Dismal Brexit spat has crossed a line for us all

It’s disquieting to watch the posturing in recent days between Brussels and Westminster, the positions being drawn, the promises being made.

It is scarcely credible that after four decades of a partnership, the EU and the UK institutions understand each other so little. 

It seems to me that, from the perspective of many in leadership positions in the UK, the Brexit decision is seen as a problem for Brussels to solve.

There is little sense of a duty of care towards the EU or for that matter towards any of its 27 remaining member states, Ireland included.

That’s hardly an opening position which will ensure a good outcome from Brexit negotiations. 

A poor negotiation result will mean that neither side will be happy with the financial settlement made by the UK when leaving the EU, and that future trading arrangements with the UK involving the movement of people, customs duties and recognition of standards licences and qualifications will be unsatisfactory.

That dismal prospect might not, in fact, be the worst outcome from these difficult negotiations.

I think worse still is the possibility that the breaking of the links between the UK and the EU will be sudden and final, without any phasing in or transitional arrangements.

While the Article 50 negotiation procedure is time bound to two years, it can be extended for a further two years. 

Furthermore, if an agreement between the EU and the UK can be reached, the future relationship can be nuanced to provide additional time for citizens and businesses alike to come to terms with the new borders, the new restrictions and the new costs.

However, the legal framing of Article 50 is such that it is more difficult for the UK to secure time extensions to the final departure date. 

An extension to the two-year negotiating deadline requires unanimity among the member states, whereas agreement on a deal itself requires only a form of majority. Where goodwill is absent, unanimity is almost impossible to attain.

While we here in Ireland are understandably preoccupied with Brexit and its consequences, the fractures emerging in the EU are barely registering where we have our other most important international relationship – the US.

From speaking to US business people in New York and Boston this week, it is not because the EU is not an important trading entity for the US. Nor even is it because US politics are even more colourful at the moment than anything Europe has to offer. 

The lack of awareness is because there is no US frame of reference against which to measure the implications of the UK leaving the EU.

In terms of fiscal and banking policy, the US approach is far more cohesive because the US states are truly united. 

The term “common currency” is only applied to the euro because not everyone has adopted it. It wouldn’t even occur to anyone in the US to describe the dollar as a “common currency”. 

But on the other hand, EU state aid rules equalise the ability of member countries to compete with each other in terms of direct tax and financial incentives.

This is not so in the US. Massachusetts advertises its life sciences’ tax incentives, Delaware has special tax reliefs for start-up companies, Utah offers tax credits to companies setting up in enterprise zones – the list goes on. The US is like an EU single market without state aid rules.

Nor does the US constitution have a comparable process to Article 50 which could allow a state to leave the union. The US federal system inspires far more loyalty than any arrangement the EU institutions might ever aspire to secure from its own member states. 

It is most unlikely that the likes of California or Texas could ever vote to leave the US because they want to “take back control” as the UK did. It would not be to their mutual benefit to do so.

The concern now must be that even if the current diplomatic spat between Brussels and Westminster can be resolved (and I suspect it will be), a line has been crossed. There will be no expectation on either side of anything other than naked self-interest in the Brexit negotiations.

This will come at the expense of mutual benefit, which was the whole purpose of being an EU member in the first place.

Brian Keegan is director of public policy and taxation at Chartered Accountants Ireland.

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