Monday, 17 September 2018

If Michael Gove is right, we face a neverending Brexit

Michael Gove’s widely reported remark that the Chequers Proposal could be undone once Britain has left the EU with a Withdrawal Agreement (WA) in place reflects a view that has been swirling around Brexit circles ever since that proposal was made. It is significant, though, for being the first time that a senior, pro-Brexit politician has stated it in such clear terms.

In one way, it is no more than a statement of an obvious fact. Wider public debate has often obscured the procedural reality that by definition Brexit was always going to have (at least) two stages. The first, Article 50, stage would, if successful, give rise to a binding agreement on withdrawal terms and a non-binding political declaration on the future, especially, trade relationship with which the Chequers Proposal is concerned. The period between the two would be one of transition, currently envisaged as lasting until the end of 2020.

Since the political declaration is non-binding, it follows inevitably that whatever it says may not be adhered to, with one reason being the scenario Gove outlines of a future British PM adopting a different approach.

It’s actually for this reason that Brexiters have often tried – and still try – to claim, unjustifiably, that the financial settlement for past obligations should be contingent on the future terms agreement. It’s also the reason that at the outset of the negotiations the government was keen to have as detailed an outline of future terms as possible, and was also so keen to move from the phase 1 talks on the WA to the phase 2 talks on the future terms (indeed, originally, an attempt was made to run these in parallel rather than in sequence, which was to have been the row of the summer of 2017 although it came to nothing).

Deferring what Brexit means - again

The reason things have changed is that, having got the phase 1 agreement completed in principle in December, the government could not agree what it wanted the future terms to be. Hence there has been virtually no progress at all on the phase 2 talks since then (and, instead, numerous arguments around the unpicking of what was agreed about the Irish border backstop in phase 1). Then we got Chequers – far too late for any substantive negotiations – which supposedly nailed down the government’s position but which significant numbers of Brexit Ultras won’t accept.

In this light, Gove’s suggestion can be seen as a way of deferring yet again this fundamental decision about what sort of relationship Britain should have with the EU. So even if the political declaration contains some version of the Chequers Proposal (and, if so, it will certainly be much modified from the present version) or for that matter, as seems quite likely, something much vaguer, all the battles and divisions which have hamstrung phase 2 will get deferred until the transition period. On this basis, the ERG Ultras might well support the deal in the knowledge they can re-open everything afterwards, whilst the generally rather reluctant potential Tory ‘remainer rebels’ could be persuaded that revolt is unnecessary.

The consequences of deferring the decision

It’s a plausible route to the government winning the ‘meaningful vote’ on the WA. And it might have the benefit of at least reducing the uncertainties over citizens’ rights. But it would also be a disaster for Britain, in a number of ways.

First, it would make an absolute mockery of parliamentary democracy. It makes the meaningful vote entirely meaningless by being a ‘choice’ between a catastrophic ‘no deal’ and a future scenario to which it is openly understood the British government has no commitment to at all. That isn’t even a choice between the unpalatable and the disastrous; it’s a choice between the disastrous and the unknown. It’s no choice at all. (In passing, it is pretty rich for the Ultras to now be objecting about the polarity that Theresa May is offering given that most of them objected to there being a ‘meaningful vote’ at all, on the grounds that this was a remainer trick, which would ‘tie the Prime Minister’s hands'. No such qualms now, apparently).

Second, it would do real damage to any belief that Britain is negotiating in good faith. That will certainly mean that the EU will ensure that the WA is absolutely watertight, since that is the binding part of the agreement. That was already in prospect, not least because of David Davis’ ill-judged remarks after the phase 1 agreement to the effect that Britain wasn’t bound even by that, the genuinely binding part of the agreement. Why regard Britain as trustworthy when it is now openly being said that the formally non-binding political declaration it signs up to can be jettisoned? Not so long ago it was being said that the government must not ‘reveal its negotiating hand’ to the EU; now the idea is to reveal that it has no intention of being bound by whatever it negotiates.

