May's Deal and Beyond

Theresa May has signed off her latest fudged deal with the EU 27. As was inevitable, even to get this deal, which relates only to the terms on which Britain leaves the EU, not the terms on which its future relations will be based, May had to capitulate across the board on all of her so called red lines. That means that none of the reasons that the Brexiteers had for leaving the EU will come to pass, which is why May's deal has provoked opposition from the Brextremists, as well as from that phalanx of Leave voters across the country who feel betrayed by May and her government. The EU, through these negotiations exposed the lunacy and lies of the Brextremists purveyed during the referendum campaign that Britain was still some powerful colonial state to which the world and its dog would come running. It exposed their argument that the EU needs Britain more than Britain needs the EU. It showed that Britain had no cards up its sleeve to bargain with, and the EU knew it, and so saw no need to make any concessions. May had a terrible hand to play in the first place, and then played it even more badly, pursuing the course of relying on a bluff that no one believed was at all credible.  At the same time, the EU, in offering this deal to May, has removed the argument of the Brextremists that the EU was refusing to allow the UK to Leave.  The EU have now thrown that responsibility back to the UK Parliament, which will inevitably, and rightly reject May's bad deal when it is put to them in a fortnight's time.

The weakness of May's hand was demonstrated by her last minute capitulation over Gibraltar. I predicted that Spain would wait until the final days before raising Gibraltar, several months ago. In the next few months we will hear much more about Gibraltar, along with a continuation of discussions over Northern Ireland, to which will be added, Cyprus, the Channel Islands, and other UK interests.  The Tory media have taken to trying to provide support for May by emphasising that she has kept making her argument.  But, all that means is that she is like some has been punch drunk boxer, who just keeps getting up from the canvas to be punished some more!  The only reason that May has stayed in place, is because at every stage of the negotiations, she has capitulated on her previous red lines.  If the only redeeming feature she has, is that she has become an object of pity by a public that sees her continually taking a battering, but apparently oblivious that she long ago lost the fight, it is not much of a recommendation for a Prime Minister, let alone one that proclaimed her qualities as a "strong and stable leader." 

The Brextremists remaining in May's Cabinet, like Gove, Fox, Leadsom and so on, are doing so, because they believe, as I wrote some months ago, that come March 29th, 2019, when Britain is outside the EU, they will be able to rip up any existing agreements, and push ahead with their desired hard Brexit, as they ditch May in the process. The Brextremists outside May's Cabinet, such as Bojo, Mogg, Raab and so on, appear to have exposed their hand, by not getting the 48 letters to challenge May's leadership, but after May loses the vote, in parliament, on her deal, there seems little doubt that the remaining letters will then go in, and the Brextremists, inside and outside the Cabinet, will once more unite against her. The problem for them is that, whilst May has no majority for her bad deal, the Brextremists are themselves even further from having a majority for their proposed No Deal. 

The strategy of May, and of the Tory media – including now it seems those formerly hard Brexit organs such as the Mail, Express and Sun – is to use yet another empty bluff. This empty bluff is the threat that, if parliament does not vote for her bad deal, then the only option is No Deal, and so, they expect that, when parliament votes down her deal, there will be a big market sell-off, causing panic, and so causing MP's to flood back into parliament to give it approval, just as happened with the TARP programme, put before Congress in 2008, by Bush. It won't happen. 

If markets were going to sell-off as a result of a prospect of a No Deal Brexit, they already would have done so, because every speculator already knows that May is not going to get her deal through parliament. If you already know that, and expect that the result would then be a No Deal, why would you not already have sold ahead of the inevitable market crash? Markets only sell-off in a big way, when something happens they were not expecting, for example, when Britain voted to leave the EU, in 2016, causing the Pound to drop by 20%. But, the markets today not only expect that May will fail to get her deal through parliament they view it as an almost guaranteed certainty that she will not. They have not sold off, despite knowing that, because they also know that it is almost as much of a guaranteed certainty that if May cannot get a majority for her deal, neither will she push through a No Deal Brexit either. 

