Tuesday 2 May 2017

Time to focus real key downsides in a 'Hard' Brexit?

There are, according to the slightly strange Peter North, over 300 agreements covered by EU Law that the UK will need to deal with post-Brexit.

With the mood music from Brussels turning from chilly to freezing over the past few days, we have to understand that there is no 'Soft' Brexit option. Indeed, the only questions should be from the reverse perspective. What are the key issues that will really de-stablisise the UK post-Brexit that we need to focus on, rather than the enormous list of important but not urgent stuff.

For me 5 stand out above all others -

1. People - We need to give people in the UK stability, at the end of the day, we need to allow all EU citizens in the UK by the time indefinite leave to remain in the UK. Ideally, we would have reciprocal arrangements with the EU, but if not then so be it - the damage here is one sided and people who left the UK in the first place should not be a deal-breaker.

2. Airspace - This is complex and we will likely leave the agreed EU area, companies need to prepare for this (probably easier from them to move their HQ, a la the Banks) so that air traffic is not grounded. The are work-arounds to the problems and it does not suit the EU to have the Western Air Corridor in a mess, but this is a key day to day process that needs arranging.

3. Euratom - The EU energy agency and policy is something to be avoided at all costs, however in the immediate term we do need a cover of some sort of transitional arrangement to keep options open and the nuclear industry as is working. I personally don't see being a rule taker from the EU on this as being so bad for 5 years or more from now. By the mid-2020's Fracking, Solar, Wind and ultra-cheap US LNG imports will mean it is likely Europe asking us for power rather than the other way around. There is so much cheap LNG coming on stream that there is no long-term problem. The real problem lies with our own energy policy however, which is a deranged as the EU one!

4. Irish Border - This does need a solution that does its best to avoid a hard border. Even the EU want to agree this so hopefully this is one area where sense can prevail. A real hard EU approach will be to demand Ireland becomes one country and stoke new civil war, it feels unlikely but remains a possibility if we can't agree.

5. Trade - WTO trade is not so bad for the UK and we can adapt, however various commissions like the Chemical regulations could provide a shock to the economy and so some of the manufacturing businesses supply lines will be threatened.

There are many more issues around legal standing, drugs regulation etc which while seemingly critical, I don't think matter day one of a hard brexit and we will, as ever, muddle through.

Time to focus on the few key matters, at least we will have the £60 billion to spend on various things having not paid the exit fee!


Steven_L said...

Ideally, we would have reciprocal arrangements with the EU

With the EU? I thought immigration from non-EU countries was a not an EU competence and a matter for individual member states? Hence it's easier to come to the UK from Pakistan than to go to France. Aren't there different rules for Brazilians entering Portugal than Poland?

Basically we need a deal with Spain. Will Spain really want a mass exodus of retired, often affluent consumers?

L fairfax said...

I have many friends who are EU citizens but any deal must be reciprocal.

Nick Drew said...

Barnier - who, as far as one can judge is the Right Man For The Job - must be tearing his hair at how ill-disciplined his own side is

but that's completely inevitable: they just can't deal on a business-like fashion - too fragmented, too much willy-waving to be done by each of the 27

the advantage is, it steers us towards a unilateral, cut-the-Gordian-knot solution, and hence ushers May away from concessions-by-a-thousand-nervous-reactions

Sebastian Weetabix said...

I want my Brexit tungsten hard. There really isn't much to discuss other than customs co-operation, and if they don't want to trade, others will fill the gap.

As for Ireland - why don't we just declare we will not impose any restrictions post Brexit, and we will maintain our common travel area as we have done since 1923? This will make everyone in our islands happy, even the IRA. They can continue their smuggling rackets. And if Brussels seeks to impose a hard border, good luck. Dublin *might* pay lip service to the idea, but I doubt it.

Peter North is a chip off the old block, isn't he? Like his old man he thinks the rules come before the politics. While they worry about para.2 of sub-section 46 of the unbundling bureaucracy regulations, the grown ups are ripping up the regs to suit.

DJK said...

Re Ireland: The arrangement should be open border, as it has been since 1923, for British and Irish citizens. We need some wiggle room to stop people smugglers shipping migrants to the UK through Ireland.

Electro-Kevin said...

Well - err... we won't have £60bn to play around with, just £60bn less debt than we might have.

There is a very simple fact.

If any one of Portugal, Italy, Ireland, Greece, Spain going belly up could have caused a cataclysmic domino effect on the global economy...

If a few banks could have caused such contagion that the global economy could have gone into depression ...

then the implosion of Britain (and London in particular) will be economic ebola.

It is utter nonsense for Remainers to say that Britain can go down the plug hole without the gravest consequences for other nations.

We have to be treated gently. At worst slow strangulation - which at least is not the 'cliff edge' that Remainers fear (or hope for.)

There is time. From this our country can adapt. Why ?

Because most of the talented people in London are trapped by virtue of what they have paid for property and their emotional attachment to it. Only a few can escape before their equity (escape fund) disappears - I think those that do will regret it. And those people left will not sit idly by or let themselves be slowly strangled - because they are not the types to settle for it.

