The Brexit negotiations have entered a critical phase. Decisions made by both sides in the next three months will have long-term consequences. In a state of conflict, all sides become extreme.
A modern English Civil War
The classic schoolboy pseudo-history 1066 And All That asserted that, during the English Civil War, the Cavaliers were “Wrong but Wromantic” while the Roundheads were “Right but Repulsive”.
History has repeated itself in the internecine Brexit debate. The Brexit Cavaliers want to restore sovereignty over our “borders, money and laws”– even if that comes at a price – short-term at least. The Remainers believe that this is to take huge risks with our prosperity. From a purely risk management point of view, the Remainers are right. (Though, as the Blair-Major-Heseltine-Clegg-Thornberry line-up confirms – they are repulsive.)
Such is politics, the enemies of this Tory government will do anything to undermine it – romantic or not. When Mr Corbyn rose on Monday, 26 February to pronounce Labour’s Damascene conversion to the Customs Union (in contrast to the manifesto on which he had fought the 2017 election campaign), at a stroke, he delivered a House of Commons majority for a Soft – or I would prefer to say, a Fake – Brexit. The Labour Party – the same Labour Party that wants trades unions to rule the roost and for capitalism to be castrated – is now in bed with the Confederation of British Industry (CBI – the mouthpiece of the fat cats who run the constituents of the FTSE-350) and the Institute of Directors (IoD).
The entire British establishment – the deep state – is Remainer to a man and woman: and if they cannot have Remain then they want the nearest thing to it, which is to stay in a customs union as near to the one we have had hitherto. Now, I explained three weeks ago why that would not really be Brexit at all and would place the UK at an asymmetrical disadvantage as the EU negotiates new trade deals going forward with Japan, China and the rest. The goods we sell abroad would have to accept EU trade rules without our having any say in how they were made. A half-way house is not really a house at all.
The Labour leadership thinks it has been clever to say that it will keep Britain in a customs union with the EU because this looks reasonable and would certainly please the EU elite who are aghast at Britain’s refusal to mimic Norway. This raises the possibility that Theresa May’s government might be defeated in the House of Commons over the (Mrs) Soubry (Conservative, Broxtowe) amendment proposing that Britain stays in “a” customs union after Brexit, if enough Remainer Tories were to vote with Labour. And all kinds of long-retired political has-beens have ghoulishly come out of retirement to stir this bubbling cauldron.
Melanie Phillips of The Times thinks that Mrs May is so concerned about this that she’s thinking of scheduling a confidence motion, daring the Tory Remainer rebels to vote her out of office and risking the arrival of Mr Corbyn into Downing Street in a chariot of fire. The extreme political irony is that Labour’s Trotskyite leadership has taken the side of big business against the inclinations of its traditional support base – the indigenous working classes who, driven largely by concerns about uncontrolled immigration, overwhelmingly voted Leave.
Europe takes an Irish hostage
Then, on Wednesday, 28 February Monsieur Barnier and his team published the draft treaty supposedly based on the agreement on the Phase I negotiations signed hurriedly in the wee hours of 15 December. (You recall that Mrs May and Mr Davis were unceremoniously whisked off to RAF Brize Norton in their pyjamas in order to join Herr Juncker for twilight croissants and brandy in Brussels. Sign here, Madame…)
The EU mandarins’ iteration of that exquisitely vague agreement – the one that assured regulatory alignment between Northern Ireland and the Republic – was that Northern Ireland would have to remain in the customs union if the rest of the UK left it. Otherwise, there would be a hard border in Ireland which is evidently a very bad thing. It is a bad thing, they imply, because it would be in contravention of the Good Friday Agreement (the 20th anniversary of which we mark next month) and would put the Northern Irish peace process at risk.
The European Union is specifically and deliberately trying to re-draw the boundaries of a sovereign state by force majeure.
So the EU is basically saying: Either you agree to split the UK into two quite separate economic zones – effectively splitting the Single Market that is the four nations of the United Kingdom – or you are endangering the peace process and the future of Ireland. Mrs May made quite clear at PMQs that very day that the European proposals were entirely unacceptable.
Foreign Secretary Boris Johnson said that Europe was using the question of the Irish border to stymie Brexit. For once, the Blonde One was clearly right. In fact, he understated his case. The European Union is specifically and deliberately trying to re-draw the boundaries of a sovereign state by force majeure. That is normally called an act of war.
