Brexit: approaching the endgame

It is a truism that nothing should surprise us about the Brexit negotiations any more.  So far neither side has handled the negotiations well, and the most likely outcome now is that the two sides will fail to achieve even the minimal positive outcome that remains even now just possible.

But even by the standards of his previous actions, Boris Johnson sprung a surprise last week with his government’s bald statement that they were planning to break the law and renege on an international agreement.  It matters not one bit that, as Secretary of State for Northern Ireland Brandon Lewis said last week when challenged, the breach is “in a limited and specific way only”:  it is still a proposal by the UK government to default on its promise and go back on its solemn word.

Predictably, this has caused a storm.  From across the UK political spectrum – Left and Right, Leavers and Remainers – have come warnings of the harm this will do to Britain’s standing, of the problems it will cause the government when it tries to sign future trade deals if its word cannot be trusted, of the specific damage it will do to Johnson’s hope for a trade deal with the United States, where politicians from both sides of Congress will fiercely resist anything that undermines the Good Friday Agreement.  The EU has reacted with extreme hostility and threats of breaking off all negotiations and even imposing sanctions.  Even within Johnson’s own party, even indeed among MPs who have hitherto been loyal supporters, there are concerns and dissenting voices.

The obvious questions that arise, therefore, are how have matters reached the point where a G7 nation is seriously proposing to renege on a solemn commitment, and what the possible outcome might be.

In order to answer these, we need to examine in a bit more detail the approach over the last four years of the two negotiators, the EU and the UK, and the specific – indeed we would suggest unique – nature of the challenge of the Brexit negotiations themselves.

Let us start with the last of these.   In any other bilateral trade negotiation, one starts with two sides who are usually friendly to each other, and who wish to build a closer relationship.  Both sides will enter into the discussions with a positive attitude, there is usually broad agreement about the general outcome even if different aspirations for the details, and both hope to end up better off after the conclusion of the agreement than they were before.  In such a positive sum game, there is room for give and take, there is room for friendly gestures and concessions.

None of these apply to the Brexit negotiations.  Most obviously, the two sides are not trying to build a closer relationship, and they are not trying to deepen their friendship.  More significantly, one side (the EU) has from day one seen the whole exercise exclusively as one of damage limitation, in which there is nothing to gain and so no reason to offer any concessions at all; while the other side (the UK) has an ideological objection to anything that has overtones of residual obligations to rules made in Brussels, without having a very clear idea of what it does want.

Even from the outset, this made the discussions unlike any other trade negotiation.  The EU’s starting position was that it had not wanted Brexit, it had not caused it, and so it saw no reason why it should suffer from it or settle for anything less than its existing rights.  Its starting position was therefore “what we have, we hold”, whether that be the rights of their citizens to live and work in the UK, the rights of their fishermen to continue to treat the UK’s territorial waters as their own, or the rights of the Republic of Ireland to maintain borderless trade in the island of Ireland.

This is a very limited and negative world view.  It shows a complete failure on the EU side to imagine any positive outcome from the referendum result, or even a willingness to look for one.

Even so, it was an understandable starting position in the immediate aftermath of the referendum result, and when Michel Barnier started to set out this opening position in 2016, he almost certainly expected the UK to state an equally robust opening position, which would then have led to the usual diplomacy as the two sides set about closing the considerable gap between their two starting stances.  But to his surprise, the UK side was incoherent:  there was no UK starting point at all, nothing meaningful for seasoned trade diplomats to discuss.

In retrospect, this is perhaps not entirely surprising:  there was no coherent UK opening statement of aims because the UK had not expected to be in this position and because Mrs May’s government neither wanted to be in it nor had any strategy for handling it.  But it appears to have hardened the EU’s negotiating stance, from the opening “this is what we would ideally want” to “this is the minimum we will settle for” to, more latterly, “not only is this the minimum we will settle for, but you must concede all of our demands before we are willing to discuss your requests”.

This is not the normal approach to diplomacy.  The EU seems to have adopted such an absolute line almost as an experiment to see how far they could maintain it, and when the UK government showed no signs of being able to extract concessions or a more co-operative line, Barnier seems to have been unable to modify or mollify the EU’s position much, whether or not he himself thought it the best approach.

