Britain’s
Brexit delusions
Theresa
May talks tough on Brexit, but the prospects do not look good for an
orderly transition.
By PAUL TAYLOR
10/11/16, 5:32 AM CET
Just eight months
after David Cameron promised Britons “the best of both worlds” if
they voted to stay in the European Union on his renegotiated terms,
Britain is hurtling toward the worst of all worlds — a swift, hard
Brexit on unfavorable trade terms.
The dynamics of
British politics since the June referendum have vaporized the softer
options with breathtaking speed, while London’s main continental
partners have their own domestic reasons to prefer a quick, clean
break. Some European government officials say privately that only a
nasty economic shock will make the U.K. more realistic in
negotiations on their future relationship.
In Britain, both
major parties have interpreted the message of the June 23 Brexit vote
as a mandate to leave the EU by the 2020 general election, control
immigration and regain full parliamentary and judicial sovereignty.
That, in essence, is what Theresa May, Cameron’s successor as prime
minister, promised the Conservative Party conference last week.
But it is
incompatible with staying in either the single market or the EU’s
customs union. The former requires countries to implement all EU
rules in national law and allow free movement of goods, capital,
services and — crucially — people. The latter would mean
continuing to let the European Commission negotiate international
trade deals on Britain’s behalf, rather than seeking the bilateral
free trade agreements with countries like the U.S., China, India,
Canada and Australia that May promised.
True, May did say
that the planned “Great Repeal Bill” to abrogate the European
Communities Act that gives EU rules precedence over British statute
would incorporate the existing body of European legislation into U.K.
law before parliament starts the long process of amending or
scrapping rules it doesn’t like. She also said the government would
not roll back EU-mandated workers’ rights. That might appear to
favor an orderly transition.
Yet the prospects do
not look good for negotiating favorable market access arrangements
for the interim period between the likely Brexit date in spring 2019
and the day when the EU and Britain reach an eventual agreement on a
future free trade pact.
British business
leaders and international bankers, who overwhelmingly backed
remaining in the Union, are pressing Downing Street for a long grace
period to ease the pain of Brexit. They want time to adapt before the
EU slaps tariffs on imports from Britain and scraps the “passports”
U.K.-based financial firms need to sell services across Europe.
The British have
built a track record since 2010 of self-delusion, misreading European
debates and overestimating their own power and support in Berlin.
It is not clear that
May will be willing or able to pay the price for, say, a five-year
standstill on trade and market access. That would likely entail
continuing to apply both past and future EU laws and standards during
the transition, making Norway-style payments into the EU budget for
market access, and upholding free movement of labour.
The first two
conditions might just be acceptable, although hardline Conservative
Euroskeptics and the U.K. Independence Party would howl with outrage.
Pledging to keep the door open to EU migrants for years after Britain
leaves would be political dynamite — as well as an electoral gift
to the virulently anti-immigration UKIP, which poses a continued
threat to both Labour and the Conservatives.
Rise of the
populists
Unable to resolve
the contradiction between single market access and controlling
immigration, May and her ministers are denying that they face any
such choice. Perhaps some of them genuinely believe the time is ripe
for European governments, under pressure from their own populists, to
reinterpret freedom of movement in a way that is compatible with
British voters’ concerns.
Last week’s strong
statements by German Chancellor Angela Merkel and French President
François Hollande showed just how deluded that idea is. Neither is
willing to countenance a debate about splitting the EU’s so-called
four freedoms that would divide the 27 for the sake of a country on
its way out. The unity and strength of the remaining EU is their top
priority, as it is for the European Commission and European
Parliament.
“This is a turning
point for our country,” May said Wednesday, calling for more
government intervention to tackle social and economic inequality.
There is a strong
determination in Berlin, Paris and Brussels that Britain should not
get a better deal on leaving than it was offered to remain in the EU,
and that the terms of its departure should be such as to deter any
prospective emulators. When they negotiate with May, EU leaders will
be looking over their shoulders at their own Euroskeptic populists —
Marine Le Pen, Geert Wilders, Frauke Petry.
The government’s
threat to make British firms register and report their foreign
employees, even if ministers backed away from it after widespread
criticism, alienated some of London’s friends in the EU. It reeked
of the “national preference” ideology espoused by Le Pen and
Wilders. How May can reconcile such knee-jerk nationalism with her
vision of a “global Britain” open to the world is a mystery.
British efforts to
sow division among continental Europeans by highlighting the
potential cost of tariffs on imports of German cars or Italian
prosecco have also been counter-productive so far. The head of the
BDI German industrialists’ federation, Markus Kerber, reminded BBC
listeners that only 7.2 percent of German exports go to Britain.
Diplomats note that
even when German business chiefs did lobby Merkel against imposing
sanctions on Russia, she brushed their pleas aside. Besides, German
officials see potential investment gains for Germany as a result of
Brexit, and they don’t see status-conscious Brits abandoning their
BMWs, Mercedes or Porsches for U.K-made Japanese cars.
Conservative leaders
are still asserting that tariffs would hurt the EU more than Britain
because the Union has a trade surplus with the U.K. Boris Johnson,
the foreign secretary and Leave campaign mascot, is a master of this
sort of “Europe wouldn’t dare” rhetoric.
Long respected as
Europe’s most skilled negotiators, the British have built a track
record since 2010 of self-delusion, misreading European debates and
overestimating their own power and support in Berlin.