It is not just that the European elite has exceeded its brief and, for the first time in its history as far as I am aware, tried to impose boundary changes on a member (or soon-to-be-ex member) state; it is also that it is cynically interfering in a partisan way in a deep and complex historical dispute it does not understand. It is clear that there are elements within Irish politics – not Mr Varadkar’s Fine Gail, who are concerned about a Sinn Féin resurgence – which seek to capitalise on Brexit to advance their ultimate aim of a united Ireland. Some commentators have expressed the view that Sinn Féin’s withdrawal from the power-sharing agreement in Northern Ireland last year was calculated to leverage the fall-out from the Brexit vote.
This might be a good moment to re-read the Belfast Agreement of 1998. This was a bilateral understanding reached between the governments of the United Kingdom and the Republic of Ireland in consultation with numerous community groups and political parties (and yes, paramilitaries). The European Union was not even mentioned in the text.
It is actually a brief document, narrow in scope, covering just three areas: (1) the creation of a democratically elected Assembly in Northern Ireland in which all communities would be represented; (2) the creation of a North-South Ministerial Council for ongoing consultation; and (3) the creation of a British-Irish Governmental Conference. As far as I can work out, by the way, the last body has never even convened. Maybe it should so now – without European interference. The main thrust of the Belfast Agreement was that Northern Ireland’s affairs should be deliberated fairly by local parties.
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There is nothing in the Belfast Agreement about trade, commerce or the management of the Irish-UK border. The fact is that the frictionless, seamless border came about because peace was established in Ireland – not the other way round. To argue that an (entirely unnecessary) hard border in Ireland would destroy the peace process is nefariously to confuse cause with effect.
Another point. Most of Ireland’s exports to the UK and to the EU beyond are not shipped across the Irish border at all. They are shipped from Dublin/Rosslare to Holyhead in Wales!
But Monsieur Barnier & Co. are determined that the real hard border will now have to run down the Irish Sea. That is a real threat to the status quo created in 1998. When Boris Johnson compared the border between Northern Ireland and the Republic as akin to that between Camden and Westminster, he trivialised an important issue. But it is not true that the British side has not advanced solutions. There were plenty of outline solutions in Mrs May’s Mansion House speech of Friday, 02 March.
Mrs May’s third major Brexit oration
The speech should have taken place in Newcastle, a great Northern British city. Instead it took place in the City of London – because of Snowmageddon!
For the Remainers and European adversaries who had accused Britain of lacking detailed proposals, this was a speech heavy with technical detail. I’m not going to analyse that detail here: but I would encourage any analyst from any opinion group to read the speech which is available on the Conservative Party website. It was a confident and insightful overview of policy options, brimming with solutions rather than problems. It was the most comprehensive outline of what a UK-EU trade deal would look like.
The reception within the Tory Party was fulsome. It seemed (for a moment at least) that the Moggists and the Soubrinis might live happily together, after all. That did not last long. And there are many issues, not least fisheries, that will rankle going forward.
The reaction in Brussels was cool, with the usual recycled language about a lack of detail and objectives. A press conference by President Tusk resembled Napoleon the Pig rehearsing the sheep in Animal Farm: Customs Union – good; trade deal – bad. Baaaa…
The Italian job
As expected, the voters of Italy turned to the populist right last Sunday. The left was thrashed; the pro-European mainstream lagged; and the right-of-centre alliance came second. The populist Five Star Movement led by 31 year-old Luigi di Maio came in first with 32.7 percent of the popular vote, gaining 122 seats out of 630 in the Chamber of Deputies and 112 seats out of 315 in the Senate[i].
I discussed Italy two weeks ago. My point here is that Five Star leader, Signor di Maio, who will probably end up as Prime Minister when a coalition is finally formed (though don’t hold your breath), is apparently warmly disposed towards Britain. He has publically expressed the view that Brussels is being intransigent in the Brexit negotiations. Could he prove to be an ally for Britain?
The French and the Germans, who sit together in the drivers’ car of the European train, have long since regarded Italy as their drunken uncle.
Forget it. Whether a broadly Eurosceptic government is formed in Italy or not, the European elite has already decided to marginalise the Italians just as they will marginalise the Hungarians further when Mr Orbán is re-elected in Hungary on 08 April. The headline in Le Monde (the organ favoured by Paris and Brussels insiders) on Tuesday (06 March) read: L’Italie: une catastrophe pour l’Europe. Meaning that the elite will just ignore it. The Five Star Movement hardly impinges on Brussels’ consciousness at all.
The French and the Germans, who sit together in the drivers’ car of the European train, have long since regarded Italy as their drunken uncle. Despite his amazing cultural achievements, his undoubted intelligence, generosity and humour, he has become a liability. He can always be relied upon to embarrass the family by falling off his chair at formal lunches or by farting loudly in church during sermons. Running to fat, he has become a spendthrift with little evidence of income. Although still dazzlingly charming, especially with the ladies, he has been caught trying to sell family heirlooms. One day, sooner rather than later, he will have to be put into care – for his own good, of course. And whether he likes it or not.
