Thursday, 17 October 2019

Time and motion

Apart from grotesque pointlessness of the Queen’s Speech and the understandable, but also pointless, proliferation of predictions and counter-predictions about the Brexit negotiations, the guiding theme of this week has been that of time. Could a deal be done, at all, and if so could it be in time for the EU Council meeting and for a UK parliamentary vote on Saturday, potentially avoiding the implementation of the Benn Act seeking an extension? The answer to both questions turned out to be yes.

We now face a situation whereby, within less than 48 hours, MPs will make a rushed, pressured decision which will shape our future for decades to come.

As ever, the roots of these events lie deep in the tangle of the last three painful years, and in particular from the aborted 2017 ‘row of the summer’ over sequencing.

A brief history of time

The theme of time has been present since the triggering of Article 50. Yet in and of itself Brexit needn’t have been characterised by relentless time pressure. The Referendum did not specify a date for leaving and had Brexiters been honest they would have recognized that, if they were serious about their project, it would entail a process of many years to complete it. For that matter, given that we are constantly told that those who voted leave knew exactly what they were voting for, it hardly behoves them now to complain that it ‘should just be done’. It can’t ‘just be done’ and if people voted thinking it could then they didn’t know what they were voting for.

But of course there has been no such honesty. That a deal would be quick and easy was a repeated promise during the Referendum campaign. Perhaps it was a lie; perhaps it was complacency born of ignorance of even the most basic of facts; perhaps, puffed up on chauvinistic dogma that all the UK needed was to name its terms, the leave campaigners believed it. Perhaps all three.

At all events, even after the Referendum, in December 2016 Boris Johnson was insisting that 18 months would be “absolutely ample” to get a “great deal” done. Who knows, but had the UK developed a detailed and realistic plan for Brexit before triggering Article 50 there might have been a grain of truth in that. Instead, entirely in order to appease the paranoid fears of the Brexit Ultras that they were going to be ‘cheated’, Theresa May initiated the Article 50 process.

From then on, the drumbeat of time has been the constant backdrop to Brexit. And yet May immediately squandered effectively six months by holding an election. And even when negotiations finally started the government was woefully under-prepared, starkly symbolised by the photo of David Davis, hapless and paperless, facing his EU counterparts with their bulging files of notes.

The timewasting went on. Having pushed for completion of phase 1 of the talks in December 2017, desperate to get to the 'real business' of trade talks, it emerged that the government had no agreed ideas as to what they wanted from phase 2. Worse, May almost immediately repudiated what had been over-hastily agreed in terms of a Northern Ireland only backstop during phase 1.

As a result, to all and intents and purposes there never were any phase 2 negotiations. Instead, there was a de facto re-negotiation of phase 1, leading to the all-UK backstop of the eventual Withdrawal Agreement (fuller detail on the convoluted history of the backstop here). As for phase 2 issues, it was not until the ‘Chequers’ Proposal’ of July 2018 that any kind of plan emerged from the UK and at that point the government effectively fell apart in acrimony, setting in place the long grind that ended in the extension of the Brexit deadline to the end of October 2019.

Despite warnings from Donald Tusk not to waste this time, the Tory Party decided to ditch May, have a leadership contest, and installed Boris Johnson who did nothing other than declare the inviolability of the October leave date, apparently expecting the EU to come up with new proposals rather than risk no deal. That ‘strategy’ foundered partly because the Benn Act rendered it impossible and partly, if rumours are true (£), because Johnson – like May before him – finally came to realise the disaster that no-deal Brexit would mean, both economically and, especially, for security in Northern Ireland.

Hence we arrived at this week’s panicky ‘essay crisis’ politics. It’s a consequence not of that Brexiter canard that EU talks ‘always go to the wire’ (the dynamic of the Brexit negotiations are quite different to those of, say, an EU summit) but of this long history of dishonesty, ignorance, and incompetence.

Time sequencing

Nested within that history is something much more complicated and, I think, somewhat under-appreciated. Apart from the general effluxion of time, the issues around sequencing in particular are crucial to what happened this week. Brexiters always thought and talked of the negotiations as being about future terms, specifically future trade terms, with the EU. Whereas from the beginning, and anyway entailed by the Article 50 process, the EU saw the negotiations as being about withdrawal terms and only when these were agreed could future terms negotiations begin.

Moreover, Brexiters usually talked, and still often talk, as if a trade deal can be completed as part of withdrawal or at least be ready for “the day after”. Theresa May herself seems only to have recognized the legal impossibility of this (the EU can’t do a trade deal with a country that is still a member state) in April 2017. That was after the Article 50 letter which, at the very least, envisaged withdrawal and future terms talks occurring in parallel, rather than in sequence.

