Brexit and the waning days of the United Kingdom

[Josquius]

A theory on Boris the foreign minister which made me smile - they were writing a list of who gets what and by his name just wrote f. Off

[Zanza]

I read this piece by the Brexit minister on how he sees the way forward: http://www.conservativehome.com/platform/2016/07/david-davis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-for-britain.html

He seems to be quite the optimist. His expectation is that Britain will have fully negotiated trade agreements with the US, China and India in place when it leaves the EU in late 2018. 

And he wants to offset the losses of no or less single market access by levying tariffs on European Union trade and using that to pay for subsidies in Britain. And somehow that makes everybody better off. Which totally makes sense for a free trade proponent.

[Maladict]

His expectation is that Britain will have fully negotiated trade agreements with the US

They're very welcome to keep the TTIP negotiations as part of the breakup. 

[Josquius]

I read this piece by the Brexit minister on how he sees the way forward: http://www.conservativehome.com/platform/2016/07/david-davis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-for-britain.html

He seems to be quite the optimist. His expectation is that Britain will have fully negotiated trade agreements with the US, China and India in place when it leaves the EU in late 2018. 

And he wants to offset the losses of no or less single market access by levying tariffs on European Union trade and using that to pay for subsidies in Britain. And somehow that makes everybody better off. Which totally makes sense for a free trade proponent.

I.e. He's thrashing about in the water and punching his friends in the face as a result.

[Sheilbh]

It's really frustrating to now see the 27 talking about precisely the kind of reforms that would quite possibly have kept us in, in response to Brexit. A lot of the stuff I'm seeing floated now would have been seen as a fairly decent rather than a pisspoor renegotiation by Cameron

As the second biggest country and if you had had a slightly more positive general attitude towards the whole thing, you could perhaps have pushed in that direction. But you prefer to be Little Englanders. 

I agree Cameron should have framed this as EU reform rather than a special deal for the UK. But I think it goes both ways. Europe was far too blithely confident that there wouldn't be a Brexit vote to even concede things that are now apparently being talked about to help fix the EU. If it's part of a reform agenda now, it would probably also have been good six months ago.

He seems to be quite the optimist. His expectation is that Britain will have fully negotiated trade agreements with the US, China and India in place when it leaves the EU in late 2018. 

And he wants to offset the losses of no or less single market access by levying tariffs on European Union trade and using that to pay for subsidies in Britain. And somehow that makes everybody better off. Which totally makes sense for a free trade proponent.

Yeah it's a very hopeful piece. But it does look like we're going to go for hard Brexit. The talk from the Chancellor (who was a Remainer) was of seeking 'access' to the single market, not remaining in it.

My suspicion is that May's policy will be to agree a framework for negotiations with the rest of the EU. It'll take longer than the two years of article 50 so I think she'll aim to activate article 50 and have parallel trade talks with the EU with something like EEA membership as a sort of interim stage until the negotiations are finalised. So I think we'll go for a hard Brexit in terms of absolutely leaving the EU but will try to do it in a 'soft' Brexit way. Especially given that May has talked about an 'initial' settlement a fair bit and in her first trip as PM (to Scotland) emphasised that we'd only start once there was a 'UK position'.

But I'm certain we'll have an election first. Yvette Cooper wrote a really good piece explaining why (and when) she thinks May will go for an election. But I think given that she's just fired a lot of people (she apparently told Osborne he wasn't needed for the cabinet as she felt he'd over-promised and under-delivered as Chancellor) a majority of 12 is difficult to work with.

Informal trade talks with the US and South Korea have apparently already started. Personally I think Liam Fox isn't fit for any public office but he does have a lot of contacts internationally, especially in the 'Anglosphere' which is probably the one advantage to him being trade minister. Also, God bless them for it, New Zealand a few weeks ago offered to loan us all of their trade negotiators who have just concluded a deal with China so that would be helpful.

