17 January 2017

メイ首相による英国のEU（欧州連合）離脱に関する基本方針に見る矛盾

The plan is riddled with inconsistencies and sets out to `cherry-pick’ the Single Market – precisely what EU27 have refused to countenance as it would open the door to a complete undermining of the Single Market. This great Parliamentarian has graciously agreed to allow Parliament a vote on the final deal… but it is actually putting a cocked gun to Parliament’s head: refuse the deal and we crash out of the EU a few months afterwards with no deal at all. Maybe EU 27 will suddenly offer unanimous agreement to a longer ratification period after the deal is agreed. Then the deadline would fall beyond the May 2020 date for the UK’s next General Election. An outbreak of democracy forced on the Mother of Parliaments by the EU!

The speech was wide-ranging but several key points emerged from the somewhat nostalgic whiff of 1950’s Imperial Britain:

·        There was much talk of wishing EU27 well and wanting to co-operate – but a blatant threat if they do not do as we want: we will move to compete as a low tax/regulation economy. It is difficult to see how this is consistent with the commitment to protecting workers rights. Presumably the low tax rates will be designed to attract US companies seeking to avoid President Trump’s taxes in the US. Will that competition be a cornerstone of the trade deal with the US?

·        She does not want to undermine the Single Market and respects their insistence on keeping the “four freedoms” indivisible but “the Agreement may take in elements of current Single Market arrangements in certain areas - on the export of cars and lorries for example, or the freedom to provide financial services across national borders...” This is what the EU 27 usually calls “cherry picking” and have frequently refused to countenance.

·       “A member of the Single Market would mean complying with the EU's rules and regulations that implement those freedoms, without having a vote on what those rules and regulations are. It would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country… It would to all intents and purposes mean not leaving the EU at all.” Does the Prime Minister have any understanding of how the Single market works? The key add-on from Free Trade is adherence to one set of rules/standards agreed by all and enforced by the European Court of Justice for the benefit of all. Her concept of such an Agreement is totally inconsistent with the way the Single Market is structured.

·        “Smooth orderly Brexit... it is in no one's interests for there to be a cliff-edge for business or a threat to stability… I want us to have reached an agreement about our future partnership by the time the two-year Article Fifty process has concluded.” The concept of this proposed `deal’ has no parallels in trade negotiations so will have to start with a blank sheet of paper that is most unlikely to be agreed in two years. Then comes the ratification of such a novel Treaty by the EU27 states unanimously, and the European Parliament. Only after ratification can work start on modifying the existing EU law to provide a transitional process – an overall process that is most unlikely to be done in less than five years. [See the Timeline in my recent paper on “Euro Clearing: Liability and Location” ]

·        The cliff edge effect is particularly important for the financial services industry where the key issue of clearing of euro denominated derivatives is likely to come to a head quickly – see my recent paper. The concept of  a “shared jurisdiction” between the EU27/ECB and the UK over London based clearing has been floated by the some members of Financial Services Negotiation Forum. (This author is currently a member of its Executive Committee) but the Prime Minister’s re-iterated insistence on being free of the jurisdiction of the European Court of Justice and  being free from making large payments to the EU appears to rule out such a solution instantly – even if there were any prospect of the Eurozone shouldering potentially-immense liabilities without full control.

·        “It was a vote to restore, as we see it, our parliamentary democracy… I can confirm today that the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.” This is the Prime Minister who has fought hard to avoid Parliament voting on the decision to operate the Article 50 Notice. But it is actually putting a loaded and cocked gun to Parliament’s head: refuse the deal and we crash out of the EU a few months afterwards with no deal at all. Maybe EU 27 will suddenly offer unanimous agreement to a longer ratification period after the deal is agreed. Then the deadline would fall beyond the May 2020 date for the UK’s next General Election. An outbreak of democracy forced on the Mother of Parliaments by the EU!

© Graham Bishop