EU inflexibility in the Brexit negotiations

Why is Brexit proving so difficult to negotiate? It is not as if there are not enough options on the table. Michel Barnier’s infamous PowerPoint printout even helpfully listed several of them in “stairwell” format, ranging from WTO terms at ground level, through a Free Trade Agreement, Ukraine-style deal, Norway deal, and into full economic and political integration with the EU.

In large part, the problem has been the inability of the U.K. government to square two utterly incompatible aspirations held by opposing roundheads and cavaliers. The first is to focus on transition, and the continued “invisibilization” of customs; the second is the aspiration to deregulate, politically decouple, and compete globally. Attempting to square the circle then runs headlong into the European Commission.

So what drives the Commission and to what extent is the ambition and innovativeness that Whitehall is indubitably, and contrary to its own customs, pursuing actually being stymied not by U.K. internal problems, but by an obstructive negotiating team headed up by Michel Barnier?

It is a fair question to ask and also a complex one. Let us begin at face value.

The European Commission, according to the treaties, is the guardian of those very treaties. Its job is to operate as the civil service that runs them.

Core to the EU is the Single Market; and as the Commission sees it, core to the Single Market are the Four Freedoms. These relate to goods, services, capital and people. Their implementation has been very mixed – arguably because certain states have a greater vested interest in opening up markets to their goods exports, rather than to services where the U.K. by contrast has a competitive lead. However, the practicalities are incidental; under the Commission’s lexicon, all four are sacrosanct. Anything that might undermine them should in its eyes be rejected.

Why such stubbornness? Two practical reasons stand out. Firstly, the Commission is afraid that once any single element is removed, the whole construct will tumble like a Jenga pile in hurricane season. Getting the EU treaty-wise to the state it is in has required multiple negotiations over many years, each one involving states ceding some point in order to win another. In some cases, the result has only meant a passing derogation and a soothing of the transition. But anything that might unravel done deals is anathema to Commission thinking. That applies even if it turns out that the idea is a good one, and where ever-closer union might possibly have overreached a more efficient contrarian dynamic of subsidiarity (now sadly more cited in literature as a Single Market tick box exercise that exercised in principle).

The paradox here is that the Commission is therefore recognizing that the Single Market, or EU regulatory union, actually does carry significant costs that member states would rather do without, and which are also issues of domestic public concern. Perceptions on what constitutes a “necessary” cost, however, are not uniform across the EU – and indeed change according to party politics. A capital one week might find the Social Chapter a burden on its businesses, and then after an election a week later find ministers declaring them a cost worth having – ideally while exporting them onto their competitors as well. In this respect, the immutability of the acquis communitaire provides the Commission with a fixed horizon.

The Commission’s default starting point is to do two things. Firstly, to lumber everyone operating within the regulatory union with exactly the same costs so competitive advantage is eliminated, at least within the borders of the customs zone since global competitors are more widely immune. Secondly, to pursue a narrative of a hierarchical gain; only by becoming politically highly integrated can the maximum benefit of EU association be won; and this takes us back to the Barnier stairwell where full EU membership sits at the summit.

In fact though, as analysis by the Red Cell has explored, different countries have different needs in their relationship with the EU. To borrow an astronomical term, each state has its own “Goldilocks Zone” of optimal orbit around the solar EU. This alternative interpretation is never acknowledged as a possibility by the Commission when reflecting on alternative models. This now carries a cost in the Barnier interpretation of how to manage Brexit.

Current models demonstrate this more clearly. The Commission has for at least a decade now been undiplomatically expressing its almost “personal” unhappiness at how it sees the Swiss model operating. Switzerland, having voted to stay out of the EEA, has a unique web of bilateral arrangements with Brussels. Viewed dispassionately, this largely operates quite well. However, in the Commission it carries key negatives; it is seen as administratively cumbersome (which it is, but an organization that can handle an acquis that stacks up as high as Nelson’s Column should be able to cope). More cynically, it demonstrates to the world that the model of full Single Market membership is not the be-all and end-all.

Text: There is precedent for bending the rules over trade in areas where politics and frontiers dangerously collide.I would suggest that the public and private comments from the Commission reveal that the Commission does not like the Swiss model because it breaks their monopoly vision. And I would further suggest that Brexit is being viewed in a not dissimilar way; and this has affected the Barnier way of thinking.

To these aspects, we should add that the form of the Commission alone carries institutional bias in how it perceives Brexit as a threat and not as a remedy. The fault line is in the treaties themselves, which mandate the EU institutions to aspire towards integration over time. This has long been spelled out in both the general and the specific, for example, in the aspiration towards “ever closer union,” or in the projection that the EU, for example, may in time generate “a common defense” or set up a European Public Prosecutor service once member states finally agreed to one.

