Let The Hague’s world judges rule on our Brexit divorce bill
To blame Michel Barnier for the Dictatus Papae of the EU negotiating team is to miss a deeper and more unsettling issue. The courteous Savoyard is not to blame. He is something of an Anglophile, known for his sense of fair play, and largely untainted by the sempiternal arrogance of the Parisian “fonctionnaire” class.
His hands are tied. His options are constrained by the rigid mandate of the EU Council, and the council is a chronically dysfunctional animal. It is rarely capable of acting fast, nimbly and with creative vision in an unexpected situation. Its default setting is paralysis.
It is why there was no coherent response to the migrant flows, and why the eurozone banking crisis (it was not a debt crisis) festered for so long that it degenerated into a pan-mediterranean depression. It is precisely why the UK has to extricate itself from the EU before the British governing system is fatally corroded.
One can, perhaps, understand why the council’s EU-27 drafted such an unworkable negotiating mandate in the immediate aftermath of the Brexit vote. Feelings were hurt. Trust was broken. Alarm was running high over copycat exits in France, Holland and beyond. All emphasis was put on the rock-solid unity of the 27 states. Preventing dissent became the be all and the end all.
Yet it was nevertheless a grave misjudgment to insist that there could be no discussion about post-brexit ties until Britain had met all the EU demands on the divorce bill, on Ireland, and on the status of EU nationals.
The issues are inextricably linked to the future relationship. The error of this strategy is now obvious, yet it is set in stone. It has become acquis. As ever, the EU has become a prisoner of its own process.
There was never any intellectual justification for the council’s stance. It was ineptly crafted, and should never have been accepted by the British side as the starting point for discussions in the first place. But of course, Theresa May bent over backwards to be helpful out of a co-operative spirit and never won any credit for it.
It is clear that the EU resorted
– from force of habit – to the well-worn procedure imposed upon every EU applicant state. These “candidates” were compelled to comply with a long series of accession chapters. They had to jump through hoops. Each box had to be ticked.
They put up with this humiliation because they were either small, or poor, or in some way vulnerable. But Britain is not trying to join the EU. It is leaving. Britain is not small by intra-european standards. It is a big net contributor to the budget. And, what is surely no small matter, the Royal Air Force and British Army regiments defend the eastern border of the EU.
So we have an impasse. The EU-27 insist that we sign first on the three dotted lines before we talk about anything; we refuse to accept the final logic of their sequencing. This is more or less what I feared would happen, which is why I always wanted to pre-empt the process by filing an immediate application to join the European Economic Area (the Norway option) for 10 years. As it is, we have manoeuvred ourselves into an unnecessarily weak position as a demandeur.
Yet it remains a fluid situation, and Europe is currently overplaying its hand so obtusely that it may force a radical change in British policy.
Let us not overreact to secondary matters. It is of no importance what Jean-claude Juncker says or does not say. He is irrelevant. The European Commission is run by a German lawyer named Martin Selmayr. I am reliably told that he does indeed want to punish Britain, inflicting such damage that no other country in a thousand years will dare again to rebel. But this too is largely irrelevant. The commission is an enforcement arm. Power resides in the council, and the council has painted itself into a corner.
The cold fact is that Britain is presented with demands that no sovereign democracy can accept
‘Europe is overplaying its hand so obtusely that it may force a radical change in British policy’
lightly, and that we could reject at a tolerable price should we choose a path of defiance. This leaves an invidious choice for “soft” Brexiteers like myself who think a hostile divorce on hard terms would cost 2pc, 3pc or 4pc of GDP over time and would damage our global standing. But one cannot reduce every matter to a calculus of GDP.
An old friend wrote to me yesterday arguing that Britain should “demand nothing from the EU, and pay nothing”. It should smile politely and walk away, leaving the door open to a free trade deal if the EU wishes to apply for such an arrangement to safeguard its large trade surplus with Britain.
If the EU does not apply for a UK trade deal, it will have to trade with this island on WTO terms. The combined effect of an undervalued sterling, a rising euro in global terms, and WTO tariffs would render many EU exports to Britain uncompetitive. Import substitution within the UK would accelerate as the supply chains adapted.
Sir James Mirrlees, the Scottish Nobel laureate, told me last week that industries in the North of England might well flourish in such circumstances. He implicitly warned against the biased Brexit narrative of Southern vested interests.
I must confess that this broad line of thinking has growing appeal in darker moments. Like many readers – doubtless – I have not made up my mind on how we should respond to the high-handed intransigence of the EU Council. Yet I certainly agree with Liam Fox that Britain is being “blackmailed” over the financial settlement.
The EU should never have used the exit bill in this fashion. It is squalid diplomacy. The issue should have been separated at the outset from the broader EU-UK relationship, with the complex details submitted to an arbitration panel. The Brussels think tank Bruegel proposed such a solution long ago. The council never listened.
The British Government does not dispute – and has never disputed, contrary to ill-informed assertions repeated ad nauseam in the European press – that this country is honourbound (morally, not legally) to cover its share of EU pensions and an array of financial obligations. The issue is how much and who decides.
Given the way the exit bill has been politicised by the EU side, I increasingly favour drastic action to wrench it from their grasp by demanding that it be settled by the Permanent Court of Arbitration in The Hague. Let Australian, Japanese, Indian, Russian and Kenyan judges decide.
Such a démarche would snatch back the initiative and shock the EU Council out of its hubris and rigidity. It would make it clear that our patient politeness in the Brexit talks over recent months should not be mistaken for capitulation. We are not a candidate country.
What would Brussels then say if we applied for arbitration? Would the EU Council dare to argue, like the Chinese over the South China Sea, that it refuses to justify its claims before the Permanent Court? Let them try.
May I make a suggestion? If the EU Council refuses to change its instructions to Barnier before a deadline set, this time by us, of November 1 2017, we should withdraw our negotiation papers and offer to settle the exit costs at The Hague. And we could blow them a kiss too.