John Bruton

Opinions & Ideas

Category: European Union (Page 1 of 2)

TIME LIMITS RISK A BREXIT CRASH

RIGID TIMELINES COULD LEAD TO A BREXIT DISASTER…..SCOPE AND TIME FOR CREATIVE THINKING NEEDED

In his book “Fateful Choices”, which describes how country after country tumbled into what became the Second World War, the British historian, Ian Kershaw wrote

“The fateful choices that were made were not predetermined or axiomatic. But they did reflect the sort of political system that produced them.”.

A Global War was not anyone’s preferred option, but a combination of ideology, a fear of being encircled or pre empted, and miscalculation of the intentions or reactions of others, gave the world the most destructive war in human history.

Similar blind forces are in play in the Brexit negotiation.

The current UK political system, and the anxieties and obsessions it has generated, determine the UK position on Brexit.

This expresses itself in an artificially inflexible, and brittle, interpretation of the meaning of the 2016 Referendum result.  

The UK Government has so far been unable to convert that into a detailed, legally viable, and constructive, outline of its desired future relationship with the EU.

If it got into detail, the disagreement between Cabinet members is so deep that the Conservative Party would split and the Government would fall. The Labour opposition has a similar problem.

It suits both of them that the EU side in the negotiation is insisting that substantial progress must be made on other issues, before negotiations about the future relations between the EU and the UK begin, because if the UK Government had to set out a detailed position on the future relationship, it is liable to split. UK party and public opinion has been polarised and is unready for compromise. The Conservative Party is consumed with its leadership struggle and cannot be relied upon to make a deal that will stick. The Foreign Secretary’s four ”red lines” make compromise impossible.

Likewise the EU political system determines the EU’s approach. There is quite understandable annoyance that the UK, for whom so many special deals were made in the past, now wants to leave the Union it freely joined over 40 years ago. The EU negotiating position is necessarily inflexible because it has to be determined by 27 countries. It can only be changed by consensus among them, and that can only be arrived at very slowly.

Yet the time limit set in Article 50 of the EU Treaty is very short. It will require immense speed of negotiation, on a vast range of difficult questions, not only between the EU and the UK, but also potentially with the World Trade Organisation and perhaps with EFTA, which the UK would have to join if it wants to be in the European Economic Area, like Norway. All this will have to be done between January and November of 2018.

Both sides in this negotiation should ask themselves this question……Are they at risk of finding themselves on rigid tramlines, heading straight for a cliff, and if so, should some rail sidings be put in place, into which the two trains might pull, for a moment of reflection, before they go over the edge in March 2019?

A  former Judge in the European Court of Justice, Franklin Dehousse recently  argued that separating  trade issues from those concerning the  Irish border  artificially disconnected connected topics, and thus  limited the possibility of constructive tradeoffs.  

But he also insisted that the UK must first come up with “precise proposals on all withdrawal matters”.  

He is right. There is no point in the UK asking for the EU to move on to trade matters,  unless and until the UK itself is capable of spelling  out in substantial detail  what it wants, and says exactly what  trade, environmental, and consumer safety policies it will follow post Brexit. It is because the UK is unable even to say what it wants, in the long term, on these issues, that there has been no progress on discussing Irish border issues.

Meanwhile  the UK Trade Policy Observatory (UKTPO), in an article by Professors Alan Winters, Peter Holmes and Erika Szyscak, has suggested that Theresa May’s idea of a “transition” or “implementation” period of two years, after the UK had left the EU, might be very difficult to implement. If so, the UK will crash out of the EU in March 2019.

They saw several problems with Theresa May’s transition idea. They are not trivial issues..

One was that, when the UK leaves the EU in March 2019, it will also be automatically out of the EU Customs Union too. Therefore they claimed it would have to negotiate a new temporary Customs Union with the EU, for the transition period. It would have to notify the WTO of this new temporary Customs Union, which could potentially lead to protracted negotiations with WTO partners.

The UK and EU would also have to agree on how all EU Regulations and Directives would apply in the UK during the transition period, with complete certainty on how mutual recognition of testing and certification,  and the free mobility of labour, would work.

According to the UKTPO authors, the status of such an agreement under EU law would not be certain, but because it would cover issues on which EU member states retain competence. This might mean that the transition agreement itself might require ratification by all EU member states too. That would take time, and meanwhile the UK and its EU trade partners would be in limbo. The UK might be already out of the EU,  while its transition deal had not yet been ratified and was inoperable.

Given the delays ratifying the EU/Canada deal, which got bogged down in the politics of the French speaking part of Belgium, this is a daunting prospect.

Imagine going through all that for deal that might only last two years, and then going through the same process ALL OVER AGAIN for the final deal!  

So negotiating and ratifying a transition deal could be almost as difficult as negotiating the final permanent deal!

The UK needs to engage itself seriously with the complexities of Brexit.  If it looks at all these complexities thoroughly, sense is that it may then conclude that, despite Boris Johnson’s anxiety to leave quickly, the time limits are far too severe and that more time is needed.

If the UK was wise, it would ask its EU partners to extend the negotiation time from two years, to (say) six years.  That extension of the negotiating period could be done by unanimous agreement among the 27 EU states and Britain.

With a longer negotiation period, the UK would need no transition deal and would remain a member of the EU, until the final exit deal was done. There would be only one deal to negotiate and ratify, the final deal.

There are really no good options here.

.It would be politically difficult for any UK government to ask for an extension of the negotiation time. “Leave” supporters would suspect betrayal.  There would be very deep reluctance on the EU side to grant such a request.. Some EU states would feel that extending the period was being far too easy on the UK, and that the UK needed a reality check.  Others would argue prolongation of the exit negotiation might destabilise other EU members, and distract the EU from other urgent work.

These are valid objections, but they are arguably less damaging than the real likelihood that the UK will crash out of the EU without any deal.

Lengthening the period to six years would, however, allow the UK electorate to consider, in a more informed way, the full implications of the course they are following.

The present tight time frame minimises the opportunity for creative thought.

Instead, it maximises the influence of blind bureaucratic and political forces.

It increases the likelihood of miscalculation, and of the UK leaving the EU with no deal at all. That would be very bad for Ireland, or for the EU as a whole.

 I hope more negotiating time can be agreed.  If not, the tempo of the negotiation must be immediately and dramatically increased.

Unfortunately, there is little sign that the current UK government, the originator of Brexit, sees this.

U.K. Needs to Decide EU Relationship

THE STATE OF THE EUROPEAN UNION

President Juncker made a good speech to the European Parliament last week.

He stressed what he called European values.

He singled out three….the Rule of Law, Equality, and the Freedom to Voice your opinion as a citizen or a journalist.

The stress on the rule of law is important in light of what is happening in Poland. The EU is facing a long and difficult confrontation with Poland and the Polish government will whip up nationalist sentiment. But the EU must not back down.

In this context, he also stressed how important it is that the rulings of the ECJ are accepted as final, and implemented, by all member states. Without this, the EU would wither away. This being called in to question in Poland and Hungary in respect of accepting refugees.

On Equality, he stressed that there should be equal pay for equal work in the same countries. This is a concern of the French President.

I am glad that freedom of speech was stressed.

Freedom of speech is important if we are not to see democracy turned into the tyranny of the majority.

Prevailing opinions must be open to challenge, and sometimes that may give offence or be misconstrued.

Those who are offended have the right of reply, and if someone is libelled they can go to court. Apologies for mistakes in the use of free speech should, in general, be accepted.

Journalists should not be forced out of their jobs, to serve the commercial interests of advertisers, who have come under pressure from social media. That is happening in Ireland at the moment can be just as much a threat to free speech today, as state censorship was in the past.

I am glad that President Juncker mentioned a European Deposit insurance scheme to help make banks safe, but there should also be a limit placed on banks buying too many bonds of their own government, which can lead to dangerous concentration of risks.

He stressed the strengthening of Europe’s defences against cyber attacks. Apparently, 4000 ransomware attacks are made every day in the EU.

He also stressed the need for better defence against state inspired and organised cyber attacks, of the kind suffered by Ukraine and Estonia. Ireland should play its part, through the EU and the NATO Partnership for peace, of which it is a member, in working to strengthen Europe’s cyber defences. In the cyber world, the fact that Ireland is an island is no defence, and will be even less so when the UK leaves the EU.

I agree with his support for having some MEPs elected on a EU wide list. That would be a small step , through the debate it would engender, towards creating a Europe wide informed public opinion

As I pointed out in a recent speech in Cahirciveen, there are huge differences between EU states voters in their views on what the EU should prioritise, and little understanding of other countries needs and fears. An election campaign in which every voter would choose between different European parties, on the basis of their programmes, would help build a sense of ownership of the EU by all the voters of Europe, and a better understanding of what the EU is, and is not, capable of doing.

