Another Deadline Whooshes Past

Two months ago, Boris Johnson said that, if Britain did not get the deal he wanted, and that, a year ago, he told us was oven ready, he would walk away from talks with the Eu, and press ahead with a no deal.  As with all his previous empty threats, he failed to carry it out.  Two months later, Brexit still is not done, and there is still no sign of his oven ready deal being cooked.  In fact, already, Britain has had to concede most of what the Brexiters claimed they would gain from Brexit.

The costs to Britain from Brexit already exceed any savings in budget contributions that might arise.  More importantly, the Brexiters have continued to make a big play over the talk about sovereignty, but they have also had to basically give up a large part of that concept of sovereignty they have been making such a fuss about.  In order even to get this far in the Brexit negotiations, Britain has had to agree that it will abide by existing EU standards.  The current issue of contention is over the need for Britain to also agree to abide by any future standards that the EU introduces, or else to face a corresponding increase in the tariffs it must pay to sell its goods in the huge EU single market.

It shows why the issue of sovereignty is a nonsense, and why the simplistic slogan "Take Back Control" was itself not just meaningless, but misleading.  No country can exercise absolute sovereignty, because it has to strike deals with other countries, and those deals mean that both countries give up a bit of their sovereignty in order to get the benefits of their agreement.  A country like North Korea can claim a high degree of sovereignty, but the price it pays is to its economy, which suffers from not being able to engage in the creation of such deals, and so on.  But, as a result of the weakness of its economy, it then also suffers other restrictions on its sovereignty.  The most obvious is that other stronger economies can pressure it militarily and so on.  The more North Korea has tried to counter that with its own military spending, the more it has then destroyed its own economy, as a result of this wasteful spending.

So, the reality that has always existed means that Britain did not abide by its threats to walk away from the negotiating table.  Several other deadlines have come and gone since September, the latest one being yesterday.  That was a deadline set by the EU.  The EU also does not want a No Deal outcome to the negotiations, because it would be disruptive.  More importantly, the EU knows that if and when the negotiations break down, Britain will try to blame the EU for it, and so they do not intend to be the ones that walk away from the talks.  Again all the cards are in their hands.  If they continue talking until December 31st. it will be down entirely to Britain.  Either Britain decides to extend the Transition Period, or else it would de facto have walked away from the talks, landing itself, by default in a No Deal situation.

The EU has little to lose in such a situation compared to the damage that would befall Britain.  There is no indication that Britain has made anything like the preparations required for a No Deal Brexit, which itself probably tells you the extent to which the government would allow it to happen when it comes to it.  But, if its rather just incompetence, then, come a No Deal, the effects will be quick to appear.  By contrast, the EU has made preparations for No Deal, even though, in large part, it does not need to.  The EU economy is seven times that of Britain.  If it has problems from a No Deal in getting the things it usually buys from Britain, it can quickly get them instead from EU producers, or from global producers of those goods, with many of whom the EU also has trade deals.  Similarly, although a freezing up of the UK economy might mean that EU exporters have difficulty getting their goods to UK markets, the size of the EU economy, along with its global trade deals with other countries and economic blocs, means that it will quickly be able to find alternative markets for them.

The freezing up of UK-EU trade only marginally affects the EU for the very reason that the huge single market means that the vast majority of EU trade, which goes on onside that single market would continue unchanged.  Its the UK that suffers from any such situation, because not only does it see its ports clogged, and its imports from and exports to the EU tied up for days on end, or disappearing altogether, it will face a similar situation with all its other imports and exports.  The news channels put out information, over the weekend about the effects of trade on WTO terms, but, in fact, the information was wrong.

They set out the tariffs on various products that apply under WTO terms for goods imported into Britain.  But, those tariffs are not the tariffs that would apply to British exports to the EU.  Under WTO terms a country can set tariffs to apply to its imports, provided it applies the same tariff to all other countries, unless it has an agreed trade deal with that other country.  So, if Britain imposes tariffs on EU imports, it has to impose the same tariff on imports from any other country, unless it has an agreed trade deal with them.

Similarly, the EU sets a common external tariff for any goods it imports, and applies it to all countries with whom it does not have a trade deal.  So, although Britain imposes an 11% tariff on imports of ceramics, under WTO, for example, there is no reason why the EU could not impose a 20% tariff, which would badly affect UK exports of ceramics to the EU.  The same applies to EU imports of lamb, or other foodstuffs such as fish, where EU tariffs would be much higher than UK tariffs applied under WTO.  It means that the UK trade deficit with the EU would likely grow significantly, as UK exports declined.

For all his promises of an over ready deal, the year is almost gone, and Brexit still is not done.