Monday 13 March 2017

What To Expect After The A50 Declaration

The FT told me over the weekend that A50 could be triggered in the week commencing 13th March. I'm going to explain why you should not believe what you're going to see, hear and read in the early months of the negotiation.

The EU has long wanted two things: its own armed forces, and the ability to tax EU citizens directly. The EU bureaucrats have also long reckoned they could sell this to the member States, most of whom have small armed forces and would welcome the chance to hand off the task of managing them: France and Germany would agree on the basis that a) they were the "someone else" and b) Britain was never the "someone else".

Britain would never agree either to an EU armed service, or to Federal taxation. That's "never" as in "out of my cold, dead hands", not, "in return for some extra fishing rights". The EU bureaucrats have known this all along, but it hadn't mattered until the Accession countries joined and 2008 happened. That made a Federal Europe seem almost inevitable, and at some point, some EU officials explained to some UK officials that Federal taxes and armed forces were going to happen, and that when Britain was the last hold-out, it would be reminded sharply that the European Court of Justice works for Europe, not Justice.

That, as I have suggested before, is the point: the EU wanted Britain out, and Britain wanted out of the EU. All the rest is theatre for the benefit of the 27, and the associates, such as Norway, Denmark and Iceland.

Why is all going to be theatre? Because a sizeable chunk of the economy of the UK is owned by EU companies, and a collapse in the UK economy would not help the cash flows and share prices of those companies. Because the European operations of Japanese and other non-European companies are only viable if they have access to the UK and Europe, but not if they face punitive costs for trading with the UK or Europe. Then it would make sense to supply from their home base operations, shipping being plentiful and cheap. Because making it difficult for UK service industry firms to sell in Europe would mean those firms would buy European companies through which to do business. Because there isn't a town in Europe which can, in the next two years, build enough office space housing and transport infrastructure to take a serious chunk of the work being done in the City of London. It would not be long before those towns realised they had simply created "London on the (insert name of river here)", that brought no new jobs, but a lot of resentment, to the local residents. Also, modern financial markets can't work under the laws of most European countries, which don't believe in finance or markets.

And also because if I was a politician in Spain, Italy, Portugal, Greece, the V4, or Poland, I would not want to deal with a population that no longer had the hope of going to the UK to get work. The UK can get workers from China, India, the rest of the Anglosphere and South America to replace those from the EU. The EU can't create three million jobs in two years.

So, no, I'm not expecting a negotiating bloodbath. I'm expecting the UK to pay directly for things like Europol and Erasmus, and to pay increased customs duties to replace some of the donations we make to the EU now.

I'm expecting a whole bunch of melodrama and posturing. The CBI will claim that any change to anything will cause the collapse of the FTSE 100 and mass unemployment (oh, wait, they do that now). The Trades Unions will claim that workers' rights will be thrown in the dustbin and henceforth we will all work for free (oh, wait, they do that now). The UK fishing industry will be threatened with extinction (oh, wait...) and at some stage something to do with beef and sausages will be briefly important. Many companies will use leaving the EU as an excuse to hike prices, even when there is no reason their costs will increase (oh, wait, companies put their prices up or their quantity and quality down because… any reason). It's not for the UK's benefit, but for the EU's. They will bang on about "no access to the single market" and how what the UK is going to get is so much worse that "single access" because that's what Brussels sells. Then they will start haggling about quotas for Somerset brie and whether Canary bananas can be sold to the UK (yes please!). What's important is boring stuff like paperwork and certification processes, and nobody will haggle over those, and nobody will notice nobody haggling over them. Haggling over that stuff would be really dumb.

I'm expecting negotiations on fishing to go on forever, but then, negotiations on fishing have always gone on forever. The EU's daily business is trade negotiation, but it doesn't feel like it because it is perceived to be internal bureaucratic wrangling. So of course we will be negotiating on this and that for decades, because we always did and being part of the EU didn't change it.

I'm expecting the French customs to create huge delays and queues on Day One when the UK finally leaves, but anyone who doesn't expect that hasn't been paying attention to anything.

It will all be theatre. All for show. All to throw some work to some bureaucrats and their chums in the trade-negotiation business. (Those people must have thought Brexit meant Christmas forever and their pensions secured, and the British government has been signalling to them that it isn't going to be like that. Why else were they talking about doing a deal in two years?) All to tell the other 27 countries and the associates that they too will get a terrible deal if they dare think of leaving.

A50 gives UK industry two years to make deals everywhere else in the world, and a business that currently trades with Europe and doesn't start looking for customers elsewhere in that time also deserves to go broke. I'm expecting a number of businesses to go broke. Because some businesses are run by bad managers.

As a good Popperian, I will specify the conditions under which I will abandon this hypothesis: when European companies start selling their UK investments. If that happens during the A50 negotiations, be afraid. Be very afraid.

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