Wednesday 9 December 2020

The real 'oven-ready' deal

 As I write this, UK Prime Minister Boris Johnson is on his way to Brussels, there to meet EU Commission President Ursula von der Leyen.  The two ‘principals’ are supposed to do their darndest to undo the plonter in the bilateral negotiations and find a ‘creative’ compromise towards a deal.  This is the latest move in an intricate dance that – everybody knows – will only end when it absolutely needs to.

In the run-up to this ‘crucial meeting’, the two sides did what they do best: jockeyed for positions.  As for us, the public, we are being told (by countless journalists and politicians) that the negotiations now boiled down to resolving three issues:

  • - EU fishing quotas in UK waters;
  • -; ‘Level playing field’ rules;
  • - Who/what will police the deal.

It is the same story: whichever paper you read, whichever channel you tune into, you’ll read or hear journalists and politicians parroting what they heard from others – adding to it only their own ideological slant and their sense of self-importance.  Most of these journalists and politicians don’t know what they’re talking about; the others are just lying to us.  The truth is that these ‘issues’ are either unimportant or very easy to solve.  They are (or can be, given the political will) non-issues.  Here is why.

The fishy issue

As long as UK was a member state (and in the transition period following Brexit) EU fishing rules – the so-called ‘Common Fisheries Policy – applied.  This sets quotas for each member state and per each species of fish.  Currently, it allows both British and EU boats to fish in British waters – up to the set quota.  In practice, this means that EU boats catch much more fish in UK waters than British boats catch in EU waters.  Come 1 January 2021 and in the absence of a deal, the UK could in principle keep all the fish for itself and not allow anyone else access to what is, legally speaking, a national resource.  This would negatively affect EU fishermen, especially those from neighbouring countries: France, Belgium, Netherlands, Denmark…

Nah, those fish cannot be saved.  They'll go into the pan...

That much is true.  But, when the Economist calls the issue “political dynamite,” that’s bollocks; when French President Emmanuel Macron threatens to scupper the deal over the percentage of fish available to the EU – that is posturing.

For both EU and UK, fishing is a minor economic issue.  We are talking truly ridiculous numbers: the total value of fish caught by EU boats in UK waters is somewhere around $0.6 billion.  For comparison, EU’s total economic output is estimated at $18,000 billion.  In other words, we are talking about 0.0033% of EU’s ‘GDP’!  In terms of employment, fishing provides a means of livelihood for just under 100,000 EU ‘nationals’.  This is almost 0.05% of the entire EU workforce, but only a small fraction of those fishermen ply their trade in British waters.  Measured in FTE (Full-Time Equivalents), France boasts an ‘army’ of 6,623 fishermen – some of whom may even vote for Macron, provided he displays enough Gallic belligerency on their behalf...

‘Level playing field’

If fishing is “political dynamite,” this one’s the equivalent of a nuclear bomb.  Currently, British and EU regulation is practically the same, ensuring that British and European countries can compete fairly in both markets.  Come 1 January 2021, the UK would, in principle, be able to change the rules, reducing the costs and/or boosting the profitability of British firms.  The British government may reduce environment protection obligations; it may improve productivity by forcing employees to work longer hours; it may reduce consumer protection standards; it may even decide to subsidise certain industries.

We must ensure a level playing field forever!

Let’s say that British and European firms both make a particular widget, which is currently priced at €100 per widget.  To manufacture it, companies have to buy Raw Material – also manufactured in the EU and costing €50 per widget.  Raw material is also available from Chinese suppliers at €30 per widget, but such Raw Material contravenes EU’s strict environmental policies and is hence verboten in Europe.  Post-Brexit, however, the British government can in principle decide that the environmental issue isn’t that important, or that it can be mitigated.  If it allows them to buy Chinese Raw Material, British firms would be able to undercut EU companies, potentially pushing them out of the market.

It’s not just about China; in fact, the EU more worried about potential supply of cheaper products from the US.  The European powers that be have worked for decades to keep certain US industries out of the common market – not because they are more littering, but because they are more efficient and can therefore supply cheaper products.

EU’s proposed ‘solution’ to this was that the UK pledges to use the same rules as the EU.  But that would make a mockery of Brexit and would constitutes a particularly painful form of political suicide for any Conservative government.