But I am not keen on his idea of merging the roles of President of the European Council, and that of President of the Commission.

The Commission is the guardian of the Treaties, whose provisions it must uphold without fear or political bias.

The Council is a political body, which, with the Parliament, must make political judgements on Commission proposals. That separation should not be changed.

Some division of powers is appropriate to a confederal Union, like the EU. The EU is not a state and is not going to become one. The fact that the UK can leave it proves that the EU is a voluntary union, unlike the USA.

I was surprised to hear him propose to move policy making on tax matters to majority voting. This would mean that big countries could set the tax policies of small countries, which is not acceptable. It would alter the balance of the EU fundamentally.

On the face of it, this would seem to require an amendment of the EU Treaties.

President Juncker seemed to suggest that majority voting on tax policy could be achieved by using a “passarelle” provision in the Lisbon Treaty, which allows some issues, currently decided by unanimity, to be moved to majority voting, by the unanimous agreement of all EU Heads of Government(without actually amending the Treaties).

I am satisfied that this unanimous agreement will not be forthcoming and that the proposal to move tax policy to QMV will not go far. In light of the 1986 Crotty judgement on the constitutionality of the  Single European Act, it is likely that demands would be made for a referendum in Ireland on a move to majority voting on tax policy.

The European Council gave the following assurance about the interpretation of the effect of the Lisbon Treaty to the Irish people in June 2009;

“TAXATION

Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or operation of the competence of the European Union in relation to taxation.  “

The Commission would be prudent to take special note of this in pursuing this aspect of President Juncker’s agenda

 

 

 

 

 

New Fault lines in Europe…..the political consequences of Brexit

If one reviews European history over the period since the Reformation five hundred years ago, the role that England has sought to play in Europe has been that of holding the balance between contending powers. It used its naval strength, and the overseas colonies  its naval strength allowed it to hold, to exercise that balancing European role.

At no time in the last 500 years, did the UK seem to disengage from, or turn its back upon, continental Europe. Indeed England felt it so much a part of continental Europe that Henry V111 actually contemplated  being a candidate for Holy Roman Emperor.

Rather England sought to be sufficiently involved in Europe to exercise its balancing role effectively, but without being so intimately enmeshed in continental issues, that it lost its freedom of action. England’s extension of its power to Ireland and Scotland were contributions to its goal of defence against, and influence over, continental Europe.

That same motivation lay behind the decisions the UK took to go to war in August 1914 and September 1939… that of maintaining a balance in Europe

The position that the UK held in the EU on 22 June 2016, the day before the Referendum, could be said to have been a perfect expression of that traditional English approach. The UK was having its European cake, and eating it at the same time.

The UK was a full voting member of the EU, but was exempted from aspects of EU policies that it might have found too entangling, like the euro, the Schengen passport free zone, Justice and Home Affairs cooperation and the Social Chapter of the EU Treaties.

But as a full voting member, the UK could still influence the direction of the EU, and, if necessary, slow down developments it did not like,  such as a major role for the EU in defence, where the UK preferred the job to done by NATO.

The UK’s budget contribution had been modified through a rebate, and agricultural policy had been modified in a direction sought by the UK.

The UK, it could be said, had the best of both worlds the day before the Referendum.

It was sufficiently IN, to exercise influence on the EU, but sufficiently OUT of it, to maintain the sort of freedom of action that befitted its historic role.

WHY IRELAND SEES THE EU DIFFERENTLY

Ireland’s position is very different from that of the UK.

It has different, but not incompatible, priorities. They explain why Ireland is determined to remain in a strengthened European Union.

Like most of the smaller and medium sized powers in Europe, Ireland does not have the military or economic strength to exercise the sort of freedom of action that a bigger power, like the UK, France or Germany, could exercise. Whereas bigger countries might find European rules to be, at times, a slightly inconvenient restraint, a smaller country finds these common rules a source of protection, security, and freedom.

For a smaller country, the common rules guarantee it against unfair competition by an overweening bigger neighbour. They make the markets in which it competes predictable, open, and free of arbitrary behaviour. The common rules that the EU makes, and enforces, enable a  country like Ireland to compete on equal terms for international investment, something that would not be the case if bigger countries were unconstrained by  a rule based system.

Even in fields in which it might not be directly involved, like defence, a smaller country, like Ireland, benefits from the fact that bigger countries cooperate, through common organisations, like NATO and the EU, to preserve and defend a peaceful, and secure, space in its vicinity. Without peace in Western Europe in the preceding fifty years, there would have been no Celtic Tiger in the 1990s!

Now that the people of the UK have decided, in a Referendum, to quit the European Union, much is changed.

THE UK IS GOING BEYOND THE REFERENDUM MANDATE

The UK government has decided to go further than the requirements of the referendum decision of 23 June 2016, and to leave the Customs Union, and the European Economic Area as well, and to reject any jurisdiction of the European Court of Justice, adds to the difficulties.

It changes the context in which common threats must be faced, by both the UK and Ireland. Brexit may be an exclusively British initiative, for which Britain is wholly responsible, but its effects will be felt by others.

This is most topically illustrated by the question of information sharing on terrorism between the 28 EU states, including the UK.

This sharing is done under the Schengen Information System, which the UK can access as an EU member, and where disputes about what can be shared can adjudicated objectively  under the aegis of the European Court of Justice.

As a non EU member , the UK will  have to negotiate a special deal  to get access to this information. Access may not be automatic, particularly if the UK continues to reject ECJ jurisdiction on disputes about  what may, and may not, be shared, and how.

Now that the UK General Election has failed to endorse the Prime Ministers vision of a hard Brexit, the parties who will be forming or supporting a new government here have the opportunity to reopen some of the question like the Customs Union and acceptance of ECJ jurisdiction in certain areas. I hope that these are thoroughly looked at again, in an open minded way in the inter party negotiations and the options properly debated. That debate did not take place in the General Election campaign at all.

THE EU ALLOWS THE MAKING OF COMMON RULES….IT  ALSO ALLOWS THEM TO BE AMENDED, INTERPRETED AND ENFORCED, IN A CONSISTENT AND EFFICIENT WAY

The example of EU cooperation against terrorism illustrates the fact that EU has provided the UK, and its fellow EU member states,  with a common system for

  • making,
  • amending,
  • enforcing and
  • interpreting

common rules on matters as diverse as food safety, aviation, intellectual property protection, and consumer protection in the purchase of financial products.

The fact that the rules are now common to all, means that food can be sold, airline competition facilitated, patents respected and savings protected across the whole 28 countries of the EU.

The fact that the rules can be amended in a single legislative process for all members saves a lot of time.

So does the fact that they will, if necessary, be enforced effectively and uniformly across Europe, under the supervision of the European Commission.

The fact that these common rules will be interpreted, in a uniform way across the whole of Europe, under the aegis of the ECJ, also avoids all sorts of confusion, haggling and duplication.

Without the EU, none of this would be the case.

It is really important for a business that seeks to sell goods across Europe to know that the  standards the goods must comply with will be the same everywhere and that these rules will be enforced and interpreted in a consistent  way in every EU country.

Outside the EU, to open EU markets to its exports, the UK will now have  to negotiate a new deal on each topic, then agree a separate procedure for  future amendments to  that deal, and agree procedures  for enforcing and interpreting the deal.

This is what the Swiss, with their 120 different Treaties with EU, enjoy. A lot of work!

It is possible to envisage, with a huge one off effort of political will on both sides, the completion and ratification of an initial Trade and Services agreement between the UK and the EU sometime in the next five years.

An equally daunting task will come afterwards, when one has to update, interpret, and ensure adequate enforcement of, the initial agreement. The opportunities for gamesmanship by commercial and political interests, for opportunistic blocking minorities, and for sheer bloody mindedness are easy to imagine.

Everything will be up for grabs each time. Bureaucracies will have never ending occasions to justify their separate existence.

But that is the path the UK has chosen.

BREXIT NEGOTIATIONS WILL DIVERT TIME AND TALENT FROM MORE IMPORTANT MATTERS

It will, I regret to say, involve the diversion of top level official talent, in 28 capital cities, away from anticipating the challenges of future, and instead towards reopening agreements made over the past 44 years.

Our most talented civil servants will be taken up with digging up the past, rather building the future. It is a tragedy.

The Brexit process will not be like a member leaving a club of which he or she no longer wishes to be a member, which is an easy enough process, once the bar bill has been settled.

