Good Times, Bad Times, Brexit Times

We may, we are told, get a good deal or a bad deal with the EU or may walk away with no deal at all. Walking away with no deal, many claim, may be better than a bad deal.

And it is not just staunch Brexiters who make such claims. Even sober remainers like John Rentoul bandy them about:

Fellow Remainers beginning to realise "No deal is better than a bad deal" is not as daft as it sounds.

— John Rentoul (@JohnRentoul) May 30, 2017

But before we can even begin to discuss such claims we require some kind of shared understanding of what is we are going to “deal” about and what might constitute a “good” or “bad” outcome. I see little evidence that any such shared understanding exists.

Our opening gambit

Theresa May (who I presume will win the election) has already announced that we wish to leave the Single Market (SM), the Customs Union (CU) and end Freedom of Movement (FoM). We shall presumably get everything May wants here since the EU sees these as the main advantages of the EU rather than as penalties for being in the EU.

Will this be good or bad?

• Leaving the CU will result in more red-tape, delays, and expense for exporters and importers thereby making trade more difficult and, in some areas, infeasible. It will result in less trade with the EU which will, all other things being equal, make us poorer.

• Leaving the SM will prevent us trading in some goods and, especially, services altogether and will result in more red-tape. This too will result in less trade with the EU and will, all other things being equal, make us poorer. Probably a lot poorer.

• EU students contribute massively to our economy and EU workers are, on average, more likely to be working and less likely to be old, sick, disabled, or claiming benefits. EU migrants are a net benefit to our economy. Stopping them coming will, all other things being equal, make us poorer. We are also abolishing our own rights to work, study, and retire in 27 other countries.

I assume we all agree that poorer and fewer rights are bad? So are there any good things here?

• Leaving the CU will allow us to make new trade agreements with other non EU countries. Many Brexiters think that the UK, though much smaller than the EU, will eventually be able to forge new trade deals that are better than the EU has ever been able to negotiate. Such new deals might eventually, they argue, compensate for some of our loss of trade with the EU. More trade (whoever it is with) will, all other things being equal, make us a bit richer. I assume we all agree that richer is good.

• Leaving the SM will allow us to reduce the number of EU migrants coming here. To find that good, your dislike of EU citizens has to be sufficiently strong that you are happy to significantly lower your living standards in order to stop them coming here.

• Ending freedom of movement will reduce the number of EU migrants coming here. See above.

As has been noted, we shall get everything “we” want on these issues and how good or bad you find this depends on your optimism about our ability to forge trade deals and how strongly you dislike foreigners.

There is, then, no difference thus far between a good deal, a bad deal, or no deal.

So what will we actually be arguing about when we do start to deal with the EU?

Item one: The rights of EU citizens in the UK and UK citizens in the EU. 

The EU has said:

Safeguarding the status and rights of the EU27 citizens and their families in the United Kingdom and of the citizens of the United Kingdom and their families in the EU27 Member States is the first priority for the negotiations because of the number of people directly affected and of the seriousness of the consequences of the withdrawal for them. The Agreement should provide the necessary effective, enforceable, non-discriminatory and comprehensive guarantees for those citizens' rights, including the right to acquire permanent residence after a continuous period of five years of legal residence.

David Davis has described these “demands” (detailed here) as 'ridiculously high' . “Ridiculously high” means, I suppose, “bad” but Davis has not really said what would be good. Perhaps, the ultimate good deal here would be zero rights for EU citizens and 100% rights for UK citizens and Davis hopes for a compromise somewhere between these extremes? Except that millions of EU citizens here have families and children and spouses who are UK citizens and whose rights will also be hit by any diminution of the rights of those citizens. And I am not even sure that there is a majority in the UK (even in its current mood) who would find it good to expel any EU citizens currently here legally or (more likely) make it practically impossible for them to continue living here. There is also little sign of the EU giving any ground at all on continuing rights for existing citizens in the “wrong” countries.

No deal would be disastrously bad for the three million EU citizens living here (and their families). They would, by default, instantly lose their legal rights to continue living here. On the other hand, I suppose the more xenophobic elements of UK society would be overjoyed - ie think this to be good. But I have little idea how good and bad deals on this issue would differ in the minds of the UK government or the majority of UK voters.

Item two: Our balance of assets and obligations – the “divorce settlement”

As the EU puts it, rather blandly:

An orderly withdrawal of the United Kingdom from the Union requires settling the financial obligations resulting from the whole period of the UK membership in the Union. Hence, the methodology for the financial settlement based on the principles laid down in section III.2 has to be established in the first phase of the negotiations.

This is an easy one. It really is a “zero sum game” ...... well unless, I suppose, you are a retired British EU civil servant whose pension comes from the EU or a scientist who has just secured several years’ research funding from the EU ……

But all that aside, a good deal would have us pay very little, a bad deal would have us pay lots, and no deal would have us pay nothing.

