EU Mistakes Increase the Odds of No Trade Deal

Mish

Will there be a post-Brexit EU-UK trade deal?

Soft Deadlines

The 11-month negotiation period in which the UK and EU need to make a post-Brexit deal runs out in December. 

Numerous soft deadlines posed by UK prime minister Boris Johnson and the EU have come gone like rain goes down the gutter.

Failed EU Summit

Last week there was a Failed Summit in which EU leaders called on the UK to "make the necessary moves" towards a deal.

That "deadline" came and went but the sides are still talking.

Sticking Points

The BBC discusses the Outstanding Issues.

First of all, there is what is known as the level playing field. That means measures to ensure businesses on one side don't have an unfair advantage over their competitors on the other.

All trade agreements have such measures, but the EU wants the UK to stick particularly closely to EU rules on things like workers' rights, environmental regulations and particularly state aid (financial assistance given by government to businesses). 

The UK, on the other hand, says the whole point of Brexit was to break free from following common rules.

Then there is fishing: the UK would like full access to the EU market to sell its fish there, but in return the EU wants full access for its boats to fish in UK waters. British negotiators say that's not possible because the UK is now an independent coastal state.

A third area of disagreement is what is described as the governance of any future agreement. That is partly about the overall structure of any deal, but it is also about how any new agreements would be enforced and about the role of the European Court of Justice.

Another issue which will remain extremely sensitive is the way the UK proposes to implement the agreement it made with the EU before Brexit, on keeping the land border in Ireland (which is now the border between the UK and the EU) as open as it is at the moment.

The EU has been concerned that the UK may not live up to all of the commitments it has made here; the UK strongly disagrees.

No Progress Since January

There has been no progress on any of these points since January. 

When dealing with the EU, there never is. Progress only comes at the last second. 

This time however, the EU made such absurd demands that the UK is discussing not honoring the withdrawal agreement.

Whom is to Blame?

Eurointelligence, a very pro-EU newsletter, accurately blames the EU in its October 20 free edition, Barnier's Overtures Rejected.

Michel Barnier [the EU's top negotiator] tried to undo some of the damage done last week by the European Council, by offering a genuine concession: the EU is now willing to discuss legal texts. This is exactly what the UK had been demanding for some time now. But that concession was not enough. A UK government spokesman noted politely that Barnier's offer to intensify the talks was welcome, but that there is no basis for discussions unless there is a fundamental shift in the EU's approach. In other words, the UK is expecting nothing less than a reversal of the council declaration, which boldly stated that all movement in the negotiations would have to come from the UK side. We think the declaration last week was an unnecessary provocation that has actually weakened the EU's position.

We think the European Council made its third tactical error during these negotiations. The first was to bet on an extension, and the second to insist on sequencing. The combined result of all of these mistakes is that the deal will ultimately require more concessions in a shorter period of time than would have been necessary otherwise.

The EU relented also on another UK request. Instead of a permanent office in Belfast, it is now happy with a team of border officials in Northern Ireland.

The probability of a deal remains impossible to calculate because it will depend on whether Boris Johnson wants one or not, and whether he is ready is to compromise on the level playing field. He would need to do this. Another necessary condition is for Emmanuel Macron to drop his extremism on fisheries. Our hunch remains that this will happen, but we can't be sure. The big danger we see is that Macron will make it easy for Johnson to pull the plug. The process will not survive another accident of the kind we had last week.

Doubling Down

In "Doubling down - EU/UK edition"  on October 21, Eurointelligence had additional comments.

One of the mistakes some EU officials have been making in the last few years is to draw their intelligence about UK politics from their usual, mostly pro-European, sources. Tony Blair's personal interventions in Brussels had a disproportionately strong effect on opinion, and were instrumental in the EU's fateful decision to play along with the opposition in the House of Commons by forcing several deadline extensions last year. 

Reliance on poor intelligence leads to poor judgement. This problem persists today. Judging by some of the comments we have read over the last week, everybody seems to be doubling down on the mistakes they made before. The issue is not what we think about Johnson as a prime minister, on which there seems to be a consensus in Brussels and national EU capitals. It is about what he will actually do.

