Brexit is done - or is it?
By Frieda Park
When Dominic Cummings was ejected from Downing St it represented a victory for the faction in the Tory party and the ruling class that wanted to avert a No Deal and have an agreement in place between Britain and the EU when the transition period ended on the 31st of December. This inevitably meant a softer Brexit than a No Deal and they got their wish with the UK-EU Trade and Cooperation Agreement (TCA) being passed at the eleventh hour.
The TCA is designed to protect British and EU capital and largely seeks to align the UK with the EU. Statements of principles within it are familiar neo-liberal territory. For example, in talking about competition policy, it says: ‘The Parties recognise the importance of free and undistorted competition in their trade and investment relations. The Parties acknowledge that anticompetitive business practices may distort the proper functioning of markets and undermine the benefits of trade liberalisation.’ (1)
Before considering the limitations of the TCA, however, it is important to acknowledge that it is a big advance on the first deal proposed by Teresa May. It does not keep Britain within, or automatically tied to, the Single Market or Customs Union, although Northern Ireland remains in the Single Market and applying EU customs rules, creating a border in the sea between Britain and Ireland. The EU will not have formal powers to direct the UK to follow its rules and the European Court of Justice will have no locus in policing the Agreement. It is easier for the UK to withdraw from the Agreement, to dispute interpretations of its provisions and have them reviewed. The Agreement allows the UK some limited freedom to set its own rules. All of this will be helpful to any future British government that wishes to implement progressive policies against EU neo-liberal hegemony.
Ironically, this deal was facilitated by the obstructive tactics of the Remainers in parliament who blocked May’s much softer deal. So the arch-Remainer Keir Starmer ended up whipping Labour MPs to support the deal in the interests of British capital, when he could have had, from his point of view, a better outcome months before.
The most lurid claims of Remainers about economic collapse, shortages and wars in Ireland or over Gibraltar have not come to pass.
But there are major constraints within the agreement. Although the rhetoric has been about Britain regaining its sovereignty it will be bound by the terms of the Agreement and limited by its continuing economic and political relationship with the EU, so is not free to act just as it wishes without consequences. The agreement on fishing is a prime example of this. Britain may have re-gained nominal control over fishing rights, but in practice gave a huge amount of ground to the EU. (2)
While the TCA nods in the direction of being able to implement different state aid policies and EU public procurement rules will not be binding, in effect these are negated by the other provisions of the Agreement. Any actions by the UK must not, as noted earlier, be anti-competitive nor distort markets, trade and investment. In reality this give little leeway for radical state intervention through investment and public procurement policies. This also applies to workers’ rights, but as others have noted, rights are so diminished anyway that this will likely have little impact. Environmental and other standards might be more of an issue.
The Agreement is based on a neo-liberal consensus that neither side will depart from, but rather both will continue with privatisation and free-market economics. Allowable state aid interventions appear to be quite localised, small scale or applicable to public services. But small scale subsidies were always possible under EU rules, they just did not allow the kind of action that would enable progressive planning in the economy, so it is not clear that the agreement substantially departs from these EU norms. For example, under the TCA, it would surely be impossible for Britain to nationalise rail operators which currently have a number of EU based companies running the services. The EU could clearly argue that, in the terms of the Agreement, nationalisation was anti-competitive. Publicly owned services are required by the TCA to act like private companies.
If a future government were to go down a route of intervention through investment and procurement policies that could be interpreted as against the Agreement’s provisions, then dispute resolution mechanisms would kick in. Joint arbitration bodies will rule on these matters. There are also provisions to ensure “re-balancing” where EU/UK legislation diverges on things like environmental standards. Ultimately the EU or the UK can take counter-measures in reprisal for breaches of the Agreement’s provisions. There are also issues, like fisheries, which are subject to transitional arrangements. And there are five yearly reviews of the Deal. The status of financial and other services remains unclear. This set up ensures a continuing close relationship between the EU and Britain.
