Thursday 27 June 2019

Making sense of the Article XXIV smokescreen

In my previous post I made reference to the recent upsurge of Brexiter interest in GATT Article XXIV. As noted there, it was mentioned as a way of avoiding the damage of no-deal Brexit by Boris Johnson in one of the leadership debates. Shortly afterwards, his claim was debunked by Mark Carney, the Governor of the Bank of England (£) but he has continued to push it in interviews this week.

Indeed, it has been debunked many, many times before – in a briefing by the trade policy specialist of the House of Commons Library, by former WTO official Peter Ungphakorn writing for the UK Trade Forum and, more recently, on his own blog, as well as, more succinctly, by Chris Morris’s BBC Reality Check, amongst many other examples. Even Liam Fox has junked it.

But however often it is debunked, and whoever does so, it shows no sign of subsiding and Brexit ideologues continue to pump out technical sounding briefings and to provide ersatz ballast for Johnson’s airy claims.

The Article XXIV claim

In a sense, strip away the roman numerals and all the claim amounts to is the proposal that the UK should seek a Free Trade Agreement (FTA) with the EU. There’s nothing new in that. What is distinctive is the idea that Article XXIV could allow this to happen even if there were no Withdrawal Agreement (WA) i.e. a no-deal Brexit.

I have the impression that some Brexiters may originally have had the idea that Article XXIV could be ‘invoked’ unilaterally by the UK. If so, that has now been dropped and, thus, the core problem revealed:  Article XXIV could only be used in the way envisaged if there was an agreement between the EU and the UK to do so. Far from being a way of ‘getting round’ no-deal Brexit, it requires a (different) deal.

Impossible is a big word in politics, but it is close to impossible that the EU would do this, and claims by some Brexiters to have been told otherwise in private are highly implausible. Thus Jean-Claude Juncker has said that the EU would not open trade talks with the UK after a no-deal Brexit unless the UK signed up to the main elements of the WA.

Michel Barnier has said the same thing in unequivocal terms: “if … the UK were to leave without a deal, let me be very, very clear. We would not discuss anything with the UK until there is an agreement for Ireland, for Northern Ireland, as well as for citizens’ rights and the financial settlement” (£). So has EU Trade Commissioner Cecilia Malmstrom who, speaking specifically of the Article XXIV claim said “it is completely wrong” - the report of which was emphatically endorsed by Sabine Weyand, formerly the Deputy Chief Brexit negotiator and now the Director-General for Trade.

Going round the same old loop

There should be no surprise about this. It has been the EU position all along, and Brexiter claims that it could be ignored have always been falsified by events – most obviously by the non-materialisation of the ‘row of the summer’ about Article 50 sequencing (i.e. that the first phase of the negotiations about the terms of leaving had to precede talks about the future). The same will undoubtedly happen this time, if we get to the point of testing it.

Indeed, it’s worth saying that the Article XXIV ‘solution’ is only being proposed now to the extent that the Brexiters have accepted what in the past they always refused to, namely that the EU is highly unlikely to re-negotiate the WA. Yet having accepted this they now expect to rip up all that has been agreed in the negotiations, ignore all the reasons why there was that agreement and those negotiations, and then to whip out their Article XXIV deal and say to the EU ‘but you won’t mind signing here will you’? It is beyond naïve.

Against this, what do the Brexiters say? They just take us right back to the pre-Referendum arguments: that ‘they need us more than we need them’, that the UK economy is (was?) the fifth largest in world, has a trade in goods deficit with the EU and, yes, that hardy perennial the German car industry.

And this is the nub of why Article XXIV is now the subject of such intense attention. It certainly wasn’t mentioned in the Referendum. It’s just a new, ‘technical-sounding’ way of resurrecting all the same false promises and naïve assumptions of their campaign – ignoring everything that has happened since – and imagining that there is a cost-free way of doing Brexit, including no-deal Brexit. It is at once their ‘return to go’ card and their ‘get out of jail free’ card.

What if the Brexiters are right?

But suppose that against every indication the EU accept what Brexiters say they will, then all that will be in place is a bare bones agreement on trade in goods (assuming they are serious in treating the one-page template that provides the legal minimum for such an agreement as the model they actually propose using). That would be an improvement on no deal, but there would still be an immediate and devastating cliff edge for services trade (let alone non-trade matters), in which the UK has a surplus with the EU.

For, remember, in this scenario there is no WA and therefore no transition period: the claim by Brexiters (for example in a recent widely reported letter to the Daily Telegraph) that their plan removes the need for any such transition and avoids any cliff edge at all is total nonsense. At best, as so often, they are treating tariff-free goods trade as the only issue that matters (i.e. to the neglect of non-tariff barriers and of services trade). At worst, they have persuaded themselves that Article XXIV allows a ‘standstill’ of every aspect of single market membership without the WA (as implied by the claim of some of them that “this [Article XXIV] is essentially a WTO form of transition”).

The Brexiters, of course, hope that such a bare bones agreement could be developed into a Canada +++ (or ‘Super Canada’) FTA. But even leaving aside the impact of the economic shock in the meantime, and even if such an FTA was eventually developed, it could never be a substitute for single market membership (indeed, this is a confusion that permeates the entire hard Brexit economic position).

