May to Plead With Merkel as Brexit Deadlocks Domestically Too; New Data Shows UK Lacks Foreign Reserves, Meaning Even More Vulnerable to Brexit

October 16, 2017
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Theresa May is attempting to keep the sinking ship HMS Brexit afloat. She is running to Brussels to implore Merkel to give the UK a break and endorse the UK position in a pending EU decision this week, that of having Brexit discussions start addressing trade, or more generally, the “future relationship” with Europe.

The emergency session looks and is desperate. The odds of Merkel (and Macron, and the majority of nations that back the German-French position) relenting are close to nil. The most May is likely to get is lip service from Merkel that endorses the plan of the EU lead negotiator Michel Barnier, which is to allow a bit of preliminary planning to take place as the next decision date for possibly approving allowing trade discussions to proceed moves back to December.

Merkel is a famously cautious politician. She has been completely consistent: her priority is preserving the rest of the EU. The UK is not going to get any special treatment. Any deal it gets must fit in the parameters of the arrangements it has with other neighbors that have close economic relations with the EU. She has the full backing of German business. She has no reason to relent.

By contrast, the UK has been irresponsible, unrealistic, and high handed from the date of the Brexit vote. The underlying assumption of the Brexiteers, that the EU needed the UK and would bend to its wishes, has proven to be false. Yes, countries that were expected to be “soft” on trade with the UK, such as Denmark and some Eastern European countries, may indeed be lobbying for the trade talks to proceed. Even if true, that’s not going to make any difference as far as the state of play is concerend How could anyone have missed that they’d been deadlocked for not just one session, but two, and that the EU response was widely anticipated?

Even the Financial Times’ comment section, which usually has a decent representation of Brexit stalwarts, had close to universal derision for May’s late effort to get the negotiations back on track. A couple of the more measured remarks:

RobVancouver

The UK is again mistaken about how the EU works. The Telegraph or Daily Mail are not a good guide, Merkel does not control the EU. And no, the Nordic countries and the Netherlands are in agreement with the rest of the EU, if the UK wants Brexit it is up to the UK to come up with what it wants and how to ensure problems are solved. The UK will have to accept that it will have to pay and give a lot to make it work. There will be no cake nor any eating of cake for the UK.

Nigel Farage wrecked the UK

As much as I love the UK I am sorry I have to say the EU does not really need a deal with the UK.  The UK has been written off a long time ago. It is next to impossible to find anything about the UK or Brexit in the continental news.

It is also a bit bizarre that the UK, who has also helped build up the EU wants to leave but still retain all the benefits. 

I think the UK can go whistle., nobody cares the EU will do better without the UK and its old empire fanatics.

The reason for the contempt is that even casual viewers who get an overdose of UK press baron Brexit boosterism can see May’s Hail Mary pass is an effort to shift blame to the EU when the UK bears responsibility for the mess it is in. As we and many others have pointed out, the Tory party is so badly divided that even if it were to make commitments, they aren’t credible since who knows how long May will be in charge (my current bet is longer than anyone thinks, precisely because the Tories are unable to get behind either Hammond or Johnson).

But the reality is that if Brexit proceeds on schedule, meaning as of March 2019, it will be a hard Brexit at best and more likely a disorderly Brexit.

Thus it isn’t clear what a trade deal even means when the UK on track to allow smuggling on a mass scale, save that it will make buying UK goods even less attractive. No advanced economy is going to be keen to take goods from a country when they won’t have any assurance as to what its content is (as in what elements are local versus which originated in other countries and are being re-exported). From Bloomberg:

Smuggling along the Irish border may be a microcosm of the challenges facing Britain and the European Union following Brexit. Theresa May’s government has made clear it won’t introduce strict border controls when the U.K. leaves the bloc. That will inevitably create a “gangsters’ paradise,” according to Simon Sneddon, a senior lecturer in law at Northampton University…

And at other entry points too, such as the port of Dover, the government last week signaled it’s prepared to rely mostly on self-assessment for customs controls, even in the event of crashing out of the EU without a deal.

Smuggling is a great business model for moving commodities or commodity-like goods. But it’s another kettle of fish entirely for multinationals that make higher-valued added goods, or where product quality is imperative, like pharmaceuticals. Does the UK want to make the country safe for Harry Lime?

But another way to view May’s almost certain-to-be-futile

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