Home Flexcit Impact Assessments Monographs Contact Archive

Brexit: the "train-wreck" looks closer

2017-01-07 04:15:14

Aided (or even caused) by the silence from No 10 over Brexit, compounded by the resignation of Sir Ivan Rogers, is a growing sense that the task of withdrawal is falling apart.

One can only hope that these fears are premature and, as Mrs May comes storming back into the debate with her speech scheduled for the end of the month we will all be mightily reassured that she has things under control.

In the meantime, we see in the Guardian the headline: "Fears that UK is heading towards 'train crash' Brexit", which seems to sum up something of the prevailing mood, where nothing is resolved and the debate is going round in circles.

This is from "Brexit editor" Dan Roberts, who writes that the newly appointed Tim Barrow "faces the daunting task of stopping what colleagues and critics suspect is a tumble towards a disorderly exit from the European Union".

Where, Roberts says, "once the choice was between 'hard' and 'soft' Brexit, the new worry in diplomatic and business circles is that the UK is heading for 'train crash' Brexit, a scenario in which incompatible negotiating demands from Downing Street and the other 27 member states result in Britain walking away without a deal on either the terms of separation or future trading relations with the EU".

This is the "accidental crisis" of which we were writing in July, when we pointed out (yet again) the perils of the "WTO option". But all that seems to have transpired between then and now is an almost wilful refusal by diverse parties to accept the consequences of falling back on this option.

Through the report of Dan Roberts, we see the "usual suspects" from the Tory back benches, making no secret of relishing the possibility of walking away with no agreement.

Typically, we have Iain Duncan Smith saying: "It's very simple. We are leaving the European Union", while the egregious John Redwood tells us that "The only significant issue outstanding about our future relationship is trade", and suggests that, "after all the huffing and puffing, they will want tariff-free as it is more in their interests than ours".

Of course, it isn't simple. Undoing 44 years of political and economic integration was never going to be "simple". It can be managed, and a successful extraction is eminently possible, if we are sensible about it. Only if we ignore the complications instead of confronting them do we face disaster.

It takes a particular type of bovine stupidity, therefore, to ignore those complications. Even more so Charles Moore, who asserts that: "Only those who don't want to leave see Brexit as mind-blowingly complicated". This facile, pompous man places himself above those who have worked so hard to make sense of Brexit, without the first idea of what he is talking about.

However, we are used to stupidity from the Tory right. They would have us out of the Single Market with nothing to replace it, and seem oblivious to the consequences. But if they object to their very obvious stupidity being described as such, there is a very easy answer. They could start by looking at this list of chapters (illustrated above) of the EU acquis.

These chapters have to be addressed by all accession countries and it stands to reason that we will have to "reverse engineer" exactly the same chapters if we are enjoy an orderly departure. To call our withdrawal "simple" is grotesque.

Despite this, it is not particularly surprising to find Liam Fox talking down the prospects of a "hard" Brexit. He thinks that, even without a deal, Britain can "temporarily rely on international tariffs agreed by the EU and strike bilateral deals in future". Though "some WTO tariffs, such as those for cars, are punitively high", he says, "most would be tolerable".

This narrow, obsessive focus on tariffs to the exclusion of all else again is typical of the Tory right-wing tendency, but also bolstered by a wilfully ignorant media which disseminates and perpetuates its own ignorance. The media we can do little about, but at least there is one small consolation that Fox isn't in charge of the negotiations and is unlikely to have any great influence on their outcome.

What is surprising, though, are the comments of Brendan McGivern, supposedly a WTO expert at White & Case in Geneva. Dan Roberts has him saying of the "WTO Option" that: "It's really not an abyss. This is the basis that the USA and Japan trade with the EU. It's a robust system".

It is almost unbelievable that we should have this from a supposed expert. It is wrong, and demonstrably so. As we were writing in April last year, EU-US trade relies on a complex matrix of 23 agreements that define relations between the two blocs. Japan registers 86 treaty agreements with the EU, many of which deal with trade, including an agreement on the mutual recognition of conformity assessment.

These complex agreements, built up piecemeal over decades, work within the overarching framework of WTO and other multilateral agreements, and it is they which make trade possible on the terms agreeable to all parties. It is inconceivable that the UK, in the absence of a fully-fledged trade agreement, could trade with the EU on anything like equitable terms, without similar arrangements.

Once again though, we are suffering from experts speaking outside their remit. McGivern is not a trade specialist. He is a lawyer working in that important but limited field of dispute settlement within the WTO. Clearly, he has little understanding of the wider issues governing relations between the EU and its trading partners.

But not only do we get this entirely unwarranted complacency from McGivern, he talks up the virtually non-existent problem of "moving to WTO tariffs". This, we are told, "would require agreement". Other signatories around the world would need to accept that Britain had a right to inherit the same rates negotiated with the EU.

"In the case of agriculture, where there are shared quotas in place to limit cheap imports, Britain would have to negotiate its share with French farmers or risk losing entire export markets", McGivern says.

But, actually, we're already working to WTO tariffs those negotiated for us by the EU. But if we shadow those tariffs, and are fairly generous in the apportionment of tariff rate quotas, then there really will be no significant perturbations. All this is explained in Monograph 8 - tariffs and quotas are the least of our problems.

Nevertheless, Dan Roberts does recognise there are worries about the chaos that might follow a disorderly Brexit. "There is also the question", he writes, "of where it might leave the dozens of regulatory agencies that provide vital services for the economy, or the millions of EU citizens stuck on either side of an increasingly bitter immigration row".

Disturbingly though, we see increasing numbers unnerved by the hostility expressed to the Efta-EEA solution and the ambitions of some remainers to use it to keep closer to the EU. Some of those, uncertain of their own beliefs, are even changing their positions.

Such changes, however, rely on talking down the potential dangers of the "WTO Option" itself a very dangerous thing to do. Their doubts are not helped by the poor quality of information, the lack of understanding of the issues and the inability of some to put the whole picture together.

There is almost a parallel between this and the "accidental war" of 1914 when, after the troops had been mobilised, there was no way of calling them back. Had the cheering crowds outside the gates of Buckingham Palace known of what was to come, they may have been less enthusiastic.

Similarly, if people properly understood the perils of the "WTO Option" and avoided the self-delusion that infects the Tory right, they might be less complacent and more determined that we follow a safer route to exit. But the very great problem here is that the fragmentation of the "leavers" - and their inability to coalesce behind a coherent plan - opens the way for the remainers to set the Brexit agenda.

As it is, everything is now being left to Mrs May. She, it seems, is all that stands between us and a train-wreck, the like of which none of us want to experience, or can afford.