Ambassador Kelleher, President Mac Craith, members of the diplomatic corps, distinguished guests, ladies and gentlemen, it is a great pleasure to be invited to give the keynote speech to this seminar this morning and to commend the Irish Permanent Representation and DCU's Brexit Institute for the initiative.
We have arrived at a point in the Brexit discussions where it is appropriate to take stock. The terms of the United Kingdom’s separation are agreed, as well as the bulk of the Transition Treaty – although some knotty problems remain – and the starting positions have been laid out by the EU and Prime Minister May for the post-Brexit arrangement.
I would like to consider progress so far, bearing in mind that neither party has negotiated anything like this before.
This has been a journey into the unknown and, for the EU, it has had the added importance of providing a precedent if ever another member felt this was a wise course to follow !
But, frankly, that hardly seems likely – and is now far less likely than it was before Britain’s referendum vote. Because one thing we have already learned from Brexit is that the UK does not have a better idea: it does not have a replacement for the Union as a way to improve the life quality of its citizens, its businesses, and its standing in the world.
Yes, it will leave the Union but it only wants to go some of the way towards leaving. We can see, now that things have become clearer, that there is a lot of the Union that the UK wants to retain. An awful lot.
You might say it doesn’t want to change its EU outfit, just its shoes.
The first element in the stock-taking, therefore, should be that the Union has kept its promise to the UK. The Union promised to help the UK withdraw in an orderly, managed way and, under the leadership of President Juncker and President Tusk and with the support of the European Parliament, it is well on the way to doing so.
It has done this by negotiating in plain sight, so to speak. At each step of the way it has made public its objectives, its suggestions on phasing, on timetable, and on the details of what is at stake. Michel Barnier has ensured that our institutions and citizens, and that includes those in the UK, know what is going on.
And this brings me to my first observation.
The “unknown” element in Brexit is almost over. The United Kingdom is now, in this negotiation, to all intents and purposes a third country. The post-Brexit arrangement that remains to be negotiated is in effect a trade agreement, something with which the EU is familiar.
A second observation is that the EU has presented a disciplined and united front, despite internal difficulties such as the long inter-regnum in Germany following last year’s election. The Union has acted as one.
Indeed, it might not be going too far to say that, in responding to the UK decision to leave and become again a third country, the value of the EU, and its solidarity, has revealed itself.
And this augurs well for our future in a world that seems to have changed massively even in the twenty months since the UK’s referendum vote – changed with the heightened security risks posed by Russia, changed with the new “America first” trade behaviour of the United States and the incipient trade war between the US and China.
On a personal, or should I say “on an Irish”, note, let me pay tribute here to the support that Ireland has received from its twenty-six partners. It is well-known that Ireland’s trade with the UK is large and Ireland is steeling itself for a blow. But there is another aspect to Brexit that is even more important.
I refer of course to the land border between Ireland and the United Kingdom. Since the Good Friday agreement in 1998, the role of this border in the day-to-day life of our citizens has diminished remarkably. This is for the better. But twenty years is a short time and the role of the border in our history, our attitudes, and, yes, our politics is still vivid – it is like the touch-paper of a firework.
The EU spotted immediately that Brexit threatened to bring the border back to life and reignite our troubles, and insisted from the outset that Brexit had to take place in a way that ensured there was no return to a hard border. The EU has been constant in its support.
The December agreement, confirmed in March, sets down the manner by which it will be achieved if the UK is unable to develop what we might call a cyber border that meets the EU’s needs for its external border.
Put clearly, the whole island of Ireland will remain in regulatory alignment with the EU if the UK is unable to develop and realise a satisfactory cyber alternative. This is what is meant by the “fall-back option” and this agreement is a signal achievement.
So, as I say, the Twenty Seven are acting as one. In the UK, on the other hand, the one acts as many.
What I have called the London-London part of the negotiation has been a lively conversation between several opposing camps, although it is showing signs of calming recently.
This may be because the different camps are preparing for battles to come, or are concentrating on other things like the local elections on May 3, or consider the clock to have been reset to December 2020 by the draft Withdrawal Treaty.
It may be calmer but there does not seem to have been a reconciliation between the opposing camps. Doubtless there is a good deal going on behind the scenes.
The government under Prime Minister May has proved adroit so far at avoiding hotspots, at least on procedural matters. From the outset it has played a long game and this probably will not change.
Indeed, at times it has seemed as if the UK is reluctant to get on with the work. But I think that impression may be more optical than real.
The UK, for whatever reason, seems happier to keep the negotiation at the level of officials, who, according to their brief, must work below the radar.
The size and the detail of the draft Withdrawal Treaty, for example, demonstrates the intensity of work that has been going on. When one considers this, it becomes clear that the UK has been fully engaged, even if its engagement at the political level – leaving aside soundbites – seems muted.
And now we have arrived at the final phase – negotiation of the post-Brexit agreement between the EU and the UK. Now, as I say, we are entering a trade negotiation. And in this phase, for the first time, starting positions are clear.
On the EU side we have the position probably best summed up in Michel Barnier’s staircase diagram, which shows how each of the United Kingdom’s red lines closes off an option until the only possible agreement is a free trade arrangement of the Canada or South Korea type. Although the EU has indicated that if the red lines were to be change, another outcome might be possible.
The EU’s position contains the proviso that its readiness to initiate work towards a “balanced, ambitious and wide-ranging free trade agreement” requires there to be guarantees for a level playing field for businesses. And the EU’s negotiating document offers guidelines on how an unfair competitive advantage for the UK may be avoided.
On the UK side we have Prime Minister May’s speech at the Mansion House in March, which lists those parts of EU membership that the UK would like to retain when it leaves. It was the most substantive speech by Prime Minister May since the referendum and listed the hard facts and realities that the UK has to confront.