Hopefully Remain London will get to see the EU for what it is. An anti-democracy. Protection of the political Bloc (faced with rampant Euroscepticism of its own, far more extreme than ours) is the only reason why Brexit could turn out war like.

Electro-Kevin said...

Nick - The right of veto for any one of the 27 shows just how incapable of making a decision the EU is.

It is too big and unwieldy.

What seems to be a negative for us is actually a positive. Any benefits to us being blocked by, say, Malta makes our situation far more clear cut and clarity is, above all else, what we need.

Yanis Varoufakis speaks of a nationally divisive, multi-headed hydra in EU dealings - they used Greek collaborators above all else (as we see British ones here.)

The more outrageous and unreasonable they are the better.

Anonymous said...

With the people issue, I'm surprised we've not just unilaterally provided some form of 10 year okay for EU citizens.

Gives businesses the stability needed, even the Remoaner camp would have to grudgingly applaud and places the EU on the backfoot. If they reciprocate, then it feels like they're responding rather than being proactive, if they don't they develop some extra anti-EU feeling and likes of the Lib Dems will be forced to condemn the EU.

From a bargaining stance I can see the advantage of not taking such a stance, but the amount of political advantage and public goodwill generated offsets that nicely, along with providing a measure of control. It would send all other political parties into a bit of a spin too, nice had it been done prior to Parliament being mothballed for the GE.

As for the Irish border, perhaps time for a reunification referendum. NI is a ballache and a money sink, and if the Troubles do kick off again then it can be an EU issue rather than a UK one. ETA has just shut up shop, so I'm sure the Spanish and French have some staff looking for a new challenge.

dearieme said...

Is John-Clot Drinker going be a nuisance or will the Germans just get rid of him? One way or another.

Electro-Kevin said...

You should write for The Sun, Dearieme. (V.good.)

Y Ddraig Goch said...

"Barnier - who, as far as one can judge is the Right Man For The Job - must be
tearing his hair at how ill-disciplined his own side is"

Negotiation at this level is way out of my league so I'd be interested in some
more informed opinion on some things that look odd to me.

The article 50 declaration rather obviously trailed "security co-operation" as
a British strength, and a few hours later I saw Guy Verhofstadt at a
microphone babbling that security was "too important" to be a matter for
negotiation - which looks to me like confirmation that, yes indeed, that does
scare them in exactly the way May hoped. Then, when May suggested that a
decisive conservative win in the GE would strengthen her negotiating hand, up
pops Verhofstadt again to say, "no, it won't, it definitely won't, it really
won't, cross my heart and with a cherry on top" - which I read as "yes,
it will". Verfofstadt comes across as the stupid character in a legal drama
who loudly gasps in dismay whenever the opposition lawyer makes a good point.

Am I just being optimistic?

Nick Drew said...

Negotiation at this level is way out of my league

same for most of us, Y !!

however, as a long-time *smaller scale* player I can tell you that the bane of any lead negotiator is when a carefully-planned line of argumentation is wrecked by some prick of a team member who suddenly takes it upon himself to pipe up with a helpful thought of his own

in the energy sector (where I do most of my stuff) you get a lot of joint ventures. When facing a JV I have mercilessly exploited their differences, driving wedges etc. When representing a JV I take my own side into a quiet room first of all, and read their fortunes for them ...

andrew said...

Brexit done well will leave us in the about same state that we would be in if we remained (in the short term).
Done badly, (in the short term) there will be a lot of angst.

The long term - anyone who claims to know is lying (looking at you cameron/osbourne/clegg/davis/gove/johnson).

We are expecting May/Davis/Johnson to be as competent in 'unwinding' our membership in 2 years as their predecessors were in 'winding up', gradually, with a lot of time for thought, reflection, testing over the last 40 years

Given the quality of thought we see from may/davis/johnson, the chances of even basic competence don't look too good so far and on the face of it, no better going forwards.

This is why just not negotiating
- at least within the EU's timetable, agenda, framework -
may actually be the least worst path.

We then negotiate on a more balanced field (or not).

Either way round, once we have made special allowance for the immigrants we need for the city/nhs/students/researchers/f1 teams/seasonal agriculture/etc/etc/etc, chances are roughly the same number of immigrants will be here

So, in short, if all goes well, not much will change (I hope).

On the upside the seat of power will move from Brussels (~600 miles from edinburgh) to London (~400 miles from edinburgh) - after all it is all about bringing democracy home.

John in Cheshire said...

I think Richard North and his son Peter have identified one key issue that cannot be ignored during the exit negotiations and that is non-tariff barriers. The French and probably others are past masters at paying lip service to agreements while introducing barriers to trade as they did over BSE, where restrictions on export of beef and cattle were kept in place, for nebulous health and safety reasons, long after the restrictions should have been lifted, to benefit their national farmers. They've done it once, they'll do it again if they get the chance and other EU members will follow their lead.

K said...

Why is the EU saying citizens rights won't be easy? How is it any different to what's already been done for RoI, Hong Kong, Gurkhas, etc?

