Economics

Playing Chicken With Brexit

Who Will Blink First: Britain Or The EU?

There was a rather inflammatory article in today’s Guardian newspaper that suggested that the EU and Britain were playing chicken with Brexit.

There were several issues that the author didn’t mention, one being the thorny issue of a legally binding settlement. From the British, that is. Now to be fair, there have been murmurings that the British were actually going to produce something. However, thus far, the British have been very good at suggesting something might happen, in the way David Davis didn’t even think to write his impact report. In a democracy, this would have been enough to bring a government down: he had been ordered by the Speaker to present the report on the given date. All he could do was to turn out his pockets and say that the Russians had eaten it.

Or something like that, I can’t remember his exact words.

Legally binding statements are inherently immovable, and the British, if they are anything, are a movable feast. Theresa May was adamant that migrants from the EU would not have the same rights as those who arrived before the so-called transition period. She has since relented on this issue. What is becoming clear is that she is going to relent on a good few more – and thereby take a few steps closer to the stance that the EU holds. All this in the face of her hard-line Brexiters in her cabinet, and the relief of those who trade with Europe.

Some of which travels to the Irish republic. The ideas on this subject are as diverse as they are batty. The latest wheeze from the British is the thought of a “congestion charge like system” but of course, without the kind of detail that would satisfy a lawyer, leave alone the Irish. Perhaps as Foreign Secretary, Boris Johnson has never travelled in a truck across an international border. For the record, I have, and I can assure you that the paperwork was considerable. France used to have – probably does still have – a warehouse filled with all the carnets du passage or whatever they called them. Not that they’d be any use, and you could store that kind of information on a modern computer. I doubt if it would be worth the effort to transcribe it all. That doesn’t mean that it’s an easy job to computerize a system that at present simply doesn’t exist. You do not need any papers to travel across borders in the way you used to.

That raises another problem for the Conservatives: just what are you going to do about the kind of customs declarations that a lorry needs? Nor are there any precedents: enter the EU from Turkey and you need a pile of documents. On a good day, the queue is only a few miles long. If the Conservatives are going to design and implement their congestion charge system, they’d better get cracking. Not that the Conservatives are very good at this, they’re better at pestering other politicians to get Michel Barnier to climb down from his high horse.

If they want their frictionless border, now is the time to get it moving. Previous studies showed that it could take five to seven years to implement, but that’s just governments for you. Give a decent geek the outline of the system and he’d have something up and running before lunch. That’s not the problem: the real problem is in installing the system across the country and training the people to use it. Then there’s the problem of fraud and of course, smuggling. With big money in the latter, geeks may not wish to enter the ring and be responsible for cutting off a criminal gang’s income. The bigger institutions who could do this have the problem that they’re rather slower at delivering. The fundamental problems remain: implementation.

Which is why the EU’s representative Michel Barnier threw down the gauntlet earlier this week and gave a clear warning that if the British didn’t come up with a workable solution – that is to say, a legally binding solution that is agreeable to all 27 nations – the EU would simply defend the needs of the Irish Republic by including the North (the Six Counties) in the customs union in one way or another. Naturally, Theresa May was aghast and against. Well, she’s stepped down from a good few red lines, but this is a whammy. This would hurt her bosom pals the DUP, who stand for an open border between Britain and the North. With the North in the customs union and the British mainland outside it has the look and feel of a border. I doubt for one moment that the DUP would sanction this.

The real problem here is that Britain signed Article 50 and has thus put the process of leaving the EU on a formal footing. What is more important is that Britain needs to draft a legally binding document that covers their retreat, so to speak. I’m 800 words into this post and thus far, all the British have managed to do is argue, bicker, make excuses and above all, do fuck all.

You wanted to leave, why can’t you get on and do it! We here in Europe will be more than happy to see Britain go what with its vetoes on tariffs on cheap Chinese steel and the like. The problem is that being argumentative is what the British do best and making legally binding statements is clearly one of their worst.

The situation appears to be less of the EU playing chicken with Britain, but of its growing more and more impatient with British intransigence. The EU has as a result laid down a few laws as a reminder to Britain of what it could lose. The British have whined that they are indispensable to the European nations who are close to them, but they haven’t pushed this point too hard and have quietly painted over some of their red lines in white.

It has been mooted that the British have set their lawyers to drafting something that may (or may not) come close to a legally binding proposal. All well and good. I can only hope that there aren’t too many of that very British kind of illusion. The kind that say the British economy would be just fine outside the EU. It’s not as if Britain’s economy is in that good a health. The restaurant trade is sweating under the increased costs of imported food, Carillion’s failure pointed to another area of the British economy that looks decidedly dicey.

In this respect, a sensible and swift agreement by the British government is the solution to some of these problems in that it might (the stress on ‘might’) give Sterling the opportunity to rise. That’s the restaurants saved at least. The likes of Carillion are a different matter altogether, and these are an entirely British problem. European companies do things very differently. Partly due to regulation and partly due to the culture. The real problem is neither of these: the real problem is the likes of Honda in Swindon that is entirely dependent on road transport. Bring one train through a borderpost isn’t exactly easy, but it’s a lot quicker than bringing two hundred lorries through Dover. That’s half a day’s deliveries, by the way. Not all of which come through Dover, but enough will.

The chaos at the Channel Ports will starve the ‘just in time’ manufacturers, whose very name suggests that their profit margins are paper thin. If they can’t afford warehouses and make a profit, they are going to suffer if those components don’t arrive on time.

Not investing in railways was a commercial decision for Honda: railways are like legally binding proposals, they are inflexible. Build a railway in the way the Germans do, and you nail that company down for two decades, what with the costs of the investment. With a road, whilst the costs are higher, they are not tied to one spot. And Britain, for all its prowess, is not competing with Germany here. Britain conceded that role thirty years ago; Britain is competing with the likes of Slovakia and Romania – both of whom have better rail links to Germany where the major producers sit. With the investment costs of an assembly plant being relatively low – we’re not talking about the kind of operation that exists in Munich or Stuttgart which are fantastically capital intensive and thus immobile – the assembly plant can pop up and can disappear in a flash.

It’s not just the EU that Britain is playing chicken with, is it?

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