A “No-Deal” Brexit looms ever closer

![cropped-barnier-and-frost2.jpg](upload://AnbPOLXD8Oa0Gr7fZB5xIcKmKHR.jpeg)

 

On January 1, 2021, whether there is a deal between the UK and the EU on future trading relations or not, significant new barriers to doing business between the UK and the EU will come into existence. There is no possible agreement between the UK and the EU that can eliminate these new barriers and borders because of the UK’s decision to leave the EU’s single market and customs unions.

At best, an agreement will provide for tariff free and quota free trade in goods between the two. But such an agreement would not eliminate the need for paperwork and customs checks, to certify such things as “rules of origin” – where the goods in question, and the components in them, were actually made. Indeed, it has been estimated that UK business will need to recruit at least 50,000 customs agents just to handle the additional paperwork involved in the export of goods.

No wonder the UK government is currently running an ad campaign boasting that it is committed to “growing the customs sector for EU trade in 2021”. This might more properly read that the UK government is committed to creating a trade bureaucracy where none currently exists.

Other “big things” that will change as and from January 1 next include:

  • An end to “Freedom of Movement”, the right of EU citizens to freely go and live and work in the UK and of British subject to freely go and live and work in the EU. Of course, movement in both directions will still be possible but such movement will now be subject to immigration, visa, and work permit regimes, which will make such movement all the more difficult. There would appear to be a great many British people who think that ending freedom of movement simply means stopping EU citizen coming to the UK and, somehow or other, does not apply to them when it comes, for example, to buying a second home in France or retiring to Spain. Expect howls of rage when reality bites.
  • The UK has a surplus when it comes to the export of services to the EU. But the export of services is highly dependent on two things: freedom of movement, and data transfers. Once the UK fully become a “third country” the ability of businesspeople to simply jump on a flight or the Eurostar to attend a meeting in some European city at a moment’s notice may well come to a stop. “I’ll be there in the morning and I can stay until we see this thing through”, will be a thing of the past.
  • UK professional qualifications may no longer be recognised as valid, preventing UK lawyers, architects, accountants, and others offering their services across EU member states.
  • The financial services industry will lose its “passporting” rights, the right to offer financial products from London to European clients. To continue to do so, they may have to set up subsidiaries in all 27 member states.
  • UK truckers will lose “cabotage” rights, the ability to drop off and pickup in multiple EU countries. They will be able to deliver from the UK to a point in one member states, and then have to head back home, load or no load.
  • And, in our view the “biggest of the big things”, the possible end to the free flow of personal data between the EU and the UK, because the free flow of personal data underscores practically all business dealings in today’s economy. Once the UK is outside the EU’s legal order it will no longer be possible for “economic operators” in the EU to send personal data to the UK unless the UK is given a “data adequacy” decision by the EU Commission.  The Commission may be in no position to give such a decision in view of the striking down by the European Court of the US/EU “Privacy Shield” in the Schrems II decision, because of concerns over the ability of the US security services to access any personal data sent to the US. The same concerns are in play when it comes to the UK. And if Privacy Shield is invalid then, frankly, so are Standard Contractual Clauses and other transfer mechanisms, such as Binding Corporate Rules.

As well as the “big things”, there are “little things”, which will make travel to Europe for business or tourism more difficult.

  • For a start, British people will no longer be entitled to use the “EU” lane at airports or seaports. Because the UK was never a member of Schengen, UK subjects have always had their passport checked. But it was a cursory glance and a wave through. After January, it will be different. There will be more questions. Demands for documentation. “Have you travel insurance? Do you have enough money to cover your trip? What is the purpose of your visit? Ah, I see your passport will be out of date in 4 months. Sorry, no entry.” Then customs. “Why have you a laptop and an iPad? Are you planning to sell them while you are here? What else have you got with you that might be saleable?”  And there will be no obligations on the border police or the customs officials to speak English. Why should there be? Expect queues. Long queues.
  • UK visitors to Europe will no longer be able to benefit from the EU’s European Health Insurance Card (EIHC) system, whereby emergency medical cover is provided to any EU citizen in any EU country as if they were a national of that country. For what this could mean for UK visitors to France, for instance, see here
  • UK driving licences will no longer suffice to be able to drive in Europe but will need to be supplemented by international driving licences.
  • Pets will no longer be covered by the pet passport scheme.  UK government advice says that if you want to take your pet with you to Europe you will need to visit the vet at least four months beforehand so all necessary tests can be carried out.
  • Today, a UK subject can buy property in Europe at will, with France, Spain, Italy, and Greece being the most popular spots. After January 1, that will become much more difficult, with proof of financial resources, health insurance etc. being required before a purchase will be sanctioned by the relevant authorities.

