Winner of the New Statesman SPERI Prize in Political Economy 2016

Friday, 27 October 2017

Why is the UK making such a mess of A50 negotiations?

The obvious answer to this question is that the negotiator, the UK government, is completely split on what it wants. But that is only part of an explanation for this shambles. In the first year I think actions were dictated by a completely unreal perception about power, and perhaps more recently by a need to avoid a coup by the hardline Brexiteers.

The people who might have thought about the negotiations before the vote itself, the Leave side, didn’t do so partly because they didn’t expect to win. But they also had completely unrealistic expectations of the relative power of each side. This was an advantage during the campaign, because they could say ridiculous things about the economic consequences of Brexit without knowing it was a lie. But once they had won, there were only two ways to go, and either of them led to an early implementation of Article 50.

The first possibility is that after the campaign they continued to believe that German car makers would pressure the German government and the EU to give us what we want, so why not bring that on by triggering A50. The second was that they began to doubt this, but that in turn led to a fear that once the people found out they had been told falsehoods about leaving they would change their minds. That too lead to an urgent need to trigger A50 before this happened.

But Leavers did not have a majority in parliament. Remain MPs must surely have realised that the EU had much more power than the UK (the proportionate cost of no deal is much greater for the UK), and that once A50 was triggered the clock was ticking for the UK, not the EU. David Allen Green has justifiably said I told you so, and I knew when I wrote a post entitled “The Folly of triggering Article 50” in November 2016 that I was just repeating expert opinion, and to be honest common sense. As I said there
“this has absolutely nothing to do with whether you voted to Remain or Leave. Anyone who actually wants a good deal from the EU when we leave should realise that the UK’s negotiating position becomes instantly weaker once Article 50 is triggered.”
The worst explanation for why the majority of MPs ignored this advice was that they didn’t hear it. (We know the Prime Minister did hear that advice from Sir Ivan Rogers.) Almost as bad was that they heard it but thought it was just a desperate ploy by experts to delay leaving. Those who want to say it is all because of mixed motives from the Labour leadership will do so. But I suspect there is a simpler explanation: MPs felt voting to delay was ‘politically impossible’.

Part of the reason it was ‘politically impossible’ is that the standard of reporting and debate among broadcasters on these issues is so poor that the argument that triggering A50 was bad tactics would simply not have got a proper hearing. In addition the tabloids would have screamed “enemies of the people” just as they did when three judges allowed MPs a vote. In this sense our media not only gave us a Leave vote, they forced an early triggering of A50 which was not in the country’s interests.

As I wrote in that earlier post, it “would only be a slight exaggeration to say [triggering A50] allows the EU to dictate terms” which is exactly what they are doing. In these circumstances, the best approach to the negotiations is to treat them as a cooperative exercise rather than a zero sum game. Yet we were led by Theresa May and David Davis, who were instead determined to treat this as a classical zero sum negotiation where, because you had more power, your best hope was to make the other side believe you will walk away. Yet that walking away threat was never credible, partly because of reasons already given, but more importantly because a deal on the EU's terms was better than no deal.

But despite this, in our negotiators minds the delusion that we have power in these negotiations as long as we threaten to walk away seems to persist. The lack of flexibility by the EU can be dismissed as them playing hardball. As firms move abroad because they need to plan and they cannot be certain of any transition arrangements, the cost of delusion will be paid for in lost UK output and lower incomes.

It is just possible that both May and Davis have begun to realise this, but the delusion of power has been replaced by something else, which is the fear of a coup by Brexiteers. The pro-Brexit views of Tory party members makes such a threat credible, but any coup would have to happen well before the negotiations ended. Perhaps the reason May is now being so slow to move is to make the possibility of a coup less likely. But perhaps that involves a level of strategic thinking the Prime Minister is not capable of and Davis has simply given up.

Whatever the motivation, the end result has one certain consequence: the economy is damaged. As one final example, take the length of the transition period. The logical thing to do is to have a transition period until a new trade agreement is agreed. Anything else involves significant economic and administrative costs. But the UK government does not seek this because it pretends a trade agreement can be done quickly, and it pretends this nonsense to avoid a confrontation with the hardliners.