When they say it's going to be difficult they must mean for Brits elsewhere in the EU. Is it really going to be the case where EU citizens can stay in "right wing Britain" but British citizens get deported from rEU?

We really should act unilaterally on this and not hold it as a bargaining chip. It's going to be a hard Brexit and we need to come out of it looking like the good guys.

Y Ddraig Goch said...

ND @ 1:55

Thanks for the response, especially the observations about joint ventures. A
27 way JV seems quite reassuring from our point of view.

One other example that I nearly mentioned in my first comment was
the ever growing exit bill which I assume they get from a flow diagram -

1. EU negotiators contemplate EU budget without Britain.
2. EU negotiators soil themselves.
3. EU negotiators add several billion to the exit bill
4. Go to step 1.

but I didn't, because recently the number seemed to have stabilised at about 60
billion. However, I have just noticed that Guido Fawkes is reporting that the
latest bill is up to 100 billion.

They must be living in another galaxy.

Sobers said...

"Peter North is a chip off the old block, isn't he? Like his old man he thinks the rules come before the politics. While they worry about para.2 of sub-section 46 of the unbundling bureaucracy regulations, the grown ups are ripping up the regs to suit"

Thats them in a nutshell. 40 years of watching the EU at work should have taught them that the rules are always subservient to the politics on the Continent.

Anonymous said...

"we need to allow all EU citizens in the UK by the time indefinite leave to remain in the UK. Ideally, we would have reciprocal arrangements with the EU, but if not then so be it"

I don't understand the logic of telling the Romanians/Poles who are in the UK "you can stay as long as you like" but not worrying if UK citizens in the EU don't get the same deal. Given the huge numeric imbalances, a strictly equitable deal is the least we should be going for.

Piotr and Stanislaw aren't here because they love our warm beer and cricket, or I wouldn't be picking so many Tyskie bottles out of the hedge.

(Btw I see that Blue Riband choc bars have joined Daddies Sauce and Twynings Tea in the exodus of UK brands to Polish factories)

Anonymous said...

Mr Hilton makes some very relevant points which the "muh GDP" brigade always forget about.

"It is the proud boast of UK governments that the British economy has created three million new jobs in the past 12 years. What is said less frequently is that most of these jobs are low paid and about three-quarters of them have gone to migrants, the majority from the EU. Thus the paradox of UK growth. It is a fact that if most new jobs pay below the national average, then that national average will gradually fall. Growth should not be the sole measure of success; it is growth in income per head that matters.

Politicians bang on about how good they are at making the economy grow — making the overall size of the cake bigger. What they never say is that it has taken so many extra workers to do this that the average share everybody gets rises very little. If the number of people wanting a share of the cake grows as fast as the cake, no one’s slice gets larger.

The coming curbs on unskilled immigration make it likely that many low-paid jobs in areas such as food-processing, catering and agriculture will disappear — the firms will have to automate or go out of business. This will hit overall growth, but counter-intuitively, because it is the below-average low-paid jobs to go first, the average of what is left will be higher."

I do think those "low-paid jobs" will disappear, but the food processing and crop-picking should be "higher-paid jobs" - as they used to be. That'll mean higher prices, but do we want to be a minimum-wage economy? An Oslo supermarket is eye-watering, but there's not a huge rush of Norwegians wanting to live in Bexley.

If Mrs May oversees the demise of the hand car wash, symbol of low-wage, low-tech, "globalisation in one country" Open Britain, I'll make a donation to the Conservative Party. My worry is that a lot of wealthier people rather like low wages - for others.

Steven_L said...

My worry is that a lot of wealthier people rather like low wages - for others.

Well of course they do. But perhaps more importantly they need rents and house prices to carry on increasing.

But interest rates are rock bottom and wages aren't really growing. So they can only really do this by increasing the population of people who will work for a pittance and slum it, thereby cramming more and more people into smaller and smaller spaces.

A Brit won't bother signing off the dole and moving out of the relevant comfort of the family home (or council B&B) to the other end of the country to work hard for 250 quid a week, over half of which you'd have to spend on rent unless you live in bunk beds or 3 to a studio flat. But an EU economic migrant will.

And three tenants prepared to pay 1/3 of their wages in rent is much better for property values than 1. Of course the tories won't ever stop EU migration, just like they won't ever raise interest rates.

CityUnslicker said...

SL - Interest rates are not in the purview of the Government to raise or not technically. Mr Bond Market will, as ever, continue to issue instructions on that front.

Steven_L said...

Bollocks, they'd sooner see another 30% wiped off sterling than even a 10% fall in house prices and they can enter unlimited bids in any sterling denominated bond market to make sure it happens that way. The 'free market' (if there ever was such a thing) is as dead as a donkey.

It's simply a game of robbing Peter to buy Paul's vote now. The UK economy is basically just a giant leveraged property trust that 50%+ of the population own units in. Luckily for the incumbent fund manager they also get to make the law.

Next time it crashes (mid 2020's I reckon) there'll be no room to lower mortgage rates and QE won't be effective. I predict there'll be a more direct 'rescue' where they basically print money and just give it to homeowners. And the 2040 crash will be an all out inflationary disaster.