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6 July 2017

8 ways the UK is in trouble over Brexit

The EU's chief negotiator has made clear just how many barriers there are to a good outcome.

By Rudy schulkind

Michel Barnier, the EU’s chief Brexit negotiator, gave a speech on Thursday morning setting straight some of the confused voices that he had heard from across the channel. The take home lessons: Barnier is well aware of the instability and weakness of the UK’s position, and we should be under no illusions – Brexit is going to hurt. Here are some of the reasons why.

1. The UK has signalled its incompetence

Barnier explained that the EU has made three things clear, to reduce the uncertainty of Brexit.

First, “the free movement of persons, goods, services and capital are indivisible”. Second, “there can be no sector-by-sector participation in the single market – you cannot be half in and half out”. And third, “the EU must maintain full sovereignty for deciding regulations”.

These red lines preclude the “have cake and eat it” approach to Brexit. The government’s inability to grasp the more basic elements of the negotiating process indicate that we are embarrassingly unprepared to negotiate a deal.

2. Barnier, and others, have noticed this signal

“These three points were already made clear by the European Council. But I am not sure whether they have been fully understood across the Channel,” he said.

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“I have heard some people in the UK argue that one can leave the single market and keep all of its benefits – that is not possible. I have heard some people in the UK argue that one can leave the single market and build a customs union to achieve ‘frictionless trade’ – that is not possible.”

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Barnier and others understand the confusion and incompetence of their negotiating partners.

3. Barnier is disdainful of Theresa May’s approach

“For these negotiations to succeed, we will have to move through the successive stages one by one and keep our calm,” he said. ”There will never be any aggressiveness or arrogance on my part. And I recommend all to adopt the same attitude”.

I can’t think of who this tongue-in-cheek comment might be directed at.

It’s not just the Conservative government’s understanding of Brexit’s details, but their broad approach to the issue, that Barnier is concerned about.

4. Frictionless trade will be impossible after Brexit

“Only the combination of the internal market and the customs union guarantees the free movement of goods,” Barnier said.

“The internal market without the customs union – in other words the regime of the European Economic Area for Norway, for Iceland, for Liechtenstein – still entails a system of procedures and customs controls.

“Conversely, a customs union agreement without the internal market – as in the case of Turkey, also implies a system of procedures and customs controls.”

5.  “No deal” maximises friction

Barnier said “no deal” with Britain would mean returning to a distant past: “It would mean that our trade relations with the United Kingdom would be based on WTO rules. There would be customs duties of almost 10 per cent on vehicle imports, an average of 19 per cent for alcoholic beverages, and an average of 12 per cent on lamb and also fish, for which the vast majority of British exports go to the EU.”

He added: “While leaving the customs union would in any case involve border formalities, ‘no deal’ would mean very cumbersome procedures and controls.”

For some UK firms, Barnier said, this would entail “keeping their products in stock for three or four days instead of a few hours, renting warehouse space and increased transport costs”.

6. The costs of “no deal” will be borne disproportionately by the UK

“In practice, no deal would worsen the lose-lose situation which is bound to result from Brexit,” Barnier said. “And I think, objectively, that the UK would have more to lose than its partners.”

He cut through the posturing of May and others about the UK’s ability to accept a “no deal”. He is well aware that such a situation hurts the UK more than the EU27. By explicitly making this point, he indicated that he is fully aware of the corollary – that it will weaken the UK’s bargaining position as Britain can less afford to walk away.

7. The EU27 is very united at the moment

“I would like to add a special message for each one of you… You have played your part in establishing all the ‘rules of the game’ that enable our competitive social market economy to function, and it is you who uphold them on the field of play, with the diversity that exists between your groups,” Barnier told the European Economic and Social Committee.

His hopeful rhetoric and praise for the EU’s solidarity echoes the mood across the continent: Eurosceptics are losing ground politically, and Brexit has galvanised the ties that bind the remaining members. The UK’s weakness and instability comes at a time of EU strength.

8. Each of the EU27 will scrutinise the process

“I know that you will be vigilant – as I will – to ensure that any trade agreement with the United Kingdom will guarantee fair competition and the protections we regard as essential,” Barnier said.

This will shrink the UK’s room to manoeuvre – it looks like it’s going to be impossible for Britain to negotiate a deal that hurts even one of the EU’s constituent members.