Brexit Means…Perplexity – Just Like in Chess

The European politicians who perpetually nudge the United Kingdom to get on with it (that is, to trigger Article 50 and to set out, point-by-point, the definitive post-Brexit blueprint) are like junior chess players who huff and puff because their opponent spends too much time making his first move.  They can’t understand that considered meditation is itself a tactic in chess – discombobulate your opponent in the early game by pondering which pawn to move forward (one or two squares?) and you gain a psychological advantage.  But the final plan will only become clear in the end-game.

To be fair to the Euro-moaners, complaint and indignation is itself a negotiation tactic.  (Though one that Mrs May and her team should blithely ignore).  It is designed to disquiet the opponent by engendering self-doubt about their purposefulness (which, in chess, as in life, is to win).

John Bruton, the former Irish Taoiseach, declared himself “astonished”[i] that the British government apparently had no contingency plan in the event that the LEAVE campaign won.  But this misses the point.  Whereas the referendum campaign was a binary choice – REMAIN or LEAVE – the debate within the government and the UK as a whole about the ultimate shape of Brexit is not binary as there are numerous mutually exclusive visions of post-Brexit Britain’s relationship with the EU – and it is by no means clear at this point which of those are achievable.

The former Taoiseach does have half a point though.  In hindsight, the Cameron-Osborne pantomime horse which ran the country for six years looks ridiculously insouciant.  They obviously thought that a REMAIN vote was a done deal – even though it now seems that they knew that the deal struck “to reform” Europe in Brussels last February was a hollow sham.

And one thing that has become clear over the long hot days of summer since Mrs May assumed office on 13 July is that the three musketeers – Messrs Johnson, Davis and Fox – have differing views on what Brexit means Brexit actually means.  Mr Johnson is thought to favour soft Brexit – the minimisation of all discontinuity with the past.  Mr Davis and Dr Fox are assumed to be advocates of hard Brexit.  It is not at all clear yet which of these three gentlemen (if any) has Mrs May’s ear.

No state has ever left the European Union before.  Indeed there is no historical precedent of any kind.  But we are where we are; though precisely where that is depends on your opinion.  Mrs May was fortunate in a way to assume office just as Parliament was about to go into recess and as all of Europe was about to go on holiday.  This gave her and her team some breathing time.  But 01 September in most European countries is the day that children go back to school (la rentrée in French) and their parents earnestly return to work.

And over the last week there have been three emblematic events which suggest that the Brexit train has finally left the station.  The first was the iconic cabinet meeting held at Chequers on 31 August at which the cabinet reaffirmed that Brexit means Brexit with all the zeal of the sheep baaing Four legs good – two leg bad in George Orwell’s Animal Farm.  The second was Mr Davis’s statement to the House of Commons on 05 September to the effect that staying in the Single Market was “improbable”.  (Much to the disgust of Labour’s ever-bumptious Emily Thornbury who is Shadow Minister for Brexit, as well as for quite a few other things as well).  Mr Davis reassured us that he now has a team of 300 policy wonks and negotiators.  The third event was the first Prime Minister’s Questions after the recess on 07 September at which Mrs May dodged a bullet about the Single Market fired by the SNP.

So we do not yet know when Article 50 of the Lisbon Treaty will be triggered – the starting gun for the formal negotiations on Brexit; nor what will be the British government’s red lines when negotiations begin.  The official position is that the Europeans will be notified early in 2017 – but there have been voices suggesting that it could be delayed well beyond that.

What do we know?  It is clear that Mrs May intends to devise some kind of regime to control immigration from EU countries.  She made it clear on the fringes of the G-20 Summit in China that this will not take the form of an Australian-style points system – much vaunted by Mr Farage, the outgoing UKIP leader, and others.  In fact, points-based systems are normally associated with countries, like Australia, which have sought to encourage skilled immigration.  The word is that, post-Brexit migrants from the EU will only be welcomed to the UK if they have secured a work permit.  This will only be forthcoming if a UK-based employer has applied for one in accordance with the rules.  This of course will not end EU migration (did anyone really think that was likely?) but it will give the Government the tools to control it – which is what the British people voted for.