It will be much more like a divorce between a couple, who have lived together for years, have several small dependent children, a mortgage, and a small business they had been running together. Not only have past bills to be settled, but future liabilities have to be anticipated, decisions made about the running of the business, and rights and responsibilities in respect of the children, agreed.

It would be naive to think that the divorce between the UK, and the other EU countries, including Ireland, will not leave scars. I hope that is all they will be, scars, that will gradually become less visible.

The financial terms of Brexit will be important, as they are in any divorce. They will encompass the future as well as the past. One should remember that Switzerland and Norway contribute to funds to help poorer EU countries to whose markets they have access through arrangements with the EU. It is unlikely to be different for the UK, but if we are to have a constructive negotiation on financial contributions, we also need to have a constructive discussion of the terms of UK access to the EU market.

As the initiator of Brexit, the UK has the primary responsibility to make it work for both sides.

Negotiators on both sides should remember the wise words of an Assistant US Secretary of State in 1945;

“Nations which are enemies in the marketplace, cannot long remain friends at the council table”.

Bitterness in trade negotiation can poison other forms of cooperation. The initiators of Brexit in this country may not have given much thought to that, but those who will negotiate it now,  have a duty to think about it.

IRELAND’S IMPORTANT ROLE

Everyone must work to ensure that no open wounds remain at the end of the negotiation. I am sure that, as a full, loyal and active member of the EU, Ireland will work tirelessly to minimize misunderstandings, to interpret UK concerns for our EU colleagues, and vice versa. As the only English speaking member of the EU, I expect Ireland will at times also have a role in interpreting the United States for our European Union colleagues .

The best way of avoiding leaving open wounds when the negotiation is finished, is through timely anticipation of the things that could go wrong.

I hope that some of the things I say this evening will help in that regard.

FISHERIES

Starting closest to home, we will have to reach agreements on the highly emotional and symbolic issue of fisheries. Fish do not respect territorial waters. While fishing boats can, in theory, be restricted to territorial waters, fish cannot. Overfishing in one jurisdiction affects the livelihood of fishermen in another. Conservation is vital. Who will adjudicate on this, ten years from now? Will there be quotas? Who will allocate them? In the absence of agreement, one can easily envisage clashes, even physical clashes, in seas around us.

NORTHERN IRELAND

Also close to home, there is the issue of Northern Ireland. Originally, when the UK and Ireland joined the EU in 1973, Northern Ireland was the subject of a de jure, if not de facto, territorial dispute between the two countries. As a result of the improved relationship between the two countries that flowed from their common membership of The EU, and as a result of a great deal of creative thought and mutual concession, that issue has been resolved.

Now Brexit has intervened.

The two big parties in Northern Ireland have taken opposite sides on Brexit.

They have revived the issue of territorial sovereignty.

Both these parties seems to be more comfortable agitating about their irreconcilable demands on territorial sovereignty, than engaging in  the day to day drudgery of Ministerial responsibility in a power sharing Administration,  in a time of limited budgets. It is time for Ministers in Stormont to go back to work.

In the past, Prime Ministers and retired statespersons could fly in to Belfast,  to provide cover for a new compromise between the parties that allowed them to get back to work.

As Brexit will absorb so much of everyone’s time in coming years, the scope for this sort of high profile counselling will be less.  Reality therapy may be needed.

The scale of border controls in Ireland, and at ports on either side of the Irish Sea, and of the English Channel, will depend on the eventual trade deal between  the UK and EU, if there is one, and on how it is interpreted over time.

The checking of compliance with rules of the origin, labelling and safety of goods will cause delays.

Even if there is a special arrangement for Northern Ireland, these matters will have to be checked somewhere, at some border, or in some port, somewhere. Such checks are a  necessary requirement for the free circulation of the goods in question in EU Single Market. I have no doubt that this is well understood here in Britain, given that Britain, under the leadership of the late Lady Thatcher, did so much to create the EU Single Market. Now that the UK is leaving, I can assure you that Ireland will be doing everything it can to preserve and enhance that remarkable achievement …the Single Market

The genius of the combination, of common EU membership of the UK and Ireland, with the Good Friday Agreement, reduced the sense of separation between both parts of Ireland, and between each part of Ireland and the island of Britain.

That made the two communities in Northern Ireland more willing to live with constitutional and institutional arrangements, that they might otherwise have regarded as less than ideal. That benign combination, of the Good Friday Agreement and joint membership of the EU, will now be brought to an end.

WHY HAVING A COMMON COURT, AND CONSISTENT INTERPRETATION, CAN HELP

As I mentioned already, Brexit has the potential to complicate cooperation between 28 or more European countries in the struggle against terrorism. Cooperation is much easier between countries adhere to common standards, uniformly interpreted under the aegis of a common European Courts system. Information can more easily be shared, new terror threats identified, and common responses agreed, in a common European system than would be possible if all we have between the UK and the EU are a series of ad hoc bilateral agreements.

Without commonly agreed protections, cooperation will become more difficult, because one will no longer have the same assurance about how the receiving country will treat the people, or the information, that one gives over.

THE DEFENCE OF EUROPE

As far as military security is concerned, the problem is less acute, because the UK will remain a member of NATO.

But, as with police cooperation,  things will not stand still.

It is likely that greater use will be made of Article 42 of the EU Treaty which allows for a common security and defence policy, with operational capacity, to be developed. The UK  used to be able to slow down use of these EU powers, and did so because it wanted any action to be under the aegis of NATO. After Brexit that will no longer be the case.

Mutual solidarity will be reduced. Outside the EU, the UK will no longer be able to benefit from the legal obligation, imposed on all EU states, by Article 222 of the EU Treaty, of help where an EU state is

 “ the object of a terrorist attack or the victim of a natural or manmade disaster”.

Outside the EU, the UK will not be taking part in meetings of the European Council which , under Article 222 must  “regularly assess threats”, whether  from within and outside the EU.

It is impossible to predict the difference the absence of the UK will make, but I am sure that regular meetings with EU colleagues, even when there is no urgent threat to be tackled, greatly facilitate speedy action when a threat does arise. UK Ministers will have less informal, casual, or routine contact with their European counterparts. Meetings will have to be set up specially.

From an Irish point of view, a lack of ongoing contact between the UK and EU could have negative consequences. A threat to the UK interests is very often a threat to Irish interests too. For example, Ireland has the same electricity grid as the UK, and our air space and territorial waters are contiguous, as is our territory on land. A threat to one of us is potentially a threat to both.

Other fora for joint work between the UK and EU states will need to used more fully.

PROTECTING KEY SHARED  INFRASTRUCTURE FROM ATTACK

Under Article 3 of the NATO Treaty, NATO members are working on “Resilience”, namely the protection of the critical infrastructure of member states. This would include the electricity grid, the commercial and health communications network, and air traffic control.  It will also involve anticipating future threats, based on the acceptance that greater interdependence across borders makes modern societies more vulnerable.

Ireland is not a member of NATO.

Now that the UK is leaving the EU , Ireland , as a member of  the NATO Partnership for Peace, may, however , have an interest in cooperating with all its European neighbours, including the UK, in this work on  the Resilience of shared networks. This would be for the protection of our own Irish people.

Ireland will also find that it is in its own interest to ensure that the EU, using Article 222 of the EU Treaty, actively helps member states that encounter threats.

Given the increasingly self oriented attitude of the present US Administration, it will be in nobody’s interest to allow Defence policy become a fault line between post Brexit Britain, and the European Union.

Working together on these matters is not a bargaining chip for negotiation, it is in the  existential interest for both parties.

So too, and for similar reasons, is the continued close cooperation between the EU and the UK on climate change.

BREXIT NEGOTIATORS NEED TO REMEMBER HOW MUCH WE HAVE IN COMMON

So when the Brexit  negotiations become fraught, as they undoubtedly will, UK and EU negotiators need to remind themselves that we have more in common than divides us, and that we each live, close beside one another, in a continent whose global weight is much less than it was 100 years ago.

In 1900, we, Europeans, made up 25% of the world population, now we are barely 7% .

At the other end of the Eurasian land mass, China will double the size of its economy in the present decade. It adds to its GDP by an equivalent of the entire GDP of Turkey….every year.

China has ambitious plans for its global role, and China has the executive coherence necessary to realize those goals.  It is thinking in ambitious geographic terms .It is promoting global connectivity through its “One Belt, One Road” concept.

The UK’s access to that Road, across the Eurasian land mass, runs entirely through the EU.

T he access of Ireland to that Road runs mainly through the UK!

