Richard North, 11/10/2017  
 


As people begin to absorb the implications of Mrs May's Commons statement, it is clear that the UK Prime Minister is taking a path which inevitably leads to a "no deal" – if only by default.

It is also becoming clear that her stance is having little impact on the Commission, evident from the Commission's responses so far – and the lack of them. And this is a view endorsed by Politico.eu which detects no indication that the EU27 are worried by a precipitate British departure.

Politico.eu notes that Michel Barnier has spent the last five months of negotiations repeating the EU's offer and watching the U.K. government creep closer to it. But he hasn't felt the need to shift his own position in any significant way. And nor, in my view, is he likely to between now and the 20th October, when he is due to report to the European Council meeting as 27.

On that basis, discussion about the merits (or otherwise) of Mrs May's implementation period are largely moot. We must reconcile ourselves to the near certainty that the October meeting of the European Council is not going to agree to progress to phase two of the talks.

That leaves the possibility of two further rounds of talks with M. Barnier's team before returning to the Council in December when, again, the 27 have the opportunity to judge whether there has been sufficient progress for them to allow the talks to continue.

Earlier, I pondered on the possibility that the Council might be reluctant in December to break away from its schedule to afford yet more time to Brexit. But, we learned from Donald Tusk yesterday that if there is no further progress then, both sides might need to move into an emergency footing to address the consequences of failing to reach a deal.

What Tusk has actually done, therefore, is extend the life of the talks by two months. Otherwise, the general feeling might have been that the October session was going to be "sudden death", marking the end of the process. After that, there would be no point in holding further talks.

On the other hand, this stay of execution has its price. If the UK has not by December offered constructive proposals on the phase one issues, then the talks will effectively be at an end. It truly will be all over by Christmas.

As it stands, there are no indications that Mrs May is prepared to put anything more on the table to resolve the phase one logjam. She is still treating her Florence speech as her final "offer" and has expressed her "confidence" that she will get her way in October.

However, it is all but impossible to predict what effect a rejection by the European Council might have on Mrs May, and on political sentiment generally – especially if it is known that we have another bite of the cherry in December. Political allies (or even enemies) may intervene to prevent her walking until all avenues have been exhausted.

Where we go if both sides agree to abandon talks is then another of those imponderables – near-impossible to predict. But, without them being specific, it appears that EU negotiators have stepped up contingency planning for a breakdown in talks.

For the moment, though, Tusk is simply acknowledging that the UK government is preparing for a "no deal" scenario, while denying that the EU is doing likewise. "We are negotiating in good faith", he says, "and we still hope that the so-called 'sufficient progress' will be possible by December".

It is there that his hint of a final break comes. "If it turns out that the talks continue at a slow pace, and that 'sufficient progress' hasn't been reached, then – together with our UK friends – we will have to think about where we are heading", he says.

In fact, if nothing is agreed by the December Council, the perilously short time allowance leaves little chance of agreeing anything substantive. The best that might be hoped for is a basic customs agreement, which will allow a limited flow of goods to and from the continent.

Certainly, the idea of concluding a full-blown "transition" or interim agreement does not seem to be a workable proposition. Given the wording of Article 50, there is no provision for extending the acquis after the UK has withdrawn. Selectively to re-apply elements of the treaties would require a completely new treaty, outside the scope of the Art 50 withdrawal agreement.

The most logical way forward is for the UK to ask for an extension of the negotiating period but, since that has been ruled out, we are left with the cumbersome and time-consuming process of negotiating a bridging treaty to keep us in the game. And such is the lack of thought that has been given to this that it is not even certain that a short-term preferential trade agreement is permissible under EU rules.

Even under the cover of a trade agreement, though, the UK will find that its "third country" status will not exempt goods from customs and other checks when they are exported to EU Member States. And, as I explained in yesterday's piece, throwing money at the problem this side of the border will not address choke points on the EU's external borders.

But now, it appears, Chancellor Philip Hammond is not even prepared to spend any money on a "no deal" exit. It would be irresponsible, he says, to spend taxpayers' money on this. We will only spend it when it’s responsible to do so.

The effect of this is more serious than Hammond might think. In order to accommodate UK goods, collectively the EU Member States will need to commit several hundred million euros to upgrading infrastructures at sea ports and airports, and along the land border with Northern Ireland.

This expenditure will be required with or without a trade deal but making arrangements within a "no deal" scenario will probably be that much harder. And if the UK Chancellor is not prepared to spend any money, it will be hard to argue that his counterparts in EU Member States should open their coffers to deal with a situation that is not of their making.

As time progresses, therefore, we are accumulating at an alarming rate a number of problems to which there are no solutions in the time available. That leaves the two sides to work on what are being called "emergency arrangements". Under such a regime, we are probably looking at imposing limits on the amount of traffic that can use the Channel ports, with the issue of permits to allow essential goods to be transported.

It does not seem possible in the 21st Century, with all the sophisticated systems and resources available, that we are seriously considering what amounts to the rationing of road access and a system of state authorisation before vehicles are allowed to travel to Continental ports. Not since the Second World War will movement have been so restricted.

Perhaps it is the seeming implausibility of such developments which are hampering the negotiation process. Neither side can fully comprehend the degree to which logistics will be disrupted. Hence, warnings of a complete collapse of trade are simply not believed.

On that basis, we seem to have Conservative politicians (in particular) who are convinced that, on Brexit day, officials on the EU side of the border will be instructed to wave UK traffic past the checkpoints, without formality. Suggestions that the full panoply of border checks will be applied are regarded as scaremongering or a bluff.

By way of a reality check, though, yesterday the suggestion by the Prime Minister that a Brexit "no deal"’ was now an option brought BALPA General Secretary Brian Strutton out of the woodwork to say that the entire UK aviation sector which employs nearly a million people and carries more than 250 million passengers per annum would be devastated by a Brexit "no deal".

"UK airlines could find they have to stop flying", he says, "it's that serious. And this would impact passengers long before March 2019 because airlines couldn't sell advance tickets and, frankly, would passengers risk buying them?" Strutton continues:
It is utter madness for anyone to think that a Brexit "no deal" would be anything but a total disaster for our world leading UK aviation sector and beyond. After all, without air cargo we will not be able to export or import freely. The entire industry has said that we have to see evidence of the post-Brexit plan for aviation now if we are to avert a catastrophic crisis of confidence.
Then, with their feet planted firmly on the ground, British retailers have reiterated their warning that the UK faces "gaps on shelves" if the country does not reach a new post-Brexit deal on trade and customs with the EU.

The British Retail Consortium (BRC) has responded to Theresa May's trade plans with a warning that without a robust new deal with the EU, UK shoppers "will be hit with reduced availability of affordable goods with almost immediate effect". CEO of the BRC Helen Dickinson writes:
The UK's future trade policy is the most significant aspect of the Brexit negotiations for consumers. ... Annual customs declarations would jump from 55 to 250 million and with four million trucks crossing the border between the UK and EU each year, new red tape, border controls and checks would mean delays at ports of up to two to three days for some products. Businesses and consumers would face higher costs, gaps on shelves and product shortages.
This is not scaremongering – and nor is the picture we have used. Sophisticated though they may be, modern logistic systems are extraordinarily fragile. Brexit involves tearing up the rule books and rewriting them around completely different systems. You do not have to be an expert to know that this means trouble.

Mrs May and her colleagues are playing with fire.






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