Brexit: Where do we go from here?

Another day, another ‘no breakthrough on the backstop‘ story. At the eleventh hour, a dose of reality seems to be setting in over the question of the Northern Ireland Brexit backstop. The DUP’s leader admitted that the backstop isn’t a backstop if it is time limited. The EU has been saying this for months and there are signs that the government has accepted it too, even if it doesn’t want to say so in public.

Where does that leave us? Pretty much where we were in December 2017. The government made incompatible promises and something had to give. Backbenchers, think tanks and, to their shame, some government ministers have come up with all sorts of suggestions as to how the UK could be outside the Single Market and Customs Union without needing border checks. All have been shot down by trade experts but, like post-nuclear cockroaches, still refuse to die. As former UK government trade expert David Henig remarked:

There is something infantile about all this. It’s like children who know they have to tidy their rooms but come out with all sorts of bizarre excuses as to why they can’t do it just yet.  The government’s indulgence of this petulant behaviour has wasted valuable time and demeaned the UK in the eyes of the world. Had it acknowledged the reality of its position early on, it might have had a more productive discussion with the EU.

For the simple fact is that there are no unpoliced trade borders anywhere in the world. The only place where goods move freely across borders is within the EU, thanks to the joint operation of the Single Market and Customs Union. As soon as a country is outside either one, there must be border checks.

Therefore, to avoid a land border in Ireland, the backstop aims to keep Northern Ireland within the EU’s legal framework, regardless of what trade relationship is eventually agreed between the EU and the UK. It keeps Northern Ireland in a customs union with the EU and in the single market for the purposes of goods trade. It is a similar arrangement to that which Jersey and the Isle of Man currently have with the EU.

The only major change between now and this time last year is that the backstop now keeps the rest of the UK in a customs union with the EU too. An important point, which sometimes gets lost in the debate, is that the Northern Ireland backstop and the backstop for the rest of the UK are different. One is a subset of the other, as this chart by William Bain explains. The backstop would therefore avoid a customs border between Great Britain and Northern Ireland but there would still be a regulatory border. In the absence of any other agreement, Northern Ireland stays more integrated with the EU than the rest of the UK.

It is extremely unlikely that this, or any other major element of the Withdrawal Agreement, will change. The idea that, if we only negotiate harder, the EU will cave in, is fanciful. As former Australian trade negotiator Dmitry Grozoubinski pointed out in a recent Twitter thread, there appears to be very little political pressure on politicians in the EU to change their stance.

Are there any signs of disunity within the EU? Are there any signs of popular dissent? Where are the demonstrations saying ‘Be nice to the Brits’ or ‘Avoid the Horror of No Deal’? Are newspaper op-eds calling for a softer stance? Have any EU opposition politicians decided they can make political capital by making an issue of Brexit?

The answer to all these questions is ‘no’ or ‘not very much’. Outside Ireland, there is very little discussion of Brexit in the rest of the EU. People seem fairly relaxed about it. Many are sad about the UK’s departure but they don’t see it as enough of a problem to make an issue of it with their politicians. Why, then, do we assume that the EU’s negotiators will capitulate at the last-minute when there is no significant political pressure on them to do so?

None of this is likely to be much different after an extension to Article 50. There might be some tweaks to the Withdrawal Agreement but the backstop will stay. Whether it takes the decision now or a few months from now, the UK therefore has the same three options: agree the Withdrawal Agreement and proceed to the next stage of the negotiations, withdraw Article 50 and stay in the EU or leave with no deal.

Once Parliament passes the Withdrawal Agreement the government then has to make some decisions about what sort of relationship it wants with the EU. The Withdrawal Agreement will not settle the question of Northern Ireland and its importance to the Brexit process. In fact, the decision on how far we are prepared to see Northern Ireland’s relationship with the EU diverge from that of the rest of the UK is crucial to the next stage of the negotiations. Until we are clear about that, we can’t go much further.

The only ways to exit the backstop will be either for the entire UK to stay in a customs union and close regulatory alignment on goods, which would probably mean staying in the single market, or to accept that Northern Ireland will have a different relationship with the EU. The Brexit options we spent so much time discussing immediately after the referendum, such as a Canada-style free trade agreement or a closer relationship like Switzerland’s or Ukraine’s, only become possible by leaving Northern Ireland effectively within the EU. Is leaving the EU’s institutions and the freedom to do trade deals more important than keeping the whole of the UK in a single relationship with the EU? Opinions will differ but it’s a conversation we haven’t really had. If anyone thinks that the trouble and strife of Brexit will disappear after the Withdrawal Agreement, I have news for you. It won’t. We still haven’t discussed, let alone answered, major questions about the future shape of this country and its place in the world.