I will now turn to the internal dynamics of the EU itself, as I expect they will evolve in coming years.

NEXT STEPS FOR THE EU, NOW THAT THE UK IS LEAVING

The European Commission has produced a White Paper which sets out five, rather stylised ,  scenarios.

These scenarios are

  • Continuing on as we are
  • Doing nothing but maintaining the Single Market
  • Allowing countries that want to go ahead with more intense integration, to do so within the EU legal order, and with the possibility for others to join later
  • Doing less more efficiently
  • Doing much more together.

Given that it is difficult for 27 countries to agree on new tasks (It was much easier when there were only 9 or even 15 members), I think the first option, continuing on as we are, will be the easiest to follow. This is especially the case if the EU remains unwilling to amend its Treaties

The last option, doing much more together, does not have public support at the moment, but that could change suddenly, if some external shock made it easier to overcome the normal resistance and inertia. Among the activities envisaged, under the doing much more together option, are a single European anti Terror agency and a single coast guard. These are not farfetched ideas, and indeed may be inevitable if passport free travel across member state boundaries is to continue.

The option of doing nothing, but maintain the Single Market. is not very helpful in my view.  In truth, it is almost impossible to agree where the Single Market ends, and other policies begin. The Commission argued  that this ”Single Market Only” option would make it more difficult to conclude more or deeper international trade agreements, because differences in standards would persist within the EU.

The option of “doing less more efficiently” is not very different. It would involve pursuing Single Market integration vigorously, but going slow on regional policy, and on social and public health policies that do not relate directly to the Single market. This option may appeal to net contributor countries, like Germany and perhaps Ireland, but would not appeal in Central and Eastern Europe. It may appeal to outsiders like the UK, Norway and Switzerland as it might reduce the fee they would pay for access to the Single market. But it would be strenuously resisted by many poorer EU states.

The idea of allowing some countries to “go ahead without the others” is one that has been around for a long time, and is actually provided for in Title IV of the EU Treaty governing what is known as “Enhanced Cooperation”.

While this provision has not been much used, it could be said that the euro, and the Schengen  border control free zone, are already  forms of enhanced cooperation.

I do  not see Enhanced Cooperation  as an ideal way forward for the future, because it dilutes the democratic unity of the EU, and this is already put under enough strain by the division between Euro and “not yet Euro” members. The Commission saw this scenario as allowing some countries to go further ahead on defence cooperation while other members might hang back.

MORE COMMITTMENT WILL BRING MORE INFLUENCE

It has, however, to be recognised that influence of a member state in the EU will be commensurate with its commitment and solidarity to and with other EU members.

A country that only wants to take part in policies from which it will gain, while going slow on things that might involve costs for it, will have less influence in the EU, and might not receive solidarity when it needs it, but it is hard to quantify this.

Putting it another way, an EU which encourages some countries to go ahead while others hang back could quickly divide between” policy maker” countries,  and “policy taker” countries. This is why Ireland has traditionally resisted a “two tier” Europe.

BUT WHAT DOES EU PUBLIC OPINION WANT?

Public opinion also needs to be taken into account, in working out the priorities of the new EU without the UK, and  public opinion on what should be EU priorities varies widely between countries.

When citizens in the 28 member states were asked in April 2016, just before the UK Referendum, what they wanted the EU to prioritise, they came up with quite different answers in different countries.

When it came to fighting against Terrorism, 80% of Greeks wanted the EU to do more, and 69% of Italians did,  as against only  33% of the Dutch and  44% of Danes. At that time, 66% of UK citizens wanted the EU to do more against terrorism, but then decided to leave anyway.

After France, 55% of UK citizens in April 2016 perceived their country as being under  a high threat of a terrorist attack, as against  only 11% of Irish people, 9% of Latvians and 8% of Estonians.

This was not the only contrast.

69% of Swedes and Spaniards wanted the EU to do more about the Environment, but only 28% of Estonians did .

Understandably, at the height of the Syrian asylum seeker crisis, EU action on Protecting External Borders was a priority for 73% of Greeks, but  only 43% of Irish people and  35% of Swedes and Latvians wanted the EU to prioritise that.

The dividing lines on whether the EU should do more on Security and Defence were quite revealing.

Overall and on average, 44% of EU citizens  felt the EU should be doing more about Security and Defence.

But, to my surprise given their proximity to Russia, only 30% of Latvians and Estonians, and 25% of Danes, did so.

In contrast, 60% of Greeks and 56% of Italians felt the EU should do more on Security and Defence. 56% of French citizens felt the EU should do more, but only 41% of Germans, which suggests that , a year ago anyway, there was not an overwhelming public demand for an EU defence policy.

But that was before the election of Donald Trump, and his disturbing omissions on European Security during his recent visit to Europe.

ENERGY SECURITY

Finally, given the low oil prices at the time, it is perhaps not surprising that so few European felt the EU should be doing more on Energy supply issues.  Yet a Single Energy market was identified as a priority issue by the European Commission even in their “Continuing as we are” scenario I mentioned earlier.

In 2016, only 36% of EU citizens felt the EU was not doing enough on the issue of Energy supply. The greatest support for more EU action on Energy supply was  in Greece  and Spain ( both 54%). But in the Czech Republic, only 18% felt the EU should do more on Energy Supply questions.

Given that Ireland is so completely dependent on, what will soon become a non EU country, for access to the international  electricity grid, it interesting to note that support for a common EU policy on Energy Supply was below the EU average in Ireland, at a mere 33%.

I expect that that will change and that Ireland will seek assurances on continuity of supply in any Brexit Agreement, and will want the support of its 26 EU partners in that.

THE OUTCOME OF THE UK GENERAL ELECTION

The recent UK General Election result did not endorse Mrs May’s very specific plans for a hard Brexit. The loss of support for the outgoing government in London, and in university towns, underlines this.

It now looks as if the next government will be a coalition of some kind between the Conservative Party and the Democratic Unionist Party (DUP).

Agriculture will be the subject to watch in any DUP/Conservative deal.

How will the incomes of farmers in Northern Ireland be protected and how will freedom of access for Northern Irish food products to the EU market south of the border be preserved?

Given the commercial interest many Democratic Unionist supporters have in trade across the border in Ireland, the Conservative Party may have to drop its insistence on leaving the EU Customs Union, to avoid the necessity of extensive and time consuming checking of goods crossing the border.

As a Unionist Party, the DUP will favour UK wide solutions rather than a special deal for Northern Ireland alone, and this may help ease the impact of Brexit on East/West trade between Ireland and Britain as well. That would be welcome.

If it were to decide to stay in the Customs Union,  the UK could of course, not do trade deals of its own.

But I believe there was little evidence  the  deals UK could do, outside the Customs Union,  would compensate it for the  deals it would lose by leaving it,

  • 295 trade deals, and
  • 202 deals on regulatory cooperation.

I hope the people of the UK will now have the sort of honest detailed, sector by sector, debate on what Brexit might mean, a debate that they so markedly failed to have during the General Election campaign.

John Bruton, former Taoiseach, delivering the Grattan lecture in the Irish Embassy in London on Monday 12 June 2017

 

NATIONALISM AND PERIPHERALITY…..TWO PROSPECTIVE LEGACIES OF BREXIT

bonnetThis long article by Andrew Duff, a former MEP, draws on the recent House of Lords reports on the subject, to illustrate how complicated the Brexit negotiations must inevitably become. 

After 40 years of interdependence and common rule making, the UK is now setting out to reconstruct the entire apparatus of a separate nation state, with separate rules, and separate rule making and  adjudication systems. This is how Theresa May has chosen to interpret the referendum result, by ruling out any jurisdiction of the ECJ.

A nation state apparatus, that would have sufficed in the 1960’s, will not suffice for the 2020’s, because the world is much more interdependent, more interconnected, and faster moving, now than it was then.

The exercise the UK is undertaking will involve establishing a new bureaucracy, to deal separately with all the regulatory questions that previously were delegated by it for collective decision within the EU. The EU superstructure will have to be replicated in London, at some cost.

The UK may want to develop separate standards for many goods and services, but, if it does so,  UK firms will have the extra cost of complying, not only with the new UK standards, but with EU standards as well for any goods and services they wish to export to the rest of Europe.

There will thus be duplication at firm level, as well as at government level.

The only way to minimise this would be to go for a “soft Brexit”, whereby the UK would adopt EU rules, but without having a vote on those rules.

Such an option may be sustainable business wise, but it will not be sustainable politically in the medium term.

It would represent a substantial diminution of UK “sovereignty” relative to the “sovereignty” the UK now has as a full EU member. This would soon become politically unacceptable to the British people.