Steve Bannon of Breitbart fame believes that the EU is treating Britain like North Korea. In Italy for the elections there last weekend, he described the treatment of Britain in the Brexit negotiations as “vicious and dismissive”.
If there were a second referendum, would you vote otherwise than how you voted in June 2016? Most Brexiteers I speak to (admittedly in my personal self-reinforcing feedback loop of pro-Brexit opinion) think that they have become more Brexit-inclined than they were during the referendum campaign. The behaviour of the Brussels elite has reconfirmed the worst prejudices we ever held about them. The European Union – at least as exemplified by the European Commission and Council and the rest of the ungainly Brussels machine – comes across as arrogant, truculent, intransigent, myopic and stubborn…Moreover they are dishonest – a libertarian intellectual friend of mine recently wrote about the putrescent feculence that flows from Brussels…
And whatever must they think of us…?
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For my own part, my starting point – that there is an unbridgeable gap between the intellectual cultures of the Franco-German tradition on the one hand and the Anglosphere on the other – has been solidly re-enforced. The Franco-German stance, which arises from the intellectual tradition of Descartes, Rousseau, Hegel and Marx, is deterministic and ideological. The Anglophone tradition, which arises from Hobbes, Locke, Hume and Mill, is sceptical, empirical, liberal and pragmatic. I do not say one is better than the other: it is just a fact of life.
The Frenchman argues from first principles that in order to have frictionless trade, it is necessary (il faut que…) that both sides of the border adopt identical standards. (Even though, already, the fiscal and legal regimes differ substantially.) And the Anglo-Saxon will argue that, given good will and a little smart technology on both sides, there must be a solution somewhere…
This cultural Europhile has, reluctantly, become a Brexit Ultra. As for the Remainers – they are now Ultras too. Their only hope is to either perpetuate this most unhappy, and deteriorating, relationship – despite the will of the people. Or, to kidnap the country as a member of a customs union over which we have no say at all. That is an extreme position. As The Mogg says: We would be a vassal state.
Reasons to be cheerful
If we should be depressed by the outlook for the Brexit negotiations, the good news just keeps on coming.
First up, on the day that Mrs May set out her vision of the way forward the Office for National Statistics revealed that the British government had run a current budget surplus of £3.8 billion in the nine months to 31 December 2017 – the first such surplus since 2001 as tax revenues leapt ahead of spending. I wrote further to the Chancellor’s Autumn Statement last November that the Office for Budget Responsibility (OBR) forecast was unrealistically gloomy: but this outturn is beyond anything that the most ardent optimist (i.e. me) could have anticipated then. The full set of numbers will be available further to the Chancellor’s Spring Statement, scheduled for next Tuesday (13 March). I hope to analyse that next week.
Secondly, the UK economy seems to be doing better than we thought. Industrial output surged by 1.5 percent in January as the Forties North Sea oil pipeline re-opened. The trade deficit shrank in December to £3.15 billion from £4.9 billion. UK exports are expected to grow by as much five percent this year according to Capital Economics. Economic growth is likely to be more like 1.9 percent this year – actually ahead of the European average. The services Purchasing Managers’ Index (PMI) recorded a better than expected figure of 54.5 in February, up from 53 the month before. Both manufacturing and services are thriving; however, the UK retail sector is flagging – I’ll have something to say about that shortly.
Thirdly, Britain continues to attract large-scale foreign investment despite Brexit uncertainty. Last Friday, as the Europeans poured scorn on Mrs May’s speech, German industrial giant Siemens AG (FRA:SIE) gave more details about its plans to build a new £200 million train rolling stock production line in Goole, Yorkshire. This will prospectively employ 700 people directly and will create about 1,700 supply chain jobs[ii]. The boss of Airbus UK has also been in ebullient mood this week.
In my piece for the January edition of our magazine I pronounced myself an optimist on the outlook for markets in the English-speaking world. But there are two types of optimist. There is the optimist who believes that the plane will land smoothly, despite the extreme turbulence. And there is the optimist who believes that the plane will probably crash: but that the passengers will limp away from the wreckage relatively unharmed – and will go on to lead fulfilling lives.
I am now the second type of optimist.
[i] The new Italian electoral system, adopted November 2017, is fiendishly complex. I refer readers who are interested to the Wikipedia article on the Italian general election, 2018 at: https://en.wikipedia.org/wiki/Italian_general_election,_2018