That said, we can begin to see what the likely choices will be.

There are only four all-UK options:

  1. Stay in the EU.
  2. The Venezuela Option – Quitting with no deal would leave us with a similar relationship to the EU as that of Venezuela.  Apart from those countries not under some sort of EU sanctions, it is the only country that has no trading agreements with the EU. Having severed its relationships with the Andean Community and Mercosur, it also has acrimonious relationships with its near neighbours. As a proxy for a No Deal Brexit, then, Venezuela is as close as you can get.
  3. The EU-Minus Option – a customs union and staying in the Single Market. This is sometimes called the Norway-Plus Option, as it implies the relationship Norway currently has, plus a customs union. That makes it sound quite good when really it isn’t. It is, essentially, staying in the EU but with no real say over subsequent rules and trade deals. The EU’s rules on the free movement of people would still apply. I thought about calling it the ‘Why Bother Option’ but ‘EU-Minus’ pretty much sums it up. (HT to Dmitry Grozoubinski for that one.) However unsatisfactory it looks, if we don’t want different arrangements for Northern Ireland, this is probably where we will end up.
  4. The Jersey Option – a customs union and staying in the single market for goods. This would be similar to the arrangement the Crown Dependencies have with the EU and the one the backstop proposes for Northern Ireland. It was first suggested by Sam Lowe and John Springford at the Centre for European Reform. Other advocates include Martin Sandbu in the FT, Alasdair Smith of Sussex University and former European Commission economic adviser Philippe Legrain. This all depends, though, on whether the EU is prepared to split the Single Market between goods and services for the whole UK. So far, the signs haven’t been encouraging.

The Jersey Option is the furthest out the UK can go from the EU without separate arrangements for Northern Ireland being necessary. Given the backstop, Options 3 and 4 are the only ones available to Northern Ireland once the Withdrawal Agreement is signed.

The subsequent options, then, are for Great Britain only:

  1. The Turkey Plus Option – This is the default option under the Withdrawal Agreement. If no subsequent deal is done, this is where we end up. It would be a customs union only agreement but a better than the one Turkey currently has.
  2. The Norway Option – staying in the Single Market but outside a customs union. Would mean continuing free movement.
  3. The Swiss Option – a series of bespoke deals. Unlikely because the EU doesn’t like Switzerland’s  current arrangement and would probably not want to replicate it anywhere else. Anyone still advocating this model should read Ciaran the Euro Courier who regularly tweets about his nightmares at the Swiss border. Furthermore, like the Norway Option, it would mean keeping free movement which is one of the government’s reddest lines.
  4. The Ukraine Option – a Deep and Comprehensive Free Trade Area similar to the Ukraine’s arrangement. This would still leave the UK subject to some ECJ jurisdiction so it is likely to be unacceptable to Brexit hardliners.
  5. The Canada Option – the free trade agreement that most Brexiters seem to want.

The outcome of the Brexit negotiation is likely to be similar to one of these models. It may not be exactly the same but it will be close. The decision tree looks something like this.

 

These decisions, though, are about more than just trade. If Northern Ireland is left permanently in a different relationship with the EU, that will upset a lot of people on the Unionist side, and not just those in the DUP. They worry that handing over some jurisdiction over Northern Ireland, no matter how small, will be the first step to its complete separation from the UK. It is early days yet but might people come to see the logical conclusion of such an arrangement as a united Ireland? Might Scotland, with its Remain majority, ask for a similar deal? Could this be the thin end of a wedge which eventually breaks up not just the United Kingdom but Great Britain too?

The implications of these questions have been barely discussed because the government has been trying to pretend that border checks are not an issue and that the post-Brexit future will be an all-UK one. If that is to be, though, the options are very limited.

So while we are ostensibly talking about trade, we will actually be making decisions about the future size and shape of the UK. Whatever path we take there will be risks and trade offs. As Fintan O’Toole said, Brexit is Britain’s reckoning with itself. It may even force us to decide whether we still want to be a United Kingdom at all. We should have been having these discussions over the past three years. Instead we have been throwing tantrums and pretending the questions will somehow go away. As the cold light of Brexit dawns, the dreams and fairy tales will disappear. There aren’t any unicorns coming to the rescue. We have some hard decisions to make.