The above two lists are by no means exhaustive but are simply illustrative of the changes coming. Despite UK government information campaigns about what will happen after January 1 next, they will come as a shock to many businesses and individuals, many of whom simply turn off when it comes to talk about Brexit, because they believe that Brexit has already “been done” and, so far, there have been no great changes.

So, how did we get to the point where the UK is building borders between itself and its nearest neighbours, not to mention putting a border in the Irish sea between the UK  and Northern Ireland?

I believe that it comes down to three things: “simplism”, “exceptionalism”, and “dominoism”, three core beliefs of the Brexiteers. Leaving the EU would be simple; because the UK was “exceptional” it was entitled to an exceptional deal with the EU; but if it didn’t get such a deal it would not matter as the EU was going to implode anyway and Brexit would trigger a “domino” effect with other countries following the UK out.

“Simplism”, a word coined by the UK Brexit commentator, Roland Smith himself a former Brexiteer, is the belief that it would be simple for the UK to leave the EU, because the EU needed the UK more that the UK needed the EU and, therefore, the UK would be able to dictate the terms of its leaving and the terms of its future relationship with the EU. As the leading Brexiteer, Michael Gove, now effectively the most senior minister in the UK government after Boris Johnson, put it, the morning after the UK voted to leave the EU it would “hold all the cards”.

“Simplism” was able to take root because the UK political elite never took the time, over the forty plus years that the UK was an EU member, to understand the EU in any great detail, how it worked and, more importantly, why it worked. For example, in his 2016 “hold all the cards” speech, Gove said that there was a European free trade zone stretching from Iceland to the Russian border which the UK would automatically be a part of, irrespective of whether it left the EU or not. No such zone exists. Was Gove being “economical with the actualités” or did he genuinely believe what he said? I am inclined to the view that he did believe it because he had never taken the time to find out differently.

Or take another leading Brexiteer, David Davis, who became the Secretary of State for Brexit in Theresa May’s government. Prior to the 2016 referendum, Davis gave a speech in which he said that if the UK voted to leave the EU, then the next morning the UK prime minister should not go to Brussels to negotiate the Brexit deal, but to Berlin to immediately negotiate a trade deal with Germany. Davis, a senior Conservative of many years standing, did not know that EU member states negotiate as a bloc and that individual countries cannot do trade deals with third countries. You have to wonder how someone advocating for Brexit could not know such a fundamental fact about the EU.

Which brings us to the second “ism”, British “exceptionalism”. The UK never wanted the EU to exist and never wanted to be a part of it. Right from the early 1950s, UK governments rejected all overtures to become involved in the “European project”, starting with the Coal and Steel Community. The UK, rapidly becoming an ex-imperial power, saw itself as more connected to the Commonwealth and the US then to Europe. Given the continuing “imperial mindset” of the UK governing elite, the UK could never be “just another” European country.

It eventually joined reluctantly because of economic pressures. Over the years, as the EU evolved from a “common market” to the “internal market”, the UK negotiated a multitude of opt-outs. Out of Schengen, out of the Euro, and out of Justice and Home Affairs. It would appear that Brexiteers came to believe that if the UK as a member of the EU could opt-out of things it didn’t like, why could it as a non-member not opt-in to the bits it liked, but without the obligations and costs it disliked?

For instance, days after the 2016 referendum, Boris Johnson wrote:

“British people will still be able to go and work in the EU; to live; to travel; to study; to buy homes and settle down …There will continue to be free trade and access to the single market (Daily Telegraph, June 26, 2016).

I have little doubt that Johnson believed this when he wrote it. Like many others, he thought the UK could quickly agree advantageous terms with a shaken EU, leaving everything much the same, all upside with no downside.