But the other side of the effect of Brexit is possibly being felt. Read a piece today in the FT saying the EU-Canada deal looks increasingly at risk now. The Canadian trade minister made the fairly legitimate point that if Europe can't agree a deal with Canada, then who can they agree with?

Do all British politicos drape their doorways in shrubbery?

Did not realise this was a particularly British thing

Would that position be like the head of the state rail company (our equivalent to president of Amtrak; (although, presumably, nowhere near as depressing)) or the head of the governing body for rail (our equivalent to the director of the Federal Rail Administration) or something else?

I don't think it's quite either.  They're responsible for the state company that runs the infrastructure (Network Rail) and for rail infrastructure in general. They're also responsible for the strategy of stuff so pricing and security etc. But then the actual rail network is privatised to various franchises (many of whom get various degrees of subsidies) so it'll be setting the terms of those franchises, negotiating with them, monitoring delivery and if they fuck up re-nationalising them (eg. the East Coast Mainline and, God willing, Thameslink).

[dps]

Sounds like the Rail Minister is sort of like being the Chairman of the Surface Transportation Board (the successor to the Interstate Commerce Commission), except that the Surface Transportation Board isn't a cabinet-level agency.  As far as our cabinet goes, there's the Secretary of Transportation, but railroads are only a minor part of the DoT's purview.

[Sheilbh]

Sounds very similar. It's not cabinet level here either. She's a Minister for the Department for Transport and answers to the Secretary of State for Transport who is cabinet level.

[OttoVonBismarck]

I was trying to research what the economic impacts of a UK-US FTA would be--my hunch is low because trade barriers between the two countries are so low already that I wonder what sort of gains can be made. That's also a similar knock on the TTIP, and the fact that the TTIP almost certainly will end up being impossible to negotiate. I stumbled upon this quite lengthy article from the Heritage Foundation (for Euro readers, Heritage is a conservative think tank, so their articles can sometimes be seen as a barometer of conservative America's thinking on issues), and while I've just read it and don't really know how much of it I agree with (I found quite a large portion of it I disagreed with), I thought it was an interesting look at sort of the "establishment" Republican view of the UK and the EU. [This was written in 2014.]

Link (for full article, I've only quoted selections)

...
The idea of free trade between the U.S. and Great Britain is so obvious and compelling that many methods have been suggested to bring it about. One of the most obvious approaches is that once Britain has left the European Union, it should simply join the North American Free Trade Agreement (NAFTA), the free trade area among the U.S., Canada, and Mexico. This approach was regularly suggested in the years after NAFTA came into effect, and it remains a popular option.[1] The idea has two advantages: An agreement would not have to be created from scratch, and NAFTA has none of the sovereignty-infringing characteristics of the European Union.

But the disadvantages of working through NAFTA outweigh the advantages. NAFTA entered into force in 1994 and is now 20 years old. It predates the rise of the Internet, and that does not suit nations like the U.S. and Britain, which increasingly conduct their trade in services online. Moreover, while Britain could apply for accession under NAFTA's Article 2204, accession would only follow negotiations with the NAFTA Commission, composed of representatives of the U.S., Canada, and Mexico, which could be complex. Furthermore, it is possible that a British application would trigger a full-scale renegotiation of the entire agreement, and the outcome of that renegotiation might not be favorable for either the U.S. or the U.K. In short, the NAFTA option is both harder and less attractive than it appears, and it overlooks the advantages of negotiating a modern, bilateral agreement directly with the United States.

