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How to negotiate with the EU

Edward Cree
December 12, 2018

In an aside from the ongoing from the pandemonium surrounding Theresa May's leadership, Edward Cree offers a detailed assessment of the Government's negotiating strategy with the EU and its shortcomings.

It's a truism in Brexiteer circles that the Government's first big mistake was to accept the EU's sequencing of the talks, which divided them into two parts: withdrawal matters (stuff the EU wants) and future trade (stuff the UK wants), with the mantra 'nothing is agreed until everything is agreed' apparently being interpreted only to apply within each part and not between them. It's interesting to consider what should have been done instead, not only for the light it sheds on the Government's failures but also in search of pointers as to what the UK should do next after rejecting the Withdrawal Agreement.

The proper approach would have been a series of agreements, each an incremental, bilateral advance on the WTO 'status quo' of No Deal. First, agreements to legally enshrine things all parties have politically promised to do, beginning with the Irish question. As the UK, the EU and the ROI have all stated that no hard border will be imposed, all should have initially signed a document to the effect that, notwithstanding the possible absence of agreed solutions for UK-EU trade beyond GATT provisions, no party shall erect a hard border between Northern Ireland and Ireland; the enforcement of any tariffs or regulations to take place away from the border e.g. by checks in the market.

Such a document would provide a true 'backstop' to further negotiations, ensuring that neither side can use the threat of a return to sectarian violence as a means to extract concessions; and the UK could and should refuse to engage on any matters of interest to the EU (such as a 'divorce bill') until it has been signed. Moreover, if the EU were to refuse to sign such a document, it would be essentially announcing to the world that it was willing to sacrifice the Good Friday Agreement and, potentially, Irish lives, on the altar of Single Market integrity.

The UK would need to make clear that the choice facing the EU was between that deal (with possible further agreements to follow) or no deal at all, and argue that in the latter case it would remain impossible for the EU to prevent goods and livestock crossing the border from NI no matter how many border checkpoints they might erect. Of course proper preparations for a no deal outcome would be essential to give teeth to this position. The reason why the EU has tried so hard to get us to sign up to a 'backstop' on Northern Ireland is because they know full well that the existing backstop of No Deal, the status quo, is an open border; we must stand firm and force the EU to legally recognise that fact before allowing anything else to be placed on the table.

Another agreement which should be insisted on in this early stage is a bilateral one on expat rights; the UK repeatedly floated the idea of such a deal as a way of taking both UK citizens in the EU and EU citizens in the UK off the negotiating table and preventing either being used as a bargaining counter. A robust negotiating approach would, again, have insisted on such a deal as a precondition to further talks, removing the uncertainty and fear that still hangs over expats today.

The second stage would consist of agreements of the kind that even unfriendly nations have with one another. For instance, aviation and telecommunications agreements to implement ICAO and ITU/CEPT commitments. Since this would mainly just be the EU recognising its member states' obligations under existing international agreements, there should be little difficulty here.

With all the above concluded, the alleged 'cliff edge' of No Deal would have been converted into the speed hump of tariffs. The EU would be prohibited, by its WTO commitments, from raising UK tariffs above those it charges on the rest of the world or introducing non-tariff barriers against products that meet its internal market standards. Meanwhile the WTO's Trade Facilitation Agreement obliges the EU to refrain from introducing unnecessary border frictions (think customs officials in peaked caps and written forms in triplicate) where smoother electronic procedures are available. A bilateral agreement to implement those obligations could be signed to give businesses certainty over the exact scope of the rules and avoid the risk that they might need to be litigated through the WTO's dispute settlement system.

Thus, the final hurdle to clear would be the 'cash for free trade' deal that lies at the heart of 'Canada+++': trade without tariffs (in both goods and services), recognising that our standards are initially identical, in return for a sum of money (the figure £39bn is often thrown around) which allows the EU to close its budget hole. Of course the EU protests that it cannot sign such a deal with us while we are still a member; leaving aside the speciousness of that claim, the deal could simply wait until after Exit Day (since exit without it would now simply be a matter of tariffs, rather than ). Or, if need be, a 'standstill agreement' could be mooted whereby the UK pays some smaller sum and, in return, the EU's tariffs are held in abeyance for some fixed period of time (say, three months — there is no need for a two-year transition period), during which the free trade deal (with the rest of the money) could be signed. (Such an agreement is permitted by WTO, under Article 24 of GATT.)

But supposing that the EU decided that it could, after all, scrounge up the money it needs from the back of Germany's sofa, and chose not to sign a free trade deal, or supposing that the process halted at any of the previous steps, the UK would have a simple way to ensure that, at least, goods inward were not disrupted (avoiding the "no medicines" and "no fresh water" scares that some Remain tendencies keep bringing up). This would be to adopt, at least temporarily, what I call the "lowest common denominator"[3] model, whereby the product standards of a series of trading partners (e.g. EU, US, Canada, Australia, NZ) are each considered sufficient for sale in the UK, and the approval of, say, Canada's regulatory bodies automatically clears a product for the UK market without needing to involve the corresponding UK regulator. Since nearly every export industry of every nation we would want to buy from sells to (and thus conforms to the regulations of) at least one of those countries, we would have no difficulty in finding a source for whatever we needed to import.

So much for what we coulda woulda shoulda done; 'we are where we are' and what do we do now? Well, as David Campbell Bannerman has pointed out, all of this could still be done today, by throwing out the draft Withdrawal Agreement and hitting the reset button. The three and a half months left are easily enough time, technically, to settle everything except the free trade deal, leaving us with what is sometimes referred to as a 'Managed No Deal'; all that is missing is the political will, and there it is only No. 10 that is the problem. For all of the precursor deals, when sold as "not intended to be the final relationship, just a stepping-stone on the way to an unspecified deeper and closer partnership", would be difficult for Parliament to object to — try to imagine MPs voting against, for instance, an Irish border accord in isolation. Similarly, they can be sold to the EU as being better for the EU than the alternative of no further deals.

We need only one thing: a Prime Minister who believes in Brexit. If the parliamentary Tory party senses the public mood, and decides after all to honour the referendum result, we might yet get one. Sadly that seems unlikely.

Edward is a software engineer from Cambridge. His pastimes include cricket and playing the French horn.
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