Even if this turns out to be pretend and extend, because the transition period will keep on being rolled forward at the last minute, this arrangement suits the EU and damages the UK. It is good for the EU because their exports to the UK do not suffer. It damages the UK because the uncertainty continues to make moving production to the EU rather than exporting to the EU attractive. Just one more way that the fantasies of Brexit hardliners are costing us all.



14 comments:

  1. As we watch our government's attempts at the Art of the Deal, it's nice to reflect on how much this western world civil war between Conservatism reminds us of its thoroughgoing inanity.

    ReplyDelete
  2. eventually the tabloids will destroy what's left of UK society

    ReplyDelete
  3. At a rough guess the reasons would be as follows: it is senseless as a proposition (i.e. any result will be worse than what we have); the government is conflicted; the personnel are not up to the job (they are either half-hearted or deluded); the bargaining position is highly asymmetrical 27:1 (Do we feel lucky?); they are conflating the interests of the Tory Party's with the national interest (which is bogus); there is an almost wholesale reluctance on the part of the government - a few MPs withstanding - to tell truth to ignorance (no-one sensible makes an omelette with rotten eggs); and they are scared of inflaming the press, most of which supports the unsupportable.

    ReplyDelete
  4. «MPs felt voting to delay was ‘politically impossible’.»

    Another argument is that it was "politically necessary": if the referendum had been won with 72% for "Leave" instead of just 52%, the "Leave" side would not be pushing to get out as quickly as possible regardless of consequences, to make sure the deed is done before the 52-48% swings the other way.

    «the fear of a coup by Brexiteers. The pro-Brexit views of Tory party members makes such a threat credible»

    More realistic than a coup in the sense of a change of leadership, it is that there are 40-100 Conservative MPs that on various grounds, but mostly out of misguided patriotism, are ready to rise above petty party politics and vote no-confidence in a Conservative government if it delays or compromises "leave". If that happens elections happen and everything goes up for grabs.

    «the UK government does not seek this because it pretends a trade agreement can be done quickly»

    In a press conference with a bunch EU27 newspapers M Barnier stated very clearly that an exit agreement is not guaranteed, that only if an exit agreement is reached there is a chance of a transition period that is like membership minus voting rights, and that a trade treaty will be Canada-like, and will take years to finalize, and will never be like being in the EEA but without free movement and ECJ:

    https://www.lesechos.fr/monde/europe/030770026245-barnier-le-royaume-uni-ne-pourra-pas-avoir-les-avantages-de-la-norvege-et-les-faibles-contraintes-du-canada-2124526.php

    Given this T May and D Davis have the following points to ponder:

    * They need the kipper votes to win the 2022 elections, as they barely won in 2017 with 2m extra kipper votes.
    * They will get the kipper votes only if they win a famous "told you so" victory over the EU27.
    * The famous victory must be either getting some "have your cake and eat it" trade deal, Canada-plus or Norway-minus, or not paying a penny of the past commitment that come due on exit, "so sue us".
    * The chances of a Canada-plus or Norway-minus post-exit trade deal are pretty much zero as M Barnier says.
    * Still in Florence T May demanded a Norway-minus transition periods followed by permanent Canada-plus permanent trade deal.
    * T May has realized that her best electoral agreement is to "Leave" without an exit agreement, without a transition deal, and without a prospect of a trade deal, and to blame it all on the EU27 "bullying".

    ReplyDelete
  5. So overall I think that the one case where the soft-exit or even non-exit happens is if there is a house price crash in London and the south-east: in that case it is certain that the Conservatives lose the 2022 elections, and then a famous victory over the EU to satisfy their kipper voters no longer makes a difference.
    But a house price crash may have far worse consequences for the Conservative donor and voter base than hard-exit, so they will do whatever to avoid it.

    ReplyDelete
  6. "[The Leave side] had completely unrealistic expectations of the relative power of each side. his was an advantage during the campaign, because they could say ridiculous things about the economic consequences of Brexit without knowing it was a lie."

    Really? Do you really think that Gove believed himself when he said that "the day after we vote to leave we hold all the cards and we can choose the path we want"? You're giving him and other Brexiteers too little credit for intelligence and too much for integrity. He's not that stupid. It was clear to any informed observer that the power dynamics would be the polar opposite of this. With the integrity of the EU at stake, a few German car sales more or less were never going to win the day. And so it turned out.

