08 March 2018
The Brexit speech.
By John Watson
You would be Bletchley Park material if you could reverse engineer the speech which Mrs May made on Friday and deduce where the negotiations between the UK and the EU really are. There was much that was vague and bits that sounded overoptimistic, inevitably the case because the speech was not just to the British public but also to Messrs Barnier and Juncker in the EU negotiating silo. No wise negotiator ever reveals his hand until shortly before the deadline. Until then he puts out shopping lists saying what he wants and why his opponent’s proposals are unacceptable. So that is all we have here and all that is in the EU’s reaction. So much for Mr Corbyn’s remark that the speech should have shown greater clarity. No negotiator he! But the hands of those running the negotiation are being held close to their chests and quite right too.
Still, it doesn’t mean that nothing can be gleaned from the speech, and a number of points are interesting. It is clear that we will not be part of the customs union because we wish to follow our own trade strategy. That means that we want tariffs on goods supplied to and by the rest of the world to be set by us. It is difficult technically, because at the same time we do not want any duties at the borders between us and the EU – particularly the border in Ireland. How to achieve that without creating a gap in the EU’s tariff protections is a technical matter, and Mrs May mentioned two possible solutions. The first is that we would apply the EU tariffs at our borders, but that there would be a special regime under which goods for consumption in the UK could be charged at our (presumably lower) rates. That sounds fine as far as it goes but would be harder to work the other way round. If goods manufactured in the UK were to go out to a third country at lower tariffs, that country would be concerned to ensure that they had no EU components. Presumably, civil servants are beavering away at how that could be made to work, but one could imagine that the system for relief might end up by being imperfect, with quite a lot of forms to fill in before one could claim the special UK tariff rate.
The alternative approach is to allow goods destined to the UK to come into the EU without EU tariffs. That sounds altogether more unlikely because it would require EU countries to participate, which is probably just too difficult.
There has been a lot of nonsense talked about cherry picking. In fact it just means that we would cooperate with participating in agencies of the EU when it suited both parties and not when it did not. That is what happens in any normal trade agreement and it is unclear why it should be offensive. What is the problem? Perhaps the idea is so sensible that it might tempt other countries (Italy, for example) to follow our route of leaving the EU. Anyway, the speech raises the possibility of our continuing to belong to / work with the European Medicines Agency, the European Chemicals Agency and the European Aviation Agency. No doubt there are lots of others too. One might imagine, for example, that the agency which exchanges security information would be high on the EU’s shopping list.
Mrs May accepts that when we belong to an EU agency we will have to pay our share and obey the rules. More interesting is her comment on how the rules would be enforced where she seems to envisage a role for the UK courts. In fact, the obvious thing is that on limited questions such as the rules surrounding an agency we should accept the jurisdiction of the ECJ, which could perhaps be supplemented by the addition of an English judge for such purposes. That would put us in the same position as other users of the agency and not give us the privilege of a special disputes resolution position. Expect movement of our position here as the deadline approaches.
Of course, an absence of tariff barriers between ourselves and the EU means that there are certain protections which both parties will need, to ensure that competition remains fair. For example we would have to commit that our standards would be as high as those of the EU and that we would not try to undercut them by unfair state subsidies or poor protections for workers. Any vision of the UK as a sort of North Sea regulatory or tax haven therefore disappears. As the regulations would be imposed by the UK courts, the EU would have to trust their neutrality; but Mrs May seems to accept that when regulation similar to those operating in the EU are in point, decisions of the European Court of Justice could have some persuasive authority.
There are lots of important areas about which little was said. The EU wants access to our fisheries and a deal is expected to guarantee them that. As we come out of the Common Agricultural Policy we will regain control of our farmyards, but there might be areas that needed regulating in common. Probably the biggest outstanding area is financial services, which was not dealt with in the speech, although it appears that the current passport rules will either disappear or have to be renegotiated. There is a big potential costs to the UK, and the EU must know it. This, then, is a big card for them.
It was of course a very political speech. Designed to heal rifts in the Government (which it seems to have done, at any rate for a short while), it needed to give little away to the other side. That is why there were no big statements of principle but rather a smokescreen which gave everyone just enough to keep the show on the road and allowed the negotiators to shuffle on behind the scenes. It is thwarting to the pundits, of course. They continue to see in a glass darkly and report grumpily as a result. Still, it is the only sensible way forward.