One can easily imagine the anger of the “Daily Mail” about the UK having to enact, and enforce, EU standards, on which the UK had had no vote!  But that is what a soft Brexit would entail.

For these reasons, a “soft Brexit” will only be a temporary arrangement, and one should  not invest all ones hopes in it.

I am coming to the view, reluctantly, that the only viable long term options are either

  • a “hard Brexit” or
  • a decision by the voters of the UK to stay in the EU after all.

The latter seems very unlikely indeed at the moment, because UK voters will not want to admit they made a mistake. They have no sentimental attachment to Europe anyway and sentiment seems to trump economics in voter’s minds nowadays.

But that could change gradually.

British people are, many for the first time, now learning about what the EU really is.

At the best of times, British people were never very curious about the EU or how it worked. Now they are required to find out, as part of the exit negotiation. It will be something of a revelation!

For 40 years, UK voters have been passengers in the EU car. Now, having decided to get out of the car, they are taking a first look under the bonnet.

They will discover how interconnected the different parts of the engine are, and how difficult it would be to link into some, but not into all, parts of the engine.

The UK will have to build its own engine from scratch now, and decide in which direction it wants the new car to travel. There was no consensus at all on the latter point on the “Leave” side in the referendum. Some want a more globalised Britain, the majority wants the exact opposite.

Ireland will be a spectator in this process.

The physical isolation of Ireland from the rest of the EU, in the event of a hard Brexit, is a problem that will need much thought at EU level, in the interests of European solidarity.

Experts in logistics, transport and communications need to be brought together at EU level, to examine how the costs of this physical isolation of Ireland can be minimised.

Commisioner Verstager, who is responsible for EU competition policy, should look at what needs to be done to ensure that states that are physically isolated from the core of the EU, like Greece, Malta, Cyprus and Ireland,  can always participate on an equal basis in the internal market.

POLITICS AND DEBT……ITALY NEEDS BRAVE LEADERSHIP

Italy and EU Puzzle Pieces - Italian and European Flag

Italy and EU Puzzle Pieces – Italian and European Flag

Crunch decisions are approaching for Italy and its new Prime Minister Paolo Gentiloni.

The really difficult decisions are not about who gets which Ministry in the new government, or even about the timing of elections, but about how to cope with the problems of some of Italy’s banks.  

On Friday last the European Central Bank rejected a request from Rome to delay a proposed private sector  led rescue of Monte Paschi di Siena (MPS), Italy’s oldest and most troubled bank.

According to the Financial Times, this leaves Italy with little option but trigger a government led bailout of the bank which will involve imposing losses on junior bondholders in the bank, many of whom are small savers rather than anonymous financial institutions. “Burning the bondholders” thus does not have quite the same popular appeal in Italy as it had in Ireland a few years back!

But the burning of bondholders, in a bank that has to be rescued by the taxpayer, is now required by EU rules, and the EU is a rule based institution. The primacy of rules, rather than of raw power, are what distinguishes the EU from other international arrangements, and are among the reasons EU membership is particularly valued by smaller countries, like Ireland.

Avoiding a taxpayer led bailout of MPS, by forcing the other Italian banks, who are better off than MPS, but have troubles of their own, to bail out MPS could infect the  entire Italian banking system and weaken confidence in it.  And all banking, like all money itself, depends on confidence. As it is, Italian banks have only half the capital they need to meet  the required safety standards.

Of course it is true that if the Italian economy was growing more quickly, its banks would not be in such trouble. The Italian economy is expected to grow by only 1% this year, well below the EU average. In fact the Italian economy is the same size as it was in 2007, whereas other countries , which are also subject to the  disciplines of the euro zone, have grown substantially since 2007, France by 20% and Spain by 15%.

This contradicts those who want to blame the euro for all Italy’s problems.

For example, David McWilliams has mistakenly claimed  that “the strictures imposed by the euro have destroyed the Italian economy”. He said that Italy’s economy grew, before it joined the euro. But it was only able to do this because it repeatedly devalued its currency. This gave temporary relief but concealed the underlying problems. Devaluation was an anaesthetic, not a cure.

Once it joined the euro, this had to stop

When  Italy’s  leaders decided to join the euro, and  set the rate of exchange between the old lira and the  new euro, they  knew  that  devaluation was impossible thereafter. This was a freely taken Italian decision.

Unfortunately Italian voters do not see things that way and blame Europe for problems that are actually home grown. For example in a poll last September, only 38% of Italians felt their country had benefitted from being in the EU, whereas 51% felt it had not .

In truth, the problems of the Italian economy predate the decision to join the euro. Government debt levels were increased during the 1980’s and were already  well above the recommended 60% of GDP  when Italy joined the euro.

Italy was already an ageing economy at that stage, with early retirement and historically low birth rates. The ageing of a society inevitably saps its growth potential, as even the Chinese are now beginning to find.

There was the added difficulty, since 2000, that the Italian consumer and fashion goods sector competed directly with goods coming from Asia, and Italy could no longer devalue  to meet this  new competition.

Italy did not adapt to this new reality.

Productivity remains poor in Italy.  For example, since 2007, Spanish productivity per hour increased by 10%, whereas Italian productivity per hour actually DECLINED by 5%. Both Italy and Spain are in the euro, so the euro does not explain this difference in  productivity performance.

The public sector in Italy is expensive and inefficient. The hourly pay rate in the Italian public sector is 40% above that in the private sector, whereas in France and Germany, the hourly rate in the public sector is below that in the private sector.

Incidentally in Ireland, hourly pay in the public sector is 25% above that in the private sector.

In Italy, healthcare and pensions absorb 20% of GDP, as against 12% in Ireland.

There are also severe inefficiencies in Italy’s commercial sector caused by lack of adequate competition. The transport and energy sectors are particularly costly.

There is a lack of competition in the legal system. The Italian courts are the third slowest in the EU. For example it takes 500 days to get a case into court. This means that it is difficult and costly for Italian businesses to enforce contracts and collect debts owing to them. Court delays have also contributed to the increase in non performing loans(NPLs) in the Italian banking system. NPLs are now 18% of all loans, as against 6% in 2007.

A Competition Bill, which would have helped resolve some of these problems, was watered down in the bargaining between the Senate and the Lower House.

Renzi’s constitutional reforms, which would have reduced the power of the Senate, would have dealt with that problem. Unfortunately they were rejected by the voters.

The Gentiloni government, like that led by Renzi, has a  majority in the Lower House, but will  now face an increased risk of  any reforms it proposes, being bogged down in the  Senate, because the Senate  will feel empowered by the referendum result.

The electoral arithmetic may have changed, but the arithmetic of Italy’s debts has not.

Leaving the euro would actually increase the nominal value of those debts, because the debts would still be owed in euros, but the money to pay them would have to be raised in a new, and probably, less valuable Italian currency.

Resolving Italy’s problems will require statesmanship of a high order in Rome, Brussels, Frankfurt and Berlin. Ireland overcame a similar crisis since 2010, and the willingness here of all sectors of society here to meet the painful challenge quickly , and leave politics aside till later, may provide a model that Italy could follow.

THE MECHANICS OF BREXIT AND ITS EFFECT ON IRELAND

 

cropped-irish-flag.jpgI am deeply honoured to have been invited to speak here today in the company of your President, John Comer, and of the Minister for Agriculture , Michael Creed.

I worked with the Minster’s father, Donal Creed, when Donal was spokesman on Agriculture for Fine Gael, and I was the then secretary of the Party’s Agriculture Committee. That was 1969, long before we joined the Common Market.

I remember many meetings with ICMSA at that time, and was always impressed by the seriousness and realism of the way in which your organisation represents its members and agriculture more generally. The fact that your President, John Comer, comes from Co Mayo is evidence of the broad national reach of ICMSA.

I have been asked to talk about Brexit. Everything I say will be a personal opinion, not representing anyone else.

Everyone would like to know what form Brexit will take, and how it will affect Irish farmers, and the rest of the country too. Unfortunately, it is next to impossible even to begin to answer that question until we first see what the UK will actually look for. Only then can we begin to speculate in an informed way about how the negotiation might go.

In what I say today, I will try to describe the mechanics of the three negotiations that will probably take place

  • the negotiation of a Withdrawal Treaty.
  • the negotiation of Treaty covering the Future Framework of relations between the EU and the UK and, possibly
  • the negotiation of an Interim Agreement, to apply after the UK has left the EU, but before a full Future Framework Treaty has been finalised and ratified

TWO NEGOTIATIONS….ONE ABOUT WITHDRAWING, THE OTHER ABOUT THE FUTURE

Article 50 of the EU Treaty says

Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”

AGREEING GUIDELINES ON THE EU SIDE

It is important to note here that it will be the Commission that will do the actual negotiation with the UK, but it will do so under guidelines agreed by the Heads of Government of the 27 Member states meeting in the European Council. It will also have to bear in mind that the final deal will have to approved by the European Parliament  too.

