A Slow Negotiation Might Help Achieve a Better Brexit Solution

Writes Patrick Honohan for the Peterson Institute’s blog here. I’ve said a few times that the Brexit negotiations will take years (and–gasp–require immigrant labour).

Patrick’s point is well made. The sheer length of the negotiation process may give time to let the British people understand the benefits of being within a free trade area, while also managing somehow starting to solve the problems the referendum result threw up. These could be solved, arguably, by less austerity and more capital spending in areas left behind in recent decades.

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Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

22 thoughts on “A Slow Negotiation Might Help Achieve a Better Brexit Solution”

  1. But if you’re a Polish couple in London with a three year old daughter what happens? You just sit tight and hope for the best for the next several years?

    I was in London last week and talked to a guy selling artsy wallpaper. It’s a British company but the printing is done in Paris. They’re not sure what to do. The pound falling obviously increases their costs but what will their costs be in three years? Will there be tariffs?

    People have to make plans. This isn’t a debate society, this has material effects on people’s lives.

  2. On the EU side there will be pressure to have the UK out by early 2019 as a new European Commission will take office (UK’s commissioner resigned after the referendum) in that year and European Parliament elections will be held.

    The UK would likely need a bad recession for the number of hardline Tory Leave MPs to diminish and ease pressure on concessions to the EU.

    The other factor is that uncertainty among international investors in a country that has had a persistent current account deficit for 30 years cannot be allowed to drift on for years – while it will take a long period to disentangle four decades of legislation, the issues of trade and investment have to be agreed sooner than later.

    Irrespective of who wins the US presidential election, the backlash against companies “shipping” jobs overseas is likely to continue while the UK’s eagerness to continue to be the lead country for inward Chinese investment in Europe and the City as a key trading location for the Renminbi, would be imperiled by years of delay.

  3. A characteristically restrained and throughtful piece – which, in the current circumstances, is very welcome.

    The Tory party appears to be recovering quite rapidly its traditional ability to provide governance – and in the process removing quickly, efficiently and ruthlessly unsuitable candidates for leadership. And, in the process of re-securing and retaining its ability to govern with sufficient popular consent, its traditional pragmatism and flexibility is re-emerging. As soon as the most likely next PM, Theresa May signalled that the target of a fiscal surplus in 2020 would be dropped under her premiership, George Osborne made the appropriate policy announcement. I suspect the speed at which the next Tory government will rediscover and apply classic Keynesianism to ameliorate the impacts of EU exit will leave the heads of the various lefties and crusties – weeping and gnashing their teeth about “neoliberalism” – spinning. It would, of course, be far better if these policies were applied and the EU exit negotiation conducted by a centre-left, progressive government. But that’s not on offer – and won’t be on offer for the foreseeable future.

    1. The system will collapse within a few years anyway. NIRP , baby. NPR. No pay rises. Groupthink. Authers. Trends continue beyond reason. Galbraith. Systems continue until overwhelmed by circumstances beyond their control. Walt. Systems continue until forced out by political power.
      Negative yield bonds are a sign of insanity.

    2. @PH
      there is no political support for fiscal activity in sufficient quantity to generate growth and move the system away from its suicidal path. Policies in motion tend to stay in motion unless power intervenes. And power has been bought by vested but deluded interestsm

  4. This may be a very sensible point:

    “Under these circumstances, perhaps the best one can hope for is that a lengthy process of negotiation allows an improved understanding of the issues among the British people, who have been battered by misinformation and prejudice in the referendum campaign. Their traditional tolerance and moderation may reassert itself to allow acceptance of a less isolationist solution than seems currently in the cards. But that would also require the British government to acknowledge and address the legitimate concerns of those parts of society that have suffered most and feel most threatened by the evolution of the economy in recent times.”

    …but as I have previously pointed out, once Article 50 is invoked by the UK there is a 2 year timeline after which the UK is out. It has left – no matter how sensible it is that negotiations continue. The only way this can be extended is by unanimous agreement of the other 27 states, and that is unlikely.

    Added to that, the unparalleled statesmanship of Mr Juncker in asking UK politicians “Why are you here?” after the vote, and when asked on camera when he the UK should invoke Article 50 stating “If the next Prime minister is from the Brexit side it will be seconds, if from the Remain side, days” does not suggest everyone is on board with Patrick’s view.

    I understand May will not fall into Juncker’s trap, but others seem naive enough to.

    1. Grumpy

      the Junckers were a class of Brahmins and landlords in Prussia and were blamed for the catastrophe that ended with the loss of Prussia in 1945. Juncker is operating above his pay grade.

      1. The junker class were actually more what we would call yeoman farmers. Not much above sturdy peasant farmers but descended from military settlers

    2. Is it surprising Juncker isn’t displaying much sympathy for the Brits? After all, Cameron did all in his powers to stop Juncker becoming Commission President, while the UK press happily circulated rumours about his drinking (“cognac for breakfast”) and said he wasn’t fit to run a golf club committee.

      1. Ninap you seem to be suggesting we shouldn’t be expecting better from Juncker because the UK government was opposed to him getting the job – and some British newspapers were mean to him.

        That sort of mentality is indeed present in poorly run golf club committees, but I’m not sure it iwould be appropriate for one of the Five Presidents of the EU.

  5. It may be worthwhile saying that, contrary to the accepted wisdom, the process of ‘dismantling’ thousands of EU laws is not in fact a necessary precursor to Britain leaving the EU, if that ever happens.
    The Irish State, on its separation from the UK, simply absorbed all UK legislation, as was, onto the Irish statute book, with exceptions only for treaty agreed changes.
    The same model could work for Britain, thus bringing down the hard initial bargaining to a number of key items, if agreement could ever be reached on them, and assuming that breaking up was still the desired objectives of both parties.