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25 Responses to Brexit: Where do we go from here?

  1. P Hearn says:

    Brexit was about sovereignty for me, and more than that, cutting out a layer of government.

    It seems clear that if we cannot decide for ourselves what our border arrangement are with a neighbour without the EU’s say-so, it’s proof we’re not in control of our most basic affairs, and neither is our neighbour. Prior to the EU, we’d have discussed this with Dublin and come up with something like a Common Travel Area and sensible arrangements between the two of us.

    Should Brexit be cancelled, fudged or otherwise not delivered, as now looks likely, can there be any point in keeping Westminster going? It’s an expensive and dishonest institution handling things best left to county or regional level administrations. We either let Brussels set the rules on trade policy, defence, workers’ rights, the finance industry, fishing, agriculture, aviation, industrial policy and so forth, or Westminster does. By any standards, having two parliaments for a country of 65 million is a luxury we don’t need.

    The United States runs an economy 7.5 times bigger than the UK’s, with 5 times the population, is a global superpower, and has 435 in the House, and 100 in the Senate. We have 650 in the Commons, 800 in the Lords. Even UK political productivity is woefully short of the US.

    If Brexit is cancelled, I say let’s go full-in for total immersion into the EU, and let the Remainers crow about it. Bring on the full Schengen, abolish the Union Jack and prosecute anyone who dares fly it. All armed forces to be signed over to joint control with the French and Italians (fit some reverse gears to all tanks), and let’s get on with adopting the Euro currency and the whole 9 yards of EU wonderfulness, (or as we’ll have to say, the whole 8.2296 metres). We should drive in kilometres, switch sides of the road, ban pints in pubs, yards on football pitches, and anyone who dares mention the war should be tied up in piano wire and shot.

    Enough of being half-in / half-out. It’s boring.

    • George Carty says:

      Comparing the numbers of politicians in Westminster vs Washington DC is misleading: for a fair comparison you’d want to include the devolved Scottish and Welsh governments on the UK side, and the governments of the 50 states on the US side…

    • rich says:

      Ireland has decided to delegate responsibility to trade to the EU, and so we have to deal with the EU when deciding on trade with Ireland. Ireland does this because it brings enormous advantages being in a powerful multi-country trade body. How is it that Brexiteers find it so hard to understand this?

      • Dipper says:

        What?? No-one in the UK cares about trade with Ireland. Other than all their lorries filling up our roads. And by “enormous advantages”, do you mean like paying to move factories out of the UK to continental Europe? We run a large trade deficit with EU in manufactured goods, so not clear how being in a powerful multi-country trade body has helped our manufacturing industry prosper.

        And for the umpteenth time, the EU is not primarily a trade body. It is a political union creating a European federal super-state. Trade policies are a means to this end, not an end in itself. And whilst Ireland, being tiny, may benefit from being in a European superstate, the opinion of the majority of UK voters, including me, is that the UK doesn’t.

        If you ever find yourself thinking you’ve spotted something Brexiteers haven’t, best to think again.

        • P Hearn says:

          Calling an ambulance to rush Rick to the burns ward.

          Spot on, Dipper.

        • Scott P. says:

          The very first complaint here was that Ireland wasn’t negotiating on its own behalf, so Brexiters definitely care about trade with Ireland.

      • Dipper says:

        Thanks P Hearn

        to be a stuck record, politics is about power, If you are not talking about power, you are not talking about politics. If you find yourself leading your discussion with economic consequences, or trade policies, you are not discussing politics, you are discussing the after-effects when the politics has been done and you have lost. And if you have lost then there can be all the economic benefits in the world, but you won’t get them, because the people with the power will take their share and leave you the crumbs.

    • Robin says:

      Most people like boring when it comes to sovereign government

  2. Simon Jones says:

    “It is early days yet but might people come to see the logical conclusion of such an arrangement as a united Ireland”

    I think this is an inevitable consequence of Brexit. There was a clear vote to remain in N Ireland in the referendum, in the 2017 General Election the split of votes was 48% unionist and 42% nationalist, and in the 2017 Assembly elections it was closer (roughly 43% unionist and 41% nationalist). The Alliance Party is very pro-EU and its voters (9-10% of the NI electorate) might well hold the balance. So a border poll in the next 5-7 years is quite likely to see a majority wanting to join a united Ireland.

