Experts needed

In the post-referendum Brexit world, Britain is in dire need of more experts, in the form of civil servants to deal with trade agreements and accesses to markets, as well as finalizing the terms of the divorce with the European Union. As Britain had been outsourcing trade negotiations to Brussels while a member of the EU, I am not sure how many Whitehall officials there are as of this moment who are competent to negotiate trade agreements and obtain the best possible deal for the UK, unless Britain can bring those in Brussels working for the European Commission back to London. Not only is there a need for a clear policy, there needs to be a bureaucratic machine that could implement and realize that policy. Trade deals are complicated and often take a long time to reach the conclusion, as such they require an enormous amount of administrative capacity and knowledge. The UK will need to negotiate with many partners simultaneously, since the UK is party to numerous trade agreements by the virtue of its membership in the EU, and these arrangements will cease to apply to the UK with its withdrawal from the EU, all the while finalizing the divorce settlement with the EU. The Civil Service is formidable, but will it be able to cope?

Seasoned negotiators are required to conclude favourable terms of access to the European single market for the UK. Given immigration has been a very contentious topic in the EU referendum, it is doubtful that the future UK government would accept free movement of persons, as such the UK would have to remain outside the single market but with some sort of preferential access to it. Commentators have rightly pointed out that EU member states would like to continue trading with the UK, be it selling cheese from France or cars from Germany, and buying Rolls Royce engines from the UK: I doubt there would be too much of an issue in coming to agreement with regard to trade in goods. The bad news is that the UK has a substantial trade deficit in trade in goods, and that would explain why the EU would be likely to agree to a deal readily. It is trade in services, especially financial services, that the UK generates a healthy surplus. London’s pre-eminence as the financial capital of Europe depends on the passport system that enables financial institutions to serve customers in the single market without local operations in each country. That will fall in abeyance with Britain’s withdrawal from the EU. The EU might deem the British regulations as its equivalent instead of the passport system, however the EU will probably drive a hard bargain in this matter. The UK may end up with an unenviable or even politically impossible choice of being a third country with restricted access to the single market which would prompt businesses to relocate, or remaining in the single market like Norway, meaning the UK will have to adhere to all EU rules, contribute to the EU budget, accept free movement of persons, all without representation at the EU, which as alluded above would be contrary to the leave position. Negotiating successfully a membership in the single market for financial services without free movement of persons would be a remarkable achievement.

So far the European Parliament, Commission, and Council, as well as individual countries seem to be pushing for Article 50 of the Treaty on European Union to be invoked now rather than later. That sets a time limit of two years for the UK and the EU to come up with a withdrawal agreement, extendable only by an agreement between the UK and the unanimous European Council, i.e. any EU member state can veto it, or else the EU Treaties cease to apply to the UK. A two-year period is an astonishingly short period of time, as 27 EU member states will have to agree on a common EU position: the European Council can conclude an agreement with a qualified majority, but I suspect it would try to come to a unanimous agreement. The joint statement by four presidents (Martin Schulz – Parliament; Donald Tusk – Council; Mark Rutte – Council of the EU; Jean-Claude Juncker – Commission) states that the agreement would be with the UK as a third country ( Given access to the single market in services would be vital, but the eventual form of access would seem to be on a third-country basis, even if there is a lot of uncertainty and there might be some room for negotiations, some UK-based banks and financial institutions would probably relocate from London to another city in the EU in due course. Good riddance, one might think of the bankers who have wrecked the economy, but unless the UK comes up with a plan very soon, there will not be much of an economy to wreck.

Speed is of the essence: ideally there will be a broad cross-party political consensus very soon as to what kind of withdrawal agreement the UK wants from the EU – the leave campaigns have been rather vague on what exactly they were proposing – and Britain needs to come up with a set of starting points which would function as the guiding principles for whichever government in power for the duration of the negotiations. The withdrawal process favours the remaining EU member states, and for that reason, a strong, clear, and unifying political leadership in Britain underpinned by solid administrative ability is absolutely paramount in order to obtain the best possible deal for the UK. Yet precisely when leadership is required, it is absent – the Conservatives are looking for a new leader over the next few months, and possibly Labour too – and there might not be enough expertise and experience with trade negotiations in the Civil Service.

Events such as turmoils in the markets in the meantime can take over, and things could start to look pretty grim pretty quickly.