Now any scheme of this kind will entail that the UK has to leave the Single Market.  But, as usual, the semantics are important.  While Mr Johnson and many other Tories would prefer to remain in the Single Market, Mr Davis will say that the real objective is to have access to it.  Outside the EU Norway and Switzerland are in the Single Market, and they have to comply with the four freedoms (free movement of goods, services, people and capital).  (Actually, Switzerland voted in 2014 to restrict the free movement of people but this is still subject to protracted negotiations).  Norway and Switzerland are also required to adhere to EU regulations and to contribute to the EU budget, even though they have no say in how it is drawn up.  A swath of other countries, from Iceland to Turkey and Ukraine, have access to the Single Market: meaning that they can buy and sell goods and services across the EU frontier without any tariffs applying, though they have to meet EU standards in terms of health and safety, pollution and so forth.

Mario Monti[ii], the very model of a modern Euro-general, told BBC’s Mark Mardell that there is no way that the UK could impose immigration controls and remain in the Single Market.  He argues that that would de-stabilise the entire EU framework.  And it is easy to see that if the UK were given some kind of privileged arrangement (as they would see it) French politicians (not least Madame Le Pen) would demand similar privileges for France.  Signor Monti thinks that Europe would descend into turmoil.

So the question then becomes, would the Europeans agree to the UK being outside the EU but having access to the Single Market?  Certainly, German industrial leaders see no reason why not – but they are not the decision-makers in Brussels.  Be aware that having access to the Single Market would mean that tariffs could be imposed at a later date in certain circumstances, though the Europeans understand very well that if they were to impose tariffs on British exports to Europe the Brits would reciprocate in kind.

In my view, the UK negotiating position is strong.  We have implemented all the EU directives and regulations over more than four decades and are therefore fully compliant with all EU regulations – more so, in fact, than many other EU members.  We run a trade deficit with Europe so any tariffs levied would hit the Europeans harder than us.  At the end of the day, European businesses will want to continue to trade seamlessly with the UK.

But perceptions matter – and Mrs May knows this.  Later this month – well before Article 50 is unleashed – we shall read the headline: Britain to leave the Single Market.  And there shall be much gnashing of teeth.  In Parliament, Ms Thornbury will no doubt have another funny turn; the BBC will drag out earnest “experts” to nod their heads, sigh and wag fingers; and the barrow bows will hit the sell button.  You can expect the Pound to take another hit.  (Remember that Sterling has “only” depreciated by ten percent against the Dollar when the REMAIN-iacs promised us a 20 percent drop!).

This is how I suspect things will play out.  When Mrs May addresses the Tory Party Conference in Birmingham on Sunday, 02 October (with a departure from tradition on its first day[iii]) she will set out not just negotiating objectives but concrete plans.  These may well be more radical than some Tories expect.  She will say that Britain will regain control of its borders in the most literal sense.  She will announce that the European Communities Act, 1972 will be repealed within the lifetime of the present Parliament.  This will de facto restore Britain’s parliamentary sovereignty.  She will tell our fishermen that a 20-mile exclusion zone will be imposed on our territorial waters.  (That, by the way, will go down well in Scotland where Ms Sturgeon is running out of gunpowder).  And she will describe how, post-Brexit, British farming will be better supported than now.  She will not mention the Single Market or our future contributions to EU coffers.  Nor will she state when Article 50 will be invoked.

In any case, there is argument doing the rounds that Article 50 is an irrelevance.  It was drawn by the same people – Giscard d’Estaing etc. – who drafted the ill-fated European Constitution precisely to make it unlikely that any state would have the temerity to leave the EU.  It provides that any leaving state negotiates, not with the European Commission which is the only body with the power to knock heads together, but with the European Council – a looser body of the 28 member states headed by Mr Tusk.  Article 50, I am now hearing, is a recipe for stalemate.  And stalemate is what all good chess players hate most.

Once Mrs May declares her intention to repeal the European Communities Act, 1972 the direction of travel will be clear.  The EU will have to decide if it wants to impose tariffs out of spite – or not.  And the sooner we have an exit date, the sooner we can start the bilateral trade deals with Australia, Canada, India and others.

Of course, as the eternal cliché goes, markets hate uncertainty; but then when was the world ever certain?  Perplexity is normal.  What the markets need is a sense that UK PLC knows where it is going.  And that its leader is a chess player.  Mrs May has a few weeks left to put her critics in check.

[i] BBC R4 The World This Weekend, 13:00 on Sunday, 04 September 2016 – in conversation with Mark Mardell.

[ii] A former Italian PM and European Commissioner.

[iii] The agenda is very revealing: see https://conservativepartyconference.com/agenda