Monday 9 December 2019

May hints at mutually assured destruction to win concessions

An employee changes the channels of televisions, on display in a store for sale in Liverpool, as they show a live speech by British prime minister Theresa May on her government’s plans for Brexit. Photo: Getty Images
An employee changes the channels of televisions, on display in a store for sale in Liverpool, as they show a live speech by British prime minister Theresa May on her government’s plans for Brexit. Photo: Getty Images
Brendan Keenan

Brendan Keenan

There was some cheer for Irish business after British prime minister Theresa May's speech, as sterling rocketed to its biggest daily gain since at least 1998 to the benefit of Irish exporters and those competing with British imports.

There was not much else to cheer about, and the best that can be said about sterling is that uncertainty will continue. Until now, talk of a 'hard' Brexit has been bad for sterling, yet yesterday's speech was anything but soft.

Those Irish politicians, British Remainers and European officials who called on Mrs May to make her position clear should perhaps have been more careful of what they wished for.

Once flushed into the open, she had no choice but to flesh out her "Brexit means Brexit" mantra.

As a rule, such an opening stance in advance of negotiations represents the hardest position, from which some concessions can be made.

But the Brexiteers in the Tory party will try to hold the prime minister to yesterday's 12 objectives, while its very toughness makes it difficult for the EU to be conciliatory and flexible.

Most Irish attention will be on her support for the common travel arrangement between this country and the UK, but we have a lot more to worry about than that. While there would be more political damage from families having to produce ID crossing the Border than truck drivers having to show their documentation, the economic damage will come from what is happening to the trucks.

Based on yesterday's speech, it will be harder to prevent the economic harm than to avoid having checks on people. Passport checks are already in existence and it is not impossible to imagine a deal where the Irish Border remains open but ports and airports have separate queues for UK/Irish, EU, and non-EU.

Brussels is conscious of the political risks from border controls on people, and EU member states may be willing to agree some special arrangements for the island.

They might demand something in return, though, in areas like corporation tax or financial services.

Even if they do not, having secured a common travel deal, Ireland would have little bargaining power in the trade arrangements, where the real economic dangers lie. It is almost impossible to imagine free movement of goods can continue after Mrs May's statement that Britain would leave not just the Single Market and its free movement of people, but the customs union as well.

This is what alarmed the business organisations such as Ibec, the British-Irish Chamber of Commerce, and the small firms bodies. Staying in the customs union would see the UK continuing to have the same trading arrangements with non-EU states, which would make negotiations a bit simpler and avoid, for example, Britain having different tariffs with the USA than Ireland .

Ibec director-general Danny McCoy was in no doubt what the possible consequences could be.

"It could seriously disrupt trade between Northern Ireland and the Republic, and deeply damage UK-Irish economic relations," he said.

Agri-business may have even more to worry about. It goes without saying that Britain is leaving the common agricultural (and fisheries) policy. If it was to begin negotiating separate trade deals on food imports, the effects on Irish farmers and producers would be dire.

"Agriculture and food cannot become a battleground between Brussels and London. There are too many farm livelihoods and jobs at stake," IFA president Joe Healy said. But most of them are in Ireland, rather than Brussels or London.

However, the customs union was the one area where Mrs May held out the prospect of substantive negotiations.

She is looking for a partial union that would see "tariff-free trade with Europe" and as little physical restriction as possible on cross-border trade.

It is not clear how she hopes to achieve such a deal; just as it is not clear to most observers why she wants to leave the customs union at all. The apparent British view that they can negotiate more favourable trade deals with other countries than can the EU, with its 500 million consumers on offer, is baffling.

It will be even more so after the speech, which also called for a special deal giving London freedom to provide financial services across borders.

Unless she has some secret concessions up her sleeve, the only way to get such arrangements would be to frighten the EU with the alternative.

The last part of the speech seemed designed to do just that. It spelled out everyone's worst nightmare: a tariff and regulation war with the UK cutting taxes, reducing tariffs, and liberalising markets in an effort to draw trade and investment away from a stodgy EU (and, it must be said, a cruelly vulnerable Ireland).

Faced with such a prospect, might Brussels back off and cut a favourable deal for Britain?

During the Cold War, the nuclear weapon strategy was called 'Mutually Assured Destruction'. There were echoes of that kind of thinking in this part of Mrs May's speech. Not for nothing was the policy known as MAD.

Irish Independent

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