Given that the European Council operates by unanimity, and that its members are heads of government and each of them have countries to run at home, agreeing these guidelines will take time and be difficult.

Any one country can object to any part of the guidelines.

There are wide differences between EU member states in their sensitivity to developments in the UK. It is to be expected that

  • some will emphasise a continuing right for their citizens to live and work in the UK,
  • others will emphasise trade with the UK, and yet
  • others will emphasise how the make gains for their businesses from the exclusion of UK competition(for example in financial services).

THE FUTURE FRAMEWORK FOR EU/UK RELATIONS

It is also important to note that Article 50 says that the proposed Withdrawal Treaty shall take account of the” framework” of the withdrawing states” future relationship” with the Union.

There is no guidance in the Treaty as to what this “framework” document might say.

In their Referendum, UK voters were asked if they wanted to leave the EU, but their views were not sought on the sort of framework for future relations they would approve.

Nothing appeared on the ballot paper about

  • access to the EU market for UK produced goods or services, about leaving the European Economic Area (which includes several non EU countries) or about what UK voters would want the agreement with EU to say about
  • the status of UK citizens already living in EU countries after the UK has left
  • the status of EU citizens already living in the UK or about
  • the future rights of EU or UK citizens to live and work in one another’s  jurisdictions or to avail of social services while there

DIFFERENT PROCEDURES FOR CONCLUDING THESE NEGOTIATIONS

Article 50 continues

“ That agreement  (for the withdrawal of a state) shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.”

So while the Council guidelines for the negotiation require unanimity, the actual approval of the final withdrawal Treaty can be done by qualified majority.

But there is a time limit because Article 50 goes on to say

“ The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period. “

This two year time limit applies to the Withdrawal Treaty, but there is no time limit for the negotiation the Framework for future relations.

If , within two years of the sending by the UK of its article 50 letter seeking to withdraw from the EU, a Withdrawal Treaty has not been agreed by the UK on one side, and a qualified majority  on the EU side, the UK is simply out of the EU, with no rights at all on the EU market beyond those enjoyed  by any state anywhere in the world.

This is a real doomsday scenario, but it is a realistic possibility, because the gaps in the negotiating positions between the UK and a potential blocking minority of EU states (26.3% of weighted votes representing at least 35% of the EU population) are very wide.

But, at least, the withdrawal Treaty can be approved on the EU side by a qualified majority (73.9% of the weighted votes  representing 65% of the EU population).

Agreeing the terms of the Framework agreement with the UK, of which the Withdrawal Treaty must “take account ” will be even more difficult, because this Future Framework Agreement will probably have to be unanimously agreed by ALL 27 EU states and their parliaments, unless it is a very narrow agreement covering only trade in goods.

If it is wider than this, it is likely to be deemed a so called “mixed agreement”, which is an agreement that includes matters where the competence is shared between the EU and the member states.

A ROCKY PATH TO RATIFICATION FOR A FUTURE UK/EU FRAMEWORK DEAL

In this case, every member state parliament, as well as every member state government, will have to approve the Framework agreement with the UK.

This is what happened with the recently concluded EU Agreement with Canada, which, as you will remember, was threatened with a veto by Belgium, because under internal Belgian constitutional arrangements, all five subsidiary parliaments in Belgium must agree to any international treaty signed by Belgium, and two of them did not agree.

A similar threat to an Agreement with the UK could come from a decision to call referendum  in a member state.

For example, the future of an EU Agreement with Ukraine has been put in doubt by its defeat in a referendum in the Netherlands, requisitioned by a petition of only 300,000 signatories out of a total population of 17 million, and on a turnout of slightly above the minimum required 30%.

It is easier nowadays to organise petitions online, so this could be another threat to a Framework Agreement with the UK, not just in the Netherlands, but in any other countries with similar petition/referendum provisions.

The UK could not really object to this happening because the UK itself, on 23 June, used a national referendum to make a decision affecting the whole of Europe in a profound way.

COULD THE UK CHANGE ITS MIND?

Could the UK change its mind, when it discovers that things are not turning out as its voters, and those politicians who favoured leaving the EU, hoped they would?

Article 50 says

“ If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

Article 49 requires the unanimous agreement of all existing member states, and of the European Parliament, to the readmission to the European Union of a member state, just as it would to a state applying to join for the first time.

In other words, the UK, seeking to rejoin the EU after having left, would be in exactly the same position as Serbia, Montenegro or Turkey is today.

A more interesting question is whether the UK, having written its Article 50 letter in March 2017, could decide, say in late 2018, just before the two year time limit  would expire in March 2019, that it wanted to withdraw the letter, and stay in the EU after all , on the existing terms?

This is not an easy question to answer.

Article 50 doesn’t say that notification once given can be withdrawn, but nor does it say that notification can’t be withdrawn.

The prevalent view is, perhaps, that notice can be withdrawn prior to actual withdrawal from the EU but the position is not clear. If revocation of an article 50 notice was not accepted by all other EU members, the Court of Justice of the European Union would have to decide the point.

This may all sound a little fanciful  at this point, but it is possible that, by late 2018, the UK might have a different view on EU membership to the one it had on 23 June 2016.

It would certainly have to organise another referendum, which could be difficult given the rigid two year deadline for complete exclusion, in the absence of an agreed Withdrawal Treaty.

But if the discussions on the Framework Agreement were going really badly, or if  the economic costs of separation were just proving greater than expected, and if prospects did not look like improving, a majority of MPs might decide to consult the voters on the possibility of taking back the Article 50 letter.

Already there is some sign that UK opinion has shifted slightly since the 23 June Referendum.

Asked in a Eurobarometer  poll last September, three months after the Referendum, whether they thought the  UK benefitted from being in the EU

  • 56%  in the UK said they thought the UK had benefitted, an increase of  5 percentage points on the previous poll and
  • only 34% said they thought it had not, a drop of 2 points on the previous poll

If that trend were to continue, things could look different in the late 2018 or early 2019.

But it would be very difficult politically to change course. National pride would be hurt.  Telling voters they made a mistake is rarely a winning political strategy……even though voters do sometimes make mistakes

CONTENT OF WITHDRAWAL TREATY

Let me now turn to what I think will be the content of the two negotiations

First ,the Withdrawal Treaty negotiation and

Second, the Framework of Future Relations negotiation

My understanding is that the Withdrawal negotiation itself is likely to cover quite a narrow, but very contentious, range of issues.

These will probably include five broad topics

  • What the UK will have to pay to leave,  what will be the UK share of any remaining financial commitments dating from its time as a member, covering matters such as pensions of EU officials , other obligations outstanding, less the UK ‘s share in EU assets
  • The mechanics and costs of moving EU institutions, like the Banking Authority and the Medicines Agency, out of the UK and into an EU country (perhaps Ireland)
  • The Rights of EU citizens already living in the UK, and UK citizens already living in an EU country. The rights of future migrants from the UK to the EU, and vice versa, will be for the Future Framework negotiation
  • The relationship of the UK with the WTO after it has left the EU

+ Special situations concerning the land boundary between the UK and the EU, as in Ireland and at Gibraltar. It is good that this being dealt with upfront, and not just buried in the wider Framework negotiations. But, obviously, the content of the final Framework deal, if there is one, is bound to affect what happens on the Irish border.

While these five issues are, on their face, straight forward, the UK contribution to the EU budget was elevated into a big issue in UK politics over the past few years. False statements were made before the referendum about the amount the UK would get back by leaving,  and a gain of £350 million a week was promised by some who now hold high office in the UK government.

So this could become a very difficult discussion.

CONTENT OF FUTURE FRAMEWORK TREATY

The Future Framework negotiation will be a much wider one and will take in matters of direct relevance to ICMSA members, such as

  • whether the EU Common External Tariff will have to be levied on agricultural products coming into Ireland from the UK, or Northern Ireland
  • how the origin of imports from the UK will be verified to ensure that they are not dumping third country products on our market,
  • how veterinary and food safety standards will be verified, and how and by whom smuggling will be suppressed.
  • whether geographic indicators will be recognised
  • if there will be a tariff free quota to allow existing trade levels to continue or if all trade will bear the appropriate tariff

The tariff issue will be particularly difficult in the food sector, because this is the sector in which the EU has the highest tariffs, and restrictions, on third country imports in order to protect the incomes of EU farmers.

