Friday 8 December 2017

The phase 1 deal: initial thoughts

The most obvious feature of what has been agreed is that in all but a few minor details Britain has accepted all the terms set out by the EU at the beginning of the negotiations. That was always inevitable unless we simply pulled out of the talks and committed national suicide, and it would have been far quicker and squandered less goodwill had the government accepted it on day one. That they did not reflects the glacial pace at which Ultra Brexiters have to be forced, piece by piece, to face reality.

Thus past financial commitments will be honoured and the ECJ red line has been broken on citizens’ rights and by implication in other areas as well. As for the Irish border, the situation is exactly as outlined in my previous post. A word fudge - ‘full alignment’ between the UK and the EU if no alternative deal is reached which keeps the border open - has postponed but not resolved the fundamental issue. There is no known way of having a fully open border other than membership of, or at least complete conformity with, the single market and customs union. So although the British position is still that we will leave both of these we have also agreed that in the absence of solving this insoluble contradiction there will be a soft Brexit.

So where does this take us? It seems to mean that hard Brexit is not going to happen, because no free trade deal can solve the border issue, despite what hard Brexiters imagine. But it also seems to mean there will probably not be a ‘no deal’ Brexit, because the default position outlined in the phase 1 agreement effectively defines no deal as soft Brexit. I suppose it’s conceivable that Britain could at that point rip up the phase 1 deal, and make itself an international pariah, but that is far less likely now that we have agreed to that deal.

It might be wondered, then, why it seems as if the ultra Brexiters in the Tory party are willing to endorse the deal as a triumph for Theresa May. The answer to that is that although soft Brexit now seems much more likely, the possibility of reversing Brexit and simply remaining in the EU is now far less likely. If the Ultras do not support May now, her government collapses and everything gets thrown into the air again, which certainly would not ensure remaining in the EU but might make it possible. Now, she will probably limp on until after March 2019 at which point remaining in the EU becomes impossible. Moreover, to the extent that Brexiters really do believe that there is a form of free trade deal that can avoid a hard border they may not realise that hard Brexit is now very unlikely.

It’s a different situation for the Ultras outside of government, of course, who need take no responsibility for avoiding chaos and have nothing to lose from the government falling. Thus Nigel Farage and others describe the deal as a humiliation and a complete capitulation. And he is right – the consequence of the policy that he successfully urged on Britain was always going to be humiliation in one form or another, as I argued a while ago. In fact, the way Britain has conducted itself since the referendum compounds this: it is now a real possibility that rather than have a soft Brexit via EFTA/EEA, with the various rights that brings, by choice, we may have a soft Brexit with absolutely zero involvement in the ‘full alignment’ we have agreed to, ending up in a kind of ‘bespoke limbo’.

In the meantime, attention will now turn to trade talks but perhaps more significantly to the question of the length and terms of a transition period. It is already clear that this transition will be on the terms that the EU has set out – meaning continuation of every aspect of membership including ECJ jurisdiction and freedom of movement, but with no political representation at all. Brexiters will protest about that but will accept it, for all of the reasons they have had to accept the phase 1 agreement. It also seems obvious that this transition will last for more than two years – five or even ten seems likely – and therefore probably beyond the next General Election. Again, this will have to be extracted tooth by tooth from the howling mouth of the Ultras.

During that period, however long it lasts, we will continue to travel endlessly around the Mobius Strip of Brexiter madness. That is to say, on the one hand the Ultras will keep finding new ways to imagine that it is possible to have all of features of being in the single market without being in the single market, whilst the EU will keep finding new ways to explain that this cannot be so. To put all this another way, the trade choices will remain something like Canada or something like Norway. But something like Canada doesn’t prevent a hard Irish border so is effectively precluded by this phase 1 agreement; whereas something like Norway could (with some significant adjustments) prevent a hard border. Moreover, it should not be forgotten that phase 2 is not just about trade but about all of the non-trade co-operations and agencies, for which Canada does not offer a model but Norway does.

Thus it would be far better – but still, as yet, politically impossible – for the government to accept this and have as its negotiating aim, rather than its default position, something like Norway. That will require real leadership, both to build some kind of national consensus for it and to swallow what remains of the Lancaster House speech. Since that is likely to be where we end up, it would be better to make a virtue of a necessity. In fact, building carefully around and upon that model it could even become meaningful to talk of a ‘deep and special partnership’. Less good than EU membership in my view, but a better outcome than the other alternatives.

Update (08/12/17): A couple of updates to this rather hastily written post. First, on the conundrum of having a fully open border without being in the single market or customs union there is an excellent explainer in a recent article by Dr Emily Lydgate on the UK Trade Policy Observatory website.

Second, on Twitter Simon Carswell raises a good point – if soft Brexit is the end point, why is a 5-10 year transition needed? I think there are two issues here. One is that I anticipate a long period in which the Brexiters keep banging their heads against the brick wall of the incompatibility of hard Brexit and an open Irish border. But, secondly, even when the penny finally drops, no one should think that soft Brexit is some straightforward walk in the park where nothing really changes. For a start, the Norway model does not – as intimated in this post and discussed in greater detail in previous posts – solve the border issue in itself. That is partly because Norway is not in the Customs Union but also because it is outside many other aspects of the EU including – to take a particularly significant issue for the Irish border – the Common Agricultural Policy. So there would still be a great deal of detailed and complex negotiation, both political and technical, to get to this end point.

Finally, I don’t want to give the impression in this post that there is anything particularly good about any of this, even assuming it is an accurate analysis (and it may not be: don’t underestimate the potential craziness of the Brexit Ultras to drag us over the cliff). At the very most, it just avoids complete economic catastrophe at a very high cost, and does nothing at all to mitigate the geo-political and cultural damage done by Brexit. It might – just about – have been possible in the immediate aftermath of the Referendum to build some kind of national consensus for soft Brexit as an acceptable outcome for most, to have planned it properly for it both domestically and diplomatically, and then to have triggered Article 50. None of that happened, and so haphazardly falling back to soft Brexit by default will leave many – perhaps most – voters on either side dissatisfied if not bitterly angry. What May has managed to do is, first, to alienate remain voters by treating them with contempt by catering only for the hardest of Brexits and, now, to alienate hard Brexiters by having to concede that she cannot deliver what she promised them, and what they, so mendaciously, promised leaver voters.



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