20 Billion, 100 Billion, or more?

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If you read last week’s post: Brexicon, you’d notice I dropped a lot of definitions. Well, today I’d like to elaborate on that of the Divorce deal/settlement. Why divorce? I mean David Cameron wasn’t married to Angela Merkel, they are not deciding how to share custody of their 26 children.  The term divorce implies that there was some kind of marriage of equals, and that it was the UK, and not the remaining 27 that has the largest income and therefore needs to support the party with the lesser income.  That is true neither on an individual, nor on a group level.

The reality is that far away from being a marriage, the true relationship between the UK and the EU is that of a members club.  When you leave a club, you stop paying your dues as of the day in which you leave, and you stop enjoying the benefits of the club.Let’s imagine we are talking about a golf country club called the EU Golf, and in exchange for a fee you are entitled to use the greens, the club house, and eat a subsidized dinner. You are invited to the AGM, you help set the bylaws, etc. One day you decide you’ve had enough of it, you don’t get a lot of value for money, you realize that you are subsidizing many members; and to top it off, there are a few other clubs out there of which you’d like to become a member. So you quit.

Next thing you know, you get a bill for finishing painting the club house, another one for 3 years worth of gardening, you are on the hook for the caterer’s pensions, and by the way you are asked to pay for a new swimming pool to boot. How would you react?

Would you sign a check? Or would you tell the to “go whistle” like Boris Johnson did in 2017?

The sole fact of using the term divorce implies future unlimited payments, shared custody of projects, paying for subsidies, alimony (in the form of contribution to bureaucrats’ pensions, or unfinished projects). By using divorce to describe Brexit, the UK media is putting in Britons’ minds that paying a large sum of money for leaving the EU is not only a moral, but legal obligation.  The UK doesn’t need to pay for subsidized meals it won’t eat, or for the pool it won’t swim in, the same way any country club member withdrawing his membership wouldn’t be expected to keep on paying fees for using the club facilities once it leaves.

So, what else? well, Brexit means exiting the EU, and the EU is comprised by several entities and agreements: Free Trade Agreement, Customs Union, European Court of Justice, etc.  EU Brexit negotiators have said in no uncertain terms that you get all or nothing, and that in order to get them you need to accept the 4 freedoms.  So, I would expect the UK to be out of all of the above once it leaves the EU, as do all the people who voted for Brexit, and those who didn’t but have an understanding of how the EU works.  There is though, a small group, who are still trying to hide the sun with one finger, and believe that they will be able to secure some sort of deal that would give access to some of the agreements mentioned above.

Most importantly, the customs union: if the UK leaves the EU, but remains part of the customs union, it basically would mean it wouldn’t be able to set its own trade deals with the rest of the world.  Because by remaining in the customs union, it will have to apply the same taxes, duties and quotas as everybody else in the EU towards any new country with which the UK will try to sign up a free trade deal.  The worse part is that by being out of the EU, the UK will have no input in the outcome of the negotiations, it would just have to take whatever is thrown at it by the other countries.

Finally there is the Irish border issue. There has to be a border, you cannot have 2 different countries with different governments, different currencies, different tariffs, quotas, and tax regimes, different migration laws without of any border whatsoever.  It is just impractical.

In my next post, a guide to a brexiting, I will discuss the best way for the UK to get out of the EU, and make the most out of Brexit.

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