    The worst explanation for why the majority of MPs ignored your advice is not that they didn’t hear it, as you state. The worst explanation is that they did hear it, and knew it to be correct, but decided that for (party?) political reasons - the threat of a Brexiteer coup sounds right - they had to stick with the empty promises and assertions of the referendum campaign. They did this knowing full well that the consequences would be economically disastrous, but those consequences can easily be deflected by blaming a "bullying" EU and scapegoating migrants.

    That's exactly how it's panning out so far, and we have by no means seen the end of it. For EU citizens like yours truly it's a terrifying position to be in. I still love this country on the whole, but it's clear that Brexit has helped a really rather ugly undercurrent to surface in national politics and wider society.

    ReplyDelete
    Replies
    1. WHAT ABOUT THE BIG LIE CALLED PROJECT FEAR AND NOW PROJECT FEAR MARK TWO.

      Delete
  7. If the UK becomes the low-tax, low-regulation tax haven that has been the Big Brexiteers plan all along, what will voters think? As public services and wages decline in "tax-haven UK" this is surely not good news for the Conservatives. How will they keep up their vote?

    As you might expect, the Conservative press is already helping by not giving much coverage to this plan, so I doubt many voters are aware of it---or the consequences it might have for them.

    With the plan safely in place, if all goes well for the hardliners, presumably the Conservative press is calculating that it can sell "tax-haven UK" to enough of its readers to keep them voting Conservative and keep them in power. The "sell" may take years but then so did a similar newspaper narrative which blackened the EU in the eyes of half of voters.

    ReplyDelete
  8. Blissex,

    Another argument is that it was "politically necessary": if the referendum had been won with 72% for "Leave" instead of just 52%, the "Leave" side would not be pushing to get out as quickly as possible regardless of consequences, to make sure the deed is done before the 52-48% swings the other way.

    Even if the percentage of British public opinion supporting Brexit had been 72% (instead of 52% and falling) then EU directive 2016/1164 (the planned crackdown on tax avoidance to begin in 2019) would mean that the Tories would have still had an incentive to rush Britain out of the EU as quickly as possible.

    ReplyDelete
  9. It behoove all of you Brits to read an article in the Volkskrant a Dutch publication, written by Luyendijk who has lived in England for 6 years and who left. He was fed up with the attitude of the English in general. His comments are similar to the comments from my Father, a Dutch Sea-Captain who dealt a lot with you English during WWII and the decades thereafter. The bottom line from Luyendijk: "he is now in favor of Brexit, because it is better to get rid of England with is arrogance and whining attitude. I personally, living in the USA, know that the present attitude and non-functioning government in the USA will make America also not-relevant. It will take 20 years, but America will slide to nothing over that time. Same problems as the English: self-admiration, arrogance, no interest in others... and yes, the Dutch did so too, in the end of the 17th century and thus lost the 4th English War. We got over it, we are doing well. (Hey, maybe it has something to do with the English language?)

    ReplyDelete
    Replies
    1. Well, Rupert Murdoch has big media interests in Australia, New Zealand, many Pacific Islands, Canada, the USA, the UK---all English-speaking areas.

      Delete
  10. Considering de Rothschild was the originator(via Murdoch) of "Brexit" and the Normans, de Rothschild biggest allies, I suspect the Saxons feel blood and want to liquidate the UK as national entity. The EU citizen is one that does not exist. The EU is a market based polarity. At some point, you need to respect the market.............or die. de Rothschild think they can grow distrust, but instead, they are making the Saxons even madder.

    ReplyDelete
  11. As soon as #projectfearmark1 failed the remainers started #projectfearmark2 to spoil the negotiations. There was no apology for the #projectfearmark1 or withdrawal from public letter to the press just an immediate persistence in break brexit. It proves that the current bunch of economists are not economically motivated just political motivated. It also proves their claim to expertise in their field is flawed.

    ReplyDelete

Unfortunately because of spam with embedded links (which then flag up warnings about the whole site on some browsers), I have to personally moderate all comments. As a result, your comment may not appear for some time.