John Bruton is a former Irish Prime Minister and EU ambassador to the USA. Like Leo Varadker, he was leader of Fine Gael, the most conservative and arguably the least nationalistic party in Ireland. Indeed he was the leader of the least nationalistic and most conservative wing of that party. So much so, that that he was dubbed “John Unionist” by his rival, Fianna Fail leader and Taoiseach, Albert Reynolds, for his willingness to crack down on IRA violence and to accommodate Unionist demands on almost everything.
I give you this background to emphasise that there is no more conservative and Anglophile figure ever prominent in Irish politics, and one sympathetic to both UK Conservative and DUP Unionist concerns. And yet he has some dire warnings for the UK about the difficulties they are likely to encounter in phase 2 of the Brexit negotiations:
The UK Cabinet is, at last, getting around to discussing the sort of trade agreement it wants to have with the EU after it has left.
It intends to make up its mind by mid-January, according to the Sun newspaper.
Prime minister Theresa May has ruled out staying on in the EU customs union (like Turkey) or in the single market (like Norway).
Although she has ruled out these options, May has in fact gone much further down the soft Brexit road.
She has committed, in the joint report of EU-UK negotiations, to “the avoidance of a hard border, including any infrastructure or related checks and controls” at the border in Ireland, and also to protect Northern Ireland’s place in the UK internal market.
Customs checks exist at the EU border with both Turkey and Norway, so May’s promise in the joint report goes beyond either the Turkish or Norwegian options.
It is noteworthy that the UK has not just said it will never erect a hard border on its own side. It has committed itself to the “avoidance” of such a border, presumably on either side. That would mean that the UK has bound itself not to adopt any UK policies that would require the EU, under its existing rules, to impose such border controls.
That would rule out devising new and distinctive UK product standards, which Boris Johnson suggested over the weekend. It would also rule out Philip Hammond’s idea of the UK diverging from EU rules on certain technologies.
He then goes on to say:
The EU would have difficulty offering the UK better terms than it would offer another European country.
For example, Norway and Switzerland have access to the EU market. They also make ongoing financial contributions every year to poorer regions within the EU. Those agreements with Norway and Switzerland would be undermined if the UK got a similar deal without similar contributions.
Furthermore any EU-UK deal will have to comply with the Interlaken principles.
These principles govern all EU agreements with third countries, and were formulated in 1978, with UK participation. They have been followed ever since.
The first Interlaken principle is that, in developing relations with nonmember states, the EU will always prioritise its own internal integration. The UK cannot expect the EU to agree to anything that would cause divisions within the EU.
The second Interlaken principle is that the EU must safeguard its own decision-making autonomy. For example, the European Court of Justice, and the legislative bodies of the EU, cannot be constrained in their decision-making processes by any deal made with the UK. The idea that a joint UK-EU court might have precedence over the ECJ would run counter to this principle.
The third Interlaken principle is that any relationship must be based on “a balance of benefits and obligations”. It is not for the nonmember state to choose only those aspects of EU integration it likes.
There is another factor the UK will need to take into account. This is the “most favoured nation principle” of the WTO, which is the foundation stone for global trade.
It requires the extension, to all members of the WTO, of any “advantage, favour, privilege or immunity” that is offered to one .
Cherry-picking in international trade could get the UK into trouble with all the countries it does business with.
Formulating a UK proposal, which satisfies all these conflicting criteria, will be hugely demanding task, not only politically, but intellectually and legally.
“Taking back control” and “no hard border” are hard to reconcile, to put it mildly.
The dilemma, in which the UK in which now finds itself, may be self-created, but it is real. Irish people should wish Theresa May well in her immensely difficult task.
The reality is that in today’s global economy economies of scale and of comparative advantage dictate vast amounts of trade are done across political borders, and some quite tightly defined rules dictate how that trade can be conducted – in fairness to all parties. And this is before we even consider the much more restrictive conditions that apply to members of the (internally borderless) customs Union.
You can, of course, choose not to play by these rules, as Trump is claiming to be doing, so far to little practical effect. But even an economy as large as the USA is going to suffer if the flow of inward investment slows to a trickle, or if US goods are subject to export restrictions – as in the case of the famous ‘chlorinated chickens’ or genetically modified foods.
It will be interesting to see how the UK responds to US plans to impose swingeing 219% tariffs on Bombardier plane exports from N. Ireland to the USA. The UK may be about to learn that its a very cold world out there if you are out on your own. Would the USA propose similar tariffs if the EU threatened to impose equivalent tariffs on Boeing planes?
For the UK the problems are much more acute, as so much of the UK economy is based on services, and these are generally not covered by trade agreements at all. The UK is already running large trade deficits – despite periodic devaluations of the £ – and it will not help if it loses access to the Single market for such services. In addition, Ireland is one of the few countries with which the UK runs a significant trade surplus. Restrictions on trade at the Irish border will not do the overall UK balance of trade any favours at all.
The UK may want a “special”, “bespoke” deal with the EU, but the reality is that the EU cannot offer such a deal without offering similar terms to Norway, Switzerland and any other WTO member claiming they too deserve similar ‘most favoured nation’ status. The EU simply has too many FTAs already agreed or in the works that it will not wish to undermine by offering more favourable terms to the UK.
Indeed German Foreign Minister, Sigmar Gabriel, has already stated that the Brexit agreement could serve as a model for other countries such as Turkey or the Ukraine, who wish to have a closer relationship with the EU. Ouch! The UK granted equivalent status to Ukraine or Turkey? poetic justice, perhaps, for Brexiteers using the false “threat” of Turkey joining the EU against UK objections as a bogeyman in Brexit referendum debates.
The UK is about to find out that in international trade, there are no best friends, just business partners, and there are a lot of rules which apply to those relationships. Unless you are at the head of a global empire, perhaps, in which case you can set your own rules. But even here, there are limits to what you can do, as Trump is finding out. Mexico shows no sign of paying for the wall. “Taking back control” is a slogan strictly for domestic consumption.