While the government held out against the UK automatically adopting EU rules and standards, nevertheless the purpose of the agreement is clearly to keep these similar through the review and rebalancing processes. In essence we are talking about Britain aligning with the EU as it already has EU standards built-in due to its past membership of the Union. The EU therefore starts from a position of power with the assumption that its standards are the default and the impetus will be to keep the UK aligned with changes in the Union rather than the other way round. There is a possibility that we end up in endless rounds of negotiations and disputes with the EU in the arbitration system and the courts. The EU is bigger and stronger, which gives it an advantage, especially since the liberal establishment in Britain is biased in its favour. Where state aid provisions, for example, are disputed by the EU the British courts may find against the UK government. British capital, having managed a reasonable alignment with the EU in this Trade Agreement, may also seek to avoid disputes by going along with the EU and trying to keep relations with it hidden from public view. A softly, softly approach will help the cause of those who still see Britain re-joining the EU at some point. In this scenario the UK will in effect become a passive rule-taker.
The implementation of the TCA will be overseen by a joint EU/UK Partnership Council with 16 sub-committees and 4 working groups under it. These are no doubt designed to try to head off any overt conflict but these structures mean that Britain and the EU will be permanently tied together in negotiating mode. Yet some disputes will undoubtedly emerge and conflict between the pro and anti EU factions of the Tory Party and British capital will continue.
But there will be a new dynamic post-Brexit. Will the interests of British capital increasingly shift away from the EU? Will that raise the possibility of a second Brexit from this agreement? How will Eurosceptic Tories respond?
Services, which account for 80% of the British economy, are omitted from the Agreement. Within that, financial services are of critical importance to the UK given their dominant position and that the City of London is the EU’s main financial centre. Clearly the EU would not accept City firms being able to continue operating as though Brexit had not happened. On the basis that any deal would have disadvantaged the City, the UK ducked the issue; it will, however, have to be dealt with.
On the first two days of dealing after the end of the transition period almost half of the value of euro-denominated shares normally traded in London went instead to Amsterdam and Paris - €6bn daily. Prior to the end of the transition period, British financial companies had transferred well over £1tr of assets, 7,500 jobs and parts of their operations to EU countries.
The crunch will come at the end of March when an EU-UK memorandum of understanding on financial services is due to be agreed. However by then a lot of damage will have been done to the City and the EU will be in a relatively stronger position as business moves away from London. A shift over this period will enable EU financial centres to adjust, preventing the disruption of a sudden break with London. France and Germany, look set to take a big chunk out of the British financial sector.
The EU of course is not without its problems due to the economic and political diversity of its member states and it would have preferred to have kept Britain in the club. It too will have to deal with economic and political fallout from Brexit. Managing all this and maintaining its dominance in the EU will be a complicated and time-consuming problem for Germany. Britain’s departure will lead to tussles between it and the second biggest power in the EU, France. France has become more assertive internationally, recently in the Eastern Mediterranean and Libya against Turkey. There was also Macron’s Napoleonic entrance into Beirut, after the devastating explosion in the city. This is on the back of other French interventions in Africa and the Middle East, where it has historical rivalries with Britain. With Britain gone, France will be the EU’s only nuclear-armed power and is positioning itself as the EU’s leading military force.
TIED TO EU
A lot of ink has been spilled regarding the TCA as commentators have picked over the contents and tried to discern the precise implications of its terms. Much of this misses the political and economic context of the Agreement, which will be very important in how it is implemented, especially since some of remains unsettled. With its drive to align EU and UK interests, the number of issues that still need clarifying, the many joint bodies, reviews, extended timetables, as with fishing, and the unclear future of financial services requiring further negotiation, Brexit remains a work in progress.
Despite the positives in the TCA that will make it more possible to diverge from the EU, nevertheless the EU will not accept any actions which threaten its interests or the freedoms for capital that it cherishes. If the UK were to attempt to implement progressive state intervention in the economy, that would mean a big battle, ultimately requiring a second Brexit from this Agreement. In reality only a radical left government can fulfil the potential of Brexit by breaking out of the straightjacket of neo-liberalism domestically and internationally and by building alliances and agreements with other countries on the basis of equality and mutual respect. For now, however, we remain in continuing negotiations with, and closely tied to, the EU.
(1) Agreements reached between the United Kingdom of Great Britain and Northern Ireland and the European Union, page 179
(2) See: Fishing sell out serves big monopolies, by Simon Korner in this edition of The Socialist Correspondent