Now May has been
forced for political reasons to set a March deadline for triggering
the EU’s divorce clause — Article 50 — time is on Europe’s
side, not Britain’s. If the two-year period provided to negotiate
an exit treaty expires without a deal, economic ties would fall off a
cliff and London-based banks would lose their “passports”
overnight.
To avert that fate,
the prime minister has fewer cards to play than her cabinet
colleagues suggest. She should have understood this from London’s
failure to draw key partners into exploratory talks before setting a
date for Article 50.
Even Joseph Muscat,
the pro-British prime minister of Malta, which will hold the EU
presidency when May fires the Article 50 starting gun next year, sent
London a stern message that it will have about as much say in the
negotiations as Greece did in its bailout talks. So much for “taking
back control.”
Paul Taylor writes
POLITICO‘s Europe at Large column.
London’s
secret weapon against ‘hard Brexit’
The
capital’s business leaders bank on Labour Mayor Sadiq Khan to stand
up to Theresa May.
By CHARLIE COOPER
AND FRANCESCO GUERRERA 10/11/16, 10:44 PM CET Updated 10/11/16, 10:49
PM CET
LONDON – Theresa
May’s plan for a “hard Brexit” is about to come up against a
very large obstacle. It’s big, it’s rich and it’s used to
getting its way. It’s called London.
The capital’s
business leaders and financial giants, worried about the impact
tougher immigration controls and departure from the single market
could have on their revenues, have identified London Mayor Sadiq Khan
as their champion.
“[Khan’s] got to
secure a place at the table,” Colin Stanbridge, chief executive of
the London Chamber of Commerce and Industry told a meeting of the
London Assembly’s economy committee Tuesday. “He needs to keep
fighting for that, and we need to keep backing him to be in there to
make sure that London is represented in these negotiations.”
During the hearing
at the capital’s gleaming City Hall building, Stanbridge and other
leading representatives of London’s business and finance community
struck a markedly gloomier tone about Brexit than the confident
voices emanating from just along the river Thames in Westminster.
A “hard Brexit”
that takes Britain clean out of the single market, and leaves the
U.K. to trade with the EU under WTO rules, will do “significant”
harm to the financial services sector, said Miles Celic, chief
executive of the influential industry body TheCityUK.
His members are
watching the political situation closely, he said. “They will make
contingency plans. The sooner we have some clarity the better.”
The City of London
has been scrambling around for some good news on Brexit ever since
May entered Downing Street in July but hasn’t found much.
The government’s
insistence on pulling out of the single market and the loss of
“passporting rights” that allow them to sell their services
across the Continent from London has prompted large banks to make
concrete plans to move some of their operations elsewhere.
Khan is widely seen
as a friendlier figure in London’s financial circles although some
banking executives are well-aware of his limited powers and influence
among the current ruling elite.
While many doubt he
can secure a “seat round the table,” his first few months in the
job have won him admirers.
“I have to say
I’ve been really pleased with what the mayor has been doing,”
Celic told the committee. “He’s been making exactly the right
points in terms of the need for close access to the European market
and for the ability of people to come here.”
Earlier in the day,
Khan railed against the government’s “lurch towards a hard
Brexit” in a speech to the Confederation of British Industry.
He urged May to “be
on the side of business and the City of London” but warned that
“some people at the heart of government are willing to lead us ever
closer to the cliff edge,” causing “significant economic damage”
to Britain.
In the immediate
aftermath of the June 23 referendum, Khan himself demanded a seat at
the Brexit negotiating table. May has since made it clear that there
can be no “opt-outs” by any region of the U.K. and her desire to
present a united front when she sits down with EU leaders after
triggering Article 50 next year will likely preclude her from
including Khan.
But a spokesperson
for the London mayor told POLITICO that he has held “positive
meetings” with May and the Chancellor Philip Hammond, who has taken
a softer line than the so-called “three Brexiteers:” Boris
Johnson, the foreign secretary, Brexit Secretary David Davis and
International Trade Secretary Liam Fox.
“He is clear that
his priority is to make sure London’s key tasks are reflected in
Brexit negotiations held by the prime minister and other ministers,”
the spokesperson said.
However, the damage
that Brexit jitters could do to London’s economy is already
becoming clear, leading figures told Tuesday’s London Assembly
committee.
Jayne-Anne Gadhia,
chief executive of Virgin Money, told Assembly members that a lack of
clarity around the U.K’s future relationship with the EU was
already likely to hurt the jobs market in financial services.
She said she had
been closely watching internal recruitment decisions in an effort to
manage costs amid the ongoing uncertainty.
“I don’t think
I’m alone in that… just as we start to work out what the future
holds I suspect that everybody is managing their costs, and that will
have a knock-on impact on employment I suspect,” she told the
committee.
The wider business
community is also nervous.
“There is a need
for stability,” Stanbridge told the committee. “We don’t want a
running commentary but we would like to know a bit more about what
we’re asking for [from the EU].”
London’s
competitors were already beginning to make hay, he said, pointing to
Berlin city authorities’ recent decision to open a branch in
London’s popular Camden Town neighborhood, aimed at poaching young
tech professionals for the German capital.
“We need to make
sure we keep that talent,” Stanbridge said.
Authors:
Charlie Cooper and
Francesco Guerrera
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