The inherent drive in this civil service is towards integration, and where the democratic arguments that drove Brexit are inherently toxic. Moreover, the selection (and self-selection) process invariably attracts and recruits those who support deeper integration rather than more Eurosceptic opinion.

This is intended as an uncontroversial observation; in this regard it is no different from people who like the work the United Nations does joining the UN for a career, or in the 1970s people who were not keen on the Soviets pitching up for work in the morning at NATO. But it does have a bearing on what follows. Because the European Commission is perfectly capable of bending the rules of the Single Market when it has a mind. It is just that it is not sufficiently motivated to do so over agreeing an ambitious Brexit deal. Or at least, not yet.

If we look back, the Commission has considerable track record in bending rules to suit political exigences. Three notable examples are those of Algeria, East Germany, and Cyprus.

Algeria prior to independence was part covered, both territorially and in terms of market access, by the EEC treaties. At point of independence, it was half way through the transition period of full authorized access. Then the clock stopped. French interests at the time were such that it was agreed to quietly retain existing rates of preferential access. The factors that changed that were the withdrawal of the U.K. accession bid (with Commonwealth preferences); developed arrangements over France’s other colonies; Italian complaints over Algerian olives and wine; and the fact that the Algerian government was nationalizing vineyards owned by French nationals. French interest therefore dropped, the blind eye blinked, and thus Algeria was obliged to formalize a new arrangement with the EEC, though only after nearly a decade and a half of quiet backdoor access.

East Germany was considered by West Germany to be constitutionally a part of itself, though as it were under temporary local management. As part of détente, Brandt and others pursued an arrangement, with the connivance of other EEC states and the Commission, that allowed East German agricultural trade in (and possibly some Polish steel with it), and East Germany in turn to import some of the same goods back in. It seems to have been largely a wheeze to generate foreign currency.

Then there is Cyprus, whose accession to the EU included a section allowing for considerable flexibility over the management of the Green Line in order to encourage cross-border trade.
The point here is that there is precedent for bending the rules over trade in areas where politics and frontiers dangerously collide. This means there is, contrary to protestations made by Mr. Barnier, “form” for bending the rules for that supposedly most intractable of trade problems that is supposedly blocking an ambitious deal, the Irish border.

Indeed, the precedent is far wider and there is considerable evidence of the EU displaying attitudinal, legal or treaty flexibility, governed solely by the caveat that nobody objects (and even when someone does, the Luxembourg Courts have shown the capability to rank political fudge over exact treaty obligations where there is wiggle room).

We might style this generous rewriting of the rules “consensus trampolining,” and it takes many forms.

Sometimes it has been over implementing specific existing policy, particularly in relation to audits of Single Market bungs, whether state-run computer companies, German mines, national airlines, or (until they kept on escalating it to farcical levels) Italian milk production.

On other occasions, it is a question of the elasticity of the treaties themselves. Indeed, three key elements of the treaties (old articles 94, 95 and 308) were nicknamed the “rubber clauses” because they were designed to allow the EU to get legal cover for decisions they might only decide later they needed to have the power to do in order to make the Single Market work.

Yet, that was through unanimity, and beyond that we enter the legal comedy putty territory of reinterpreting the existing treaties according to the needs of the day – of which the Disaster Clause of the Lisbon Treaty is the most egregious example. It suited the Commission and most EU capitals to pretend that a clause designed to provide legal cover for mass emergency aid in the event of, say, another Messina earthquake or angry Vesuvius, provided legal authority to oblige non-Eurozone states to prop up Eurozone members with sovereign bailouts.

The point, in short, is that for an entity that prides itself on being a “rules-based organization,” the Commission is not beyond playing hard and fast with – and occasionally rewriting – those rules it pretends to protect. Conceptually, there is nothing stopping the Commission from negotiating a Brexit arrangement that establishes a new arrangement, whether on mutual recognition clauses or IT solutions to the Ulster border.

The charge that the EU does not do novel deals becomes particularly absurd when you break down the existing set of third-party agreements into their component definitions. According to the official nomenclature as defined by the EU itself, there are 42 different types of deal the EU operates to manage its trade – whether full EU membership or opt out states, an EPPCCA or a ACEC model, or an EPA or EMAA or PCA model (and so on). Each of these when first drafted would have been unique, and some still are.

The Commission sets a Single Market precedent when it gets out of bed every morning. It should at least be honest about what it can and cannot do, if it shortly finds a need to come up with any excuses.