The British concession was the so-called ‘non-regression’: as part of the deal, the UK would pledge not to lower the regulatory requirements below the current levels – which are aligned with those of the EU.  But European politicians were quick to point out that the EU constantly raises its standards.  So accepting merely ‘non-regression’ may, in the future, still result in a competitive advantage for British firms.  In the words of German Chancellor Angela Merkel:

“We need to have a level playing field not only for today, but for tomorrow, and the day after that.  Otherwise the result will be unfair terms of competition, which we cannot impose upon our businesses.”

Mrs. Merkel’s ‘offer’ was that the deal should include provisions allowing the EU, in the event of ‘unfair’ British regulation, an ‘automatic right’ to retaliate – for instance by curtailing access to certain markets for British goods and services.  But, beyond being unpalatable to any ‘sovereign’ British government, such provisions would be exceedingly complex to design and implement.  What constitutes an ‘unfair’ change in regulation?  Who will determine what is or isn’t ‘unfair’ as opposed to just ‘different’?

This seems like an insoluble conundrum.  In fact, an Irish politician called it an attempt to “square the circle”.

But it’s all just smoke and mirrors.  There is a very straightforward solution: rather than attempting to be restrictive or prescriptive in terms of ‘level playing field’, the deal should simply allow either side to unconditionally terminate the agreement (in its totality, not partially), with – say – one year notice.  This means that, if it feels that the agreement does it more harm than good (for instance, that British firms are enjoying an unfair advantage and are therefore undermining the ‘health’ of the single market), the EU would be able to bail out long before that vaunted single market sustains significant damage.  The one year transition period would allow government agencies and companies to adapt to the new reality.  And, if the agreement is terminated, we would all be no better and no worse than with no deal in the first place.  But the risk of termination would be – I dare say – exceedingly small: the two parties would be more likely to negotiate away small hiccups and weigh eventual drawbacks against broader advantages.  What’s more, any issues would be assessed for their real impact – rather than for the imagined future risks.  From afar, the shadow of an anthill can often be mistaken for a steep mountain!

An unconditional right of termination would ensure that this will always be a relationship between two willing partners; it would defuse the suspicion that it may at some point turn into an unhappy catholic marriage.  And this brings me to the next ‘major area of disagreement’…

Who/what would police the deal

What happens if one of the signatories believes that the other has violated the terms of the deal?  Who is going to interpret what’s been agreed – and make a determination as to what constitutes ‘the terms’?

The EU wanted its own ‘Court of Justice’ to make those determinations.  ‘Keep dreaming!’ responded the Brits.

There are, of course, solutions – international treaties often include complex clauses designing bespoke processes of conflict resolution.

But here’s the thing: international treaties are extremely difficult (and often impossible) to enforce.  If you want an example, look no further than the ‘transition deal’ between EU and UK.  The ink has hardly managed to dry on those pieces of paper, before the UK government introduced a bill aimed at ‘clarifying’ its obligations and ‘protecting the UK’ from ‘extreme EU interpretations’ of what’s been agreed.  Government officials have serenely admitted that the draft bill violated international law, albeit only in a “specific and limited way” (rather than in a general and unbounded manner, presumably!)

This may sound unpleasant to certain hypocrites and wishful thinkers; but the reality is that a sovereign state cannot – except in the most extreme circumstances – be forced to comply with ‘international law’, or with treaties it signed.

So the best – nay, the only – guarantee that an agreement will be complied with is making sure that it is and remains in the best interest of its signatories.

Luckily, he is protected by International Law...

An unconditional termination clause would make ‘policing the deal’ and ‘conflict resolution processes’ superfluous.  It is catholic marriages that account for the most acrimonious divorces – just ask Henry VIII!

So why are they fighting?

But, if the ‘major areas of disagreement’ are actually non-issues, why this prolonged, painful ‘process’?  Why the rancour, the recriminations, the bitterness?

To understand this, one has to appreciate that the European Union has long ceased to be about economics.  In the 1975 referendum, the UK voted to enter the Common Market – an economic bloc; in 2016 it voted to leave the European Union – a political project.