The fundamental obstacles to a U.S.–U.K. free trade area are political. On the U.S. side, the obstacle is simple: The Obama Administration, like most other post-war U.S. administrations, wants Britain to remain a member of the European Union. Showing any willingness to negotiate a free trade area with the U.K. would be tantamount to approving of Britain's exit from the union. It is therefore extremely unlikely that the current administration will make a move in that direction. Indeed, the Administration's approach so far has been to use the threat of denying Britain the trade advantages that will supposedly flow from a TTIP to encourage it to remain in the EU.[2]

This is a shortsighted and destructive approach, and it rests on several fallacies. The first and narrowest fallacy is the belief that if Britain remains in the EU, it will be able to push the union into being more economically free—that is, ruled by a less top-down, bureaucratic, and centralizing government—than it would otherwise be. This is essentially an approach of seeking to use Britain as the U.S.'s Trojan Horse inside the European Union. The disadvantages of this approach are grave. Worst of all, it subordinates Britain's interests and right to govern its own affairs to the U.S. This naturally alienates British patriots and encourages them to view the Anglo–American alliance with a jaundiced eye. To put it simply, by backing the EU, the U.S. angers many Britons who are generally inclined to like the U.S. as a nation and to support conservative principles.

...

The broader misconception on which U.S. policy is based is the belief that supporting the EU is in the interests of the United States. Between 1946 and 1989, the U.S. promoted closer cooperation between the European democracies, seeing this closeness as an economic and political contribution to winning the Cold War. After 1991, when the Cold War was conclusively over, the policy of European integration was no longer in the U.S. interest.

Unfortunately, the U.S. did not turn away from this approach. Instead, it continued to back the building of what was clearly a European super-state that was based on denying national sovereignty; that tended to see itself not as a pillar of NATO but as an alternative to it; and that emphasized top-down regulation and supranational bureaucracy, not economic freedom and limited government. The result has been the increasing economic stagnation of Europe, the rise of European neutralism, and a steady transfer of political power from national governments to Brussels. U.S. support for European integration was based on the hope that it would promote prosperity and democracy; in reality, it has promoted economic stagnation and rule by bureaucrats.

Continued U.S. support for the EU reflects a fit of absence of mind: It has become a habit based on beliefs that were already outmoded 20 years ago. It also, regrettably, reflects the fact that a considerable part of the progressive American Left likes the European Union because it shares the union's opposition to national sovereignty, strong national defense, and economic freedom. Given this reality, it is not just wrong as a matter of foreign policy for conservatives to continue to support the European Union; support for the EU directly contradicts the policies that conservatives seek to advance in the U.S. itself.[6]

...

The creation of the EU did tremendous damage to the U.K. for the simple reason that the U.K. had—and, in spite of the EU, continues to have—much wider trading relations outside Europe than it has with the continental nations. As a food importer, it had nothing to gain from the creation of a more closed agricultural market that curtailed its traditional system of imports from the rest of the world for the sake of forcing it to contribute to and buy from continental producers through the Common Agricultural Policy. As a trading nation more broadly, it sacrificed closer ties—existing and potential—around the world for better access to the EU's markets. That was not simply an economic sacrifice; because the EU now makes U.K. trade policy, it was also a sacrifice of the U.K.'s political freedom.

Undoubtedly, the U.K. gained from having tariff-free access to EU markets, but the relative and ongoing economic decline in the EU's share of the world economy means that the relative importance of U.K.–EU trade, though still very significant, has decreased, is decreasing, and will continue to decrease.[7] Trade with the continent will always be important to Britain, but the EU was a trick of history played on the U.K.: Though EU membership in 1973 was sold as a path to prosperity, it actually locked Britain into the EU at the moment when the EU's growth slowed and Britain would have benefited from being able to trade more freely outside the EU. That dilemma has become increasingly sharp with the economic rise of Southeast Asia and East Asia since the 1980s. In the coming years, the opportunity costs of EU membership—that is, the costs of having access to the EU, which in turn prohibits Britain from negotiating outside the EU—will only grow.

...

Once the U.K. has left the EU, the main barrier to negotiation of its own trading arrangements with other nations will certainly not be Britain's attractiveness as a trading partner. It is easy to forget that Britain has the world's sixth-largest economy and by 2030, on current trends, will have an economy larger than Germany's.[11] Of course, projections of this sort are merely forecasts, but the basic point remains: Britain has one of the world's largest economies, and it is growing faster than most other developed economies. There is no reason why such a nation should be unable to negotiate satisfactory trading arrangements. The most important barrier will be that, as a result of its 41 years of membership of the EU, Britain has no experience with negotiating FTAs on its own.

