The Meeting of the Waters

The editor of Critical Quarterly bought me a drink last December and told me that he was planning a special issue on, of all things, Thomas Moore’s The Meeting of the Waters. Would I care to write an economics column on the theme?

Well, it’s one thing to write a quarterly column on whatever is interesting me at the time, another entirely to write them to order. But since we were coming up to Christmas, and since my father’s family is from Wicklow, I said yes.

You can read the result here, and while I’m not sure how much economics there is in it, I did manage to work in a reference to Sargent and Velde!

Who is fudging? (Answer: not the EU.)

There has been a lot of talk since yesterday’s deal pointing out that there has been a certain amount of fudging going on. But there is fudge and fudge, and it’s helpful to be clear about what’s being fudged and by whom.

Paragraph 49 states:

“The United Kingdom remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s objective is to achieve these objectives through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and Customs Union which, now or in the future, support North-South cooperation, the all-island economy, and the protection of the 1998 Agreement.”

These are commitments made by the UK to the EU and there is very little fudge here. The UK is committing as a backstop solution to the full alignment needed to “support North-South cooperation, the all-island economy, and the protection of the 1998 Agreement” in the context of an over-arching commitment to avoid a hard border. Avoiding a hard border requires full alignment for all traded goods. North-South cooperation involves the famous 142 areas of North-South cooperation we have been hearing about, and brings services like health into the mix. The all-island economy is even broader. And the Good Friday Agreement brings things like human rights into the mix.

Paragraph 50 states that:

“In the absence of agreed solutions, as set out in the previous paragraph , the United Kingdom will ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom, unless, consistent with the 1998 Agreement, the Northern Ireland Executive and Assembly agree that distinct arrangements are appropriate for Northern Ireland. In all circumstances, the United Kingdom will continue to ensure the same unfettered access for Northern Ireland’s businesses to the whole of the United Kingdom internal market.”

Notice anything? These are not commitments made by the EU. These are, once again, commitments made by the UK, in this instance to the DUP.

Paragraphs 49+50 appear to be a bit of a fudge, although the fudge can be undone by the entire UK maintaining full alignment with the EU. But let’s be clear: this is the UK fudging, not the EU, and the UK needs to fudge at this stage because of the internal contradictions of its own position. But the EU will naturally take the view that the UK must meet its commitments made to the EU in Paragraph 49. There is no fudge here: the EU has sought and obtained an impressive series of concessions from the UK, and the UK will be held to its word.

Note also that Paragraph 45 states that:

“The United Kingdom respects Ireland’s ongoing membership of the European Union and all of the corresponding rights and obligations that entails, in particular Ireland’s place in the Internal Market and the Customs Union. The United Kingdom also recalls its commitment to preserving the integrity of its internal market and Northern Ireland’s place within it, as the United Kingdom leaves the European Union’s Internal Market and Customs Union.”

These are again UK commitments, and the first of these is in the present context a commitment to respect the fact that the EU needs to police the external frontiers of its Internal Market and Customs Union. So the turning-a-blind-eye-to-smuggling non-solution is out.

And finally, note that Paragraph 46 states that:

“The commitments and principles outlined in this joint report will not pre-determine the outcome of wider discussions on the future relationship between the European Union and the United Kingdom and are, as necessary, specific to the unique circumstances on the island of Ireland. They are made and must be upheld in all circumstances, irrespective of the nature of any future agreement between the European Union and United Kingdom.”

The first sentence rules out the Brexiteers’ Baldrick-like cunning plan to use whatever special arrangements may be reached on the island of Ireland as precedents, allowing them to have their cake and eat it when it comes to the economic relationship between Great Britain and the European Union. And the second sentence commits the UK to uphold its engagements on Ireland in all circumstances.

As I say, it doesn’t seem to me as though the EU allowed much fudging when it came to the UK’s commitments to the EU regarding Ireland.

How Her Majesty’s Government simultaneously manages to meet its Paragraph 49 obligations to the EU, and its Paragraph 50 obligations to the DUP, taking account of inter alia Paragraphs 45 and 46, is something it will have to figure out. The UK government clearly ought to fulfil its commitments to the DUP, but whether it does so or not is hardly a primary concern of the EU. Paragraph 49 is what the EU will care about, not Paragraph 50. (Although Ireland would be very happy if the UK met both obligations in the only way that seems possible, namely by effectively staying in a Single Market and Customs Union type of arrangement with the EU.) If the UK wants to leave the EU in a civilised and amical manner, and strike a trade deal with the EU in the future, it will have to uphold the very clear commitments it has made to the EU. How the British deal with British fudge — whether Mrs May betrays the DUP, or abandons her previous red lines regarding membership of a customs union and the Single Market —  is a matter for them. But sooner or later they are going to be forced to confront and deal with the internal contradictions of their position.

Wir brauchen nicht noch mehr Offenheit

The NZZ interviewed me last week in Zürich. I made the case that we live in a world that is already astonishingly open, and sufficiently so that it is allowing poor countries to grow rapidly; and that Davos Man and Woman should therefore seek to preserve existing levels of openness, rather than pursuing a permanent pro-market revolution that will inevitably provoke a political backlash (and  indeed is already doing so). The interview is here.