Consequently, the conflict between the UK and EU isn’t about the economy, as we are being led to believe; it is about ideology.  Nothing exemplifies this better than a recent Twitter-facilitated ‘conversation’.  On 2 December 2020, UK Secretary of State for Business, Energy and Industrial Strategy Alok Sharma posted:

“The UK was the first country to sign a deal with Pfizer/BioNTech - now we will be the first to deploy their vaccine

To everyone involved in this breakthrough: thank you

In years to come, we will remember this moment as the day the UK led humanity’s charge against this disease”

I’m no fan of the Rt. Honourable Sharma; one can dispute the taste he displayed in an official tweet that sounded like the boastful cheering of a football fan.  But that’s not what he was criticised for.  No, Mr. Sharma’s tweet was criticised for being nationalistic.  Within 3 hours (which is warp speed in diplomatic terms), a certain Andreas Michaelis, Germany’s Ambassador to the Court of St. James, weighed in – also on Twitter:

“Why is it so difficult to recognize this important step forward as a great international effort and success. I really don't think this is a national story. In spite of the German company BioNTech having made a crucial contribution this is European and transatlantic.”

Listen to the music: the German envoy wasn’t objecting because Mr. Sharma omitted to give credit to the vaccine’s ‘German connection’.  No, he was annoyed by Sharma’s expression of national pride.

And therein lies the difference: born as a sensible economic alliance, the European ‘Union’ is now an ideological movement – one that aims to gradually wipe out the nation states in favour of a new (some would say ‘artificial’) European identity and its political manifestation: a supra-national entity (some would call it an empire).  Hence the relentless push against any trace of ‘nationalism’ – even the mild, benign form that many would call ‘patriotism’; hence the instinctive, knee-jerk reaction against manifestations of such ‘nationalism’ – whether in the UK, in USA, or elsewhere; hence the hostility towards Israel – the embodiment of such ‘nationalist’ aspirations.

The problem the EU has is that this ideological push does not really have much to show in terms of popular support; it is the dream of a political, economic and intellectual elite, which is promoting it without much consultation with those they seek to re-educate and re-mould.  Consequently, as the push towards ‘multilateralism’ and ‘European identity’ advanced, so did the (generally hostile) popular reaction to it.  What’s worse, from the point of view of the promoters of ‘the European project’ is that the initially diffuse popular reaction soon drew the attention of politicians eager to ride that ‘populist wave’.  There is, within the EU itself, a rising ‘Euro-sceptic’ sentiment, a centrifugal tendency that worries the ‘internationalists’.

Brexit was, of course, by far the most powerful manifestation of that tendency – and it has shocked and shaken the ‘Union’ to the core.  The worst nightmare of the ‘Europeans’ is another ‘exit’, a second member state that would decide to contradict the ‘EU line’ ideologically and cross it politically.  That would be, from the point of view of the ‘European project’ a disaster.  The ‘Unionists’ must avoid it at all costs and ‘sell’ Brexit as a complete outlier, a regrettable setback and – most of all – as an unmitigated mistake.

Hence, from EU’s point of view, Brexit must be (or at least must look like it is) very painful for the UK; and if pragmatic interests (economic and political) have to be sacrificed in the pursuit of that ideological imperative – so be it.  On the other hand, they cannot go too far: EU’s economy is already on its knees; and a spurned UK would be a loose cannon aimed at the European prow.

My conclusion is that a EU-UK deal is not just a possibility – it’s the only possibility.  The ‘solutions’ to all the ‘major disagreements’ are simple; a deal could have been signed months ago.  But that’s not to say it will be signed today, tomorrow or by 31 December.  It might indeed; or it might not – if the EU powers that be feel that they can afford to postpone it to 2021.  Paradoxically, Biden’s election makes the latter outcome more likely.  But postponing has a price – and not just an economic one: once the UK absorbs the ‘birth pangs’ of the new situation, the British government’ desire to do the deal will go down a notch, with the result being a stiffening of its position in the ensuing negotiations.  Meanwhile, the EU will have to absorb a few pangs of its own; and, since they will not be equally felt by the various member states (Ireland, for instance, will feel more pain than Austria), the vaunted ‘European unity’ may start to fray at the seamline of opposing interests.

As for us… We the People will continue to be misinformed by lazy and incompetent journalists; deceived by scruple-less politicians; and generally treated with contempt by arrogant fools with a superiority complex and a sense of entitlement.  Until (not unless!) we do something about it.

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