A few years ago, I was listening to a talk by a coach and motivational speaker who was extolling the virtues of positive thinking and the new empowered, non-hierarchical, collaborative workplace. I said that, while I loved his wonderful image of the future of work, I didn’t see much evidence of a trend in that direction. We had been talking about these things for twenty years, yet command and control was still the norm in many industries and technology was making some workplaces more regimented than ever. Not to mention the people on various forms of precarious contract at the whim of their managers.
His response was that, by choosing to focus on such things, I was displaying my negative mind-set. I was filtering information according to my preconceived ideas and refusing to allow in the positive and hopeful future. See what he did there? He turned his complete lack of supporting evidence for what he was saying into my problem. It was me being negative, not him ignoring the data.
Alas, the cod-psychology of self-help and motivational mumbo-jumbo has seeped into the Brexit debate. Leave campaigners are telling anyone who raises concerns about Brexit to ‘be positive’, ‘just get on with it’ and, my personal favourite, ‘move on’. It’s the sort of language adopted by managers who want to railroad a project through and don’t want to hear the staff tell them it might go wrong.
But just get on with what? Move on to what? I’m as happy as the next person to move on if it’s clear what we are moving on to but, at the moment, we have no idea. We might have voted against the EU but what did we vote for? The government should have had a plan, say the Brexit campaigners. (There it is again; turn your own failings into someone else’s problem.) But it is difficult to see how anyone could have planned for this, especially when we don’t know what ‘this’ is. “Brexit means Brexit,” said Theresa May, which sounds decisive but is anything but because Brexit can mean all sorts of things.
I have managed any number of change programmes over the years, consisting of multiple but mutually dependent projects. When I look at this, though, I wouldn’t even know where to start. I tried to draw a diagram of the various options but I gave up because each one of them has so many potential permutations and stumbling blocks, each dependent, in turn, on the political pressures on many different actors.
Just deciding the UK’s starting position is going to be difficult enough. Most business groups are adamant that the UK should retain its membership of the single market while a lot of those who voted Leave did so on the assumption that, after Brexit, free movement of people from the EU would stop. At the moment, EU governments and, perhaps more importantly, their voters, are very reluctant to offer the UK a deal that allows both.
The next diagram* shows the various relationships that different countries have with the EU. Broadly speaking, the further right you go, the more control you have over things like regulation and immigration but the less favourable the trade terms get. Switzerland, for example, is being threatened with reduced market access if it goes ahead with its plans to restrict immigration from the EU. Beyond the red circle, you leave the EU orbit altogether and either negotiate free trade agreements with the EU or trade under WTO rules. (More on this later.)
We start from the point, then, that there is no consensus in the UK about what Brexit should look like. Going into a negotiation without knowing what you want and hoping it will become clear as you go along is really not a good place to start. Ideally, to satisfy everyone, we would need to have Norway’s single market rules and Canada’s right to restrict migration from the EU. It is very unlikely that other EU countries would agree to that.
Even if we can agree a starting point which a majority of people in the UK might accept and which would not trash our economy, the negotiations are likely to drag on for some time.
As Bloomberg reported earlier this week, each EU country is drawing up a shopping list of the things it wants and doesn’t want from Brexit. Some positions are defensive, others are looking at exploiting the opportunity, such as Luxembourg going after London’s financial trade and Spain grabbing Gibraltar. Against this background, just agreeing an EU-wide position will be difficult enough and it is something over which the UK has very little control. There will be negotiations nested within horse-trading nested within more negotiations.
Then there are the negotiations with those outside the EU to consider. The UK will have to re-negotiate its membership of the World Trade Organisation. Again, this could be subject to a veto from any one of the other countries. The head of the WTO has warned that such talks are likely to be long and tortuous. And all this before any bilateral trade deals can be agreed.
The simplest option would be to leave the EU and remain part of the European Economic Area (EEA). The plug-in-and-play option is always worth considering when planning any major change. The consequences of leaving the single market (as opposed to leaving the EU) were not really discussed during the referendum. This piece by Ben Kelly, a pro-Leave campaigner advocating the EEA option, goes into some of the detail. It’s not just tariffs that are the problem, he says, it’s the non-tariff barriers too.
At the moment, all goods produced in the UK are assumed to be compliant with EU rules. That is the point of the single market and all that horrid EU regulation. But the moment we leave the EU, we will no longer be part of that single market so our goods will be produced outside the regulatory area. Once the UK leaves the EU, therefore, the EU will have to start inspecting all UK exports in the same way it would goods from any other country. As Ben Kelly explains:
The great benefit of the Single Market is that border checks have been eliminated; facilitating free trade. The common rules are monitored by relevant national authorities and there is mutual recognition of standards. This makes it possible to load a lorry in Glasgow and ship goods all the way to the Turkish border with little more than occasional document checks.