In this context, we noted a report this morning that the EU's strategy was now based on giving Johnson bragging rights. Letting him decide when to return to the table and declare victory, and then force him to concede on all the substantive issues. The EU should prepare itself for the possibility that this might not be the trajectory in the next four weeks. We think the UK may well return to the negotiating table. We think a deal is possible, but it will have to include a readiness by the EU to compromise as well. Judging by the discussion in the European Council last week, that has yet to happen.

We do not claim to have any special insights into the ever-changing mind of the British prime minister, but we do know that he is surrounded by advisers who accept a no-deal outcome, and some who advocate it. It would be another mistake to rely on the idea that Johnson will fold because of economics.

Another Last Second Deal?

I have long learned not to bet against EU deals at 1 second to midnight. 

In that regard, a No-Deal Brexit (not to be confused with the deal-or-no-deal post-Brexit discussion now) was nearly a miracle. 

Brexit happened because the negotiation was not totally internal. Had the EU thrown the UK a bone at any stage of the Brexit game, there would not have been a Brexit.

EU stubbornness and arrogance is why we are here now. A basic deal should have been easy but the EU again foolishly thought it held all the cards.

The EU is great at last second deals, but only internally. 

Will Macron bend? Johnson? 

Both have to and it is not at all clear if they want to.

Moreover, if the EU makes another mistake, there will not be a deal, even if both sides want one.

If there is no deal, both sides will suffer, with Germany taking the biggest hit to exports.

Mish

Comments (49)
No. 1-10
njbr
njbr

Of course there will be agreements after the deadline.

All this past few years of BS is done is just push Britain into a weaker and weaker position.

To function, there will have to be trade agreements and something approaching harmonization on key issues.

Otherwise the irrelevance of Britain deepens.

njbr
njbr

Pro Brexit commentator Peter North today in his blog "Turbulent Times"...

This, though, is not simply a matter of having a “bonfire of regulations”. Whatever we get rid of, we’re going to need alternative policies – for which there are presently none. We know not what the Tories intend to deregulate, what they intend to replace it with, and there’s no reason to believe they know either. It will fall to the whims and obsessions of one Dominic Cummings.

The second problem is that this government, as much as it doesn’t have a master plan for Brexit, it doesn’t have the stones to start severing the long reaching tentacles of the EU. Furthermore, we’ll find a great many impediments to the exercise of sovereignty come not only from the EU but also by way of a number of international conventions and global norms. Asylum rules for starters. The Tories don’t have what it takes.

That, therefore, is the essential problem with no-deal. We are taking a maximalist approach to sovereignty but there’s no outward indication we are going to wield it in any meaningful sense. We are still committed to Net Zero eco-austerity and Johnson’s Tories are still largely in step with global regulatory trends despite Brexit.

If we are to leave without a deal then we should at least do something with that new found sovereignty. Decide what sort of country we want to be and then talk about trade. We cannot have the tail wagging the dog.

The [way] it looks right now, a deal with the EU looks highly unlikely (unless what we’re seeing is “optics”) in which case the hard liners have prevailed. But they won’t get their Brexit revolution. All we’ll succeed in doing is cutting ourselves off from our main export market while the Tories fiddle around the edges, to eventually be replaced by a managerialist Labour who will try as best they can to put things back how they were.

Though I always preferred the EEA Efta route as a long term interim solution, if only to minimise the economic harm, there always was a case for a more radical Brexit. That case, though was never made. What we got instead was hopeless misinformed dribble about “free trade” and WTO rules, allowing the remainers to win the argument on deregulation because the Brexiteers could never credibly outline what they would go after and why.

Looking at EU regulation in totality, there is much that could be done to improve sustainability of our agriculture and our food ethics, being that the single market favours factory farming and low wage exploitation. Brexit could take its inspiration from those older left wing themes while still exploring ways to liberate our economy from regulations only the multinationals and the big four can afford to comply with. That then massively increases the competitiveness and fairness of our economy.