    • P Hearn says:

      United Ireland solves a lot of problems, and complete unfinished business from 1922.

      It’s inevitable with or without Brexit. Brexit might foreshorten the process by a decade.

      Ireland may have to deal with a few years of terrorism from the loyalist side, but the advantages to the rUK will be such that they’re not realistically going to fight too hard to keep NI, once a border poll gets anywhere near a majority for unification.

      It’s only a matter of when, after which, the rUK can finally forget about it and move on.

      • Jim says:

        The Republic wouldn’t take NI if it was offered it, it doesn’t want to have to pay for it. It wants to be able to stick its oar in all the time, but keep its hands in its pockets.

        The best solution for Brexit all round is for England to secede from the UK, maybe with Wales if they want freedom too. Everyone else seems to want to stay in the EU, so they can stay as legally the UK, and be in the EU, England (and Wales possibly) will be free to go their own way. To be honest the English are fed up of being the constant bad guys in everything, but expected to pay for the privilege of being abused as well.

        We’ll leave, the rest of you can do what you like. You might find its a bit cold out there without the hated English tho…………

        • If it “was offered it” (in the form of a border poll that chose unification), the Republic would willingly integrate the 6 counties. No Irish party would survive in government if it refused to do so. The cost of unification would likely be heavily-defrayed by the EU.

        • michael4snupps says:

          Ironically, you have exactly expressed the views of London toward England regarding Brexit.

        • Jams O'Donnell says:

          Sounds good to me – get on with, and good luck. Just keep your collective nose out of our business from then on.

  3. Dipper says:

    As always this is very solidly argued. A few points.

    The position the UK finds itself in largely vindicates Leavers’ analysis of the EU made at the referendum. To recap, the Leave case was that we had to leave the EU because it made all our laws and regulations, had removed sovereignty, controlled every aspect of our lives, and we had no practical democratic means of acting in our interest, and the situation we find ourselves in is that we cannot leave because all our regulatory and legal framework has been transferred wholesale to the EU and we have no practical means of taking them back. Some, noticeably the TUC and Sarah Wollaston, argue for a kind of reverse colonisation, that the EU is a better lawmaker than a parliament elected by British voters. The failure to get control over immigration was merely the prelude to us being dragged into a Federal Europe with the threats we are now facing being deployed to keep us in line.

    The various options presented here are of almost historical interest. The debate has moved on. What has happened is an almost complete breakdown of trust. For the various mixed schemes to work would require a degree of impartiality in the way the EU exercised whatever control it had. I don’t personally know all 17 million leave voters, but I suspect not a single one would trust the EU to treat any of these regimes in any other than a punitive exploitative way.

    I understand that what would satisfy many people is if millions of UK citizens including myself accepted that we should be taxed, regulated, and otherwise controlled against our will. But as in life, if your solution is for somebody to act against what they perceive to be in their best interests and instead act in yours, then it probably isn’t a solution. If the Remain/soft Brexit/ BRINO solution wins, then the problem has not gone away and will return.

    The UK abandoned its strategic interest in NI formally in the GFA. at any time there could be a poll north and south of the border and reunification could take place. I know a lot of Leavers who would breathe a huge sigh of relief at that. But personally I think we are duty bound to make a positive case for NI to remain in the UK, as we are with Scotland. I’m not sure how genuine the concerns over the Irish border are. Other borders exist as physical borders because nations want the borders. Given the scale of the effort, without NI, there might be some other equally “intractable” problem.

    As a Leaver I feel this situation simply vindicates what I and others have been saying here for the last two years; namely that from 24th June 2016 we should have headed for the exit, as only by leaving would we get a decent deal. Instead the UK behaved in a co-operative way, conceding security, agreeing to the schedule of talks. It comes as no surprise that this negotiating strategy has brought us here.

    I would just re-iterate for all those pouring scorn on the dreadful state of UK statesmanship and blaming Leavers, that the civil service and political establishment are all remain, and have been in charge. The fact that this episode has shown them to be hopeless and incompetent just shows how corrosive EU membership has been to our political establishment and shows we need to get rid of them. Remainers like to make a big deal of Ivan Rogers’ speeches and comments, but his solution is simply for the UK to be a colony of the EU, so is not a solution at all.