Only if we arrived at a position where May, or her replacement, was actually going to push through such a No Deal Brexit would markets sell-off. But, the markets know that no such thing will happen, not just because parliament will find a way of stopping such a course of action, but May herself, and, despite all of the hyperbola, probably not Bojo or some other Tory leader, would push through such a No Deal Brexit either, because it would be the equivalent of committing political harakiri. The threat of a No Deal Brexit is an empty threat now, just as it always has been, because any government that implemented it, would have to take responsibility for the absolute chaos and catastrophe that followed it. The markets know that, which is why they have not sold off, why they will not sell-off, significantly, after May loses the vote, and why, therefore, it is no threat weighing upon opponents of Brexit. 

The EU 27 simply held their ground, as their far superior position allowed them to do. The idea that the EU needs Britain more than Britain needs the EU was always a ridiculous suggestion. The EU, with its $14 trillion economy and 500 million people, dwarfs the UK's $2 trillion economy and 70 million people. 70% of UK trade is with the EU, or else with countries covered by trade deals negotiated by the EU. The idea that the UK could cut itself off from those trade ties was always ludicrous. By simply holding to its line, the EU exposed the lunacy of the Brextremists argument. 

The Brexiteers claimed that the basis for leaving was to regain control over Britain's laws, borders and money, but that same reality means that that goal is equally unattainable. A country can nominally regain control over those things if it is prepared to engage in some sort of autarky, like North Korea. Even then, as North Korea, Cuba, Iran etc. have experienced, it doesn't stop other bigger states from messing with you in a big way. But, even just normal global rules of economics, and politics means that even a country engaging in some kind of suicidal policy of autarky, has no real control over any of those things. Still less does a country like Britain that depends on trade, and says it wants to engage in even wider global trade have real control over any of those things. 

Take each of the three things mentioned above as the goal of the Brexiteers. For example, laws: the UK is party to a whole series of international treaties that have the power of international law behind them. In other words, the UK is committed to abiding by a whole series of international laws that have been formulated by others. The UK, could attempt, as Donald Trump is doing, to renege on those treaties and agreements, but the UK is not the US. Even the US, is finding that its not big enough to simply ignore what the rest of the world is doing.  Trump's policies are weakening the role of the US in the world, leaving the door open to China, the EU and others in a whole series of areas where the US is walking away.

If the UK attempts to renege on the international treaties it has entered into, the first thing that would happen would be that its standing in the world would decline even more sharply. If Britain wants to enter into trade agreements with other states across the globe, why would they do that, having seen the UK break agreements it has previously entered into? 

The whole process of negotiations between the UK and EU over Brexit, shows exactly what a weak bargaining position the UK will be in, in any of these future negotiations too. Even if May was to get her Brexit Withdrawal deal through parliament, it is only the first part of the process. The much harder part lies ahead, of negotiating the future relationship between Britain and the EU. If Britain wants to be able to trade expansively with the EU, it will have to agree to abide by the same laws and regulations it currently abides by now, as an EU member. The difference is that Britain will have no seat at the table in determining those rules, regulations and laws. The same is true if the UK wants to do a trade deal with the US, or China or India. What is more, it will quickly find that the rules it has to agree to abide by to trade with the EU, conflict with those it has to abide by to trade with the US, or India, or China, for example, the celebrated chlorinated chicken. Donald Trump has already written into his new trade deal with Canada and Mexico that if either do deals with other countries that the US disapproves of, he will have the right to cancel their existing deal. 

Take then the issue of borders. Already over fishing, and fishing rights we are seeing that issue muddied, as the EU insists on having access to UK waters for fishing as part of any future trade deals. The UK is currently saying that after Brexit, EU workers will have no different rights in coming to Britain than workers from elsewhere in the world, but that position will not hold. The truth is that the UK government knows its immigration target is ridiculous. It could have limited non-EU immigration over the last 8 years, but Tory governments chose not to, because the UK economy, needs large amounts of immigrant labour. But, the fact is also that in any future trade negotiations, it's quite obvious that the EU will insist on EU workers having privileged access to the UK, as a quid pro quo for the UK having access to the vast EU market. Similarly, already, in Britain's talks with India, India is demanding that Indian students have privileged access to the UK, and so on. The idea that Britain will have control over its borders, to any significant degree greater than it already enjoys is nonsense, because, in order to sign trade deals, and so on with other large economies, it will have to open those borders to goods, services and people to all those states it seeks to enter into agreements with, just as it does now with the EU. 

