Wednesday, 6 December 2017

We Gotta Get Out of This Place

The government's attempt to find a form of words that would satisfy the EU27 and allow progress to phase 2 has run aground not on the mechanics of commercial regulation, which are as much of a mystery to most MPs as to the general public, but on the vexed issue of sovereignty. It's worth reminding ourselves at this point of the difference between internal and external sovereignty. The former concerns who has the ultimate authority within a state. That authority includes the right to pass domestic laws to accommodate the interests of foreigners in general (e.g. allowing non-citizens to own property in the UK) or other states in particular (e.g. allowing the US to operate airbases on UK soil) , but doing so does not compromise sovereignty because those laws can always be repealed or otherwise amended in the future. The ability to reject the past and impose a new regime is a defining characteristic of the sovereign. Constructively ambiguous though they may be, terms such as "no divergence" and "regulatory alignment" imply a commitment to keep domestic regulations in sync with the EU, but they do not imply submission to regulation or oversight by the EU. This is therefore an exercise of internal sovereignty.

External sovereignty concerns the concession of specific authorities beyond the state. Historically, that was often the result of coercion, such as by colonies in an empire or through the ceding of territorial control (e.g. by China to the UK over Hong Kong). Today, it is more likely to mean cooperation, such as intergovernmental organisations like the International Criminal Court, or collective regulation among peers, such as the EU single market. In respect of sovereignty, there is no fundamental difference between the UK's relationship with the EU and its relationship with the UN, NATO or the WTO. In all cases the UK has pooled authority in return for specific benefits. While states can always revoke concessions of cooperative external sovereignty, as the UK is now doing in respect of the EU, the reciprocal nature of those concessions entails a quid pro quo: we necessarily lose something, a point that the EU has repeatedly emphasised but some Brexiteers remain in denial about. Though it has received less media coverage than the border, the actual issue of external sovereignty that remains up in the air is the continued status of the ECJ as a final court of appeal in respect of the rights of EU citizens in the UK post-Brexit.

The government presumably hoped that their preferred wording on the Irish border would provide sufficient reassurance to the EU27 to allow progress to phase 2 of the negotiations without any concession of external sovereignty; in effect substituting the Good Friday Agreement as a guarantor in place of any EU institution. This would have been an astute move if the DUP were genuinely keen to preserve the GFA, but even a passing acquaintance with Irish politics should have alerted London to the unlikelihood of that. The DUP chose to interpret the wording both in terms of external sovereignty, as a concession to a foreign power (the Republic), and in terms of internal sovereignty, as an erosion of the constitutional integrity of the UK. Leaving aside for the moment that this integrity is illusory (not least in Northern Ireland), this shows the way that mixing the two produces a volatile combination in which matters of practical international cooperation are inflated into existential threats. The Tory ultras have done likewise, condemning the proposed wording as both a constraint on future trade deals with other nations and as an attempt to achieve a united Ireland by the back door.

Today has seen members of the cabinet provide two key insights into the British government's thinking. David Davis told the Commons Brexit Committee, "The strategy we decided way before the October council, before March, indeed before the triggering of article 50, was that we would go for an over-arching, comprehensive trade deal". For Davis, this was a reason to not bother preparing impact assessments, but it also implies that the government did not expect to have to elucidate, let alone honour, the wording in respect of the Irish border. The gamble appeared to be that a superior deal could be agreed in phase 2 that would make the wording irrelevant. However, while it wasn't unreasonable to believe that the EU27 also wanted a comprehensive trade deal, it was risky to imagine that this would be bespoke rather than off-the-peg. We know that the government can only reconcile the demands of Brexiteers with the need to maintain advantageous market access through cherry-picking, but that is precisely what the EU27 will not allow (it is also likely to fall foul of WTO rules if it is anything short of comprehensive, and a comprehensive deal with the EU would limit the potential for deals with other countries).

Of the off-the-peg solutions, the Norway option (EEA) is clearly unacceptable to the ultras because it entails the free movement of labour and continued payments to the EU, while the Canada option (CETA) would be inadequate because it doesn't cover services and would require a hard border. At the moment, the Canada option looks like the logical starting point for the phase 2 negotiations, assuming we ever get there. The omission of services would be difficult to rectify short of a comprehensive scope, which is essentially the EEA option. A more limited deal for financial services will no doubt be mooted, but that would be picking the largest and juiciest cherry, which is unlikely to meet EU27 approval unless there are major concessions elsewhere. The need for a hard border could be avoided by agreeing to align with the EU's external tariffs, but that would be identical to remaining in the Customs Union and would constrain the UK's ability to agree trade deals with others. The UK might be able to swing a financial services sector deal in combination with continued membership of the Customs Union, but that would pretty much kill the "free trade" vision of Brexit and indicate that the government's priority remains the City of London. That's not a popular look.

The second key insight came with Philip Hammond's admission that there has been no substantive discussion by the cabinet on what the Brexit end-state should be. His explanation was that this would have been premature before the end of phase 1, though it is unclear what new data or understanding has been gained over recent months that would have a material impact on any debate. Given Davis's admission that impact assessments haven't been carried out, Hammond's caution seems at odds with the general air of insouciance. One way of reconciling these two attitudes is to assume that the key players have arrived at the same conclusion from different directions, namely that Brexit will largely mean whatever the EU27 decide it means. The phrase "nothing is agreed until everything is agreed", which has replaced "Brexit means Brexit" as the stock answer to most questions, might suggest this. Rather than May, a woman not known for sunny optimism, adopting a Micawberish attitude of "something will turn up", it looks more like she is hanging on grimly in the hope that reality and the EU's own red lines will gradually persuade the cabinet to concede that the Norway option really is as good as it is going to get. Until that realisation dawns, we must continue to plod wearily through the slough of despond.


  1. Are you casting the EU as Mr Worldlywiseman? He doesn't end well either.

  2. If it comes down to a choice in cabinet between a 'Norway option' (however it may be dressed up) and a 'no deal' (WTO rules) can the Tory party survive?

    If the cabinet decides for a 'Norway option' it will pass the House of Commons because the bulk of the Labour party will support it together with whipped Tories. There will be a large number of Tory rebels who will then bring down May, a leadership contest ensues. A general election should follow.

    If the cabinet decides for a 'no deal' perhaps they can get this through the House of Commons, but surely it would be close. On the 28 March 1979 Uncle Jim's Labour government lost the vote of confidence by one vote.

    The force keeping the Tories together is the desire to remain in power. To get on in the Tory party in recent years has required demonstrating sufficient Euroscepticism. So it's possible Euroscepticism trumps the desire for power. Or put another way the only way to keep the Tory party together is to keep pushing for a hard Brexit.

    It's very hard to see a happy ending for the Tory party at this point.

    Another factor worth considering is what is going on in the rest of Europe. Germanay still to form a coalition. Italian General Election May 2018. The Italians have suffered horribly in the Euro under the SGP. Maybe the shine coming off Macron in France. However the Eurozone economy is picking up. Even if a very radical government came to power in Italy would EU change occur, probably not, or at least not fast enough to effect Brexit.