Prepare the following article for translation (in the tutorials) .
Why Europe wants a hard Brexit to hurt
Britain’s European partners are uniting around
a very tough position on the forthcoming Brexit negotiations. At the same
time, Theresa May is starting to rule out options that could leave Britain
closely integrated with the continental economies. Both her government and the
27 are being driven by politics rather than economic self-interest. This will
harm trade and investment and therefore leave Britain poorer.
May has announced that she will invoke the article 50
exit procedure
before the end of March, while also rejecting the jurisdiction of the
European court of justice. Together with her promise to restrict
the right of EU citizens to work in Britain, this precludes staying in the
single market with which Britain does almost half its trade.
This means the UK will have to negotiate access to
the single market, sector by sector, through a free trade agreement (FTA).
British manufacturers may not suffer too much, since FTAs (such as the recent
EU-Canada deal) eliminate tariffs on goods, although the UK’s likely
decision to also leave the EU customs union will create hassle on borders for
importers and exporters. The problem with such an agreement is that it would do
little to open up markets in services such as finance, construction or aviation.
That would require the removal of regulatory barriers – which is what the
European single market is all about.
The British economy is about 80% services. The
glummest faces that I saw at the Conservative conference in Birmingham were
those of the bankers. They noted that ministers failed to speak out on the
importance of their sector. They are becoming resigned to losing “passporting” –
the rule that allows a UK-regulated firm to do business across the EU – and are
preparing to
shift operations out of London. Some bankers reckon that this exodus will
deprive the Treasury of about
£10bn in taxes a year.
British officials hope to win a much better deal than
the Canadians; after all, Britain has a bigger economy and the 27 would benefit
from it thriving. They expect a “Canada-plus” FTA, covering some services as
well as goods. That may be possible. The problem, however, is that the 27 other
governments are forging a very hard line on Brexit.
Liam Fox will need to negotiate ‘an interim deal to
provide cover in the years between leaving the EU and the entry into force of
the free trade agreement’. Photograph: Carl Court/Getty Images
Article 50 was written to put a country leaving the
EU at a disadvantage. Once a government activates the article, it has just two
years to negotiate the exit settlement. The two years may be extended by
unanimity, but most of the 27 want Britain out before the June 2019 European
elections and the conclusion of the next round of EU budget negotiations at
about the same time. A separate negotiation will be needed for the future
economic relationship, in the form of an FTA, but that could take five years or
longer to complete and would then need ratification in each of the national
parliaments (and there are, confusingly, 45 in the EU). So the UK will need an
interim deal to provide cover in the years between leaving the EU and the entry
into force of the FTA.
But the clock will be ticking during the negotiation
of the divorce settlement and the interim deal. And if the talks break down
without agreement, the UK will be on its own with only World Trade Organisation
rules – which would mean 10% tariffs on UK exports of cars and more than 50% on
some meats, and provide no access for services.
Because the cards are stacked against the UK, the
prime minister has asked for “pre-negotiations” before invoking article 50: she
wants to know what her partners might give her, including in an interim deal.
But the 27 are
refusing informal talks lest clever British diplomacy undermines their
unity.
On recent visits to Berlin, Paris and Brussels, I was
struck by the uncompromising line on the “indivisibility” of the four freedoms –
of labour, capital, goods and services. Key policy-makers say the UK cannot be
allowed the benefits of membership, such as participation in the single market,
without accepting the responsibilities, such as budget payments and free
movement (Switzerland and
Norway accept both).
British negotiators need to understand why the 27 are
so obdurate on this point. The Germans and others worry that if the British win
a special status, other countries – inside or outside the EU – would ask for
equivalent deals. And that would potentially destabilise the union.
‘For Angela Merkel (pictured right with Theresa May),
the interests of the EU come first.’ Photograph: Hannibal Hanschke/Reuters
But the biggest driver of the tough line on the four
freedoms is fear of populism. In Paris, mainstream politicians do not want
Marine Le Pen to be able to say: “Look at the Brits, they are doing fine
outside the EU, let’s follow them there.” Similar views colour thinking in The
Hague, Rome and other capitals: the British must be seen to pay a price for
leaving.
The British need to worry about the European
parliament, with which they have long had antagonistic relations, and which
believes in the mantra of the four freedoms. It must approve both the article 50
agreement and the FTA. If by some feat of brilliant diplomacy, Britain were to
win a deal combining single-market membership with limits on free movement, MEPs
would throw it out.
Many Brexiters claim that the toughness of the 27 is
merely an opening stance, and that, when talks commence, economic self-interest
will push them to soften. But that may be wishful thinking. One top German
official told me that a bad deal for Britain would divert investments to Germany
and thus benefit his country.
And although German industrialists would like to see
Britain closely integrated with the European economies, Theresa May should not
assume that they drive German policy. They have spent the past two years
lobbying against EU sanctions on Russia, without any impact. In any case, an FTA
between the EU and the UK, removing tariffs on goods, would suit German
industry. It would not be so good for the service-dependent UK economy.
Britain will leave the EU by 2019. But for years
afterwards, until there’s a new agreement, its most vulnerable will suffer the
full force of globalisation
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Many Conservatives hope that in the end Angela Merkel
will look after the UK. It is true that she is likely to remain chancellor after
next September’s general election. And she certainly
regrets Brexit and
wishes Britain well. But her main responsibility, as the EU’s unofficial leader,
is to keep the 27 together, and that means working closely with the French to do
so. For Merkel,
the interests of the EU come first. She believes that maintaining the
institutional integrity of the EU, and the link between the four freedoms, is in
Europe’s and therefore Germany’s interest.
One reason that British politicians are
over-optimistic about the kind of deal they can achieve is their misreading of
continental debates on migration. They tend to assume that because the British
dislike EU migration, other Europeans must think similarly. Therefore, they
argue, the 27 will soon come round to Britain’s viewpoint and want to limit free
movement.
However, in most EU countries the big issue is
inflows of people from outside, not inside the EU. In Germany, for example,
mainstream politicians do not see intra-EU migration as a big problem. So the 27
are not going to allow the British to combine single-market membership with
controls on EU migration.
Because article 50 puts the British government in a
weak position, it cannot hope for a half-decent deal without a lot of goodwill
from EU partners. If British ministers thump the table and issue threats, they
will lose goodwill. The
anti-immigrant tone of the Conservative party conference will have done
nothing to enhance the UK’s reputation.
https://www.theguardian.com/commentisfree/2016/oct/07/europe-hard-brexit-hurt-british-trade-deal