But, the issue over Gibraltar, as with Ireland emphasises this point even more starkly. At the moment, both Britain and Ireland are EU members, and as an important member of the EU, the UK is able to exert considerable influence in terms of relations over the Irish border with Northern Ireland. The Good Friday Agreement would not have been possible without it. The same is true in terms of Gibraltar. Both Britain and Spain are EU members, and both have an equal say in the councils of the EU, when the future and current condition of the rock is being discussed. But, once Britain leaves the EU that will no longer be true. Once Britain is outside the EU, whenever any issue of dispute arises in relation to the Irish border, to Gibraltar, or to questions such as British bases in Cyprus, or potential questions over British territories and tax havens such as the Isle of Man, or the Channel Islands, the EU will obviously throw all of its considerable economic and political and ultimately military weight behind its own EU members states, and against Britain, especially when it develops an EU Army. In real terms, when it comes to future issues of sovereignty over these UK territories, the UK will, in fact, have lost a considerable degree of sovereignty and influence. The same may well be the case in relation to future discussions over the future of the Falkland Isles. 

Finally, money. The 20% drop in the Pound following the 2016 Brexit vote, shows just how little control political sovereignty gives in relation to the economic fortunes of a country. The fact is that the value of a currency depends upon astronomical money flows on global capital markets. When a country proposing doing something that those markets see as damaging to its economic fortunes, or more precisely to their potential for extracting interest, or capital gains from its economy, the markets respond by selling its currency, which then causes its inflation to rise, and the standard of living of its people to fall, and prompts rises in interest rates, as lenders stop lending, and the central bank attempts to prop up the currency. 

None of the promises made by the Brexiteers were based upon the conditions that exist in the real world, which is why none of them have been achieved in the deal that May has negotiated. That is not just because May, in attempting to appease her Brextremists, set up ridiculous red lines, which she was always going to have to abandon, that she proposed a ridiculous bluff, of a No Deal Brexit, based upon the idea that she was engaged in some kind of poker game, when it was more like she was playing Solo Whist and had declared Misere Ouvert, but because the objectives proclaimed by the Brexiteers could not have been achieved by any negotiator. That is also why Labour's suggestion that it could do better in such negotiations is also a fairy tale. 

The Brextremists proclaim horror that May's deal could leave Britain locked into it, via the backstop for ever, the so called Turkey Trap. In reality, the EU does not want to keep Britain in that position, because already some EU states think that Britain has been actually given too much in the Withdrawal Agreement, because it allows them to effectively stay in the Customs Union and Single Market, as part of the backstop, without being a member of the EU. They will want to end that situation as soon as possible, but that simply means that yet again, all that this deal has done is to provide yet another fudge that leaves the real settlement to be resolved in the next two years, and the truth is that resolving that presents all of the same contradictions that have been encountered in the last two years. It will ultimately come down to whether Britain wants a hard Brexit, and becomes totally separate, or whether it accepts the need to remain in the Customs Union and Single Market etc., but without any of its current rights to determine the rules and laws that govern those institutions. But, why would any country want to do that? 

If Britain were to eventually then leave completely, it would face exactly the same catastrophe that it faces now, with the consequent response from global markets. It would have set course for a rapidly declining role and status in the world, which would probably quickly result in a recognition of that reality, and an application to re-enter the EU, which would then be on much worse terms than Britain currently enjoys. Alternatively, Britain might go for some second tier-status membership of the EU, being in the Customs Union etc., but outside the political institutions. Again, it would probably not take long before it was realised that that situation, i.e. May's current deal, more or less on a permanent basis, or Labour's proposals, represents the worst of both worlds, committed to abide by EU rules and regulations, but with no say in determining them, and so would again result in a subsequent application for readmission. 

In short, it would just be a costly, and pointless exercise and waste of time. Far better, to just scrap Brexit, and stay in the EU, working with other progressive social democrats and socialists, across the EU, for its reform, and for a Workers Europe.