Third, it would prolong and exacerbate the very high levels of business uncertainty that have already been caused. There would not be even a rough sense of where terms of trade were heading, and everything would depend on yet another round of political infighting. Just as the Tory Party have failed so far to be able to agree on what they want future terms to be, there is absolutely no reason to expect that once we pass March 2019 they will miraculously come to a resolution. Inevitably, there will be just more trips around the loop of different Brexit models.

Which means that almost immediately a new no deal scenario will loom, this time for December 2020. Almost all trade experts agree that this, itself, is far too short a time to actually put together a trade deal (see, for example, today’s report from the Institute for Government). If much or most of it is taken up with the continuation of the endless Tory civil war on Europe it becomes an even more unrealistic timescale. This may mean (if there is scope for it in the WA) an extension of the transition period, or it may mean that December 2020 becomes the unpostponable cliff edge. So relocations, disinvestment and deferred investment will become the chronic condition of the British economy for the foreseeable future. The economic damage of Brexit is no longer a matter of predictions, it is already well underway as illustrated, for example, by the food industry.

Fourth, and for the same reasons, it means an interminable prolongation of all of the toxic debates which have proved so damaging and divisive for the country as whole: what Chris Johns in the Irish Times yesterday described as an “odd civil war”. These divisions, too, will become chronically embedded in our political culture (as will the governmental paralysis caused by lack of administrative bandwidth for anything other than Brexit).

In fact, the divisions would become worse. Those who are pro-Brexit will be even more fed up that nothing much really seems to have changed, and suspicious that they are being sold out. Meanwhile, what is now a clear, and likely to to grow, majority do not want Brexit at all and will be having it done to them against their wishes.

For the latter group, one important consequence of this scenario is that it will, of course, become impossible to argue for a People’s Vote with an option to remain in the EU: we would have left. Thus, no doubt, a movement would emerge to seek re-admission to the EU, but that would be a long and arduous process, at the end of which, at most, would be membership on worse terms than Britain currently has. Clearly it is this, in part, which might make the Brexit Ultras support any version of the WA: for them, it removes EU membership semi-permanently from the table.

The prospects for a neverending Brexit

It is obviously unknowable at the moment whether the argument Gove made will win over the ERG Ultras. Ironically, one reason for that is the way so many of them seem to be ignorant of quite basic facts about Brexit. That ignorance – which also leads them to facile or impossible proposals – along with a baked-in paranoia means that some may not comprehend the point that Gove is making.

Thus a detailed recent report on current ERG thinking quotes an anonymous ex-minister opining that May had done a ‘secret deal’ with Angela Merkel to “get Chequers over the line, which suits the EU down to the ground”. Clearly, that means at least one of the Ultras does not grasp that Chequers is about the future terms, not the withdrawal terms, and so the line will not be crossed in March 2019. Similarly, even if Gove’s argument holds sway with the ERG for now that may not survive the almost inevitable compromises on any version of Chequers that makes it into the political declaration even though these, too, could be disowned later.

The term ‘blind Brexit’ has recently entered the political lexicon to denote the scenario I’ve discussed here. In a way, that is misleading to the extent that, as noted, it was never going to be the case that we would know the full future terms at the time of exit. But there are degrees of blindness, and it is being used now because it seems likely that we won’t have more than the vaguest sense of what the terms might be. Or, worse, that any sense we do have of them from the political declaration will be immediately ripped up by a British government in thrall, as it has been for years, to a group of Brexit extremists who will neither accept any proposal made by others nor make any proposal of their own.

What that will create is not so much blind Brexit as ‘neverending’ Brexit. It is a prospect few, on any side of the argument, will relish.

Friday, 14 September 2018

Send in the clowns

The ‘will they won’t they’ publish question, discussed in my previous post, was answered this week when the ERG decided not to release their detailed plan for Brexit, despite having promised – or threatened – throughout the summer to do so. The reasons, apparently, were that they could not agree on it and that the draft contained ideas of such barminess that widespread mockery was feared.

