EU UK TRADE DEAL REFLECTION - WHO HAS CONTROL NOW?

EU UK TRADE DEAL REFLECTION -  WHO HAS CONTROL NOW? - 1350 words

(100 word Summary at the end)

Some of this  is openly declared hindsight because we now know more than we did a week ago.

Was No Deal an option?

Now that we know how close the two sides were in the final weeks (as measured by the fact that they finally agreed), then I don't believe that No Deal was in fact seriously being considered by the UK side in December, despite all the noises to the contrary, because it would have been viewed as insane to take all that unnecessary pain - why accept all the tariffs now, “justified" by the concern that some limited tariffs might be imposed in the future? That makes no sense, as was pointed out. Of course, if there had been other massive issues then the Deal might have broken down for other reasons, but (we now know for definite) there were not.  Fish was touted as a stumbling block but in fact the UK stuck to some demands until the timing was right to finish the discussion on Christmas Eve and then conceded; you can use any issue as a Timer in this way if you are more concerned about timing than about the substance (actual fishing quotas). Presumably Christmas Eve was always the UK target date; that’s what you would aim for if you had a bad deal that you didn't want scrutinised. If so that would be the third time the UK government has manipulated the timetable to reduce scrutiny by MPs - firstly prorogation, and secondly trying to push through the Withdrawal Agreement by Halloween 2019. They have past form.

The bluster about No Deal continued for the benefit of the ERG etc, but this will not have convinced the EU negotiators who knew how close they were.

This hypothesis certainly would explain the conspiratorial chuckle between Boris Johnson and Grant Shapps when asked by Robert Peston about "No Deal" at the Press Conference; this looked very like a "Tell" giving away the meaning "Aha - they've bought our 'Ready for No Deal' story".

The Advantage in Negotiation

The EU has acted in the EU's interests. Of course the EU acted in the EU's interests, what else should we expect? It would be surprising if they didn't.

"They need us more than we need them" ? Dubious, but in any case, the EU has a trade surplus with the UK. Trade is smoother than with No Deal - easy for the EU to sell to the UK now, but more problems the other way - rules of origin etc.  A win for the EU.

Services is where we have the surplus with the EU. Services are not served well. No win for the UK.

In any negotiation:

- the larger partner is likely to have the advantage

- the more experienced partner is likely to have the advantage

- (and these factors will influence who supplies the initial draft which is used as the basis for the agreement; true to form, it was the EU's initial draft that was used) 

and these advantages were always likely to work massively in the EU's favour.

But there was one factor that we could try to influence:

- the party that is in more of a hurry is at a disadvantage.

And with a triumphant "taking back control", Boris Johnson decisively and (so he said) irreversibly tied the UK negotiators' hands behind their backs by unilaterally committing to a fixed and premature deadline.

(This WAS viewed as a colossal mistake at the time by many including me; a big mistake if you want a good Deal, anyway).

The Result

The Johnson Deal is the result. The headlines in many newspapers will be the Boris Johnson "victory". In fact, if this Deal was intended to preserve some of the advantages of EU membership, it is massively incomplete. Trade is covered, as it had to be, but for example the service sector has lost out big-time.  UK criminals are big winners as we lose the European arrest warrant and online access to EU crime databases.  And incomplete coverage was always likely. If a reasonable estimate of how long you need for a building project is two years but you only allow a year, then people will do their best, but after a year you may have the walls up and the roof on but all sort of bits missing. This is plain common-sense, you don't need to be a project management expert to spot that. And so we have an incomplete Deal. (Also a deal in which it took 235 weeks since the referendum to decide the arrangements - timescale set by Johnson - with one week allowed for implementation; that's an arrogant statement to business).

Let’s just emphasise. The timing of this, which has proved to be wildly badly arranged , was set entirely by Johnson. A sane timetable would have a draft Deal followed by scrutiny and where necessary amendment / renegotiation, finalisation of the Deal, preparation of communications, education and consultation, time then for business to prepare with the necessary recruitment and systems and infrastructure work.  So, either Johnson massively underestimated the time needed (as we said at the time), or he just has contempt for both politicians and for the business people who have one week to implement.  Hence the Government adverts telling us to get ready without knowing what for. Of course, some work could be done in advance – and some will have been on No-Deal preparation, buy business and by Government, which is wasted effort.

What Next?

One worry of course is how good the agreement is with minimal scrutiny. The last time that Johnson dragged an Agreement out of an all-nighter he appeared not to know what was in it and then wanted to rip it up some months later.

But – even assuming the agreement holds -  can we fill in the missing bits of the agreements?

Yes, that's possible, in separate negotiations. Certainly.

But. crucially, we have lost any negotiating leverage from the Trade Agreement to apply in Services. We can't say "Unless you agree to XYZ in Financial Services, then we won't agree to the Trade Terms" because we already agreed to the Trade Terms.

And so Johnson has handed the advantage fully to the EU.

Smart people, these EU. You might prefer to have them on your side of the negotiation table rather than the opposite side.

I guess this is not surprising. In other Trade Deals (e.g. UK-Japan) the UK government has trumpeted the fact of the Deal without picking out any value added compared to being in the EU. Emily Thornberry dissected Liz Truss' argument on this in the House of Commons. If Liz Truss actually was satisfied with that Deal and wasn’t just blagging that it was a success then that shows chiefly the limits of her ambition. In general, the UK Government has as in this case prioritised quantity of Deals over quality, but even then has not completed the task - with less than a week to go until New Year's day 11 out of the 40 most important Deals are missing. 
https://www.bbc.co.uk/news/uk-47213842 

In other words - this was the moment, supposedly, to reset our arrangements, to make a historic new start after 46 years. And Boris Johnson has handed control to the EU. 

 

SUMMARY: - 100 words

We now know that the 2 sides were so close that it’s hard to imagine No Deal being considered in December.

Boris Johnson handed the EU a negotiation advantage by committing to a 2020 timescale.

An incomplete Deal is the result. EU will be pleased that Trade is covered; Services matter more to UK.
The timescale was set by Johnson and was wildly inappropriate, giving Business one week from seeing the draft Deal to implement.

But UK has in other areas also prioritised quantity over quality.

The advantage is now with the EU, Johnson has handed control to the EU.