This was the background to the threatened ‘row of the summer’ of 2017, a row which never materialised because the UK accepted sequencing, leading to the phase 1 agreement mentioned earlier. But Brexiters have never really accepted that sequence. That is evident in the repeated complaints about having to agree the financial settlement without having any guarantees about future trade terms (mistakenly, of course, since the settlement is for past commitments). But most significantly of all it is evident in relation to the Northern Ireland backstop.

Here, the Brexiters’ position – not entirely unreasonably – has been that the arrangements for Northern Ireland are to a degree contingent upon the future trade terms. Why, then, should the EU insist on sorting them out first? The answer is that the moment the UK made ending single market and customs union membership its red lines there were inevitably going to be implications of some sort for the border. In the absence of knowing what these would be, a backstop was necessary to ensure that, whatever happened, the border would remain unchanged.

In Johnson’s approach over the last two weeks, this basic structure, embedded in sequencing and legally articulated in May’s Withdrawal Agreement, has been ripped up. Thus rather than making new proposals for the backstop, what he made were new proposals for what the final state of the Irish border will be. This remained the case even after the original ‘two border’ proposals of 2 October were discarded in favour of the dual customs approach (see below) that has now been agreed. Many commentators expressed surprise when the new deal was unveiled to find that there was no longer a backstop. They shouldn’t have been – that is precisely what has been at stake over the last fortnight.

This is significant partly because it develops out of a persistent misunderstanding amongst Brexiters of what the backstop meant. For, in their eyes, it “permanently trapped” the UK (in May’s agreed version) in the customs union. That was nonsense to the extent that were a different solution to materialise then the backstop would never be used, or would be superseded. Nevertheless, they treated the backstop as a statement of the final state.

Now, instead, they have successfully sought to make a different solution (not Johnson’s original proposal, of course) the front-end agreement and to render this the permanent outcome, notwithstanding the new ‘consent’ clauses requiring periodic agreement from the Northern Ireland Assembly which set a very high bar indeed to consent being withdrawn. This seems a strangely pyrrhic victory from a Brexiter point of view, since it makes permanent a jurisdictional role for the ECJ in one part of the United Kingdom. It is also, of course, deeply ironic that what this new permanent arrangement looks like is not so very different to the original idea of a Northern Ireland only backstop, with an Irish sea border, that May had said no British Prime Minister could accept.

The other big change in Johnson’s deal compared with May’s deal also roots back to the earlier issue of sequencing. Along with expunging the UK-wide backstop in the Withdrawal Agreement (WA), the Level Playing Field (LPF) clauses have also disappeared from there, but have re-appeared in the new Political Declaration (PD). These clauses relate to things like employment and environmental standards and competition rules.

Their removal from the WA was proposed in the original Johnson plans [paragraph 4]. Whether he had originally wanted them to move to the PD, or whether this was forced upon him by the EU I don’t know. But it is a significant change because whereas the WA is legally binding the PD is not. In terms of sequencing, this puts LPF exactly where Brexiters said it should be during the withdrawal negotiations – in phase 2. This in turn means that it could be abandoned in the future trade talks.

There would be a price to pay for that, of course, since without agreeing to LPF any trade deal would at best be of a minimal ‘Canada Minus’ sort, whereas Brexiters typically say that they want a Canada +++ deal. Still, it may well be that Canada Minus is where they now want to go, especially given Johnson’s desire to do a quick trade deal with the US, which would be impeded by LPF. Moreover, the fact that the government are now talking about the trade deal with the EU being completed within about a year suggests either that it still hasn’t understood the complexities of trade negotiations or that it is content with a very narrowly-scoped agreement.

Politically, the presence of the LPF clauses in the PD may also prove significant in the coming parliamentary vote, but in ways that are rather unpredictable. On the one hand, the fact that they are in the PD not the WA is more palatable to Brexit Ultras. On the other, that they exist at all may be encouraging to Labour MPs who want to vote for a deal but not see rights eroded. The trouble for the government is that what is attractive to one group is unattractive to the other. Both may see it as ‘good enough’ but, equally, might conclude the opposite.

Time travel

Finally, it’s worth considering the proposed dual customs arrangement for Northern Ireland. That is, Northern Ireland like the rest of the UK would leave the customs union, but would apply the EU tariff regime. Thus (with the caveat below) a good entering Northern Ireland would be subject to the relevant EU tariff, but the importer would be rebated if the UK tariff were lower. If, on the other hand, it were then to be shipped into Ireland (or any other EU country) there would be no such rebate since the good had, indeed, had the correct EU tariff charged.

The problems with this are numerous, since the entire system is massively complicated and completely untried. But the central problem is that of rules of origin. It is one thing to identify the tariff to be paid on a good moving from one customs territory to another, and then make the appropriate adjustment. It is quite another to determine what to do if and when that good is then combined with others and then sold in a different territory.