Everything depends on what sort of food and agriculture policy the UK decides to follow outside the EU. Will they go for a “cheap food” policy like they had before they joined the EU 40 years ago or will they retain current supports for farmers and rural life?

There is no indication so far as the what choice they will make, at least after 2020.

Negotiations about product  safety, rules of origin, and related issues will arise with all products and services, even those to which no tariff applies, because once it has left the EU, the UK will be free to depart from recognised EU standards.

If the UK rejects the jurisdiction of the European Court of Justice, as Prime Minister May says she will, there will no longer be a referee to interpret the rules of the shared market, and all markets need a referee.

If one wants to assess the likely complexity of a Future Framework Agreement the UK and the EU will have to negotiate with one another, one has only to look at the content of the Agreement the EU has concluded  with Canada.

As well as tariffs and trade, that agreement had to cover

  • product testing and standards….would each side recognise the other side’s tests for every product or would there be duplication?
  • mutual recognition of professional qualifications….a huge field
  • the right of EU and UK firms to sell goods and services to government entities in one another’s jurisdictions
  • protection from discrimination against EU investors in the UK and vice versa
  • access to fishing grounds

The EU and the UK negotiators will not only have to reach agreement on the substance of how these matters are to be handled, but  they will also have to agree a procedure for settling disputes about interpretation, because the UK, outside the EU, will not accept the rulings of the European Court of Justice (ECJ)

But probably the most contentious issue in the Future Framework negotiation will be right of people to emigrate to the UK from the EU, and vice versa.

Control of Immigration was not, initially, one of the UK’s complaints about the EU.

The Blair government actually opened the UK to  central and east European EU immigrants, in 2004, before it was obliged to under the Accession Treaties for those countries.

But, during the Referendum campaign, immigration became the central debating point ,and leaving the EU was presented as the way of “taking back control” of immigration.

The case was over stated.

Of all immigrants moving to the UK in 2014,

  • 13% were UK citizens returning home.  
  • 42% were EU nationals emigrating to the UK. But the biggest number,
  • 45%, were non EU nationals moving to the UK.

The UK already had full “control” over 45% of all immigration which came from non EU countries, and the Minister who exercised that control then, the Home secretary, is now the Prime Minister.

But in politics, perception is sometimes more important than reality, and immigration from the EU is perceived to be a problem by UK voters.

The EU side has taken a firm line on this. There will be no participation of the UK in the EU Single market without free movement of people to work. If capital is free to move, people should be free to move too. No Single market without free movement. Discrimination on the basis of nationality is excluded within the EU, and a state should not be able to leave the EU, introduce such discrimination, but still have all the other benefits of access to the EU market. If that option were the open, others EU members would be inclined to follow the UK out of the EU.

The fact that there must be unanimous agreement, by all 27 EU countries, to the Future Framework is relevant here. Countries like Poland will not be keen on a breach of the free movement principle.

WILL AN INTERIM DEAL BE NEEDED IN 2019?

I think it should be clear, from all I have said, that finalising a Framework Agreement with the UK within the two year time frame will be so difficult as to be almost impossible.

The Agreement with Canada took six years to negotiate and it was much less complex than any agreement with the UK would be.

So what happens, in late March 2019, when the 2 year deadline is reached, if the Withdrawal Treaty has been agreed, but  if the Future Framework negotiations are still going on, with no certainty whether they are going to succeed or not?

In this case, some form of interim agreement with the UK might have to be reached. This might involve the UK leaving the EU, losing its voting rights, but still retaining full access to the EU market until a final Framework Agreement was reached.

There will be almost as many knotty questions to answer about  that sort of an Interim Agreement as there would be about a Final Agreement.

For example, what contribution would the UK  then continue to make to the EU budget?

Would there be a time limit on the Interim Agreement, and could it be extended?

Would the UK accept the jurisdiction of the ECJ during the Interim?

Would an Interim Agreement have to be approved by the parliaments of all 27 member states?

Does the EU Treaty allow for such an Interim Agreement?

CONCLUSION

My conclusion from all of this is that the decision of the UK Conservative Party to have a referendum on EU membership, without a clear alternative being known, was unwise because it will lead to a huge diversion of time and talent away from more constructive purposes.

Since the Referendum, the UK government has, retrospectively, interpreted the vote to mean a decision to leave the EEA, and leaving the European Customs Union, things that were not on the ballot paper, and are not required by its wording at all. That is undemocratic.

Brexit poses disproportionately great challenges to Ireland. It will require us to build new and stronger alliances in every EU country, and to do that we will need to understand the interests of other countries almost as well as we understand our own. We must not make the mistake David Cameron made of thinking that an understanding with Germany will deliver what we want from the EU. In the EU, every country counts.

………………………………………………………………………………………

Speech  by John Bruton,  at the AGM of the ICMSA at 4pm on Monday 28 November in the Castletroy Park Hotel, Limerick

 

ITALY……..EUROPE’S NEXT BIG CHALLENGE

Screen Shot 2016-08-08 at 17.31.08Now that the UK has decided to leave, the next big problem facing the EU is the constitutional reform referendum in Italy later this year.

In April the Italian Parliament has passed a package of constitutional reforms.  They were designed to improve the efficiency and stability of the Italian state, and reduce the ability of the Italian Senate to bring the government down.

Although  the package passed, it did not get  the required  66% majority in both Houses  to come into  immediate effect.

The only way the package can come into effect now, is if it is approved by the Italian people in a referendum.

The Prime Minister, Matteo Renzi, decided that this referendum will take place this autumn, and he has gone further and said that, unless the people approve the proposals, he will resign.

David Cameron’s recent failed  referendum gamble makes this look now to be  a more risky decision than when it was taken.

The proposed constitutional  reforms  include

  • reducing the size of the Senate
  • reducing the power of the Senate  both  to block legislation that has been passed by the Chamber of Deputies, and to bring down the government
  • reducing the power of Italian regional governments

Major reforms of the Italian state are urgent because the debt of the Italian state is 130% of GDP, and the state has to find resources for an ageing population, and influx of refugees, and bank rescue.   The Senate has proved to be an obstacle to some reforms.

Reforms are needed to increase the overall productivity of the Italian economy.  This  requires

  •  a simplification of the tax code,
  • less taxation of work and more on property,
  • simpler public administration and
  • a simpler and more efficient courts system.

State owned enterprises also need to face  more competition, as do some professions and retailers.

Before it joined the euro, Italy was able to devalue its way out of short term problems, as the UK is doing now. But devaluation  enabled it to avoid making big and difficult reforms.

Since it joined the euro, Italy has reformed its previously unviable public pension system, a task Ireland and the UK have yet even to discuss seriously. So Italy’s underlying ability to make big reforms should not be underestimated.

The polls on how Italians will vote in the referendum are very volatile.

The proportion in the “Don’t Know” category ranged from 19% to 42% in the two most recent polls.

Furthermore Prime Minister Renzi’s party lost ground in recent city elections, including in Rome.

Renzi’s main opponents are the “ 5 Star” Movement, who make their policies, and select their candidates, by polls over the internet. They reject the idea of career politicians and prefer politicians to be amateurs, who do the work on a short term basis. This sentiment is similar to the rejection of the opinion of “experts” and “elites” in the recent UK Referendum.

The trouble with amateur politicians is that, while they may have good ideas, they may lack the necessary technical ability, and staying power, to see their ideas through to full and effective implementation.

Italy is the 8th largest economy in the world. It has an excellent quality of life, and a great reputation.

Unfortunately its state system does not work well and there is not enough political consensus to put things right. This is not a weakness that Italy can afford. It needs a strong and effective state.  A rise in the price of fuel, or in international interest rates, could cause a big crisis for Italy, unless it has a state that is capable of making and fully implementing difficult decisions.

That is why Prime Minister Renzi’s referendum is so important for Italy, and for Europe.

 

 

THE EU IS A FRAGILE, VOLUNTARY, UNION THAT CAN ONLY WORK IF THERE IS GIVE, AS WELL AS TAKE

cropped-European-Union-flag-006.jpgThere is no denying that the Brexit decision is a blow to the EU. There is a real risk now that the 27 EU countries will start pursuing national interests at the expense of the common EU interest. If they do, everyone will lose.

The 27 EU states need to act resolutely to strengthen EU wide democracy, to ensure respect for EU rules, and to show that the EU can do business efficiently with the rest of the world.

The European Union is not a monolith. It is a voluntary Union of 28 states, with no independent tax raising power.

