deal with the USA (meant to put pressure on the EU) or initiating talks with the EU under (inapplicable) WTO rules, providing a standstill replacing the obsolete “transition period, during the negotiations.

Another widely disseminated red herring is the belief held by Brexeteers that splitting the unanimity among the EU 27 would lead to concessions on the W/A. This is both wishful thinking and self-defeating because, should such a maneuver succeed, it would automatically lead to a “no deal” exit by default any alternative requiring the very “unanimity” that had been destroyed!

These phantasms seem also to overlook the practicalities of such negotiations:

a) The EU will remain the major trading partner of the UK regardless, essentially for their unalterable geographical proximity. Any early concessions granted to third parties that were incompatible with the EU’s single market framework (norms, standards, tariffs) would severely jeopardize the UK’s position in negotiating a comprehensive Free trade Agreement with the EU as well as with third parties. Most third countries will want to know the outcome of UK/EU negotiations before committing themselves in order to weigh any consequences on their own relations with the much larger EU single market with which many enjoy valuable existing FTAs.
b) In addition, before initiating post Brexit talks, the EU will insist on the UK agreeing to the essential terms of the “defunct” W/A (Irish border, debt settlement, citizen’s rights). The posturing of Brexeteers on these matters may well play favorably to their domestic audience, anxious for a final resolution, but they will not impress their European partners and only create a poisonous environment in which to undertake the productive negotiations they purport to support.

As was so well expressed by Michel Barnier recently, Brexit is a lose-lose proposition so that no one comes out a “winner”. Both parties will endeavor rightly to limit the costs involved. This is best achieved in a serene atmosphere rather than in a confrontational setting. With goodwill on both sides, it should be possible to mitigate the unavoidable negative fall-out of Brexit, keeping in mind the overriding objective of preserving the 20 year old peace in Ireland as well as reducing to the greatest extent possible, the weight of the inevitable new administrative formalities that characterize, the world over, trade, financial and mobility terms and conditions between two fully sovereign and independent entities.

Conclusion

As it has now become apparent to all that a “no deal” Brexit on October 31st is the most likely outcome (as evidenced by the recent volatility of £), it behooves both parties, in addition to completing their respective unilateral preparations, to engage with each other, during the remaining 3 months available, in order to reduce, as far as possible, the inevitable disruptions created by the situation.

Rather than taking a purely passive attitude, waiting for the UK to formulate (or not) a request for an extension of the UK’s EU membership, the Commission should take the initiative – without in any way restricting the UK’s existing options – to reiterate to the new UK government that it fully respects the result of the Referendum as well as it accepts the eventuality of “no deal” exit as a consequence of its own refusal – mandated unanimously by the 27 – to reopen any negotiations on the W/A.

It would simultaneously suggest creating immediately a bilateral task force aimed at minimizing the practical consequences of a “no deal” Brexit by preparing jointly the implementation of the necessary procedures affecting their relations as of November 1st.

This – mostly technical and transitory – initiative would be completely separate from initiating negotiations on the “permanent” future EU/UK relations which, in any case, cannot start before the UK had left the EU and will be spread over a period of several years.

There is a major political advantage for the EU in following this scenario, insofar as it forces the UK to face up immediately to the choice of a “no deal”, thus avoiding the EU being blamed (wrongly) for its occurrence “by default”. Indeed, the engagement of the UK in such a joint task force would clearly indicate that “no deal” had become the “shared objective” that only the UK would have the power to change unilaterally by revoking Art.50 Notification or ratifying the W/A prior to October 31st.. [...]

Full article on Paul Goldschmidt website

© Paul Goldschmidt