How to negotiate the Brexit trade agreement

Negotiations between the British government and the EU are hotting up. The new question is how many agreements they need to establish a trade agreement. If they can’t agree on this, there won’t be an agreement.

Do you need an agreement to agree on an agreement, or do you need an agreement to agree on an annex, which is a political agreement, in which the politicians agree to agree on a trade agreement, with the details to be agreed upon later?

The British favour the marginally simpler option. Influential EU politician Guy Verhofstadt tried to explain to the BBC why this is inadequate. An annex is crucial, supposedly to get things moving.

All this really just exposes the remarkable workings of EU negotiations. They might make you giggle, but they’re important. Britain will trade with the EU under some sort of framework. The closer to free trade, the better.

But a trade agreement is hard to complete with the EU. Take the Canadian experience, for example.

In 2004 the Canadians and EU representatives agreed on an agreement for a new trade agreement to be agreed upon.

In 2006 they paused negotiations on the agreement which they had agreed to agree upon because a bigger and better agreement had emerged by then. Thus, the agreement in principle was born, in which the Canadian and EU Commission leadership agreed, in principle, to agree to the new agreement instead.

Once that agreement was finally agreed to, so beyond just agreeing to agree on it, the various EU parliaments had to ratify it, meaning they had to agree to the agreement too. Their agreement is ongoing, so there’s not enough agreement yet, making it a provisional agreement.

Not to mention, there’s a Belgian challenge in the European Court of Justice about the legality of the dispute resolution system of the agreement. It might violate EU law. After all, you need to agree on what happens when you don’t agree about an agreement.

So even after 14 years, the Canadians still don’t have a fully-fledged trade agreement with the EU.

I hope you’ll agree that the EU’s way of establishing a trade agreement is rather difficult. That’s why the EU leadership is pushing for an annex which promises future agreement – much easier to get than agreement on the agreement itself. During the transition phase, the actual details of the agreement can be agreed upon, said Verhofstadt.

Why they can’t agree

There are three things to point out here. The Europeans think that the longer Brexit drags on, the less Britons will want it. That improves the chances of abandoning it. Their incentive is to delay and draw the process out.

Personally, I think the opposite. The longer the Brexit process takes, the more likely Brexit is. The EU is pursuing its usual disastrous policies which make it so unpopular in Britain and Europe. Europe’s economy is a basket case. For example, it cannot bear the higher interest rates and inflation that are emerging. The more things go wrong on the continent, the more leaving looks smart.

Then there are the upcoming EU elections. All those protest votes in national elections the last few years haven’t made their way into the EU parliament yet. But they will next year. There’ll be Nigel Farages from all over Europe.

Last but not least, remember what the need for a trade agreement with the EU implies. Currently, the EU and UK have fairly free trade and migration. Why is that a good thing? Because it allows people to make the choices that they think will make them better off or happier.

If Britain leaves the EU, why must this change? Why does the EU have to implement trade barriers? Why does the UK have to implement migration barriers? Why do both governments have to prevent their people from doing what makes them better off?

Rejecting the EU doesn’t have to mean rejecting trade and migration. That change is a separate question. Tying them together is a false dichotomy – a false choice. The UK just has to expose this in its negotiations to get the trade deal it wants – close to free trade.

If Theresa May spoke to the EU’s people and said that Britain still wants plenty of migration and free trade, but the EU leadership is threatening to stop such trade, the issue would be clear. The EU is the one threatening to prevent its citizens from enjoying their existing economic freedoms. For no reason.

Alternatively, the UK could simply commit to putting in place no trade or border restrictions on the EU. That’d leave the EU with having to expose itself by preventing the trade and border movements. Checkmate.

For example, on the Irish border issue, it’d be hard to criticise the UK government for implementing any kind of trade or immigration restrictions if there simply weren’t any on the British side. Any EU implementation of trade restrictions would expose the EU as the trouble maker regardless of who instigated Brexit.

All of this sounds obscure, but it already holds true on the issue of immigration. As MEP Daniel Hannan pointed out at our conference in October, immigration into the UK is not a question of border control. The fears about Romanians illegally sneaking into Britain via the Northern Irish border are absurd.

Currently vast amounts of Romanians enter the country not by sneaking in illegally but by booking a flight to Luton. Brexit won’t stop free-flowing tourism, a far easier way to immigrate illegally than trying to understand an Irish accent first.

The immigration issue is about whether foreigners can find black market jobs, whether they’re prevented from legal jobs, and their welfare rights in the UK. Those are UK policy issues under Brexit and the reason for Brexit in the first place.

The Brexodus and record immigration

The Brexodus is well underway with Europeans fleeing Britain in droves and no longer wishing to move to the UK. After all, the day we voted for Brexit was the day we suddenly became collectively xenophobic.

The Home Office confirms that for a record third month in a row, it hit the cap for skilled non-European workers…

Wait a minute, people are moving here in record numbers from across the world? That means any “skills shortage” would appear to be the direct fault of the immigration caps and therefore the government…

Britain certainly seems to be getting the crème of the crop from overseas this year. The Guardian reports how much they’re worth to the UK economy:

The Home Office confirmed that the minimum salary for a job to qualify for a skilled work visa was normally ÂŁ30,000, or ÂŁ20,800 for a graduate recruit. However, in December it was set at ÂŁ55,000 and in January tier-2 visa applications for jobs paying less than ÂŁ46,000 a year were refused unless they were PhD-level roles or were for jobs on the official shortage occupation lists.

Given a huge portion of these workers are for the NHS, it’s no wonder the system is under financial pressure… from government rules.

This begs the question, was Brexit a protest about immigration generally, immigration from the EU, or about sending a protest to Britain’s rulers in Brussels? Because the appropriate policy for the three varies wildly. And guessing wrong causes you problems, as the Tory party found out last election.

For example, I think it’s outrageous that EU citizens are favoured over others when it comes to migration. As a UK, Australian and German citizen, you’d think I’d have the best of all worlds. But it’s proving absurdly difficult to move to the UK thanks to a Japanese partner. If I was just Australian, we’d be in under the Tier 2 visa without as much trouble.

Given the UK immigration system has only recently begun trialling a digital application system, I think it’s safe to say that the problem lies with a clueless Home Office and government.

Even leaving the EU won’t fix some things…

Until next time,

Nick Hubble
Capital & Conflict

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Category: Brexit

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