It operates on the basis of rules, which its 28 members must freely respect. If they fail to do so, the EU ceases to mean anything.

These rules are made under the authority of the EU’s Treaties, which have been ratified by all member states, and the Treaties can only be amended if all 28 states agree.

The more members the EU has, the harder it becomes, by a form of geometric progression, for the EU to amend its Treaties.

A club that has no power to change it basic rules will eventually fossilize and die.

The EU’s 28 members are, in theory, sovereign equals, regardless of differences in population or wealth.  But voting weights do recognise differences in size, on all issues where unanimity is not required.

The EU makes trade deals on behalf of its members, using the extra bargaining power that its size gives it. But because it negotiates on behalf of 28 states, not just one, it can be harder for the EU to finalise a deal that it would be for one state, negotiating alone.

In the case of some Trade deals, it is sufficient  for them to be ratified by the European Parliament alone.

In others, all 28 national parliaments must ratify too. In these cases, the EU has much more difficulty being an effective trade negotiator.

RESPECT FOR RULES BY MEMBER STATES IS AN EXISTENTIAL NECESSITY FOR THE UNION TO SURVIVE

If one or more member states get into a habit of failing to respect EU rules or directives, the EU ceases to be operational, particularly if the states failing to respect the rules are bigger states.

Recently France has threatened to flout an existing EU directive because efforts to amend it, in a direction France wanted, are being blocked by the national parliaments of 11 EU states.  In response the French Prime Minister, Michel Valls, is threatening not to implement the existing directive, which would completely undermine EU rulemaking.

Michel Valls said

“If it is not possible to convince … France will not apply this directive.”

That is a direct threat to the EU from a founding state. It is really dangerous

COMPROMISES BETWEEN NATIONAL INTERESTS NEEDED IF EU IS TO DO TRADE DEALS

Likewise, if it becomes too difficult for the EU to complete trade agreements because a few states within the EU hold up the agreement in order to advance a national interest, then the EU’s utility as a trade negotiator fades away.

This was an argument  advanced by some of  those who favoured Brexit, namely that the UK could negotiate its own deals more easily outside the EU, without having to wait for 27 other countries to agree. That thesis will be put to the test soon.

Commission has conceded, under pressure from national government facing early elections, that the Trade deal with Canada must, not only be ratified by the European Parliament and the  28 government, but by the 28 national parliaments as well. This is a risky decision.

If the EU’s deal with Canada fails because one or two national parliaments fail to ratify it, years of work by Canadian and EU negotiators will go down the drain. Other countries will begin to doubt if negotiating with the EU is worth their time. The Brexit advocates will have won part of their argument.

A lot more is at stake here than the content of the agreement with Canada.

TREATY CHANGE MUST ALSO BE POSSIBLE

It has become accepted wisdom in every EU capital now that Treaty change is off the agenda. This is because  of

+The requirement to have a referendum in Ireland on a Treaty change involving a transfer of sovereignty
+ the voluntary decisions of France and the Netherlands to have referenda on certain EU matters, in the Netherlands case  even on a minor agreement with Ukraine.
+ the expectation that a Treaty change would be preceded by a cumbersome  Convention.

The net result of all of this is that the EU will not consider Treaty changes, even ones that might make it more democratic.

If that remains the case, the EU will eventually freeze up, because it will not be able to respond  to new circumstances, and its member states will have to look to other, less democratic or transparent institutions than the EU, to advance their collective interests. One could even see NATO being called into service for more broadly defined “security “ purposes.

Some may argue that Treaty change in general is not urgent.  I agree there is no need for a comprehensive review of the Treaties, so soon after the Lisbon Treaty came into force.

But a Treaty change to respond to concerns that emerged in the UK referendum campaign, for example changes to make the EU more visibly democratic and accountable , should be possible.

For example, Treaty changes could be envisaged to

  1. Have  the President of the European Commission be elected directly, in a two round election, by the entire electorate of the EU. 
Have the President of the Euro group be similarly elected by  the Euro zone countries
  2. Give National Parliaments of the EU, if a minimum number agree, a power to require the Commission to put forward, for consideration, a legislative proposal within the EU competence in the Treaties.
  3. National Parliaments already can delay EU legislation, so why not allow them make a positive proposal?

UK GOVERNMENT FIRST STEPS NOW

Now that the UK has voted to leave the EU, the first step has to be taken by the UK Government.

It must decide what sort of relationship it wants to have, trade wise, with the rest of the world.

At the moment, that is governed by agreements negotiated, for the UK, by the EU.

If the UK simply leaves the EU, all those agreements will  fall, as does UK membership of the World Trade Organisation(WTO). Agreements with dozens of non EU countries, will have to be negotiated again, at the same time as negotiating  with the EU. A lot of work.

Basically the UK government will have to choose choice between three options

  • Leave the EU and, like Norway, apply to join the European Economic Area (EEA),
  • Negotiate a new special trade agreement, like the agreement Canada or Switzerland has with the EU
  • Leave the EU without any trade agreement and apply, as a separate country, to join the WTO

The EEA option could be put in place quickly and would not disrupt trade all that much.

The EEA is a readymade model for external association by a non member with the EU. It could be taken down from the shelf, so to speak.  But, as an EEA member, the UK would still have to implement EU regulations and contribute to the EU budget. It would not allow curbs on EU immigration. The EEA option has been dismissed by “Leave“ campaigners, but it does involve leaving the EU, and  complies  with the literal terms of  the  referendum decision.

If the UK experiences severe balance of payments problems over the summer, the EEA option may become attractive. The UK already has a big balance of payments deficit anyway and capital inflows may be inhibited by the Leave vote. The EEA option would buy time, and would not preclude leaving altogether eventually.

The second option, a special trade deal, would be much more difficult.

It would require a detailed negotiation on every type of product or service sale between the UK and the 27 member countries of the EU, including across our border.

Such an agreement would take years to negotiate (probably 7 or 8 years), because it would be subject to domestic political constraints, and political blackmail attempts, in all EU countries, each of whom  would have to ratify it. If it proposed curbs on immigration from the EU, the EU countries affected  would make difficulties with other aspects of the deal, as a bargaining counter.

It is unlikely that a Trade Agreement would allow the UK to sell financial services into the EU. Indeed it would be in the interest of EU countries, that might hope to attract financial services, to make sure the UK got few concessions .

The third option…leaving the EU with no agreement… could come about, either because that was what the UK chose, or because the negotiations on a special trade deal broke down or were not ratified by one or two EU states.

It would require the application of the EU common external tariff to UK or Northern Irish products crossing the border into the Republic.

Average EU tariffs are around 4%, but on agricultural goods the mean tariff is 18%. The imposition of these tariffs is a key part of the Common Agricultural Policy, which protects the incomes of EU farmers. We would have no option but collect them at customs posts along our border. All forms of food manufacture and distribution within the two islands would be disrupted.

The disruption of the complex supply chain of the modern food industry would be dramatic and the knock on effects impossible to calculate.

A similar effect might be felt by the car parts industry, which is subject to tariffs, and is important to some parts of England.

Meanwhile the remaining 27 countries of the EU, and the EU institutions, will have a lot of thinking to do too.

They need to respond decisivly to the (false) claim that the EU is not democratic.

All EU legislation has to be passed by a democratically elected European Parliament, and also by a Council of Ministers who represent the democratically elected governments of the 28 EU countries.

The members of the European Commission must be approved by the democratically elected European Parliament.

But there is room to further  improve  EU democracy.

I  would make two suggestions ,

  • The President of the European Commission should be directly elected by the people of the EU in a two round election , at the same time as the European Parliament Elections every 5 years

2.)To create a closer link between National Parliaments and the EU, a minimum of nine national parliaments agreeing should be sufficient to require the Commission to put forward a proposal on a topic allowed by the EU Treaties . National Parliaments can already delay EU legislation, so they should be free to make positive proposals too.

That said, the EU should avoid over promising, and should not allow itself to be blamed for all the problems people face in their daily lives.

The EU is not an all powerful monolith that can solve the problems caused by technological change and globalisation. It is just a loose voluntary confederation of 28 countries, with no tax raising powers of its own. Nor is the EU responsible for debts mistakenly taken on by its members.

If the losers of globalisation and technological change are to be sheltered from misfortune, it is for the 27 states, not the EU itself, that has the taxing power to redistribute money from the winners from globalisation  to the losers.

The UK has not been particularly generous in this regard.  Its welfare system is modest, and its investment in productivity improvement has been poor.

In some respects, UK voters  have just mistakenly blamed  the EU. for the effects of the  omissions, and under performance, of successive UK governments.

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