If the U.K. is to do this effectively after leaving the EU, it needs to start preparing now. This is all the more vital because of the referendum on continued EU membership that Prime Minister David Cameron has promised to hold in 2017 if he is returned to office in the 2015 general election. If that referendum is to have any meaning—in other words, if the choice of leaving the EU is to be a real one—Britain must treat the negotiation of agreements outside of the EU as a genuinely live option. To do that, the U.K. needs diplomats who are prepared to negotiate, as well as to make decisions, about which nations it will seek to negotiate with first.

...

Precisely because this U.S.- and British-led effort has been so successful, barriers to trade based on tariffs between the U.S. and Britain are low. The gains from their elimination through the creation of an FTA, while significant because of the size of the trade, would not transform the economy of either nation. In order for a trade agreement to generate larger gains, it must address what are known as non-tariff barriers (NTBs) to trade. There is no universally accepted definition of NTBs, but they are "generally defined as policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both."[13] One study has estimated that free trade with the U.S. that addressed both tariff and non-tariff barriers would add about £10 billion (approximately $16 billion) to the British economy when the area came fully into effect, but such estimates can only be illustrative, as they depend on the assumptions underlying the modeled area.[14]

...

But the most important facet of a U.S.–U.K. free trade area is not what it would do now, but what it would do in the future. Simply put, it would significantly insulate the U.K. from the damaging effects of further EU interference by aligning it clearly with the U.S. as a nation outside the EU's regulatory reach. This would not just benefit the U.K. It would also help the U.S. by improving the ability of the most important foreign investor in the United States to continue to serve as both a source of investment and a recipient of it.[26]

...

The U.K. and the U.S. should seek to negotiate a free trade area. While this goal cannot be realized until the U.K. leaves the European Union, interested parties in the U.S. can advance this goal by stating clearly that they would welcome the negotiation of such an area. A U.S.–U.K. free trade area should serve as a symbol of and a real contribution toward a shared Anglo–American rejection of supranational control and the shared belief that government must be based on sovereignty and freedom. In preparing for these negotiations, the U.S. should commit to abandoning protectionist policies, such as its stance on the licensing of energy exports, which are not compatible with the promotion of economic freedom.

The U.S. should also abandon the attempt to pressure the U.K. to remain in the EU. The U.S. has a fundamental interest in supporting the right of democratic nations to choose their own foreign and domestic policies. It should want nothing less or more for Britain (or any other democratic nation) than it wants for itself. The EU prevents Britain from exercising that freedom. Britain's future should be decided by the British people, unaffected by pressure from the United States.

...

The same cannot be said of efforts to reform the EU, which will not work. British political leaders have argued for decades—in some cases seriously, in other cases only rhetorically—that the EU can be reformed in ways that will create an entity that serves British interests. This is a delusion. Britain has been trying to achieve that aim since the mid-1950s, and since that time the EU has only grown more centralized and less respectful of national sovereignty. Even successful British initiatives, like Margaret Thatcher's campaign for the Single European Act in the mid-1980s, have been distorted into mechanisms for advancing supranational bureaucratic centralization.

The U.K. cannot fix the EU. If it had the power to do so, the EU would not exist today in anything remotely resembling its current form.

The U.K. should therefore begin to prepare seriously for life outside the EU. If the U.K. does not do this, the 2017 referendum, if it is held, will not offer a serious choice. Preparing requires, at a minimum, two steps.

First, the U.K. needs to reinvest in training its diplomats to work outside the EU framework. In many areas of national policy, this will not require much, because the EU does not have competence (responsibility) for many portions of foreign policy. But in the realm of trade diplomacy, where the U.K. has had no independent experience since 1973, a major effort will have to be made. This will require clear political leadership because, left to its own devices, the Foreign and Commonwealth Office will certainly opt for and even campaign for the preservation of the EU status quo.