But, for the avoidance of any doubt, all talk of Canada +++ is well beyond what the Brexiters are claiming for what Article XXIV would do the day after a no-deal Brexit and even that is based on a totally non-credible assumption of EU agreement to it.

Alternative Arrangements

In tandem with the GATT XXIV smokescreen is that of ‘alternative arrangements’ for the Irish border. Indeed, the two are very intimately linked. The issue of a hard border arises from leaving the single market (and, to an extent, the customs union). Brexiters have never understood or accepted that this is so, and Johnson this week has again rehearsed the idea that Irish border arrangements are something that properly belong in the negotiations about future trade terms, rather than needing to be settled as part of the WA. In this sense, he is reprising the ‘row of the summer’ mentioned above (one might say that Brexit has been going round in circles ever since the phase 1 agreement in December 2017 even though Johnson himself, at the time, applauded it).

In a certain way, it is true that the two are inter-linked (which isn’t so of the related Brexiter canard that the financial settlement is in some way a down payment for a trade deal). But as soon as the UK made leaving the single market and any customs union red lines, it meant that the border could not simply be left to be sorted out in the future. Even if there were eventually to be a Canada +++ FTA it could not prevent the need for a border somewhere.

This remains the case now. This week the Alternative Arrangements Commission presented its interim report (described by Boris Johnson as “brilliant”) on possible solutions. It is highly debatable how feasible they are (£), not least because although many of the technologies and administrative solutions may exist in isolation, the viability of bringing them together, in what time frame, and in ways consistent with the very specific political and historical complexities of the Irish border is simply unproven.

So the issue remains, as it always has, that whilst these alternatives can be explored – and doing so is written into the WA – they cannot substitute for the backstop (i.e. for what happens if nothing else that works can be found).

Making sense of all this

With all that’s being said at the moment it can be difficult to see the fundamentals of what it means, but there is some sense to be made of it.

First, it shows that for all the bravado of the Brexiters’ “do or die” no deal talk, and their claim that the case for Brexit is nothing to do with economics and everything to do with freedom and sovereignty, they know that no deal would be very damaging and – which was always the reason for the ‘Project Fear’ attack line - that for a lot of voters economics still matters. Indeed, this rush of claims about Article XXIV is highly significant because it marks a clear retreat from their previous insistence that trading on WTO (Article I) Most Favoured Nation terms alone would be perfectly fine for the UK.

Second, it shows the incoherence of the Brexiter claim about sovereignty – in the meaning of the UK being subject only to the rules and laws it makes for itself. For if that’s the central reason for Brexit, why is being subject to WTO rules and law so desirable? Why, indeed, is ‘Article XXIV’ greeted as a saviour (even if it were) because of the rights and obligations it creates for the UK and the EU, when following EU rules is such an affront?

Third, it shows that the criticism of the Brexiters for having no plan has hit home. Even Johnson is not able to rely solely on bluster about ‘believing in Brexit’ any more. The pressure to produce a viable approach has mounted. Hence the promulgation of all this technical-sounding guff about Article XXIV and solutions for the Irish border. This means that, for all the frustration of doing so, and for all that many voters won’t be listening, it is still important to keep providing technical rebuttals of the sort linked to throughout this post.

Fourth, although the current context is the leadership contest, what is going on is also (and maybe more) about what happens afterwards. This has two aspects.

The first aspect is that, potentially, it is providing a ladder for the ERG rebels against May’s deal to climb down. If some form of words can be found that re-emphasises the existing provisions to seek alternative arrangements for the border, and Canada +++ as the ultimate destination, that could allow Johnson to get a deal through Parliament (maybe accepting some rebellion from the ‘Spartans’ and the Grieve wing, but garnering Labour leaver MPs). I could just about see that happening, although it doesn’t currently look very likely and, to be clear, it would set up years of political problems and economic decline.

The second aspect for the future is rather more likely. Deliberately or not, an alibi is being prepared for the catastrophe of no-deal and, indeed, it is one that Brexiters are already rehearsing. For if that happens, Johnson and the Brexiters will continue to claim that ‘Article XXIV’ and ‘alternative arrangements’ for the border were perfectly possible. Only EU intransigence prevented it, and all the hardship of no-deal Brexit will be down to them. It will be a deeply dishonest claim. But that will hardly be a novelty. The big political question will be whether voters buy this lie or whether they turn on those whose every promise proved to be false.

Note about recent problems (for those who may have been affected): My apologies for some recent problems with this blog and its email notifications. Last Saturday I wrote a post entirely about Article XXIV and the false claims being made about it. Several hundred people read it, and many tweeted it, but on Sunday morning I took it down to make some corrections and additions. My initial plan was to re-post a revised version but in the end I decided to incorporate some of what was in it into this post. This led to some confusions on Twitter and also with the email alert service – people signed up for that will have received the post as an email text after the post itself disappeared. Meanwhile, because of a glitch in the way the alert service works, an alert for a post from a few weeks back was also sent. So it was all a shambles, for which, again, apologies.