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Debates

The UK and Europe

Brexit flexibility and creativity - but for everyone

Claus Grube / Aug 2018

Michel Barnier. Photo: European Union

Lately there have been renewed calls by UK politicians, British media and European academics for ”flexibility and creativity” from the EU in response to the British government’s Chequers White Paper.

There is no doubt that all EU27 countries’ governments are scrutinising the White Paper thoroughly, but there will be limits to flexibility and creativity due to their national responsibilities vis-à-vis their electorates, businesses and tax payers. If the UK wants a ”UK first” approach the reply will be ”EU first”.

Everybody in the EU would like to have a good and close relationship with the UK after Brexit, but not for the price of undermining the integrity of the Single Market, which has benefitted so greatly all EU countries’ economies for the last 25 years. And reading the White Paper it seems to be a creative, but un-balanced combination of EEA-rights with only FTA-obligations to the benefit only of the UK.

It remains to be seen in the ongoing talks with the UK government, whether the rights and obligations will be balanced upwards towards a EEA/Switzerland-like model or downwards towards a more traditional FTA-model.

One example: why  should other EU countries invest time and money in a bureaucratic never-tried-before custom system, with uncertain outcomes, which do not benefit them or their business and which could be of a only temporary nature? This makes the UK criticism of EU-bureaucracy look hypocritical.

Another problem is the present turmoil in UK national politics. Just days after the publication of the White Paper the government changed the part dealing with the crucial Customs/Backstop. That limits the willingness to long-term commitments if they can be overturned by a parliamentary majority any day or after a next election.

If Brexit is to make sense somewhere it only does so if you can improve your competitiveness by deregulating and distorting competition for goods, services, capital and qualified labour with deviating rules, state-aid, lower labour cost and/or reduced regulatory costs. Otherwise why leave the EU/EEA?

And that’s what the EU27 fears will happen over time and the reason why there will be strict limits to the “creativity and flexibility” when it comes to securing a ”level playing field” as this will only amount to a transfer of resources from EU to UK to cover as much of the cost of Brexit as the UK can get away with. The EU27 countries will try to minimise that cost as much as possible in the opposite direction – why not?

It is also a challenge to negotiate a far reaching ”bespoke” deal with a government which does not seem to have a majority for its own policy nor a working majority for any clear alternative. The first thing to ask oneself before negotiating is - can they deliver? If in doubt you play safe.

The simplest way to do so is to remain united and adhere to the EU rules and principles, which protect the EU countries against the distorting “cherry picking” . That’s just an euphemism for reverting to 19th century nationalistic power politics. And a way to maximise the ”export” of the cost of Brexit to the EU27.

In traditional UK politics there are only winners and losers. But if the EU is going to be the loser and UK the winner, there will be no deal. Not because of lack of ”flexibility or creativity”, but because the EU27 governments cannot afford to let their electorates and economies pay disproportionately for the cost of Brexit, which in no way is of their making.

My country Denmark will be relatively hard hit by a “no-deal”. Already a year ago the cost of a no-deal scenario was estimated to a loss over medium-term of around 1% of GDP corresponding to the IMFs newly published estimate. Not a welcome contribution, but manageable. Not very different to the loss already suffered by the sanctions towards Russia and their counter sanctions. A global recession created by a fully fleshed trade war with the US would be more costly to Denmark than any form of Brexit.

So the “no deal”-scenario is discounted in many EU countries position making. And the EU will not be pushed around by threats or accusations of inflexibility or lack of imagination. Brexit is the wish of the UK only. We have been told all along that ”Brexit means Brexit”. So if the political establishment in the UK prefers a no-deal, so be it! Even though it will only reinforce the lose-lose nature of Brexit and benefit no-one, but those who dream of dismantling the multilateral system of free trade and international law and order.

Flexibility and creativity, yes – but on the condition of a fair balance between rights and obligations for everyone.

 

 

Claus  Grube

Claus Grube

August 2018

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