I'm going to look at a few of these common misunderstanding in turn. Be warned that there are no jokes or pop videos today. I am pretty much boiling with rage at the crass stupidity of the ideologues running the UK Government. Honestly, my patience has run out and now I'm just an angry man frothing on the internet armed only with rational argument and facts.
If you're Scottish and read this without thinking independence is now the only path to preserve any base level of constitutional sanity and economic stability you need to see a doctor with high priority. Just saying.
Article 50 is only concerned with our divorce from the EU. It is absolutely not concerned with our trading relationship with the countries of the EEA (single market). The timeline is that we leave the EU and then negotiate any trade deal in a separate round of talks. While those trade talks are ongoing the UK will need to trade with the EEA under the rules of the WTO.
The only caveat to the above is that our divorce is concluded within the procedural two years of Article 50 and all parties agree to a deferred leave date. This is simply not going to happen because the EU doesn't want UKIP MEPs in the next European Parliament. Likewise, the UK Government is being judged on how quickly it concludes its European business. All sides want this concluded before April, 2019.
Let's summarise this once more. The UK is going to leave the EU with no specific trade deal with the member nations of the single market. Worse than that, all the trade deals the EU has with third parties will also no longer involve the UK. These will all need to be separately negotiated after the UK has left the EU. Almost nobody seems to get this point. The UK Government doesn't get it, the Labour Party doesn't get it, the Liberal Democrats don't get it, the UK press doesn't get it. Nobody gets it apart from the EU itself. That's right, the EU understands this perfectly well.
We are sleepwalking into a very, very bad deal because we haven't bothered to find out anything whatsoever about the EU.
Every time I hear a Brexit supporter discuss trade deals they start banging on about tariffs and how the UK can now negotiate lower tariffs to mutual advantage. This is simply not the case. Why? Well, tariff rates are almost immaterial for developed nations because they all trade with historically low rates of import tax. What, then, is the real barrier to trade? You won't learn the answer in newspapers or from a "journalist". You definitely won't hear it from the leading politicians responsible for the future of UK trade. We all know the answer, though, don't we? That's right, non tariff barriers are the real barrier to free trade.
A non tariff barrier might be a ban on the addition of specific chemicals used in paint. Let's imagine two countries A and B have entered into a trade deal. Country A might have a long-standing ban on a specific paint additive due to health or environmental concerns, while country B might have a more relaxed approach to poisoning the public. How can paint manufacturers in country B sell their chemically-enhanced paint to country A? This has all the hallmarks of an investor-state dispute. It's time to call the lawyers.
Trade deals are complex because legal mechanisms are required to resolve investor-state disputes like the one described above. If these disputes are not resolved with a formally agreed arbitration process there simply will be no trade whatsoever. A dispute will occur every time two nations in a trading partnership have differing legislation about what can and cannot be sold in the shops. A dispute will also occur when they have different regulations for labelling or require different testing regimes. In fact, almost any divergence in any area of domestic policy from worker's rights to mains water pressure will lead to an investor-state dispute. These disputes can only be resolved with an independent legal process set out in the detail of the trade deal.
The effectiveness of a trade deal is obviously governed by the faith both parties place in the legal process that is used to resolve investor-state disputes. For that to happen a lot of detail needs to be hammered out and agreed upon: how courts are appointed, the powers they will be given, the procedures and methodologies they will apply, the underlying principles that will guide legal judgements. It seems that the UK Government doesn't get this point because they bizarrely think multiple trade deals can be completed by the time the UK leaves the EU. They are also still labouring under the illusion that trade deals don't require the adoption of legal obligations that might run counter to local decisions. They pretty much reckon you just rock up to the talks with a low tariff rate, open a bottle of imported prosecco and that's that. With that attitude the chances of completing a meaningful trade deal with will be close to zero.
The Single Market
What is the single market? Boris Johnson seems to think it is some kind of enormous flea market where anything can be bought and sold without recourse to a shared understanding of common law. In his mind, access to this mythical marketplace is all that is required and having picked the lock to the front door the embarrassment of Euro riches will continue to flow Westwards. Well, guess what, it doesn't work like that. How does it work? Well, the single market is a relatively successful attempt to unlock the global trade blockage caused by investor-state disputes. In short, it works through regulatory harmonisation and mutual recognition. Regulatory harmonisation is achieved through EU directives that are absorbed into each nation's legislative framework. Mutual recognition is achieved by regular checks on the way that each nation implements and applies the directives. This system encourages free trade by having a single set of manufacturing rules instead of 28 sets of rules. Even more importantly, however, it lays the foundations for fair trade. For example, those troublesome investor-state disputes simply vanish because paint legally manufactured in country A can by definition also be legally sold in country B.
The single market is a complete system. If you don't accept the rules of the club then you're not getting in. It is that simple. There can be no cherry-picking or special favours to the UK because, as I already said, the principle of fair trade lies at the heart of the EEA. Undermining the principle of fair trade would undermine the whole of the EEA.