The problem is: what would happen then? After all, the sums involved pale into insignificance beside the sums we make from trading with the EU.

Item three: Goods placed on the market before the withdrawal date 

I have no idea. Have you? Has our Government?

Item four: Ireland

In line with the European Council guidelines, the Union is committed to continuing to support peace, stability and reconciliation on the island of Ireland. Nothing in the Agreement should undermine the objectives and commitments set out in the Good Friday Agreement and its related implementing agreements; the unique circumstances and challenges on the island of Ireland will require flexible and imaginative solutions. 

Basically the UK Government wishes to close our border to the free movement of people, goods, and services at Dover but keep our border open to the free movement of people, goods, and services in Ireland.

I suppose a good deal would be any solution that worked. I am buggered if I can think of one. Every deal I can imagine – even using the full flexibility of my imagination - will be bad. Walking out of the negotiations would inevitably result in border controls – which would be really really bad – and enforcing those controls would be the responsibility of the UK under WTO rules and of Ireland under EU and WTO rules.

Item five: Cyprus 

Again I have no idea.

Item six: Union's interests in the United Kingdom 

No idea

Item seven: Overall governance of the Agreement 

Tricky. Any deals we make will have to have some kind of enforcement mechanisms. Even the WTO has dispute resolution “courts” to settle disputes between nations. Bad (for us it seems) = European Court of Justice arbitrates disputes. Good = ? – we have not said. No deal avoids this problem I suppose, but again, what then?

Item eight: A common approach towards third country partners, international organisations and conventions in relation to the international commitments contracted before the withdrawal date, by which the United Kingdom remains bound. 

It gives me a headache even thinking about this so I am not going to.

Item nine: Our future relationship with the EU

I assume this is the item most people have in mind when they talk of good or bad “deals” with the EU.

The EU puts it thus:

As soon as the European Council decides that sufficient progress has been achieved to allow negotiations to proceed to the next phase, there will be new sets of negotiating directives. In this context, matters that could be subject to transitional arrangements (i.e. bridges towards the foreseeable framework for the future relationship) will be included in future sets of negotiating directives in the light of the progress made. This approach will allow an efficient allocation of the limited time that Article 50 of the Treaty on European Union imposes for the conclusion of the Agreement by avoiding the need to address the same matter several times at different phases of the negotiations.

In other words, once we have sorted out all the other stuff, we can start discussing a new Free Trade Agreement (FTA) with the EU – something along the lines that Canada has just negotiated (after many fraught years). Such an FTA would allow us lower or abolish tariffs on both sides (without contravening WTO rules) and to agree a new regulatory regime.

Many people seem to fondly imagine that the EU will, at this stage, offer all sorts of special favours to us that will allow us to carry on as though we were still part of the CU and SM for certain purposes. I may be proved wrong, but this seems vanishingly unlikely. They have repeatedly said "no cherry-picking" and May accepted this in her Article 50 submission.

Since it will be impossible to conclude an FTA in the months left before we Brexit, it would seem to be prudent that we agree transitional arrangements that continue the status quo until the new trade agreement is in place. But is anyone being prudent?

Any deal on mutually reducing tariffs would be better for us (and the EU) than no deal. But no possible deal will be anything like as good (for trade) as what we have now.

Even if we storm out of the talks in a fit of pique, I expect we should eventually come back to the table and forge a deal on tariffs with the EU. Any such deal will help to mitigate our exit from the CU and the SM. But since tariffs are among the very least of our worries, the mitigation will be rather slight.

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So given the UK’s stance, walking away or staying in the negotiations will (details aside) yield almost exactly the same eventual outcome: loss of the advantages of Free Movement, the Single Market, and the Customs Union and perhaps, in their place, some kind of free trade deal for some goods and services. The best possible free trade deal will allow far less trade with the EU than we enjoy now and provide scant compensation for what we are losing.

Whether you regard this a as good or a bad arrangement would seem to depend entirely on how much you value your prosperity versus how much you value not having as many European foreigners as neighbours; and the notion that Theresa May can make a significant difference to this longer-term outcome by getting a good or bad FTA deal in the coming negotiations is fanciful.

In the meantime, and returning to the details, we do, however, have the opportunity to seriously fuck up the lives of millions of people, UK agriculture, the supply of perishable goods, our international standing, the situation in Ireland, and our short-to-medium term economic prospects if we simply walk out of the talks.

It is simply not within the EU’s power to punish us any harder than we are punishing ourselves by leaving the CU and SM and ending FoM so we have nothing to lose by pursuing an FTA with them. Our overall new deal with the EU will inevitably be a bad deal but no matter how bad any new FTA deal is, it will be slightly better than no deal at all.