We didn’t get any of this from the Brexit blob though. They’ve been winging it from the outset and when they get their no-deal Brexit, they won’t have the first idea what to usefully do with it or how mitigate the loss of the single market. I have no problem with radicalism just so long as there’s a plan – but with a feeble Tory government and no intellectual basis for no-deal, I really struggle to see the point.

This, I suppose was the ultimate folly of the Brexit movement allowing the Tories do do Brexit for us. The Tories aren’t the radical right wingers the Guardian insists they are. It wouldn’t be so bad if they were. Vote Leave wasn’t interested in starting a revolution. Its main interest was in preventing one – absorbing the insurgency on the right and safeguarding Tory incumbency. Thanks to the gullibility of the hard liners and the Boris fanboys, it looks like they succeeded. Consequently we’ll get the wreckage of a no-deal Brexit, but the revolution is back to square one.

PecuniaNonOlet
PecuniaNonOlet

Interesting take Mish. From what I have read, EU wants to make an example of UK so no deal will maximize pain for both parties and teach other EU members that think about exiting that they too will get max pain on withdrawl. That seems to make sense if the EU is trying to survive, brexit is a done deal, time to look to the future of eu not the past (uk).

Its a bit ironic the uk wants ALL the fish to themselves but then wants to sell that fish to the eu.

FromBrussels
FromBrussels

What can you expect ? The EU is a nonthinking, unwieldy, awkward institute with 27, mostly clashing, opinions ! A circus composed of an army of grossly overpaid, worthless, nationally failed clowns, officially named politicians, not giving a shit about any agreements with the UK whatsoever !

Doug78
Doug78

Neither side will back down and they shouldn't. The UK wants out and they will get it. The EU wants to discourage other states from leaving and will probably get that too. With no deal then trade drops down into WTO rules. The fishing problem is more a local issue in both blocks. EU citizens want fish and don't care where it comes from as long as it comes from sustainable fisheries. Germany loses. France gains. And the UK? Knowing them they will do just fine because they have interesting alternatives.

Scooot
Scooot

“In this context, we noted a report this morning that the EU's strategy was now based on giving Johnson bragging rights. Letting him decide when to return to the table and declare victory, and then force him to concede on all the substantive issues.”

This won’t happen, the last thing the EU want to portray is that the UK have had “their cake and eaten it”. This is the main sticking point, they’ll be no deal until the EU give up on this ridiculous stance and focus on what’s best for everyone.

njbr
njbr

A little bit of self-awareness should tell you that the possibility of the FORMER British empire dictating terms to the ROW is foolish indeed. Hail Brittania, indeed.

A nice place to visit, but a people a little full of themselves.

Licking the boots of the aristocracy for centuries, including those arriviste lot from the crumbled Germanic states--meanwhile thinking they are astride the world like atlas.

Yearning for the good ol'days of bowing to the carriages while proclaiming their independence...it's all rather awfully funny.

njbr
njbr

Boris is as big a phoney as Don the Con.

Buy a comb, Boris...

Younger days...

frozeninthenorth
frozeninthenorth

I would like to suggest that the outcome of the Brexit talks was almost a given because of British stubbornness, jingoism, and small-mindedness. On the other hand, talking to European is like negotiating with the Chinese -- the guys in charge are never in the room.

Europe has made many errors, as has Britain, they are now looking at losing Scotland, and maybe Wales (less likely) as these countries seen many benefits in staying in Europe (and sticking it to the English).

The fundamentals are that the whole process was flawed, The Brits couldn't get the ducks in a row for the longest time, and the European dealt with the UK they did with Cyprus (check it out); our way or the high way.

Simple negotiating tactics say that you always leave an exit strategy to your opponent; Europe decided that not only would they not give an exit to the UK but would humiliated them in the process --

Now Britain has no friends (at first they thought the Americans would be there for them0 they concluded a single trade agreement (with Japan) and that's the extent of the diplomatic trading efforts.

Once again Britain has scewed the pooch. There will be hell to pay in a few months

Henry_MixMaster
Henry_MixMaster

The UK also misapprehended who needs a trade deal with the UK more. It certainly is not the EU.


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