The full text of Theresa May’s A50 notification letter is available here, and is well worth a read in full. It is a largely unobjectionable 2200 word document, and takes into account some of the previous criticisms that the UK should not be allowed to “cherry pick” those aspects of the EU it likes, to the exclusion of those it does not like.
Overall it paints a positive picture of the EU it wants to do business with as an economic and security partner. So much so, that one wonders why the UK wants to leave in the first place! Membership already provides what the UK says it wants to achieve in its future partnership with the UK. One is left with the feeling that what the UK really wants is not to be just one member amongst 28: It wants to be in some kind of equal Partnership with the EU27 as a whole.
Ireland will be particularly pleased that it makes special reference to our unique relationship with the UK, to the importance of the Good Friday agreement, to the avoidance of a “hard” North south border, and to the maintenance of the strong trading relationships and free travel area between Ireland and the UK. Again, nothing we don’t currently already have.
So it reads very much like the UK wants “to have it’s cake and eat it” at the same time: Maintenance of existing relationships and freedoms with Ireland and the EU, whilst at the same time achieving the freedom to do business with the rest of the world without reference to the EU. Well, she would say that, wouldn’t she?
But there are a few problems already apparent in the letter. Reference is made to wanting a “strong” EU as an economic and security partner sharing common values. But how is Brexit supposed to strengthen the EU? And have Brexiteers not been quite open about their wish to see the EU disintegrate and about their expectation that other members will seek to leave once they see what a “success” the UK has made of Brexit?
The Letter makes it plain that the UK wants to negotiate a future trade deal side by side with the detailed arrangements for leaving. More than that, Theresa May wants any such trade deal to go beyond the scope of any trade deal agreed in the past to include financial services. This rather ignores the fact that even much less comprehensive trade deals typically take many years to negotiate and that any comprehensive agreement is unlikely within the 2 year A50 time frame.
Reference is made to trading on WTO terms if no agreement is possible, ignoring the fact that even WTO terms have to be negotiated and agreed between trading partners. There simply are no “default terms”, other than a few general principles, available under WTO rules in the absence of agreement. Import duty rates and quotas have to be negotiated first. There would be nothing to prevent either or both of the UK and EU putting duties on each other’s exports post Brexit if no such detailed terms of trade are agreed. Indeed the EU might be forced to impose such duties if a major devaluation of Sterling were to put it at a dramatic trading disadvantage.
Reference is made to both sides “having regulatory frameworks which already match”: but what is the point of Brexit if it is not to free the UK from EU regulatory oversight and to enable divergence in due course? Theresa May has already threatened to turn the UK into a low tax, low regulation haven if talks fail. Allied to a major Sterling devaluation, such measures would simply force to EU to protect its own industries through import duties.
Reference is made to have a disputes resolution procedure when the EU already has one – the ECJ – which Theresa May has said the UK will not accept. Indeed rejecting the jurisdiction of the ECJ appears to be one of the main drivers behind Brexit. Why on earth should the EU reject its own judicial system? To do so would be to accept that the ECJ is incapable of resolving disputes with the UK and that the UK must be granted equal status in any new disputes resolution process. Why reward Brexit by promoting the UK from being one of 28 to being one of 2 equal partners?
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Much as I would like to see the Brexit negotiations resolved amicably, and much as it would be in the particular interests of Ireland that this should be done. I just cannot see the A50 process ending well. There are two main reasons for this, one economic, and the other political.
1. Economic reasons for a hard Brexit
The referendum result has already seen the large-scale development of contingency plans by UK based companies to relocate large part of their operations in the EU27. There have been almost no announcements going the other way – of EU27 companies re-locating large parts of their business into the UK to protect their UK market share. Why on earth would the EU wish to discourage this process?
Much has been made of the fact that the EU “needs” London’s financial expertise and expertise and the fact that many financial disputes are resolved using UK law. This may very well be so, but can the EU really expect to be taken seriously as a world power if it does not develop its own, Euro based, centres of financial power and judicial determination? Some short-term disruption may be damaging, but the long term interests of the EU are clear. It must develop its own independent financial services presence in the global economy.
2. Political reasons for a hard Brexit
However much you might seek to dress it up in emollient language – as Theresa May’s Letter seeks to do – the hard fact is that Brexit represents a stab in the back for the European Project. The over-riding purpose of that project is to maintain peace and stability on the continent by reining in competing nationalisms and ensuring that the common interests of all member states take priority over the particular interests of one member state or ruling class at one particular time. No one member state can be allowed to game the system to the detriment of all others.
Brexit represents an attempt by one member state to re-write the rules in its favour. Not content to be one of 28, the UK seeks the right to negotiate more or less comparable terms on its own behalf without being subject to the overall Sovereignty of the 28 and the institutions of the EU – the ECJ, EC and EP. Effectively it is seeking a special relationship as a more or less equal partner: able to go its own way as and when it chooses whilst maintaining most of the benefits of membership.
Trade and other international agreements constrain both parties. Why should the EU27 agree special arrangements with the UK which might constrain their future freedom of action in response to some international financial, economic or, indeed, security crisis. The UK could, for example, agree a future deal with Russian Oligarchs to locate most of their assets in London, on favourable terms thus giving them access to the EU on whatever terms the UK has been able to negotiate – whilst at the same time the EU might be more or less at war with Russia over the Ukraine or some other crisis point.
The UK could become the sanctions busting, low tax, low regulation, environmental, civil rights and labour rights busting haven in Europe; undermining every value the EU holds dear or is trying to achieve; an ally to Trump and every dictatorship on the planet; and refusing to accept refugees from anywhere. Does the EU really want to tie itself to that nightmare scenario?
If the UK really wanted to be a team player in Europe it would never have chosen to leave the EU in the first place. It has been gaming the EU for long enough. No deal is better than a bad deal for the EU as well. Otherwise we might as well get used to the Le Pens of Europe ruling the roost and breaking up what is left of international solidarity on the continent.
For the EU Brexit is about much more than transient economic or political advantage. It is about maintaining the peace and prosperity achieved on the European mainland since World War II. Some economic disruption is probably unavoidable. The German car industry and Irish agricultural and food exports will suffer. Financial services and many transnational production processes will have to be re-organised. Trade with the UK will suffer and overall growth in Europe will decline. The EU, too, will have to reform its institutions to ensure they do a better job of avoiding crises and protecting the common good.
But nothing compares to the devastation which could ensue if we allow the EU project to fail. For the EU to survive, Brexit cannot be seen to be a “success”.