The UK Government seem to think that they can get complete access to the single market without adopting the principle of freedom of movement of people in the EU. This is but one of those pesky club rules. At the very least they are aware that this might indeed be a rule, even if they think the rule will either be bent for mighty Britannia or is just not a very important rule. It's clear, however, that they are completely unaware of all the other rules of the club eg the rules that govern cross-border pension transfers, the rules governing the movement of money and shares, the rules governing the safe disposal of batteries, the rules that tell farmers how they must treat water on their land and so on and so on. How do I know that? Four words: The Great Repeal Bill. The UK Government are going to mirror all of our EU legal obligations in a single tranche of UK legislation. They are doing this so that they can modify them in the future as political will dictates. That is obviously incompatible with membership of the single market, which requires that governments harmonise their regulatory frameworks with a standard set by the EU. The UK Government clearly don't understand this at all because they are stumbling along the path leading to regulatory divergence. A simple lack of understanding of the EEA is forcing the UK Government to leave it, whether it wishes to or not.
We can pretty much forget about the row over the freedom of movement of people. It is a red herring that gets the ideologues hot under the collar but it is actually just one visible symptom of the UK Government's complete lack of understanding of the European single market. Honestly, they have no clue and that misplaced arrogance is going to see the UK stumble out of the EEA without an economic parachute.
There is a massive trade vacuum awaiting the UK when it finally splits from the EU. Perhaps this is too tedious for public debate but I'm prepared to bet it is just another hole in the Brexiteer's bubble world. What's the problem? At the moment, the EU negotiates with the WTO on behalf of all EU member states. That will soon end for the UK. When that happens it will need to renegotiate its WTO position. Even if the UK Government had formulated a strategic plan for its long-term trading interests it would take some time years to reach a compromise agreement at the WTO. The problem here is that the WTO works on consensus and cooperation rather than a timetabled vote. While that consensus is being reached, the UK might find a ready consensus that it temporarily adopts its current WTO obligations. What exactly are those obligations? For example, how much of the EU quality beef quota will the UK adopt? How could that value even be measured? Would an estimation suffice? Can the EU reduce its beef quota in line with the UK's adoption of its agreed share? This is already a lot to decide. It gets worse, though, because we can't start negotiating until we have left the EU. I call that a trade vacuum because I'm not an economist and don't know the technical term for full-on catastrophe brought about by narcissistic lying demagogues.
The EU Negotiations
The UK Government believe that Brexit is the biggest crisis facing the EU. It isn't. The EU has to manage the refugee crisis, the Euro crisis, the democratic crises in Hungary and Poland, then there's Ukraine and Russia. I could go on but I'm even starting to bore myself. Brexit is just another problem to add to the list. The EU is always beset with issues because by definition it deals with problems too difficult for individual nations to solve on their own. It is well used to managing multiple crises and wouldn't have survived this long without cultivating that ability. The UK, on the other hand, is genuinely in a crisis of unbelievable magnitude because its ability to trade with anyone at all is under threat. Even the constitutional arrangements that uphold democratic principles in the UK are under threat. I'd certainly call it a crisis. In short, Brexit represents insurmountable crisis for the UK but only a significant problem for the EU.
The way the Brexiteers carry on you'd think they had a gun pointed at the head of every EU Commissioner. This simply isn't the case. The EU has already begun the job of factoring in the cost of Brexit to their budgets and forecasts. It could even be said that the EU is relaxed about the prospect of the UK's departure. Why? Because the UK blocked pretty much all EU reform since Westminster passed the 2011 European Union Act. How many times have you heard a Leave campaigner moan that the EU needs reform? Well, the truth is that the UK was the nation that single-handedly blocked all that much-trumpeted reform by insisting on a UK referendum to ratify almost any change. The EU can now get on with its European Army, tackle the Euro crisis with deeper political integration, and renegotiate the Lisbon Treaty without bothersome Brits getting in the way all the time.
The UK Government's lack of understanding of the EU will present further issues at the divorce proceedings. The problem here is that the EU understands perfectly well the technical details of membership. After all, it has just completed the accession of Croatia. Only a few years ago it was Bulgaria and Romania. It also has ongoing bi-lateral discussions with Switzerland to ensure that the bi-laterals reflect the rules of single market entry as applicable. Complex details and their intertwined relationships are fresh in the mind of the EU Commission, the body which oversees all this detail. Can we say that about the UK? Certainly not. Instead of an eye for detail we have chief cheerleader Michael Gove telling the UK to get on with it and why oh why all the fuss and nonsense, this is easy, just get on with it and leave. This is going to be a problem because the EU will be seeking clarity on details way beyond the UK's knowledge. The lack of preparation for Brexit is not only going to prolong the divorce talks but also undermine the UK's ability to negotiate the optimum settlement. If it was a boxing match it would be stopped in the first round.
Nobody in the UK Government gets this at all. They just can't see the reality of the situation. The reality is that political motivations and the long-term economic gains brought about by preserving the EU's founding principles will override the short-term losses of the UK's departure. David Davis, if you're listening, car safety standards are global rather than European so German-built BMWs will still be available for sale in the UK after Brexit. The drop in the value of Sterling will surely be the biggest disincentive to UK buyers because a few % at the border is a relative drop in the ocean. Does that hurt BMW more than UK consumers or the other way around? He will never, ever understand this because he is a buffoon driven by his own arrogance.
Over and out,