It is worth reflecting for a moment on just how extraordinary this is. Here we have a group of politicians who in some cases have been dreaming and scheming for Brexit for 25 years or longer. Yet now, over two years after the referendum and just weeks before finalisation of the Withdrawal Agreement, they still cannot agree on what they think Brexit should mean or on something which they dare articulate in public. Even more absurd, despite this they persist with the claim that the 17.4 million who voted leave in 2016 knew exactly what they were voting for.

Rehashed hash

In place of producing the document, two others were launched. First, on Tuesday, Economists for Free Trade (EFT, formerly known as Economists for Brexit), the eccentric but media-savvy group led by Patrick Minford, published its latest document. It was a rehash of their familiar refrain about ‘trading on WTO terms’, rather meaninglessly – and misleadingly - rebranded as the ‘World Trade Deal’ (this is part of a wider recent attempt by Brexiters to avoid the term ‘no deal’, having noticed how badly it plays with the public).

It was almost immediately trashed by those long-acquainted with the EFT approach - a “shoddy piece of analysis” according to trade expert Sam Lowe of CER – whilst Tom Peck in The Independent described it as “deranged” and “bizarre gibberish”. Wholesale critiques of the EFT’s approach have been undertaken again and again, for example by several leading economists from the LSE and Sussex University - and Ian Dunt did so for the present iteration – but the group never retracts and rarely responds. Truly, these are the Brexit Bourbons who keep returning, having learned nothing and forgotten nothing.

Curiously, although their launch event was hosted by Jacob Rees-Mogg, the EFT are not propounding the ‘Canada-style’ deal which he and other ERG Ultras claim to want, but rather the ‘no deal’ Kamikaze Brexit (which, many suspect, is also the secret dream of many of the Ultras). But both approaches share the well-rehearsed problem of the Irish border.

The EFT report is about the post-Brexit trade arrangements rather than the Withdrawal Agreement (which, under the ‘World Trade Deal’ – i.e. no deal – would not be signed) and simply wishes the border problem away in a few sentences (p.11-12).

By contrast, the ERG document, launched by the group itself on Wednesday, with the ubiquitous Rees-Mogg again in the chair, is solely concerned with the Irish border conundrum. As with the EFT report it was a restatement of already discredited ideas, in this case about technologies which do not currently exist in the permutation proposed, and which would take years to develop, if at all (the brief mention in the EFT plan refers to the same fantasy). It was effectively a reheat of the MaxFac proposal of earlier this year, introduced at the launch by David Davis - who having been Brexit Secretary at the time must surely be aware of all the reasons why it doesn’t work and wasn’t pursued. But he still proposes it.

One of the strangest features of this is that if the Brexiters genuinely believe that they have a solution to the Irish border of the sort they outlined then they have no reason to oppose the Northern Ireland backstop in the Withdrawal Agreement. As agreed in December, this would only come into force if other options, including the kinds of things the ERG are proposing, failed to avoid a hard border. So if they are right, the backstop would never be invoked and there is no need for them to fight against its inclusion. Or is it that, in fact, they know they are proposing unworkable solutions?

Convergent divergence

Of course one issue is that the ERG are not just gunning for the NI backstop but also for the common rule book for goods, which is a central part of the Chequers Proposal’s attempt to develop an alternative of the Irish (and other border) issues. On this both the ERG and the EFT documents have as their central intellectual and practical flaw the fact that they rely on notions of regulatory equivalence and mutual recognition* to avoid border checks and non-tariff barriers to trade, which is depicted as achievable because, of course, the UK is currently in full regulatory convergence with the EU (this has long been a Brexiter fantasy, and underpins Liam Fox’s discredited ‘easiest deal in history’ claim). But at the same time they demand, and claim as a key benefit of Brexit, the right to regulatory divergence.

Beneath all the relatively complex detail of the two proposals, this fundamental contradiction (which is, I suppose, a rarefied form of ‘cakeism’) makes their ideas completely unworkable, and to the extent that either report acknowledges the problem, it is in vague terms with no realistic solution proposed or in terms which are simply factually incorrect.

Much of this – especially the use of semi-digested factoids about WTO rules – seems to derive from the familiar Brexiter pathology whereby what they believe ‘must be true’ and so every piece of evidence to the contrary is either ignored or distorted, sometimes in the most grotesque way.