[Zanza]

I agree Cameron should have framed this as EU reform rather than a special deal for the UK. But I think it goes both ways. Europe was far too blithely confident that there wouldn't be a Brexit vote to even concede things that are now apparently being talked about to help fix the EU. If it's part of a reform agenda now, it would probably also have been good six months ago.

Pff, shall I quote your posts from before the vote? You were just as confident.
And of course the other EU members and the EU bureaucracy expected Britain to remain as that is in their view the only rational policy.

My suspicion is that May's policy will be to agree a framework for negotiations with the rest of the EU. It'll take longer than the two years of article 50 so I think she'll aim to activate article 50 and have parallel trade talks with the EU with something like EEA membership as a sort of interim stage until the negotiations are finalised. So I think we'll go for a hard Brexit in terms of absolutely leaving the EU but will try to do it in a 'soft' Brexit way.

What's the interest of the EU that is served by such an approach? It's all nice to make up a negotiation strategy, but there are 27 other governments and electorates whose interests you need to consider. So far, I've heard lots of "quick divorce" voices.

But the other side of the effect of Brexit is possibly being felt. Read a piece today in the FT saying the EU-Canada deal looks increasingly at risk now. The Canadian trade minister made the fairly legitimate point that if Europe can't agree a deal with Canada, then who can they agree with?

Well, if we can't even agree with Canada, what makes you think that we agree to any of your shenangians? Hard Brexit, here we come.

Anyway, I don't doubt that Britain can easily conclude FTAs like the one between China and New Zealand. The UK has the second highest trade deficit on the planet, so why would anybody not agree to not having any tariffs with the UK? The China-NZ FTA does not contain very much about common regulations or so as far as I can tell, so you can still keep all your non-tariff trade barriers. You know, the ones the single market tries to adress.

[OttoVonBismarck]

I should point out that since Germany and France are essentially the imperial center of the EU project, and will always get to drive its direction, it's probably not all that fair for a German to point out to a peripheral member that staying is seen as the "only rational course."

I do think there's valid argument against being part of a supranational super-state, I know I wouldn't want America to be part of that--regardless of economic benefits.

My reason for being anti-Brexit boiled down to my belief Britain had a "good deal" with the EU as is, and was protected from further forced integration. But given how Britain hasn't actually been all that successful at preventing further unwanted integration into the super-state project, I can actually view the element of Brexiters who were skeptical of Britain's ability to avoid that to be perfectly rational. The irrational part of Brexit was all the nonsensical immigration stuff, but there's actually some perfectly rational sovereignty and even some economic arguments for leaving the EU.

[garbon]

One thing I don't get about the rush to have Britain start the clock - does anyone actually think the EU could iron out something good in 2 years' time? Seems rather optimistic to a pollyanaish degree.

[Sheilbh]

Pff, shall I quote your posts from before the vote? You were just as confident.

I wasn't just as confident I always thought there was a very strong possibility we'd leave. I thought it would be 54-46 Remain and I thought it would be like Scotland but, as with Scotland, I felt there would be a very real risk of a Leave vote. To be honest as well I thought the murder of Jo Cox would have had a bigger impact. I was in the pub the night of the referendum and said my head said we'd vote remain but just looking at what I'd seen that day my gut said we were about to leave.

For what it's worth I think the same is happening again. I've seen British journalists in Berlin, Brussels and Madrid all say that there the general view is that Brexit probably won't happen and the talk is of 'if there is a Brexit'. I think the view from London is that there's almost no way that it won't happen.

What's the interest of the EU that is served by such an approach? It's all nice to make up a negotiation strategy, but there are 27 other governments and electorates whose interests you need to consider. So far, I've heard lots of "quick divorce" voices.

