Is Britain to sail alone in the high seas of trade wars?

Michel Barnier, the chief EU negotiator for Brexit speaks at the BUSINESSEUROPE Day 2018. Date: 01/03/2018. © European Union, 2018 / Source: EC – Audiovisual Service.

If Britain is counting on the US for a favorable bilateral trade agreement after Brexit, Donald Trump the President of ‘America first,’ rushed last Thursday to destroy that Brit dream; he announced 25% extra tariffs on steel and 10% on aluminum imports, prompting anger and retaliatory measures from America’s closest political allies, Canada and the European Union. Actually,  Trump is starting an all out trade war and blatantly said “it’s a good thing”. Individual countries, like Britain outside strong clubs like the EU or big enough like China will find it very difficult to survive. As they say ‘when the buffaloes fight in the swamp, the frogs pay the dearest price’.

Before Trump though, it was Michel Barnier, the EU Brexit chief negotiator who traded an even stronger blow to Britain. In the early hours of the last day of February the European Commission published its draft Withdrawal Agreement between the European Union and the United Kingdom. This is a legal text of 119 pages under the title of Draft Withdrawal Agreement, setting the EU terms for the exit of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community. It sets out the Brussels positions on all the main items of the Brexit procedure.

Polemic EU Commission

According to the European Commission, the draft Withdrawal Agreement “translates into legal terms the Joint Report from the negotiators of the European Union and the United Kingdom Government on the progress achieved during phase 1 of the negotiations, published on 8 December 2017, and proposes text for those outstanding withdrawal issues which are mentioned in, but not set out in detail, in the Joint Report. It also integrates the text on the transition period, based on the supplementary negotiating directives adopted by the Council (Article 50) on 29 January 2018”.

The hottest part in this paper is about Ireland. This EU proposal for an after Brexit EU-Britain deal, leaves Northern Ireland within the EU, thus cutting the UK in two. The document states, “The territory of Northern Ireland… shall be considered to be part of the customs territory of the Union”. In other words, after Brexit, Northern Ireland continues to be a part of the EU, while the rest of the UK remains outside the club. This is tantamount of erecting customs controls and checks between the island of Britain and Northern Ireland. In short, there goes the United Kingdom.

Cutting the UK in two

Theresa May’s government rejected it right away. The 10 Downing Street lady tenant stated in Parliament “no prime minister could ever agree to these terms as they would threaten the constitutional integrity of the UK”. She also clarified “The draft legal text the Commission have published would, if implemented, undermine the UK common market and threaten the constitutional integrity of the UK by creating a customs and regulatory border down the Irish Sea and no UK prime minster could ever agree to it.” Other members of her government were even more aggressive.

There is more to it though. The text published by the Commission clearly states, “It (the draft Withdrawal Agreement) will now be discussed over the coming weeks with the Council (Article 50) and the Brexit Steering Group of the European Parliament before transmission to the UK authorities for negotiation”. The meaning of this paragraph is even more disparaging for the UK. It says the 27 EU member states of the Council and the European Parliament will discuss and agree on the final text of the Withdrawal Agreement.  The final version most probably won’t substantially differ from the just published document. Then it will be presented to Britain.

Take or leave it

At that stage it will be not a Commission proposal, but a final Agreement text on Brexit, being a unanimously ratified and cemented offer to Britain by the EU 27 and the European Legislative. As a matter of fact, it will be a ‘take or leave it’ offer to the Brits, almost impossible to be negotiated and changed in its main provisions. After the EU 27 member states and the Parliament have collectively formulated the text, it will be rather impossible for all of them to come back and change its main provisions. In such an eventuality, the situation will be tantamount to a European ultimatum to Britain, to either accept it or get lost in the high seas of international markets.

This brings us back to Donald Trump’s declaration of trade war, with his super tariffs on steel and aluminum imports. He appears quite defiant vis-à-vis the threats about retaliatory measures from the rest of the major global trading parties. He blatantly tweeted “trade wars are good and easy to win”. The International Monetary Fund among other international bodies, criticized this decision and “expressed concern about the proposed tariffs and said they likely would damage the U.S. economy as well as the economies of other nations”. According to reliable US sources, Trump’s tariffs on steel and aluminum may in the long run destroy more jobs than the ones to be created in the two sectors.

A ‘good trade war’

As things stand now, this Trump decision may be followed by more, equally disruptive White House pronouncements on international trade relations. He personally has said, the US needs balanced trade relations with all and every individual country. It’s highly improbable then, that the White House will offer Britain the ideal trade deal the Brexiteers have in mind.

In short, Britain after the latest Barnier bombshell is badly cornered and seemingly, the only possibility of salvaging the country from a disastrous Brexit may be a second referendum or a full participation in the EU customs union and internal market. In both cases, the Brexiteers have to swallow their tongues.

May’s ‘hard facts’

As a matter of fact, in last Friday’s Brexit speech, Theresa May, the British Prime Minister appeared more down to earth. She was diluting the Brexiteers dreams for a trade agreement with the EU to their full liking. May, clearly spoke about ‘hard facts” for everybody. According to her, one of those ‘hard facts’ is that “the UK would still continue to be affected by EU law and some decisions of the European Court of Justice, such as the ECJ rules on whether EU agreements are legal”. To be noted, ECJ’s authority in Britain after Brexit is anathema for the Tory hard Brexiteers. The day before May’s speech, Thursday, despite May’s clear retreat, Michel Barnier had rejected other of her key ideas, even before she pronounced them. He was commenting on information that she was expected to say the morrow.

In conclusion, with the global trade relations in a limbo, the 27 EU countries do not have the luxury to show more flexibility in the negotiations on the future trade relations with Britain, as May sought for last Friday. Simply asking is a bad sign for London and an avowal of being in the weak side. It may be depressing for the Brits to accept that, but unfortunately this is the way it is.

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