    “Outside Ireland, there is very little discussion of Brexit in the rest of the EU. People seem fairly relaxed about it.” Well, they might be wrong to be relaxed. The EU is beset by permanent low growth. It has dreadful youth unemployment. Without UK markets, without the opportunity to go to the UK for jobs, without the UK financial contributions, there is a ratcheting up of the pressures on the EU. The EU is clearly approaching some kind of crunch, with the pro-Federalists now seeming to think that it is now or never. So the UK departure may be the straw that breaks the camel’s back.

  4. sdbast says:

    Reblogged this on sdbast.

  5. bill40 says:

    Rick, you seem to be confused about the Norway options or I am and I’ll happily stand corrected if it’s me. The original Boles plan was Norway plus an entirely pointless extra staying in *the* Customs Union, he was seemingly oblivious to the fact that EFTA ruled this out.

    The Norway style option we ought to go for doesn’t rule out *a* customs union which would be dealt with by protocol. Yes it means FoM which is a good thing. It makes NI solvable, sorts out the 5 million and is the only compromise available. I am amazed more Remainers didn’t back it.

    I’d also caution against using the term ‘Venezuela Option’ as it sets the bar too high and give wriggle room to the ludicrous No Deal ers.

    • Dipper says:

      “the ludicrous No Deal ers”

      well … if no deal is ludicrous, then the time to realise and act on that is probably when you’re voting to have a referendum on leaving. Because if you cannot leave an organisation without that organisation’s permission and agreement, then firstly probably best to avoid getting in that situation in the first place, and then rather than asking people if they want to leave, fess up and say actually we cannot leave. Otherwise, uninformed people might think that when they were asked “Would you like to leave the EU?”, that leaving was something that could actually happen.

      I do sometimes wonder of all those Remainer MPs frantically trying to overturn the vote and keep us in realise how much trouble they are storing up.

      • bill40 says:

        I don’t think it helps stating that we shouldn’t start from here even though I agree. There is a way to leave and EFTA/EEA was it though the boat has probably sailed. To Remain would indeed be as ludicrous as No Deal.

      • Basil Seal says:

        “if no deal is ludicrous, then the time to realise and act on that is probably when you’re voting to have a referendum on leaving. Because if you cannot leave an organisation without that organisation’s permission and agreement”

        We can leave without the EU’s agreement, that’s what no deal is. You can resign your golf club membership, but you can’t expect to turn up and use the greens as normal the day after you’ve stopped paying, and if you want to keep using them, then you need to arrange some sort of agreement with the people who own them because you can’t stop being a member of a club and expect to carry on using the facilities.

        The leave campaign promised voters they could have something that was even better than membership, which was all very well because they didn’t have to deliver it once they’d won. The problem is that May’s govt has gone along with their fantasy promises and has agreed to deliver on them, and have spent the last two and a half years chasing unicorns instead of engaging in realistic and pragmatic dialogue with the EU, now they’ve run into the buffers of reality.

        You’re right that there should have been honesty about what no deal meant at the time of the referendum, but i suppose “we can do this but it will screw the economy” wouldn’t have been a winning slogan to paint on the side of your bus.

    • Rick says:

      Bill, I don’t see how Norway with a customs union is any different to Norway+ (or what I have called EU Minus here). My understanding of “the” Customs Union is that we can’t stay in it after we have left and we would have to have “a ” customs union anyway.

      • bill40 says:

        That is correct but far better to refer to customs arrangements or protocols. No EFTA agreement is the same so our would be what we make of it. Having said that Barnier seemed to indicate he was prepared to negotiate staying in the *the* customs union so it may be technically possible but completely unnecessary. A simplified way of looking at it is we withdrsaw from CCP but maintain the UCC.

  6. Dipper says:

    … and this is pretty much bang on

    https://www.spectator.co.uk/2019/03/why-mps-must-hold-their-nose-and-back-mays-brexit-deal/

    “It is pretty clear how negotiations ought to have proceeded: the government should have started with preparations for a no deal and told the EU to get in touch if it could make a better offer.”

    Am now wearing my “I told you so” Tee shirt.

  7. seandanaher2017 says:

    Regarding the Irish border I was struck by this 1914 quote: “I have rarely felt more hopeless in any practical affair: an impasse with unspeakable consequences upon a matter which to English eyes seems inconceivably small and to Irish eyes immeasurably big. Isn’t it a real tragedy.” -Asquith

  8. Pingback: From here to Brexternity | Brian's Brain Juice

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