Brexit: A solution in search of a problem

In Blog by Hosuk Lee-Makiyama0 Comments

Philippe’s newsletter last week included the quote “Brexit matters to voters not because of what it is, but what it brings”. The past week only brought more uncertainty about purpose. Why did we just have an election? And whatever the voters once thought leaving the EU would bring, many voters now think of Brexit as a solution in search of a problem.

And some find the most contrived arguments to find a problem: the right-wing tabloids blamed the Grenfell tower tragedy on the EU energy efficiency requirements, necessitating the insulation that caught fire. However, the material is banned in most of Europe, and even in the United States. The tragedy was not caused by neither EU over-regulation nor UK de-regulation – but by unfit regulations.

But with no solid parliamentary majority for a hard Brexit, the pendulum is swinging back to the middle. According to the FT, the Brexit secretary David Davis will start the Article 50 negotiations next week with a “very generous” offer on rights for the 3 million EU citizens in the UK. This is promising. But whatever the offer actually is, accommodating the hard-working EU citizens who are net contributors to the UK economy is not “generous” – it’s in the UK’s self-interest. Davis says he enters the negotiations with “head held high”. Well, using residents as human shields in trade talks would be somewhat head-less.

Furthermore, the rumour has it that the UK Treasury is returning to its long-held views that the UK should be in a customs union with the EU. This makes perfect sense. The Economist has made the case for it, given the onerous procedures involving rules of origin. The customs union would save thousands of jobs from leaving the UK – including the car-manufacturing jobs in Sunderland.

A customs union would let the UK have the cake and eat it too: The UK could still negotiate its own trade agreements with other countries on services, investments, regulations, e-commerce, food, and agriculture – i.e. on all the areas that the UK disagrees with the rest of the EU. Meanwhile, Brussels would handle the negotiations on industrial tariffs on cars, industrial equipment, trains and electronics. Since the EU always negotiate these tariffs down to zero, the only rational reason to reject a customs union is if UK wants to impose protectionist tariffs against non-EU countries. In other words, a hard Brexit doesn’t seem like a very free trade proposition. Meanwhile, Borderlex reported yesterday that the idea of a customs union is supported by EU business groups too.

By the way, here’s some last-minute news: the very competent Crawford Falconer, New Zealand’s former ambassador to the WTO, was just confirmed as the UK’s new chief trade negotiator.

But here in Brussels, Brexit is still non-news, and ultimately a British problem. Instead, the EU institutions are in a self-congratulatory mood since the ban on roaming fees came into effect on Thursday. Hi-res selfies from mediterranean beaches (with hashtag #ByeByeRoaming) is cluttering my twitter feed. On a side note: why are so many people on vacation in the middle of the week, early June?

Read the first-hand account of a thirteen-year battle to end roaming fees, written by the former spokesperson of Neelie Kroes (the Dutch commissioner who started the initiative). It spares no punches against the European conservatives who intervened to protect German telecom interests. And by the way, the same people who lobbied against the roaming ban are behind next week’s antitrust ruling against Google. To paraphrase this week’s theme: Is there a solution to their problem with search? I’ve outlined some of the warped arguments used by the Commission in its antitrust cases in a blogpost.

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Thank you, and have a good weekend.

Hosuk