NOTE ALTERNATE CROP Mayor of London Boris Johnson salutes from the deck of the tall ship Tenacious, which is moored at Woolwich, in east London, as part of the month long Totally Thames festival.

Goodbye Europe. (Photo: Dominic Lipinski)

There won’t be an easy deal

“We are going to get a deal which is of huge value and possibly of greater value … We are going to get the best possible deal for trade in goods and services.” - Boris Johnson

by the Know Nothing Enquirer   14/10/2016              

Hardly any day passes without a headline story about one of the three Brexiteers threatening the EU with a nasty breakup if they do not concede to British demands - free access to the single market without (or very limited) free movement of labour and no payments into the EU budget. David Davis recently claimed that a “punishment strategy” would primarily hurt “the continent” and that it would be in the interest of the EU to let Britain freely trade with them. Boris Johnson, who likened the EU to the Nazis during the Leave campaign, said in a speech this week “we are going to get the best possible deal for trade in goods and services.” He continued that the single market had been "mired in low growth” and the UK should instead look towards "bounding" Commonwealth countries, such as Australia, New Zealand and Malaysia.

“We are going to get a deal which is of huge value and possibly of greater value … We are going to get the best possible deal for trade in goods and services.” - Boris Johnson

Of course these demands are completely delusional, but most newspapers (and voters) seem to ignore that fact. According to a recent YouGov poll, most voters still see Theresa May’s government favourable, despite the slumping pound and the “Marmitgate” scandal. In 2015, 44% of Britain’s’s goods and services were exported to the EU, while 53% of imports came to the UK from the EU. The “bounding” Commonwealth countries, on the other hand, make up a way smaller proportion of trade. Only 1.2% of British exports go to Australia, 0.5% to Malaysia and 0.24% to New Zealand. Britain currently exports more to France than to China. Free trade deals would have to be signed with these countries independently and a beneficial trade deal for the UK is not necessarily guaranteed. After all, why should China give the UK better trading terms than the EU?

"Who does it harm more if we end up in a new tariff environment? Does it harm more those who sell more to the UK, or the UK? It's in everybody's interests that, as we move forward, that we have at least as free a trading environment as we have today.” - Liam Fox

daily_mail-1210

Biased? Not the Daily Mail! (Photo: Kisoko)

Being part of a single market with your biggest trading partner that happens to be located right next to you is not only beneficial in terms of tariff free trade but also because many other non-tariff trade barriers are removed. The most important point, however, is that it is mostly in the interest of the UK to remain in the trading block. And yes, the UK has a huge trade deficit with the EU. Keeping in mind that the EU has a population of 446 million (without the UK), it would be foolish to think that it would make such huge concessions to a country with 64 million inhabitants (even if it would hurt its exports). In the event of May’s government aiming for a “hard Brexit” (which seems likely at the moment), the UK would still remain one of the EU’s most important trading partners, although Britain would be in a rather disadvantaged negotiating position, despite what the three Brexiteers would like the British public to think. Why would the EU want to give the UK a better deal outside of the union? Surely the EU and its member states aren’t interested in proving Eurosceptics that leaving actually pays off.

”The fundamental principles of the EU will be threatened (…) Other countries would want to leave to get the supposed advantages without the obligations (…) There must be a threat, there must be a risk, there must be a price.” - François Hollande

The timing of Brexit also greatly reduces Britain’s negotiating options. Last week May announced that Britain will formally launch the Brexit process by the end of March 2017. Of course the date isn’t only bad for the UK, it comes at a time of worldwide political uncertainty and economic decline (combined with a fragile banking system) and a year of important votes in key EU countries. On May 7 2017, France will elect a new president. The runoff will most likely be between a Les Républicains candidate (former PM Alain Juppé or former president Nicolas Sarkozy) and Marine Le Pen. Even though it seems most likely that the former will win the elections, a swing to the right and increased “hard talk” on EU topics is guaranteed. In autumn 2017, Germans will elect a new government; with a continuation of the “grand coalition” between Social Democrats and Conservatives the most likely outcome, even though it is still unclear whether Angela Merkel will stand for reelections. The rise of the right-wing populist AfD (currently around 13% in the latest polls) makes a coalition between a “Volkspartei” (one of the two big parties) and a junior partner unlikely. Similar to France, the new government will probably swing further to the right to appease right-leaning voters. On December 4 2016, Italy will hold a constitutional referendum and the country will likely be preoccupied with domestic debates over the result. In March 2017, the Netherlands will also elect their next government.

“If we don’t insist that full access to the single market is tied to complete acceptance of the four basic freedoms, then a process will spread across Europe whereby everyone does and is allowed what they want.” - Angela Merkel

In other words: the three main leaders of the EU will all be struggling with their own issues and Brexit discussions will not make it easier for them. Giving in to British demands will send the wrong signals to their voters. EU institutions have proven to be tough with Switzerland and Norway over the terms of access to the single market and they refused Hungary’s rejection of EU migrant quotas. Of course the future relationship between the EU and the UK isn’t solely decided by the big countries as well as the EU parliament and the commission. All member states (and in some cases, such as Belgium, local parliaments) have a veto right and could potentially halt the entire process. A potential deal would have to suit every member. It wouldn’t be in anyone’s interest to give Britain a better deal than it already has, considering that the UK already has the best deal of any EU country at the moment - thanks to the rebate on the membership fee and the numerous opt-outs from treaties, such as Schengen and the Euro. This will be especially hard to explain to the many right-leaning voters flirting with Eurosceptic parties and could potentially give populist movements across Europe new momentum. EU member states, the EU commission and parliament will want to protect national and EU interests during the negotiations and not punish Britain - the same way Britain wants to protect its national interests, albeit with delusional demands. Hollande insisting that there must be a price for Britain to pay for Brexit is not a way to punish the country but to prevent it from dictating its own selfish conditions while still benefitting from the single market - i.e. the end of the EU. Further, some countries might actually benefit from a “hard Brexit”. In this case Britain will lose its “passporting rights” and banks will have to shift their offices and staff to EU member states. Foreign companies in the UK, such as Japanese car companies, will look for new plant locations in the EU, which could be an interesting opportunity, for example, for Hungary that already has a large automobile industry. Plus, according to article 50 of the Lisbon Treaty, once Britain formally announces its withdrawal from the union it only has 2 years to reach a deal with the EU.

“This approach (“take back control” campaigning) has definitive consequences, both for the position of the UK government and for the whole process of negotiations. (…) Regardless of magic spells, this means a de facto will to radically loosen relations with the EU – something that goes by the name of hard Brexit. (…) The only real alternative to a hard Brexit is no Brexit, even if today hardly anyone believes in such a possibility.” - Donald Tusk

Theresa May’s government has to decide which way to go. 51.9% voted to leave the EU on the imaginative terms made up by the Brexiteers. If her government chooses to continue a “hard Brexit” without acknowledging the consequences for Britain and its future relationship with the EU, it can only result in disappointment on both sides and harms the UK’s national interest. It may seem hard to believe for May, the three Brexiteers and the Eurosceptic papers, but the EU has the upper hand in the upcoming negotiations.

Leave a Reply