This week’s Brexit-related news were dominated by the continuing change in the political landscape due to Brexit. With the Queen’s Speech, the UK government revealed its legislative plans for the first post-Brexit parliamentary year and the DUP elected a new leader after the downfall of Arlene Foster over the Northern Ireland Protocol (NIP).

Yet, what I found particularly interesting this week is an increasingly wide-spread acknowledgement that the current relationship with the EU – based on the Trade and Cooperation Agreement (TCA) and the NIP – is neither stable, nor sustainable, nor settled. It is not surprising to hear that from critics of the government’s handling of Brexit. But this week Lord Frost himself acknowledged that the NIP is unsustainable. This is actually a remarkable development. Of course, in the Brexiteers’ universe, the TCA and the NIP have now become a victory for the EU and the biggest sell out in a generation. But we should not forget that it was Johnson’s – and hence Frost’s – preferred alternative to Theresa May’s backstop. It is a protocol that the UK government negotiated, agreed, signed, and sold to the British public as part of the ‘have-your-cake-and-eat-it’ deal that Johnson miraculously secured for the country. That was of course always going to be an illusion, but the person at the heart of Johnson government’s post-Brexit UK-EU relationships admitting as much should raise eyebrows. Lord Frost acknowledging it is de facto an acknowledgement of his failure in the negotiations with the EU.

Except, of course, that in post-Brexit Britain, the discourse of a strong, sovereign country that has regained its freedom and power, can live alongside the continuing discourse that we are still being ‘shafted’ by the EU, as a DUP MP recently put it. So, the UK is at the same time a World Power that does not have to fear anyone and can fend for itself on the world stage and a victim of continuing EU bullying. The fact that a large part of the population does not seem to find this dual narrative inconsistent and unconvincing, shows just how well the Brexiteer propaganda works.

Brexit Propaganda: The ‘Brexit Boom’ according to the Express

Reading through pro-Brexit newspapers always feels like entering a different reality. Chief among the Brexit cheerleaders, the Express ran an article following the Queen’s Speech on Tuesday, which announced that “Brexit boom starts now: SEVEN new laws announced to exploit UK's freedom from EU.” The seven (actually there are only six listed as the NI contributions bill is listed twice) laws referred to were the Subsidy Control Bill, the Procurement Bill, the National Insurance Contributions Bill – mentioned for creating “Freeport's in England to increase investment, trade and jobs” and once for helping “employers access professionals across the world to fill vacancies” – the Planning Bill, the Turing Scheme, and “an unspecified Bill” on animal welfare. The article does not explain how any of these will lead to a ‘Brexit Boom,’ other than the usual libertarian argument that “Bureaucratic EU red tape will be scrapped, and new international markets for trade will be opened to help with the economic recovery.”

Beyond the usual involuntary Brexiteer irony in the article (e.g. celebrating a bill that essentially aims to make immigration to the UK easier), the victorious tone about post-Brexit realities largely ignores evidence to the contrary. Thus, the benefits of free ports have been questioned by most experts (for shifting the location of investments rather than generating new investments as well as for creating opportunities for money laundering). Also, it has recently come to light that the newly negotiated trade agreements with 23 countries contain a clause that will make it impossible for firms producing in one of the new free ports to benefit from these FTAs.

The Express also regularly runs articles announcing the new trade and investment deals discussed with various countries – before they are actually concluded – e.g. most recently reporting on the discussions with Canada under the headline : Vindicated at Last! Mega £17bn deal looms – as fishermen celebrate new record.

(Incidentally, the record level of exports of Scottish salmon to the EU mentioned in the article’s headline also requires some contextualisation and nuance: The Scottish salmon producer organisation reported a 74% increase in exports to the EU during the first quarter of 2021 compared to first quarter of 2020 – but with MORE red tape and at an extra cost for producers. So, the right way to interpret that news story is that demand inside the EU for Scottish Salmon has increased (which in all likelihood has nothing to do with Brexit). Brexit does not prevent Scottish farmers from satisfying that EU demand (thanks to the TCA – as opposed to a no deal situation). But it is more costly and more difficult to do so after Brexit than it was before, because Brexit has created extra red tape and costs and therefore reduces the profitability of Scottish salmon farmers (which has everything to do with Brexit)).

