Fears that UK is heading towards 'train crash' Brexit

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Sir Tim Barrow, Britain’s new permanent representative in Brussels, faces the daunting task of stopping what colleagues and critics suspect is a tumble towards a disorderly exit from the European Union.

Where once the choice was between hard and soft Brexit, the new worry in diplomatic and business circles is that the UK is heading for “train crash” Brexit, a scenario in which incompatible negotiating demands from Downing Street and the other 27 member states result in Britain walking away without a deal on either the terms of separation or future trading relations with the EU.

That was the concern of Barrow’s predecessor, Sir Ivan Rogers, who wrote to the 120 staff at the UK’s imposing office block at 10 Avenue d’Auderghem to warn them of “muddled thinking” back in London. “Contrary to the beliefs of some, free trade does not just happen,” concluded one of the most stinging resignation letters in Foreign Office history.

Aside from a groaning intray, Barrow inherits a demoralised and depleted team. He has just lost his deputy, Shan Morgan, who is due to start a new job in Wales, and gained a new turf war in Whitehall, where the top civil servant at the department for exiting the EU opposed his appointment and demanded to be in charge of talks instead.

“The structure of the UK’s negotiating team, and the allocation of roles and responsibilities to support that team, needs rapid resolution,” warned Rogers in his farewell letter.

Officials at the other No 10, in Downing Street, rushed to counter their outgoing ambassador’s claim that the government did not have a proper plan. A speech by Theresa May at the end of January will make clear, they briefed, that the top priority was ending the free movement of people and that, if Britain could not remain a member of the single market as a result, then so be it.

After receiving instructions and rebuilding his team, Barrow’s next priority is convincing the other 27 governments that Britain is still serious about negotiation. Previous intransigence over wanting both free market access and an end to free movement have left many in Brussels thinking London misunderstood its basic membership principles.

But even though the UK appears ready to concede the need for reduced market access and possibly ongoing budget payments, the new ambassador also needs to convince his counterparts of the need to negotiate any new trade deal at the same time as the talks on the terms of separation – or, at the very least, agree a transition phase.

With EU demands for a divorce settlement of tens of billions of euros looming large, the Brits risk having to agree to pay this budget contribution before they are even allowed to move to the next step. Only then could Barrow get to the crunch issue for his political bosses, which is the negotiation of new trade terms.

Rogers had warned that talks on a replacement free trade agreement could drag on for up to a decade. The swift appointment of Barrow, an FCO veteran and former ambassador to Moscow, was intended to reassure civil service mandarins worried that the government no longer wanted to hear bad news – a signal, it was claimed, that it was at least trying to strike a deal in Brussels.

But the reaction from those in favour of a more hardline approach has only underlined the suspicion in Whitehall that many politicians secretly relish the possibility of walking away with no agreement.

“It’s very simple,” claimed the Brexit-backing former cabinet minister Iain Duncan Smith on Wednesday when asked what the government’s objective was. “We are leaving the European Union.”

“The only significant issue outstanding about our future relationship is trade,” added fellow Tory John Redwood on Friday. “I suspect, after all the huffing and puffing, they will want tariff-free as it is more in their interests than ours.”

Despite Rogers’s withering remark that trade does not just happen, there is some support for falling back on World Trade Organisation rules if a new trade deal cannot be agreed.

The view of Liam Fox, the international trade secretary, is that even without a deal Britain can always temporarily rely on international tariffs agreed by the EU and strike bilateral deals in future. Though some WTO tariffs, such as those for cars, are punitively high, most would be tolerable.

“It’s really not an abyss,” said Brendan McGivern, a WTO expert at White & Case in Geneva. “This is the basis that the USA and Japan trade with the EU. It’s a robust system.”

The problem is that even moving to WTO tariffs would require agreement. Other signatories around the world would need to accept that Britain had a right to inherit the same rates negotiated with the EU. In the case of agriculture, where there are shared quotas in place to limit cheap imports, Britain would have to negotiate its share with French farmers or risk losing entire export markets.

“People like Fox suggest it will be an easy and painless process [to inherit WTO rules] but I am not really convinced of that,” said McGivern. “It will be relatively easy for industrial goods but not for agriculture. Because the pie has to be split, it becomes a zero-sum game.”

Some even argue that this would still not prevent the UK selling the same products elsewhere. One reason forecasts by groups such as Economists for Brexit are more rosy is that they assume all trade eventually finds a global price regardless of tariffs, much like commodity markets for crude oil. The reaction of more complicated export industries, such as the British car industry, is one of horror.

Exporters are not the only ones worried about the chaos that might follow a disorderly Brexit. There is also the question of where it might leave the dozens of regulatory agencies that provide vital services for the economy, or the millions of EU citizens stuck on either side of an increasingly bitter immigration row.

Already there are concerns that so-called shared regulatory competences will unravel chaotically unless a comprehensive transition deal is agreed with the other EU member states. This is bad enough for those based in the UK, such as the European Medicines Agency, which has reported an exodus of skilled staff. But finding replacements for other vital bodies, such as the European Atomic Energy Community, presents a whole other level of challenges.

Many of the Tory sceptics pressuring Downing Street fear all this talk of transition arrangements is a trap to prevent the Brexit referendum result from being implemented.

“They are looking for ways they will be betrayed,” said Mark Leonard of the European Council on Foreign Relations. “They don’t want to get bogged down. They would rather just take the economic hit.”

Timeline - Brexit spring

January

  • May gives speech outlining negotiating objectives.
  • Supreme court rules on parliament’s right to be consulted.

February

  • David Davis expected to provide written plan for Brexit.
  • Bill on triggering article 50 likely to enter parliament.

March

Powered by Guardian.co.ukThis article was written by Dan Roberts Brexit policy editor, for The Guardian on Friday 6th January 2017 18.21 Europe/London

  • Non-binding debate in parliament on the government’s plan.
  • Article 50 invoked allowing two-year period of negotiations to begin.

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