At another time, in another circumstance, Prime Minister May’s Mansion House speech would have been a strong argument for joining, not leaving, the EU. And this is an impression that is further strengthened when one considers, for example, the UK’s expressions of disappointment when it realises that as a third country it will be excluded from Galileo – the EU satellite system.
I make this point not to argue that the UK should change its mind. Its citizens have decided to leave the EU and the UK will revert to third country status in about 355 days from now – or 354 depending on how you count. Its flag will be hauled down from before the EU’s institutions; the Twenty-Eight will become the Twenty-Seven; and the number of EU citizens will reduce by 13 per cent. Also, for any geographers present, we shall be six per cent smaller.
The Union has accepted this.
It is difficult to believe that any country would wish to engage in a policy of divergence from their neighbourhood countries – particularly from 27 neighbouring countries. But that's the way it is.
Also, the EU might have its own preference between the three possible outcomes on a final agreement – free trade agreement, customs union, single market. We might have a preference but we have to realise that there is nothing we can do to realise it. The UK has decided that it wants a free trade agreement and that must be our focus.
I make the point to underline the central attitude of the EU during the third and final phase of negotiations. The UK cannot expect to retain the benefits of EU membership when it is no longer a member. Galileo and many of the desired benefits listed by Prime Minister May are facilities for EU members only.
We can think of the EU as a piece of intellectual capital, something with similar characteristics to patented research results. Member states use this intellectual capital for their betterment – economic, social, and political – but it remains the property of the EU.
By leaving the EU, the UK loses the right to use the EU’s intellectual capital. It really is as simple as that. And the member states have an interest in ensuring that this is so, since if we allow others to use it, its value to us, the holders, is reduced.
Consideration of the final phase of the separation – the free trade agreement – brings me to a couple of further observations.
The first is to repeat a point I made in passing a few minutes ago. The draft Withdrawal Treaty resets the clock to 2020 for this final phase. Yes, there must be a political document before the autumn which describes the objectives of the trade negotiation. But, given the UK’s preference for the long game, we should not expect any rush to clarity on its part.
One result of this is that we can expect the uncertainties that characterise the UK’s position to continue. This will make it useful for the EU to keep reminding itself of the one thing that is completely certain – the UK is not going to change its mind on EU membership. I, for one, cannot imagine any circumstances in which the UK will change its mind on the desirability of EU membership – not for many years, if ever.
The EU must therefore see the negotiation on the free trade agreement for what it is – a trade negotiation with a third country in which both parties will be trying to do the best for their citizens.
The UK will be looking for a deal that works best for Britain. The EU will seek to defend and advance the interests of its citizens. It is on this basis that the EU has established its starting position. It is on this basis that it should proceed. The EU will remain clear-sighted.
I have one final observation – and, for this, I look at the Brexit negotiation from the United Kingdom point of view rather than from the EU’s. So far I have tried to steer away from a discussion about the UK’s own attitude to the discussions and about the apparent conflicts in its position.
The negotiation for the post-Brexit free trade agreement between the EU and the UK will be the UK’s first step into “Global Britain” – that network of trade deals with third parties which the UK expects will achieve the double objective of offsetting any losses in its trade with the EU and bringing increased benefits.
In her Mansion House speech Prime Minister May cited Global Britain and the benefits it will bring as a main argument against a customs union or single market. She is confident that regaining its power to negotiate trade agreements will enable the UK to achieve greater well-being for its people through wider trade. One hopes she is right for the sake of UK citizens.
But there are stubborn facts that over-shadow a rosy picture.
Global Britain will mean for the United Kingdom a return to medium-sized nation status.Yes it will regain the sovereignty to seek and strike agreements where it wants but with reduced bargaining power, reduced security of its markets and supply chains, and a friction and cost added to each trade shipment to the EU, its biggest trade partner.
Probably, in time if not immediately, there will be an increased sensitivity of the £ Sterling to Global Britain’s trading performance. The UK trade balance was a headline feature in the Sixties, often used to justify policy changes to reduce consumption.Will this be a feature of Global Britain ?
Global Britain expects to rapidly agree a trade deal with the US. Indeed it is one of the assumptions on which its calculations about the economic effects of Brexit rest. I imagine that the US basis for such a rapid agreement would be its desired TTIP – with the requirement of access for its agricultural products, some of which are resisted by EU (and UK) consumers.You do not need me to point out that the EU refused to accept the TTIP desired by the US.
The UK expects to be able to roll forward all trade agreements to which it is a party because of its EU membership. Sometimes this may be easy, sometimes not. Many contain tariff-free quotas, sometimes of extraordinary sensitivity. The EU’s agreement with Canada, for example, contains tariff-free quotas for beef (important for Canada) and dairy produce (important for the EU).Such things are not lightly agreed and take years to negotiate.
Speaking of Canada, reminds us of the Commonwealth. Yes, the Commonwealth has a common language and similar legal systems to the UK which recommends Commonwealth countries as trading partners.Yes, it is growing rapidly. But it is not a cohesive bloc and UK-EU trade, where legal and language differences have surely been absorbed after 45 years, is six times higher than UK exports to the ten Commonwealth countries for which trade data are tracked by the UK’s Office for National Statistics.
Stepping into Global Britain is stepping into a difficult world. And there will be a huge gap between hope and experience. As I say, one hopes that Prime Minister May’s confidence is not misplaced.
It remains only for me to again thank the organisers – the Irish Permanent Representation and the DCU Brexit Institute – for the invitation and the opportunity to deliver these remarks. You have assembled a very impressive line-up of participants for what I'm sure will be a fascinating, informative and valuable seminar. I wish you well in your deliberations.