Article 50 is being activated today, but is this an act of madness?
Why the urgency? April 23rd and May 7th see the two rounds of the election in France. Until that is over, and the result decided, there is very little that can happen. As Samuel Tombs at Pantheon Macroeconomics said: “If Le Pen wins, the EU27 will be fragmented and Britain might then be able to negotiate a series of bilateral deals that lead to a continuation of free trade. The most likely outcome, however, is that Emmanuel Macron—a centrist and a Europhile—will gain support from other candidates who are knocked out in the first round and will beat Le Pen. This outcome would strengthen the EU's negotiating hand and leave it less likely to agree a bespoke, favourable deal with the UK.”
The month of May also sees local elections in the UK, these may influence the UK’s negotiating position.
The UK is on a two-year countdown, but the first few months will be dead time.
A powerful Japanese business lobby group – Keidanren – has warned the UK government that it must give deeper consideration to the effects on the UK economy of Brexit. Truth is, Japanese companies such as Toyota, Hitachi and major Japanese investors in the UK are reacting in horror to the rhetoric emanating from Downing Street.
The UK government says “no deal is better than a bad deal”, but many Japanese companies have invested into the UK as they see it a bridgehead into Europe.
These days, the manufacturing process is defined by a complex web of players – specialist companies that fulfil a specific niche within a complex supply chain. World Trade Organisation rules – which will be adopted if there is no deal – will mean each time a component, a tiny part of the manufacturing process, either leaves or enters the UK, it will carry a tariff. In this highly-interconnected world we live in, one in which geography matters – since a supply chain that is spread across the world is highly inefficient – no deal could mean devastation of UK manufacturing.
The FT quoted a person who has seen the Keidanren communique as saying: “The key message is this: please negotiate with deeper consideration for the economy. What is desirable is a right deal for sound economic development.”
Other reports suggest that the German government is unwilling to advance Brexit talks until the so-called Divorce Settlement bill has been agreed.
The EU says that UK commitments work out at around 60 billion euros. The Daily Expres may claim that in fact it is the other way around, and that the EU owes the UK £50 billion, but the reality is that unless the UK agrees to some kind of enormous settlement – no deal is the most likely end result.
But any kind of offer to the EU will be politically controversial at home.
Theresa May is in an impossible position, not even flag waving and spouting such poetry as “I want a red, white and blue exit” can solve her challenge.
Her political interests may lie with going down the no deal route – even though such a lack of deal might be catastrophic for the UK economy – but the UK electorate have shown they are more interested in the image of glory, the triumph of emotion, than the reality of complexity and imperative of compromise.
Forty-four per cent of UK exports are to the rest of the EU. Eight per cent of exports from the rest of the EU are to the UK, and yet every day we hear the lie that the EU needs the UK more than the UK needs the EU.
Such an argument hinges on UK arrogance.
Today speaking on Good Morning Britain, former leader of the Tory Party, a man once described by Ann Widecombe as having “something of the night about him,” Michael Howard, said that the UK has “to get it out of our heads that we are some kind of supplicant, we are the fifth or sixth largest economy in the world.” But the UK’s GDP in 2016 was 2.36 trillion euros, the EU’s 14.8 trillion, the UK’s economy is just 17 per cent of the size of the EU.
Much of the Brexit rhetoric seems to have its roots in a kind of Ladybird book view of history: the UK is great, the rest of the world owes us a huge debt for the magnanimous way in which we gave the world industry, democracy and afternoon tea.
Not all of the world sees the UK is such a light – China has not forgotten opium wars, India does not look back at the days of the Raj with fondness.
Meanwhile pro Brexit MPs walkout of a meeting because they don’t like the conclusions of a report drawn up by highly professional and politically neutral economists.
The BBC, an organisation that puts so much emphasis on being politically neutral that it often ends up appearing bland, is castigated for an anti-Brexit bias.
Facts count for nothing, objective reasoning has been placed in a box marked ‘irrelevant’, scientific analysis has become an anathema.
But then in Brexit UK we have had quite enough of experts, and to suggest we need to apply a few more facts in our reasoning, is to be labelled as ‘remoaning.’
Brexit may represent the end of the UK’s close relationship with Europe, but it clearly represents the end of reasoned debate.