The Corner

National Security & Defense

Brexit’s Hard Pounding

The slump in the pound has—how can I put it—attracted some attention in recent days, and has put a spring in the step of those who want to talk Brexit down. The Financial Times, long something of a Brussels Pravda, has rather relished pointing out that sterling had now hit (an effective) 168-year low. Then again, the pound was at a roughly 160-year low just eight years ago.  

What’s spooking the markets is uncertainty over the form that Brexit might take. What will the Brits ask for? What will the EU agree to?  Investors have been made more uneasy still by hints from some in the British government that they could live with a ‘hard Brexit’. That term is  best understood as a unilateral breach with Brussels that would (roughly speaking) leave the UK reliant on WTO rules, a far worse option than it may sound (to understand why check out this very detailed analysis prepared by the Leave Alliance).

My own guess/hope is that Prime Minister May is allowing her team to discover for themselves that, however great its romantic appeal for the pur et dur, ‘hard Brexit’ is not the way to go. The best solution, at least as an interim option, continues to be some variant of the ‘Norway option’. Membership of the European Economic Area is not, contrary to the claims of some of the more strident euroskeptics, the same as being in the EU.

Back in February, I wrote this:

The fact that the “Norway option” is less of a break from Brussels disappoints some euroskeptics (at some level it disappoints me), but they need to face the reality that it beats the most likely alternative — a nervous British electorate voting to stick with the EU, the devil it knows. They should also understand that such a move could be the starting-off point for a more profound disengagement with Brussels, a disengagement that will be all the more effective and all the less intimidating for being taken step-by-step. No, the Norway option is not ideal, but my feeling, at least at the moment, is that this is the Brexit route that is most likely to have a chance of success. The best place to see how it might work is the immensely detailed “Flexcit” prepared by EU Referendum’s Richard North. The latest version (PDF) stands at a modest 421 pages, but that is evidence of a complex reality very different, sadly, from one-leap-and-you’re-free…

Norway has much more of a veto power [actually a  right of reservation]  than is generally understood. More than that, it can participate directly in setting the international rules that govern so much of global trade. As a member of the EU, Britain, often, cannot: Brussels has to negotiate on its behalf. Put another way, Norway sits at the top table. Britain does not.

Whether such a deal is available (I still reckon yes, but after a  lot of shouting) is a different question, not least because of the attitude of EU leaders such as France’s soon-to-be lame duck President Hollande, an attitude that has now drawn an angry response from the Daily Telegraph’s Ambrose Evans-Pritchard:

“There must be a threat,” said French president Francois Hollande. “There must be a price… otherwise other countries or other parties will want to leave the European Union.”

These are remarkable comments in all kinds of ways, not least in that the leader of a democratic state is threatening a neighbouring democracy and military ally. What he is also admitting – à son insu – is that the union is held together only by fear. He might as well write its epitaph.

In that, I fear, Mr. Evans-Pritchard being is too optimistic. The EU may be a dead-end, but it’s far from done yet.

Evans-Pritchard also takes aim at the pious nonsense  that the likes of Hollande and Merkel (the latter an apparatchik fluent in pious nonsense since her days as an activist in East Germany’s FDJ) have been mouthing about the  EU’s ‘four freedoms’:

Mr Hollande and German Chancellor Angela Merkel invariably fall back on the four freedoms -movement, goods, services, and capital  -enshrined in EU treaty law, as if they were sacrosanct. These freedoms are nothing but pious shibboleths. They often do not exist, and where they do exist they are routinely honoured in the breach. Services make up 70pc of the EU economy yet account for just 22pc of internal EU trade. All attempts to open services up to cross-border commerce have been defeated, to the detriment of Britain.

The sorry saga of the Services Directive in 2006 tells all you need to know about how the EU works. “The French and Germans gutted it,” said Professor Alan Riley from the Institute for Statecraft.

The ‘country of origin rule’ that would have allowed firms to operate anywhere in the EU under their own domestic law was dropped, casualty of the “Polish plumber” scare. The directive did not cover health care, transport, legal services, professions, tax experts, and the like. Germany protected its guilds.

Online and digital trade across borders remains minimal, riddled with barriers. Britain’s All-Party Parliamentary Group for European Reform concluded that “there is no single market in services in any meaningful sense.”

As Brussels correspondent I covered the parallel fiasco of the takeover directive. This too was sabotaged by France and Germany,  after fourteen wasted years. They reinstated poison pills and a host of tricks in an explicit attempt to stop ‘Anglo-Saxon predators’ taking over their companies, even as their own companies were free to stalk British prey….

So much for the freedoms of capital and services. Nor has the free movement of people been strictly upheld. France and Germany – unlike Britain – blocked access to their labour markets and welfare systems for East Europeans for seven years after they joined the EU in 2004. It was political decision.

The four freedoms are really just aspirational guidelines, enforced when expedient, neglected at other times. The rigid exhortations from Paris, Berlin, and Brussels that there can be no free trade with Britain unless there is unrestricted migration – even after leaving the EU – is politics masquerading as principle. If they want to find a compromise solution, they can do so easily.

And so can the Brexiteers. But can is not the same as will. 

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