Generational Dynamics World View

[John J. Xenakis]

*** 19-Oct-18 World View -- Brexit appears headed for worst of all possible worlds for UK

This morning's key headlines from GenerationalDynamics.com

• Brexit appears headed for worst of all possible worlds for UK
  
• The most likely deal: 'Extend and Pretend'
  
• The Northern Ireland 'backstop'
  

****
**** Brexit appears headed for worst of all possible worlds for UK
****


Brexit warning sign on road running across the Ireland-Northern Ireland border (AFP)

Ever since the referendum passed on June 23, 2016, Brexit, the UK exit
from the European Union, was never going to be anything but a disaster
for the UK, and almost as much for the EU, and increasingly there's
a search to mitigate the disaster as much as possible.

A month ago, Christine Lagarde, the managing director of the
International Monetary Fund (IMF), said:

<QUOTE>"I’m a desperate optimist, and I very much hope and
pray that there will be a deal between the European Union and the
UK.

Let me be clear, compared with today’s smooth single market, all
the likely Brexit scenarios will have costs for the economy and to
a lesser extent as well for the EU.

The larger the impediments to trade in the new relationship, the
costlier it will be. This should be fairly obvious, but it seems
that sometimes it is not."<END QUOTE>

Lagarde said that the IMF will issue its latest forecast for global
economic growth in November, and that "clouds on the horizon have not
become lighter but darker."

The UK is leaving the EU on March 29, 2019. The most severe
consequences for the UK economy would occur if the UK "crashed out" of
the EU with no deal whatsoever. In this case, there would no longer
be a "smooth, single market," no "frictionless trade" at all between
the UK and EU. Instead, there would be a "hard border" between the UK
and EU, which would damage tens or hundreds of thousands of individual
trading relationships that for years have depended on frictionless
trade.

The main stumbling block in the negotiations is and always has been
the problem of Northern Ireland. After Brexit, the (southern)
Republic of Ireland would be in the EU, while Northern Ireland would
not, but would still be in the UK. That means that there could be a
frictionless border between Northern Ireland and Ireland (which
everyone says they want) or a frictionless border between Northern
Ireland and Britain (which the UK wants, but the EU couldn't care less
about), but not both.

UK politicians in London, led by prime minister Theresa May, have for
months been in chaos debating this issue, with the "Remainers" wanted
as close a relationship to the EU as possible, and the "Brexiteers"
wanting a full and complete break. But as the weeks and months have
gone by, the London fog finally seems to be clearing, well enough that
we can begin to make out the shapes of what the final deal is most
likely to be. Reuters and Irish Times

****
**** The most likely deal: 'Extend and Pretend'
****

Readers may recall what happened with Greece's financial crisis, when
it was clear that Greece could not meet its debt payments, and would
in fact never be able to do so. The EU and the European Central Bank
came up with an "extend and pretend" policy, which lowered the
interest rates and stretched out the debt payments to decades, and
then pretended that by 2100 Greece would be able to repay its debts.
Extend and pretend.

So everyone in the EU and the UK, not counting the hardcore
Brexiteers, is in favor of a two-year Brexit transition period --
lasting until December 31, 2020. This was agreed in March, and now
appears to be set in stone. It's back in the news because on
Wednesday, both Theresa May and the EU said they were discussing
extending it for an additional year.

The transition period will be pretty much the worst of all worlds.
The terms will be as follows:

• Freedom of movement: EU citizens arriving in the UK and UK
  citizens arriving in the EU will enjoy the same freedom of movement
  rights. This is the same as today, and it's a policy that Brexiteers
  oppose because of migrants from Eastern Europe.
  
  
• The UK will still be part of existing EU trade deals, but unlike
  today, will be allowed to negotiate trade deals -- though those trade
  deals will only take effect after the transition period has
  ended.
  
  
• The UK will still be in the customs union and single market, so
  there will be no frictionless borders -- same as today.
  
  
• The UK would still be under the jurisdiction of the European Court
  of Justice (ECJ).
  
  
• The UK would still be subject to all EU regulations. But, unlike
  today, the UK will have absolutely no say in changes to the
  regulations.
  
  
• The UK would have to pay all EU taxes - contributions to EU
  budgets, just like today.
  
  
• The UK will effectively stay part of the Common Fisheries Policy.
  This means that French and English fishermen will be allowed to fish
  in each other's waters.

So the whole point of why the Brexiteers wanted Brexit was to get away
from the EU regulations, EU taxes, and the ECJ. In the transition
period, all of these will remain, with the additional restriction that
the UK will have to obey all the regulations and pay all the money,
but will have no say in changing them. That's what I meant by "the
worst of all worlds."

According to Liberal Democrat Brexit spokesman Tom Brake saying the
extension was merely “kicking the can further down the road and
delaying, by a bit, driving off the cliff.” iNews (London)

****
**** The Northern Ireland 'backstop'
****

But wait! How does the transition period solve the Northern Ireland
problem? Well, it doesn't, but it gives the politicians 2-3 more
years to find a solution. And yet, no one that I've heard or read
believes that an extra 2-3 years will solve the problem any more than
the last two years have.

That brings us to the "backstop." That's an "insurance policy" that
the EU is insisting on. They want the UK to commit to a specific plan
to preserve the frictionless border between Ireland and Northern
Ireland when the transition period end. And they've already rejected
every UK backstop proposal, including the delusional hope that in 2-3
years the technology will have been developed to enforce customs rules
on the Irish border without requiring commercial vehicles to stop for
inspection. Well, maybe in 2-3 years some technology will develop,
but no one really believes that will happen.

The backstop that the EU wants is that at the end of the transition
period, Northern Ireland will be part of the EU customs union and
single market. That means that there will be a hard border between
Northern Ireland and Britain. That means that UK citizens traveling
between Northern Ireland and Britain will have to go through customs,
and it means that goods shipped between the two will have to be
inspected.

Britain's prime minister Theresa May says that this is unacceptable
because it would split the sovereignty of the United Kingdom.

This is still a seemingly unsurmountable obstacle to achieving
any sort of deal before the UK leaves the EU on March 29.
Guardian (London) and BBC and Irish Times

Related Articles:

• Report: EU and UK ready to accept 'fudge' to get through Brexit (02-Aug-2018)
  
  
• Ireland hiring 1,000 new customs and veterinary inspectors for hard Brexit (20-Jul-2018)
  
  
• Brexit negotiations in crisis as deadlines approach with no agreements (09-May-2018)
  
  
• European anger and British self-delusion follow Brexit plan speech (19-Jan-2017)
  
  
• Britain's Millennials are furious at Boomers for Brexit vote (26-Jun-2016)
  

KEYS: Generational Dynamics, Ireland, Northern Ireland, Brexit, EU, UK,
Theresa May, Greece, extend and pretend, Tom Brake,
Christine Lagarde, International Monetary Fund, IMF

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John J. Xenakis
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