The Express’s triumphant reporting on anything Brexit related, may of course soon be hit by reality. Indeed, while the Indian Covid19 variant may slow down – or even reverse – the return to normality, as restrictions start easing, post-Brexit Britain will discover new ways in which Brexit has changed our lives and reveal additional ‘unsustainabilities’ in the current arrangements, beyond the ones we already know about; most importantly the NIP.

NIP – Shifting the political landscape towards confrontation?

The fact that the NIP is unsustainable and a threat to the Good Friday Agreement has been patently clear for some time. Now, pressure is mounting to find a solution to the issues surrounding the NIP, as politicians fear that the fragile situation could further escalate when the Protestant ‘marching season’ starts in June. This week, the UK has replied to the EU Commission’s letter from March initiating legal action over the UK’s unilateral extension of ‘grace periods’ for border checks. It is not clear what the response contains, but the EU’s reaction to it could either contribute to diffusing tensions somewhat or add a further complication to an already complicated situation.

Pressure to find a solution is also mounting with Edwin Poots’ election as the new leader of the DUP. While NI politics are too complex to allow any simple analyses, Poots’ leadership may very well lead to a further hardening of unionist position over the NIP. Indeed, given suggestions that Poots shares responsibility for the NIP in its current shape, he will be keen to mark a clear break with his predecessor Arlene Foster and take a hard line on the protocol. This will limit the UK government’s leeway in renegotiations with the EU.

It is currently not clear where the renegotiations are at, but a key roadblock on the way to a solution seems to remain unsolvable: The UK insists on a ‘risk-based approach’ to sanitary and phytosanitary (SPS) checks. It also wants an ‘equivalence regime,’ whereby both sides recognise each other’s rules as not aligned but achieving the same level of consumer protection. The EU, on the other hand,  insists that it cannot create a precedent for other third party states by exempting British goods from complying with EU rules. On the British side, business start putting pressure on the  government to align its SPS rules on the EU’s in order to solve the problems around post-Brexit trade. Yet, given the government’s focus on ‘sovereignty,’ accepting such a unilateral alignment is of course impossible. It would also limit its leeway in negotiations of FTAs with other countries, most importantly the USA where considerable concessions on SPS would probably have to be made to make a trade deal possible.

Regardless, the SPS rules are emerging more clearly as one of the ‘unsustainabilities’ built into the post-Brexit ‘eat-your-cake-and-have-it’ arrangements under the TCA. A UK-EU SPS agreement will be necessary, but it will will not be easy to negotiate.

The return of normality and the true impact of Brexit

Another ‘unsustainability’ that will very likely soon rear its ugly head is the sheer unbelievable neglect of services in the TCA. Given that the UK is a heavily service-based economy, with service making up around 70% of GDP and nearly half of its exports, it seems reckless not to have included the relevant sectors in the TCA. So far, the impact of Brexit on this important economic sector has been tempered by the Covid19 pandemic. But as service companies are preparing for the easing of restrictions, more and more evidence emerges for the severe disruptions caused by Brexit. As the FT shows, they can be classified into (at least) four different categories: First, there are the direct restrictions to provide services in person or remotely in EU members states, due to limitations to the number of days a third country national can work in any given EU members state or the non-recognition of professional qualifications. Secondly, there is the opposite problem of the difficulties that UK immigration rules posit to UK-based firms when they seek to hire EU nationals to provide services in the EU (e.g. an Italian speaker to service the Italian market). Thirdly, this then has knock-on effects in terms of creating disincentive for EU nationals to buy UK services (e.g. refraining from hiring a band from the UK for a festival due to the red tape and costs associated with obtaining work permits). Fourthly, this situation will create disincentives for foreign companies to set up operations in the UK to service the EU market. On the latter, there is already clear evidence emerging that the UK has become less attractive for Foreign Direct Investment due to its lost position as an English-speaking country from where the EU market can be served without restrictions.

