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NUMERO 32 - 18/11/2020

Brexit Undone? Why Biden election won't trump the Brexit process

Jubilant images of the town of Ballina in County Mayo in the Republic of Ireland, apparently Mr Biden’s ancestral home, celebrating the election of its five generations down the line most famous citizen, have been widely shared in the UK media. They have also been often used as supposedly evidence that a Biden Presidency might have significant repercussions for the Brexit process. With less than 50 days to the end of the transition period after which EU law will finally stop applying in the UK, many have argued that whilst a Trump re-election would have ‘ensured’ a no deal outcome in the EU–UK negotiations, a Biden presidency is instead likely to put pressure on the UK to conclude a deal with the EU. All these arguments seem to me pretty misconceived and rather indicative of it is always about us mentality rather dominant in my country of adoption.  Whilst it is certainly true that a Biden administration will pursue a far less confrontational policy towards the EU than its predecessor and there may be a real chance to redefine transatlantic relations, a new USA-EU friendly approach will not necessarily translate into a softening of the Brexit stance currently embraced by the UK Government. Apart from the rather obvious considerations that Brexit is unlikely to figure at the top of the priorities of the new US administration (it is not a priority in Brussels, let alone in Washington) the main reason why the attitude on Brexit will not change due to the election results across the Pond, is Brexit itself. Much before the US elections, it was abundantly clear (if one take aside political rhetoric) that the benefits of a fast-tracked USA-UK FTA, which was supposedly possible under president Trump, were negligible if compared to the loss derived from leaving the EU. The UK Government itself has estimated that the effect of a possible USA–UK FTA would amount to 0.16 per cent of GDP over a not better-defined ‘long term’ horizon. The reasons for such a low margin are pretty easy to explain: on the one side, the UK is already enjoying an extensive low or zero tariff access to goods trade because of its membership of the EU and the margins for increasing trade with the US through tariff reductions are thus small; on the other, reductions on non-tariffs barriers are always complicated and would have likely met with resistance from the USA anyway, especially in areas such a services, digital market, pharmaceuticals and so on.  To put it even more brutally, whilst the UK trade with the EU is over 40 %, the UK trade with the USA is below 12%. Pretty easy numbers to grasp but the ‘Brexit is done’ sovereignty discourse does not accept to be subordinated to any other consideration. The Brexit all cost is also a very potent argument in the current EU-UK negotiations. For instance, state aid rules have become one of the most contentious issues in the EU-UK negotiations, a true deal breaker with the UK refusing to provide assurances to adopt a system of control comparable to the EU system. Such a stubborn refusal is hard to understand as the UK has no economic net gain in undermining a system which as a EU Member State it has shaped so heavily, with a very British insistence on transparency of support measures and on an efficient allocation of resources. A state aid control system that also guarantees effective constraints on some of the big spenders, such as Germany, France and Italy, soon to be fierce UK competitors. Likewise the ‘Brexit is done’ argument seems to prevail over considerations on how to prevent some of the most of practical disruptions than a no deal scenario would certainly provoke. Just this week a report of the National Audit Office, the UK independent public spending watchdog, provides a long list of risks in the government’s Brexit no deal planning from the failure to expand the number of customs intermediaries to handle post-Brexit paperwork, meaning some companies will have to stop trading with the EU to the by now (in) famous 7,000 lorries that may need to queue at the approach to the short Channel crossings, such as Dover to Calais. In conclusion, only the internal dynamics of crunch time negotiations between the EU and the UK can change trajectory with external events – even so relevant as a US election - likely to have only a marginal impact. To go back to Ballina, what about Ireland or more precisely Northern Ireland? True, both President elect Biden and other leading Democrats have expressed their displeasure at the recent position adopted by the UK with respect to Northern Ireland which seems to put at risk the peace process in Northern Ireland. When the Good Friday Agreement was signed in 1988, cross-border cooperation between the Republic of Ireland and Northern Ireland was specifically encouraged and the dismantling of hard borders required. The Northern Ireland Protocol attached to the EU–UK Withdrawal Treaty attempted to deal with the specific peculiarities of NI. The Protocol, through a very convoluted regulatory framework, guarantees that Northern Ireland remains de facto in a sort of custom union with the EU thus preventing a hard border and further EU state aid rules are made applicable in that part of the UK.  The recent UK Internal Market Bill, a very curious piece of draft legislation, which borrows heavily from some ‘classics’ of EU law such as the principle of non-discrimination and that of mutual recognition, intends to regulate how free trade will continue to flow between the different regions of the UK. However, it also seeks to re-define Northern Ireland’s place in the UK’s internal market and customs territory by simply conferring to the Government huge powers to override provisions in the Northern Ireland Protocol. It provides that Ministers will be able to set aside unilaterally provisions in the Northern Ireland Protocol on the movement of goods between Great Britain and Northern Ireland, and to ignore the state aid rules contained in the Protocol (state aid again!). Ministers would also be able to exercise these powers without first having invoked the mechanism set out in the Protocol for settling disputes with the EU.  The Bill candidly confers such powers ‘notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent’ (Clause 47 (1)). Despite such a series of blatant violations of international law (and despite the concurrent launch of an infringement procedure announced by the European Commission) the House of Commons has approved the Draft legislation on the 29 of September. Still with a vote by 433 to 165, on the 9th of November the House of Lords (including 44 Tory Peers that voted against their government) rejected the provisions contained in the UK Internal Market Bill related to NI, as this ‘would be an unacceptable breach of the rule of law’.   Could this be a defining moment to prevent a hard Brexit? I am again rather sceptical. We have been here before with the Government suffering several crushing Parliament defeats and bad days in court. The UK Internal Market Bill will simply return to the House of Commons in early December and the Prime Minister has already signalled that he intends to table it again in the original draft.  Further, Mr Johnson also indicated that in December the Government will present a Draft Finance Bill which will give ministers control over a post-Brexit tariff regime for goods passing from the mainland UK to NI, thus circumventing the NI Protocol provisions again. By December we would know how the EU-UK negotiations would have ended. So any predictions? I would argue that if a EU –UK deal will be reached, the Northern Ireland question is likely to be dropped and actually used to show that a tough approach has worked. However, in the event of a no deal, the Government will need to decide weather to drop the UK Internal Market Bill thus risking the wrath of the most ardent Brexiteers or to face a considerable reputational damage and possibly the annoyance of the US ally. Still it would be all too late, as the cliff edge we have been hanging over for more than four years would have eventually collapsed… (segue)



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