If we leave the EU and the Single Market without negotiating an agreement to replicate these benefits, this all stops. The exported goods may still comply with exactly the same standards, but the testing houses and the regulatory agencies are no longer recognised. Thus, the consignment has no valid paperwork and is subject to border checks, visual inspection and physical testing.
In practice this mean the shipment is detained while samples are taken to be sent to an approved testing house. With a container inspection costing approximately £700, and detention costs running to around £80 a day for ten days or so it takes to get the results back, plus a testing fee, exporters are paying over £2000 just to deliver a container to an EU Member State.
This would have serious economic consequences. The delays would be devastating. Supply chains across European industry are integrated, with many working on a “just in time” regime. This means that any delays even to a small number of consignments will have an adverse effect on the whole system.
So the ‘just get on with it and leave’ option would be extremely dangerous. If we found ourselves outside the EU without a trade agreement we would be in big trouble. Advocates of the WTO Option, the default of simply leaving the EU without any agreements, claim that the US, China and Australia have no trade agreements with the EU yet freely trade with it. But all these countries do have agreements with the EU on regulation. These Mutual Recongition Agreements (MRA) recognise each other’s regulatory standards thereby reducing the amount of inspection needed at borders and simplifying customs procedures. Regulatory regimes are a bit like traffic lights and road markings. They help things move more quickly. If you got rid of road rules, traffic would grind to a halt. If the UK quit the EU’s regulatory framework without negotiating a MRA, something similar would happen to our trade with the rest of Europe.
Even the EEA option would not be without its problems though. We would be left with similar rules on free movement, which a lot of Leave voters would see as a betrayal, and there is no guarantee that the other countries involved would agree to it anyway. As constitutional law professor Michael Dougan says, there are 32 potential vetoes over the UK’s membership of the EEA; the 27 other EU countries, the 4 EEA countries and the European Parliament. Norway is already threatening to block the UK’s EEA membership.
There really are no easy answers here. The idea that we can just walk away from the EU is utter nonsense but all the other options are complex. The length of time they will take and the resources needed to bring them to a conclusion are impossible to forecast.
Which brings us to the final piece of the problem – resources. As anyone who has ever run a major project will know, being clear on the objectives, tasks, dependencies and sequencing is only half the battle. You then have to secure the resources to do it.
In another announcement that barely made the news, National Audit Office boss Sir Amyas Morse warned that the government doesn’t have the spare capacity to carry out all the extra work that leaving the EU will bring. This, he said, is not just a matter of capability:
We will have set civil servants a Herculean task and set them up to fail. And none of us can afford that.
Please don’t misunderstand me, I am not joining the clamour pointing to our lack skills in trade negotiation.
My point goes further. If that were the only issue, we’d be relatively well placed!
Brexit, he concluded, will have to be prioritised with consequences for all other major government projects. In short, without a significant increase in the size of the civil service, just about everything else will have to be scrapped.
With no clear objectives, an incalculable number of dependencies, unfathomable sequencing, timescales impossible even to guesstimate and depleted resources, any project planner might be forgiven for throwing in the towel. Some sort of plan will emerge eventually but, at the moment, just making one for the project’s first phase, defining what the hell it is we want, is going to be difficult enough.
So spare me the pseudo psychology and the David Brent-isms. Trite phrases like ‘move on’, ‘be positive’, ‘just do it’ and ‘we are where we are’ reflect a failure to understand the magnitude of the Brexit task. There’s no ‘just’ about any of this. It is a colossal and eye-wateringly complex task. It will take years and will dominate UK politics for the rest of the decade.
The chart above is not a Venn diagram. It is simply an illustration of the levels of trade integration with the EU but, as some people have remarked, it simplifies the nuances of the countries relationships with the EU. The EU is not a subset of EFTA and EFTA is not a subset of the Customs Union.
This one from a recent EFTA report (which is an interesting read) shows the varying relationships and agreements between European countries, including those that are not related to trade. Turkey, for example, is a member of the Customs Union but not of the EEA. Norway is a member of the EEA without being in the Customs Union.
There is a discussion of the pros and cons of each option in this FCO report from earlier this year. The Institute for Government has a useful one-page explainer.
At the moment there is no provision for countries to become part of the European Economic Area without either being in the EU or EFTA, as this useful FAQ page on the EFTA website says. As some people have pointed out, it would, at least in theory, be possible for the UK to negotiate a similar arrangement without being an EFTA member and to lob in some restrictions on immigration too. It looks unlikely, given current political and public opinion in the EU, that there would be much support for such a deal.
Confused? You will be… and this will all drag on for some time.