But if it did not work out, no matter. “Dominoism” would see to that. It needs to be remembered that in 2016 there was a widespread belief among Brexiteers that the EU was on the point of collapse and that Brexit would push it over the edge. As they saw it, the euro was in trouble, the migrant crisis was unmanageable, and populist, anti-EU parties were on the rise. Brexit would trigger a domino effect with other countries following the UK out. Brexit Britain would then step in and remake Europe in its own image, as it had tried to do previously in the 1950s.

If “simplism” and “exceptionalism” were Plan A, “dominoism” was Plan B. And Brexiteers were confident Plan A could be delivered even before the UK formally triggered the Article 50 exit process. Informal negotiations and “soundings” with major European capitals would see to that.

There was just one problem with this. The EU did not agree. It had its own playbook. That playbook said that there would be no negotiations with the UK until such time as the UK formally notified the EU of its intention to leave: no negotiations before notification. The UK belief that informal, pre-notification negotiations would allow it to identify a “landing zone” was shot.

Worse, the UK would now have to trigger the Article 50 without knowing what it wanted. A bit like getting the family into the car to head off on holidays without knowing where you are going. At the end of the street, do you turn right or left?

The EU did not fall apart, and Brexit did not trigger a domino effect. In fact, Brexit resulted in a new cohesiveness among the remaining 27 member states. Brexit turned out not to be simple and the UK was not regarded as exceptional.

The other magic that Brexit was supposed to deliver, breakthrough trade deals with countries wide and far, turned out to be no more than smoke and mirrors. To date, all that has happened is that some countries have agreed to continue to trade with the UK on the same terms as they trade with the EU. In other words, the UK continues to trade with these countries as it does now. No pluses to offset the negatives of building borders between itself and Europe.

Which brings us to where we are today, with just four months to go until the UK cuts its ties to the Customs Union and the Single Market. As I write, the Guardian is reporting that:

Downing Street has played down the prospect of reaching a trade deal with the EU in time for December, saying it will be “very difficult” – and blaming Brussels’ insistence on tackling tough issues upfront.

“The EU continues to insist that we must agree on difficult areas in the negotiations, such as EU state aid, before any further work can be done in any other area of the negotiations, including on legal texts, and that makes it very difficult to make progress,” the spokesman said.

“We would instead like to settle the simplest issues first, in order to build momentum in the talks, as time is short for both sides.”

For its part, the EU continues to insist that it must have sight of the UK’s post January state aid policy to ensure a “level playing field” between the two and avoid distortion to competition. Brussels is rightly concerned that the UK could subsidise favoured industries, allowing them to compete unfairly with European companies. Further, EU officials point out that while the UK claims it would be happy with a minimalist deal. In reality, it is asking for quasi-single market access across a whole range of sectors. Out, but wanting a lot of opt-ins. (For a full understanding of the EU’s position see Michel Barnier’s speech on 02/09/2020 to Ireland’s IIEA: here)

The Guardian further quotes the Prime Minister’s spokesman as saying:

“We’ll set out further detail of our domestic regime in due course. After the transition period, the UK will have its own regime of subsidy control, and will not be subject to the EU’s state aid regime. We have been very clear about that throughout … The UK’s future subsidy arrangements are a matter for the British people and parliament, not the European Union”

In my opinion, the EU will not move from demanding details of the UK’s future state aid policy because it sees such a policy as potentially undermining the single market if (subsidised) UK goods get tariff free and quota free access. (Again, see Barnier’s speech).

The UK says it will not move because the EU’s demand infringes its sovereignty to set its own policies, which it sees as the essence of Brexit.

Could Johnson u-turn like he did in 2019 over the Withdrawal Agreement when he accepted a border in the Irish Sea, while continuing to deny that he had done any such thing?

Unlikely, for as former UK Tory MEP Brendan Donnelly put it on Twitter:

It may be in Johnson’s objective interest to have a deal. It may be that “no deal” is not his first choice. But he has said too many things to the EU and his Party which cannot easily be unsaid. He has painted himself into a corner with no exit easy enough for his indolence.

No deal draws ever closer.


This is a companion discussion topic for the original entry at https://beergbrexit.blog/2020/09/03/no-deal-brexit-looms/