The result has been a “negotiation” like no other in history between two parties who are allies and who, one assumes, wish after its completion to remain at least on civil terms with each other.  And four years later, almost certainly the EU has pushed it too far:  if one side concedes nothing at all, then the other side has no incentive either to agree to anything or to honour what they have already been forced to concede.  And both end up worse off.

At times, indeed, the discussions have resembled more the dictation of terms to a defeated enemy in war;  specifically, the imposition on the UK by an outside power of conditions on trade between Northern Ireland and Great Britain are we think without parallel in any other trade discussions, or indeed any other international negotiations outside the resolution of conflict.

Mrs May knew this, and said forcefully that “no UK prime minister could ever sign such terms”;  she was as good as her word, and saw her whole agreement collapse, and with it her premiership, before accepting such an imposition.  Almost certainly Boris Johnson knew it too – which leads to the question, why did he even so sign the agreement at the end of last year?

We do not think it likely that Johnson did not understand what he was signing.  He was repeatedly advised that the terms the EU were imposing would imply a customs border in the Irish Sea;  indeed he tried to address these concerns by going out of his way to refute this and promise that there would not be.  (It is one of the minor ironies of the current situation that for once, Johnson is trying to keep his word, and ensure that his promise that there would be no customs border between Northern Ireland and Great Britain is upheld).

We conclude that Johnson signed the Withdrawal Agreement fully knowing what it implied, firstly in the hope that something would turn up to rescue him from his conflicting promises, and secondly in the expectation that if nothing did he could just consign that promise, like so many others he has made, to history.  And by then he would have secured Britain’s irrevocable exit from the EU, from which there would be no going back.  Unusually, and for once, he would have got what he wanted from the EU before having to pay the price.

Johnson’s critics point out that his actions will render it almost impossible to agree a trade deal with the EU.  But this is we think to misunderstand what Johnson and the hard Brexit core of his party have all along been aiming for.  In a nutshell, a trade deal with the EU, while without doubt nice to have if on the UK’s terms, is not their real aim;  rather, their real aim has been hiding in full sight since before the referendum, and is encapsulated in the three words “Take back Control”.

There is a well known “trilemma” or “impossible triangle” of globalisation, set out in a paper nearly 10 years ago by Dani Rodrik[1].  To quote a recent summary of Rodrik’s paper by Michael Funke and Doudou Zhong of Suomen Pankki[2]:

According to Rodrik’s impossibility theorem for the global economy, deep economic integration, national sovereignty (sometimes also referred to as nationally-distinct jurisdictions or the nation-state), and democratic politics are mutually incompatible. Equilibrium is only feasible by sacrificing one of the three components.  In other words, in a globalised world, a country can have extensive economic integration, the nation-state or democratic politics, but not all three (at least not fully).  A nation can choose integration and the nation-state, and therefore sacrifice democratic control for technocratic, autocratic institutions. Alternatively, it can choose integration and democratic politics, giving up the nation-state and transferring or surrendering control of traditional government tasks to supranational institutions. Or it can choose the nation-state and democracy by [rejecting globalisation].”

We think this, in the final analysis, is the kernel of the Brexiteer position:  a belief in the nation state and a belief in democracy, which automatically means by Rodrik’s trilemma a rejection of rules imposed from outside.  Certainly, on those occasions when Boris Johnson is expounding his true beliefs most forcefully, the twin motifs of the nation state and democracy resonate strongly.  And it implies a rejection of everything the EU has been trying to impose, from the rules on trade in Ireland to the rules on state aid.  It is not, for example, that Johnson wants to indulge in a great round of state aid, it is that he does not want to be told by someone outside the UK that he can’t.

So Johnson is not indulging in hyperbole or bluff when he says that if the impasse with Brussels results in no deal at all, it is a good result.  He really believes it.  And he and his government are increasingly likely to achieve it.

 

[1]           Rodrik, D: The Globalisation Paradox: Democracy and the Future of the World Economy (Norton & Company, New York, 2011).

[2]              Funke, D and Doudou Zhong: “The political globalisation trilemma revisited: An empirical assessment across countries and over time” (Bank of Finland Institute discussion paper, Helsinki, 2020).