There is a difference of opinion between those who want to treat the UK as 'deserters' and those who recognise we'll still be a major market for the EU and we'll still be important to Europe's security policies even outside the EU. I think there are lots of rational reasons not to go for an approach that hurts everyone, however much it may be emotionally satisfying for Eurocrats. I've heard 'quick divorce' voices from German Social Democrats, Juncker, the Belgians and the French - I've heard the opposite from Eastern Europe (we're providing 1/5 of the NATO troops to the Baltics and Poland and have put a further 3000 on permanent standby for Eastern Europe), the Nordics, the Irish and the Dutch.

The EU interest that's served is that they also don't suffer any further economic shock than is necessary and, I imagine, the EU would like to continue to have good relations with one of its major markets and allies. We're not talking any new deal of single market without free movement here but just a framework of negotiation of article 50 to the EEA for the duration of the negotiations and then once we leave the single market we've left.

Well, if we can't even agree with Canada, what makes you think that we agree to any of your shenangians? Hard Brexit, here we come.

As I say from the May comments it looks like we're going for a hard Brexit - it looks like we will be leaving the single market in full. But I think it goes both ways if the EU can't even agree a deal with Canada maybe it is better off out.

Anyway, I don't doubt that Britain can easily conclude FTAs like the one between China and New Zealand. The UK has the second highest trade deficit on the planet, so why would anybody not agree to not having any tariffs with the UK? The China-NZ FTA does not contain very much about common regulations or so as far as I can tell, so you can still keep all your non-tariff trade barriers. You know, the ones the single market tries to adress.
[/quote]

[Sheilbh]

One thing I don't get about the rush to have Britain start the clock - does anyone actually think the EU could iron out something good in 2 years' time? Seems rather optimistic to a pollyanaish degree.

From our perspective there's no rush. As I say I'd be amazed if we start the clock this year - at the very least I think May will go for an election and some form of formal consultation with the nations and regions and businesses and unions etc before we start. The only British politicians who've called for starting the clock so far are Nigel Farage and Jeremy Corbyn.

From the European perspective if it were done, were better it were done quickly, I suppose.

My reason for being anti-Brexit boiled down to my belief Britain had a "good deal" with the EU as is, and was protected from further forced integration. But given how Britain hasn't actually been all that successful at preventing further unwanted integration into the super-state project, I can actually view the element of Brexiters who were skeptical of Britain's ability to avoid that to be perfectly rational. The irrational part of Brexit was all the nonsensical immigration stuff, but there's actually some perfectly rational sovereignty and even some economic arguments for leaving the EU.

Agree and the vote was about identity above all in my view and that is inherently irrational. I'd add that my view is the best situation for Europe - looking at its peripheries of sceptics and struggling states - would be for the EU to be a core union that is wholly committed to the project in all its forms: integration on all subjects, monetary union, full harmonisation. But then to have an associate union of far fewer rights and obligations for countries like the UK, Norway, Sweden, Ukraine, Turkey and maybe others who will never be willing to go into full integration but whom it would be advantageous for Europe to tie them close.

[Zanza]

I should point out that since Germany and France are essentially the imperial center of the EU project, and will always get to drive its direction, it's probably not all that fair for a German to point out to a peripheral member that staying is seen as the "only rational course."

I was not really speaking about myself, but about the blithely overconfident eurocrats.
That said, the UK made itself peripheral. It had lots of allies in the EU, but rarely pushed any positive agenda. It could have shaped the EU to much bigger extent than it did.

I do think there's valid argument against being part of a supranational super-state

Sure, there are lots of arguments for that. Rarely heard those though. Then again Britain is itself a superstate consisting of four separate countries. Let's see if they can keep at least that together.

I know I wouldn't want America to be part of that--regardless of economic benefits.

You already have a continent spanning superstate...

[Zanza]

Sheilbh, I should have been more specific. I don't think the EU is interested in a staged withdrawal, i.e. first EEA membership then a mere FTA. The reason is that this would tie up political energy for years to come.

I don't doubt that there are lots of proponents for having a fair good deal with Britain to keep you as partner and ally. But I don't see the negotiation strategy as outlined as the way to achieve that. It would just create a never ending story. Which no one wants at this point of time.