Thursday, September 29, 2016

Britain's Brexit negotiating position

It's worth taking time to get Britain's negotiating strategy right before invoking article 50.

Our negotiating position after the Brexit vote is nothing like as strong as the more optimistic "Leave" supporters would have you believe, but it is not entirely hopeless either.

Because the population and combined economies of the remainder of the EU are considerably bigger than Britain's the "Remain" side were undoubtedly correct that exports from other EU nations exports to the UK are a smaller percentage share of both the GDP of EU nations and of their exports than British exports to the rest of the EU are of ours, so we must be careful not to overplay our hand.

However, in absolute terms the "Leave" side was also right to point out that exports of goods from other EU countries to the UK are greater than those from the UK to the rest of the EU and Civitas suggested this week that in consequence 5.8 million EU jobs are linked to trade with the UK compared with 3.6 million UK jobs linked with trade with the rest of the UK.

Are those 5.8 million jobs so important to the other EU countries that they will suspend all other considerations to protect them and the UK can demand whatever we like in the Brexit negotiations and expect to get it?

Of course not.

But are those 5.8 million jobs such an insignificant consideration that they don't mind if much of that trade is lost and millions of their voters end up unemployed? Have we no negotiating leverage at all?

Of course that is not true either.

The truth lies somewhere between those two positions.

In general, trade in Services is more vital to Britain and trade in Goods more vital to the continental economies, which is why it is very important when we are discussing market access that these two issues must not be de-coupled. It would be a disastrous mistake to pay a heavy price for market access in goods while failing to secure market access for services.

However, even in services, our negotiating position is not entirely hopeless.

As Iain Martin points out at Reaction,

wrecking the City of London would actually be a disaster for the rest of the EU as well as for Britain:

we have to negotiate patiently, carefully, and with well-judged diplomacy to maximise the probability that the wiser heads who realise this prevail.

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