    1. UK mythology about the EU focuses on laws and “diktats”. Even the IT yesterday fantasised about a more liberal interpretation of human rights as a way out of the UK’s economic malaise even though pay rises are the issue.
      http://www.irishtimes.com/news/world/uk/brexit-presents-thorny-choices-around-uk-s-future-global-role-1.2714128
      “Others argue that Britain’s best bet lies in capitalising on the advantages of Brexit by offering lighter financial regulation in the City of London and adopting a more flexible approach to human rights”

      Madness

      The whole UK attitude to the EU is driven by incoherence.

    1. Thanks for sharing. I’ve only read parts but seems excellent. I still like experts. I see there’s video or audio options which I’ll opt for, though I was enjoying the YesMinister imaginings whilst reading. I liked the phrase “if you’re not at the table then you tend to be on the menu”.

      From the bits I’ve read, there’s a strong bregret in reviewing out options.

      1. The problem for the experts is that they are trying to apply logic to a situation that has none. But you will note the emerging conclusion that the UK could invoke Article 50 and, at any point within the two-year period, break off the exit procedure. As I said on another thread, an understanding – it is impossible to imagine it being publicly enunciated – on this point must be a key element in finding some logical starting point to bringing some order to a chaotic situation. Van Rompuy in a Guardian interview crosses the t’s and dots the i’s.

        https://www.theguardian.com/world/2016/jul/07/herman-van-rompuy-uk-free-movement-single-market-eu

  6. The EU is refusing to engage with the UK until it invokes Article 50. Any suggestion that there should be a slow process should probably address why the EU 27 and the Commission have taken this position. I posit reasons:

    1. The EU does not want to leave itself open to being portrayed as bullying or bribing the UK to stay in the EU or to have a second referendum. If there is a second referendum, it must be the UK’s decision alone to hold it and the UK government’s decision, without any outside interference, to promote it. The UK must face up to its mistake without excuses or scape-goats and without any siggestion that it got anything in return. Otherwise, the UK must leave on the terms dictated by the EU.

    2. Art. 50 is drafted as a disincentive to leave the EU. You have to put yourself at the mercy of the other member states by serving the notice without any right to retract it. Informal negotiations would rob this Art. 50 of the strong disincentive built into it.

    3. The UK Government and its media have characterised the EU as something they see as an economic arrangement or transaction. They have not paid any respect to the underlying political goal or preserving peace in Europe by uniting its peoples. Allowing the UK to negotiate before serving notice would be to facilitate the UK behaving as if their decision was something to be played out in negotiation subject to the rules of game theory and their version of the real-politik, rather than treating it as a decision of political principle and philosophy. The UK has purported to take a decision of principle and must irrevocably act on it before there can be any talk of negotiations. EU membership cannot be kept in one’s back pocket to be horse-traded like a dirty five pound note. To engage with the UK before the notice is served would undermine and demean the value of membership.

    4. The UK has acted selfishly by having the referendum. It is an egregious act of exceptionalism in a union dedicated to peace and stability. Like all exceptionalism it denotes total disregard for the security, welfare and stability of other countries. The UK should not be rewarded for this. The UK has undermined its own negotiating position by having the referendum. It has made its bed and it must lie in it. The EU will give it a take it or leave it offer based on the EU 27’s best interests after the notice has been served. Why should it do otherwise?

    1. I think that all your points are valid except the suggestion that an Article 50 notification could not be withdrawn. From the legal commentary that I have been reading, the wording of Article 50 could be read either way. My own view is that, if there was general agreement that this would be the best outcome, in the light of the extraordinary difficulties that had arisen in negotiating the terms of withdrawal (not an unlikely scenario), it could be done. The Tory leadership campaign reveals that the possibility is agitating the two sides to a considerable extent, if hidden behind the debate on when to trigger Article 50. How this campaign ends up is a crucial but not, in my view, a decisive consideration. What will decide whether or not the UK ultimately leaves the EU will be developments on the economic front in the UK and the national debate about how these were brought about.

      Corbyn’s view.

      https://www.theguardian.com/commentisfree/2016/jul/08/jeremy-corbyn-labour-negotiations-europe-tories-exploit-cheap-labour

      The article is revelatory of one crunch weakness in trying to imagine a benign scenario i.e. the fixation of the left in the UK with the idea that there is some form of EU plot to introduce the type of free-wheeling labour legislation prevalent in the UK when this is entirely the result of internal UK political processes.

    2. Well put. Except that it also in the EU interest to have the UK as a (however recalcitrant) member.

  7. Leadsom could become PM. Imagine John Bolton as PoTUS for the equivalent in madness.

  8. fyi
    Interview with Juncker and Schulz: ‘Deadly for Europe’

    Interview Conducted by Klaus Brinkbäumer, Horand Knaup and Michael Sauga

    The presidents of the European Parliament and the European Commission, Martin Schulz, 60, and Jean-Claude Juncker, 61, talk about the consequences of the Brexit vote, the failures of EU leaders and their early morning phone calls.

    ‘… our working-class origins are at least as important to our bond.

    Juncker: My father was a steel worker and Martin’s grandfather was a miner in Saarland. In these occupations, there is a particular awareness of solidarity. That creates links that aren’t present in other relationships.

    Schulz: There is an additional biographical parallel. Your father, Jean-Claude, was forcibly drafted into the Wehrmacht (Eds. Note: Germany’s Nazi-era military). He was badly wounded and ended up as a prisoner of war in Russia. My mother’s brother was killed while clearing mines in 1945. Those are things that mark your childhood and they help explain why we are so devoted to European unity.’

    http://www.spiegel.de/international/europe/interview-with-jean-claude-juncker-and-martin-schulz-a-1102110.html#ref=nl-international

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