A good example came when Bernard Jenkin appeared on Radio 4’s The World Tonight to defend the ERG document. In response, Irish Senator Neale Richmond pointed out very forcefully that the proposal was based on a fantasy that had already been discredited. But the particularly revealing moment came in relation to the question of UK access to EU VAT databases post-Brexit, which would be needed as part of the frictionless border. Jenkin opined that there should be no problem as Britain and the EU already had a “shared system” for this (another aspect of ‘convergence’). Richmond pointed out the obvious: that this was a “ridiculous statement” because it was not a ‘shared system’ between the EU and the UK but something the UK was part of because of being a member of the EU, and so would not continue after Brexit. All Jenkin could say in reply was that if the EU insisted on being “hardline” then the outcome would just have to be WTO Rules!

Here in microcosm was not just the convergence-divergence paradox but the wider way in which Brexiters continually expect many of the features of EU membership to persist because it would be ‘common sense’ and refuse to recognize that losing such features is an inevitable consequence of ending that membership (and, hence, one reason why ‘common sense’ would dictate not leaving). When this blatantly obvious point is put to them directly and plainly – as it far too rarely is – they can only respond with bluster about punishment or bullish talk of walking away with no deal.

Serious nonsense
How can our country have got to the point where the preposterous clowns of the ERG and EFT have their nonsensical proposals reported as headline news as if they constituted a serious response to what is rapidly becoming a national crisis? There are, of course, many answers to that which would take a book to enumerate. But one immediate explanation is because the Government’s own Chequers Proposal - most obviously as regards the Irish border but also, although less widely discussed, on issues of mutual recognition and equivalence - is equally unworkable. On that, if nothing else, the ERG are correct. And so we have the ludicrous spectacle of a political debate of great urgency and massive national importance being conducted in terms of the relative merits of two impossibilities.
That reflects the terrible error of judgment – one of several since she became PM – Theresa May made in developing as her Chequers Proposal something that finally lost her the support of the ERG without the corresponding benefit of the kind of soft Brexit that would have been just about viable, both economically and in terms of healing some of the societal divisions. As I wrote at the time, the proposal garnered all the pain of taking on the Ultras with none of the gain of creating a pragmatic plan. That is the real leadership story about what is happening, rather than the narrower issue of whether or not May will survive as PM.
The latter does matter in its own way, though, albeit not as a Westminster bubble story about personalities and political careers. If she does survive, it will most likely mean the scenario depicted in my previous post, whereby a much-modified version of the Chequers Proposal enables a Withdrawal Agreement alongside a very vague statement about future terms to get through parliament. If she doesn’t survive it will most likely be because the ERG topple her and in the process create a crisis which would open up all kinds of possibilities, including an extension of Article 50, and election or even another referendum.
Ironically, then, the best hope for remainers, or just for soft Brexit pragmatists, now lies in whether the ERG try and succeed in deposing May. In that sense, what the clowns do in the next few weeks could have deadly serious consequences for what happens in the next few decades.

*The EFT position of Mutual Recognition Agreements (MRAs) is completely contradictory. On the one hand, they dismiss (p.8) their significance in relation to how they supplement basic WTO terms in the trade that the EU does with third countries (such as the US) with which it has no FTA, noting that this “anti-Brexit” argument (which has been widely made by many, including me) “often is technically true” but then claim it is “not very relevant”. The weasel words are ‘technically’ (as if to imply that, somehow, it’s not really true) and ‘not very’. (They also claim, with no justification at all, that it “should not pose serious problems” (p.9) for the UK to renegotiate the existing EU MRAs with third countries). Yet, on the other hand, they make MRAs the central pillar for replicating existing terms of trade with EU, making it therefore abundantly clear that MRA adjustments to basic WTO terms are far from being irrelevant, but in any case completely failing to understand that MRAs do not and could not remotely cover the full range of regulatory harmonization which characterises the single market. For more detailed analysis of the limitations of MRAs in this respect see here and here.