Britain plays with fire over Brexit
It holds a weak hand – without a deal, trade and relationships will be damaged
by: Martin Wolf    

Later this month, Theresa May, British prime minister, will start the most significant negotiation the country has engaged in since it negotiated membership of the European Economic Community in the early 1970s. This time, the country will repudiate its membership of what is now the EU, by triggering Article 50 of the Lisbon treaty. Whether one was in favour of leaving or of remaining, one has to hope Mrs May gets a good deal.

The UK’s fate will always be bound up with that of the continent. It will also always be a significant European power. But these common interests will not be enough to secure a good deal. These are going to be difficult negotiations. The chances of a calamitous outcome, with poisonous long-term results, are high. Some of the more fanatical Brexiters would appear to desire this. Mrs May must resist such pressure.

How should the UK government approach these negotiations? It must set the right objectives, appreciate its position and adopt an effective approach.

The overriding objective must be to achieve the best possible deal on trade. The reality, however, is that the UK has a weak hand: without a deal, it would have its trade disrupted and relationship with the continent in tatters. Its counterparts know this. The UK does far more of its trade with the rest of the EU than the rest of the EU does with the UK. It has more to lose.

Former prime minister Sir John Major has laid out the best approach: “The most successful results are obtained when talks are conducted with goodwill: it is much easier to reach agreement with a friend than a quarrelsome neighbour. But, behind the diplomatic civilities, the atmosphere is already sour.” Charles Grant of the Centre for European Reform, adds: “At a time of global uncertainty . . . Britain’s decision baffles its partners. They feel snubbed, hurt and (at least in some cases) insecure.” (See charts below.)

If the negotiations are to succeed, the government must focus its energies. This should not be over the terms of the divorce, particularly money or the rights of EU citizens to stay. The EU intends to ask for €60bn (£52bn). This is roughly 3 per cent of the UK’s annual gross domestic product. Over, say, a decade it would amount to 0.3 per cent of GDP annually. This is petty cash. The future of its relationship with the EU is far more important than that. Similarly, in return for high-quality access to the single market, via a comprehensive free-trade agreement and an “enhanced equivalence” regime for services, plus a smooth transition to such an arrangement, the UK should be willing to pay a continuing contribution to the EU. This would contradict the Brexiters’ claim that leaving the EU will release £350m a week for the National Health Service. But that was a fib.

Proponents of this approach might be condemned as “enemies of the people”. Since Robespierre, Lenin, Hitler and Mao all applied variants of this phrase to those they slaughtered, I deem this epithet an honour. In a liberal democracy, no temporary majority may arrogate to itself the label of “the people”. The 48 per cent who voted for Remain are also “the people”. In this particular case, there is no good reason to conclude that the form of hard Brexit that is now likely would have obtained the slender majority Leave managed to win in June 2016.

Some in the government and many Brexiters argue that if the UK does not get the deal from the EU it wants, it should become a low tax, free-trading state, similar, perhaps, to Hong Kong. But, as Sir John notes, “such a direction of policy, once understood by the public, would never command support”. It is not only contrary to everything stated by the Leave campaign, but also contrary to everything Mrs May has pronounced since taking office. This would be an anti-democratic outrage.Let us suppose that the government fails to obtain a good deal from its negotiations with the EU.

Let us suppose that this failure is not because it approached this negotiation in an arrogant and demanding spirit. In fact, it approached them in an emollient and reasonable one. What then? Former prime minister Tony Blair argues that “if our government were conducting a negotiation which genuinely sought to advance our country’s interests, that negotiation would include the possibility of Britain staying in a reformed Europe”.

I have no objection in principle to the idea that the application to leave could be reversed once the nature of Brexit became clearer. It is certainly no less patriotic to wish to remain than to leave. Moreover, the result of a referendum on a particular date cannot be sacrosanct for all time. It is possible that the electorate will change its mind. Those Brexiters who insist on parliamentary sovereignty can also not object in principle to a parliamentary vote on the terms of the deal that is actually reached, set against the option of remaining in the EU.

Yet, in practice, this option is highly implausible. This is partly because it would shatter the stability of the Conservative party at a time when there is no credible opposition. Yet what is even more important is the view of the rest of the EU. I find it impossible to imagine that after two years of hard negotiations, the UK would be allowed to get away with saying to its counterparties that the deal they have offered is so bad that it has decided to stay inside, almost as a form of punishment. This would violate all norms of decent behaviour. I suspect that any attempt to withdraw the Article 50 application in these circumstances would be rejected by the members, supported by the European Court of Justice. The latter would view such whimsical behaviour as incompatible with the survival of the EU itself.

The election of Marine Le Pen as president of France might make all this moot. But, as things now stand, the assumption must be that Britain will leave. The question is exactly how. On that, everything remains in play.

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