Brexit is confusing, and it is I am afraid going to become more so. That is partly because, as in any debate where the different sides have strongly held views, evidence is presented as fact, whereas it is really just opinion. But it is worse than that, because of the complexity of the UK’s relationship with Europe, and the lack of time to sort out that complexity.
There will be some sort of deal, and what we all would like to know is where on the spectrum of closeness or separation that deal is likely to be struck. But before digging into that, there are two other basic points to be made.
One is that in economic terms what happens to the world economy is much more important than the deal the UK does with Europe. If the world economy continues to grow strongly both Europe and the UK get richer. If it doesn’t, perhaps because of a trade war, we won’t.
The other is that much of the debate now ignores the long-term dynamics. Yes, there will be a deal, but the relationship between the UK and Europe, and with the US, China, India and other major economies, will evolve over time. The less favourable the deal is to the UK, the more the UK will focus on the rest of the world.
That said, maybe the easiest way to get a hugely complex negotiation into a manageable structure is to think of it in three areas of consideration. The first is: what access does the UK get to the European market? Two: what access does Europe get to the UK market? Three: how well, or badly, does the admin get sorted?
Take the latter first because this will attract most headlines. To call it admin may sound dismissive, but what I mean is the mass of detailed regulations and agreements that have to be redrawn. With goodwill this can all be done; this is what the bureaucrats do all day. But with ill will what should be mere detail can be used to stir up antagonism.
Already we have seen difficulties. One is the Irish border. It should and can be seamless, as are the borders between Switzerland and the EU nations that surround it. But it can be turned into an issue. I was brought up mostly near Dublin and well remember the palaver of the customs when we crossed the Irish Sea. (My mother apparently looked like a known smuggler and was searched particularly closely.) At that time Ireland was still restricting imports to protect local producers.
There are many other difficulties. There needs to be an agreement on airline traffic, on the Galileo satellite system, on drug regulation, on health services on both sides of the Channel and so forth. Conceptually this is very simple: you just agree whatever is most sensible and get the lawyers to do the paperwork. In practice it can be extremely divisive, as negotiators seek to gain short-term advantages for their home companies, rather than build a long-term strategic relationship.
So there will be – and we need to be adult about this – a string of disagreeable stories, placed by whoever and designed to destabilise the negotiations.
Now point one. What access does the UK get to the European market? There are three areas here: goods, services and people. Goods are easy, because Europe sells so much more to the UK than the UK sells to Europe. It is not in the self-interest of Germany to restrict sales of BMWs to the UK and I cannot see us charging a tariff on them.
Services are tricky because in general (there are exceptions) the UK sells more services, including financial services, to Europe than it buys. This is the so-called single market. Actually there isn’t a single market because there are all sorts of non-tariff barriers to trade in services – try and start a ski-school in France and see what happens. There will be a deal but, from a UK perspective, not an optimal one.
People are less difficult, simply because not many Britons work in Europe. We don’t have the language skills. British people, when they choose to work abroad, go to the US, Canada, Australia, the Middle East or Singapore and Hong Kong. They don’t, in the main, go to Italy. We retire abroad, at least for a while, but that is a less contentious issue.
Now to point two. Europe will get virtually the same access as it has now to goods and services. Over time there may be a shift away from Britons buying European goods as other trade deals are struck, so in practice its privileged access may gradually be eroded. (Small point: there is already a marked switch taking place from Champagne to UK sparkling wines.) But there will be no sudden shift.
The bigger issue is people. Will Europeans still have access to the UK job market? This has been very important for the EU, for it has become a pressure valve, relieving tensions in the EU labour market. Even now, despite the recovery in the Eurozone, there is still a net inflow of EU citizens seeking jobs in the UK. Expect this to be a contentious issue.
There is a deal: Europe gets reasonable access to the UK labour market, while the UK gets reasonable access to the European market for services. Can that deal be struck?
It is massively in the self-interest of both the UK and the EU to have a friendly relationship. The question is whether self-interest triumphs.