Michel Barnier used the example of combining imported sugar with other ingredients to make a fizzy drink in Northern Ireland that is then sold in Ireland. There is really no practical way of working out what tariff should apply to this sugar (assuming that the EU and the UK tariffs are different). Multiply that across the full range of goods that are traded and it becomes very difficult indeed to implement it. The wrinkle that the new deal adopts to try to make this more manageable is to say that tariffs will only be charged on goods travelling from Great Britain to Northern Ireland if they are “at risk” of onward travel to Ireland. But which goods these will be is to be decided by the Joint UK-EU Committee. In this sense, the most difficult operational details of the new arrangement have been deferred, or side-stepped. It will be interesting to see, if this all comes to pass, just how it will actually work in practice.

Such apparently abstruse technical details matter, because they are the practical substance of what Brexit means – precisely the kind of substance that Brexiters have for the most part been uninterested in. But they also matter because they exemplify a persistent problem within Brexiter thinking. It is widely remarked upon that much of that thinking exhibits a nostalgia for the past, for the latest discussion of which see Professor Robert Saunders’ excellent article in New Statesman. That nostalgia is apparent not just as a general pre-disposition but in an extraordinarily outdated understanding of how modern businesses and trade work. That is apparent whenever Brexiters talk about how ‘we managed perfectly well before we joined the EU’, in denial or ignorance of the multiple ways that business has changed since the early 1970s, as if they had not just won a referendum but built a time machine.

In the present example, it manifests itself in the problems Brexit poses given the complexity of modern supply chains. The new deal tries to accommodate this through the fiendishly complicated dual customs system, which may just about work for goods. But completely cut adrift by this system are cases where goods are combined with services (e.g. maintenance contracts), otherwise known as Mode 5 services which, within the EU, are intimately tied to freedom of movement rights. (It presumably goes without saying that services, per se, do not figure at all, either for Northern Ireland or Great Britain: they are the biggest economic casualty of hard Brexit).

This lack of understanding has more generally been shown by the Brexiter failure to comprehend not just modern international supply chains but their often just-in-time character. Because it has dropped the UK-wide backstop, Johnson’s deal, even more than May’s, probably sounds the death knell for businesses – most obviously auto – working on that model.  Relatedly, it is shown by constantly configuring trade barriers and trade agreements in terms of tariffs and their removal in a way that may have been true in the nineteenth century but is entirely inadequate in a world where non-tariff and regulatory barriers, especially for services, are the main obstacle. This then feeds through into the false proposition that a Free Trade Agreement (FTA) could substitute for single market membership, all the more false if it were to end up being an FTA of the most limited sort i.e. Canada Minus.

Clearly this will have long-term implications not just for Northern Ireland, where the focus of attention now sits, but for the viability of British business in general. This was underscored by the report this week from the UK in a Changing Europe research centre, showing how Johnson’s deal is more economically damaging that May’s deal. This forecasts that Johnson’s deal would over 10 years make the UK’s GDP between 2.3% and 7% lower than would have been the case if remaining in the EU, compared with between 1.9% and 5.5% under May’s deal. To which might be added that, according to the latest update from John Springford of the Centre for European Reform, by June 2019 the UK economy was already 2.9% smaller than it would have been had the Referendum vote been to remain.

Time for a parliamentary motion

And so, finally, it is parliament’s time again – and perhaps the last time it can postpone, or find a path away from, Brexit. It is utterly ludicrous that, after all the years of wasted time, delays and backtrackings described above, it should come down to a rushed debate barely hours after the new agreement has been made with the EU. In fact it is more than ludicrous, it is actually offensive to any lingering idea of rationality in politics, arising solely from Johnson’s fetishisation of the 31 October deadline.

The outcome now rests on the complex parliamentary arithmetic. Will the DUP stick to their present intention to oppose the deal? How many ERGers will remain Spartans to the last, and, like Farage, regard any actual form of Brexit as a betrayal of ‘true Brexit’? How many Labour MPs of the ‘Brexit must be done’ persuasion will support the deal just because it is a deal, regardless of its economic impact on their constituents? How many of the ‘Tory 21’ who lost the whip – even though many had voted for May’s deal – will feel inclined to support their one time leader?

As things stand, it seems impossible to predict how these numbers will land, both as regards supporting the deal and supporting an amendment – if tabled – on making support for the deal conditional on a referendum (which, in turn, would mean applying for an extension).

That latter option, to my mind, is the only sensible and morally correct course to take. Sensible, because if this deal is passed it is only going to lead to many more years of acrimony and dispute, so it would be better to seek explicit popular consent. And morally correct because nobody voting in 2016 could possibly have known that Brexit meant Brexit as defined in the agreement published just today.

Given that we are all going to have to live with this for decades, we should surely take just a little more time to check that this is really what we want to do.
 
I will probably do a short blog after Saturday’s votes

No comments:

Post a Comment

Note: only a member of this blog may post a comment.