Once the pandemic is over, the full impact of this quadruple blow to UK services will start to become clear. It will also become apparent that the current arrangement is hardly sustainable in terms of the costs and red tape it imposes on UK services firms. So, unless the government is really willing to sacrifice one of Britain’s key competitive advantages on the altar of sovereignty, the negotiation of a services agreement with the EU seems inevitable.

(Re)negotiating with our ‘European Friends’

These unsustainabilities clearly show that nothing has been solved with the TCA and the NIP. Urgent renegotiations of the NIP, the SPS rules, financial and other services will be necessary to create a more sustainable basis for UK-EU relationships.

However, in order for such renegotiations to be successful, a good relationship between the negotiation partner seems key. Especially if the UK government want to convince the EU to consider the use ‘equivalence regimes,’ which are based on the two partners trusting each other’s regulatory and legislative standards. Such trust is undermined by the UK government on a daily basis because of its confrontational approach to virtually anything concerning the EU.

Indeed, this week has brought more news about the deteriorating UK-EU relationship. The tense relationships with our ‘European friends’ – to use Johnson’s cynical term – start affecting the UK’s negotiating position. Thus, France has threatened to block an agreement on financial services over the fisheries dispute. Similarly, the reports about the treatment of EU immigrants in UK immigration centres have sparked concern in the EU, further reducing any post-Brexit goodwill the UK can expect from the EU.

As long as the UK government remains stuck in a ‘culture war’ where nationalist posturing prevails over solving real economic problems, the prospect of finding sustainable and mutually beneficial solutions for the post-Brexit ´unsustainabilities’ seems remote.

A look into the crystal ball

It’s impossible to predict what arrangement will emerge to replace the TCA and the NIP, but it is a bit easier to predict how it will emerge. What needs to happen and what eventually will happen is that people will get tired of the false promise of ‘sovereignty’ (you can’t eat sovereignty!). They will then want to see progress on actual social and economic issues they are facing. When this ‘return to reality’ – as I called it in last week’s post – happens, the realm of the politically feasible will shift. Rather than being debated and decided in the arena of the ‘noisy politics’ of nationalist posturing for the benefit of the domestic electorate, a space will open up for the ‘quiet politics’ of substance-focused policy making. This will also mean that businesses will have it easier to voice their concerns over the current arrangements and to be heard. Business influence over politics is of course not an unmitigatedly desirable thing (as the lobbying practices around Greensill Capital and the PPE procurement illustrates). But representation of sectoral interests through business associations or other formalised channels (as opposed to personal connections to people in power) is important in any advanced capitalist economy for policy makers to formulate policies that are based on economic realities and knowledge of any given sector. Moreover, in the current context, business influence over policy making would almost certainly also imply a return to reason.

An increasing number of academic studies show that economic actors have been surprisingly indecisive and ineffectual in representing their interests in the Brexit process. Including the City of London. This is partly, because before 24 December 2020 none knew what Brexit would look like. While businesses in some sectors (e.g. logistics) did perceive Brexit as a threat, others saw opportunities, e.g. due to the promise of far-reaching deregulation. As Brexit reality kicks in (e.g. in terms of further shifts of derivative trading away from London), businesses and their associations will start discovering how exactly they are affected by the new arrangement. This may soon lead to more decisive mobilisation of some sectors in favour of a new UK-EU arrangement. The preferred arrangement of many businesses is likely to be a closer alignment with the EU than the current one. Indeed, it seems difficult to imagine that businesses will accept being cut off the largest market at their doorstep forever in the name of sovereignty.

Of course, this will also lead to a resurgence of anti-EU sentiment and possibly a resurrection of UKIP. Indeed, some Brexiteers already warn of a return of Brexit in Name Only (BINO) and urge the government to more decisively diverge from EU rules. But the more the impact of Brexit becomes visible, the more having to make the case for a hard Brexit a second time will be difficult given that people now have had a taste of what Brexit reality is like.