When you have eliminated the impossible…

A quick thought on the news that the UK “offer” has been agreed by Cabinet (see Robert Peston).

One thing that has been underdiscussed in all the arguing about the Irish border issue is that the core principle of the Good Friday agreement is cross-community consent. The agreement foresees that there can be no change in the status of Northern Ireland without the consent of both communities, and the agreement itself was subject to an act of public consent in the form of a referendum. This is crucial to the whole project. Cross-community consent offers a guarantee to the Unionists that they cannot be sold out by the British, but it is more than just a Unionist veto. To say that there can be no change without cross-community consent is also to say that there can be change, if such consent were given. In taking imposed change off the table, it puts the possibility of change through consent on it.

This is sauce for the goose and for the gander. Stephen Bush on the New Statesman has repeatedly pointed out that there are precisely three options:

a) a land border
b) a sea border
c) no border

The problem with both a) and b) is that they both represent a change in the status of Northern Ireland. I suppose a real sophist might try to claim it wasn’t substantive change, but I can’t see it washing with anyone. If you are committed to the GFA, like all British and Irish political parties, you can’t really support either unless you think you can convince the Unionists to accept b) or the Nationalists to accept a). Neither is realistic. It is not just that the DUP would hate b) or Sinn Fein a) – neither option is acceptable in terms of the GFA because both involve a change in the status of NI imposed on one community or the other.

With a) and b) ruled out that leaves only c), no border. Even the much mocked DEXEU paper on drones, balloons, and such is a sort of twisted acceptance of this point. The point of a “frictionless” or “invisible” border is that it is very like no border. This leads us to a further trilemma. The DUP, and indeed the British government, has acquired three commitments:

1) the Union
2) the GFA
3) Brexit, defined to exclude the customs union

The first is existential. The second is extremely important. DUP ministers, members, and voters benefit from peace and the open border. The third was entered into verbally when Theresa May chose to up the rhetoric at the 2016 Conservative conference, and is not binding in any way. If the first cannot be given up, the second would be extremely costly to give up, and the third merely embarrassing, what do you think will give? How does your answer change now the government has agreed to pay up?

This is why I have not been particularly worried about the Irish element of Brexit, and why I think we’re staying in something.

Brexit and Airlines

About a week before the UK government triggers Article 50, and the stories are just rolling out about taking control how difficult untangling the UK from the EU is going to be, how much business is going to head across the Narrow Sea (and to a much lesser extent, across the Irish Sea), and how very little influence the UK government is going to have on the process.

EU chiefs have warned airlines including easyJet, Ryanair and British Airways that they will need to relocate their headquarters and sell off shares to European nationals if they want to continue flying routes within continental Europe after Brexit.

The Guardian adds a little British understatement, “The ability of companies such as easyJet to operate on routes across the EU has been a major part of their business models.” Indeed.

Some airlines have started to seek headquarters within the EU and to restructure their ownerships. EU holding requirements could include “the forced disinvesting of British shareholders.” At least some business leaders were hoping the problem would go away. Because reasons, I suppose. “EU officials in the meetings were clear, however, about the rigidity of the rules, amid concerns at a senior EU level that too many in the aviation industry are in denial about the consequences of the UK’s decision to leave the bloc.”

Getting a new agreement won’t be easy, either. At present, the European Court of Justice is the final arbiter of disputes that arise under the agreements that cover air travel within Europe. The current UK government has signaled that it wants to leave the ECJ’s jurisdiction entirely. And of course undoing a multilateral agreement opens the door for some states to assert their individual interests in negotiating a new one: Spanish diplomats have said that they will not sign on to any international accord that recognizes the airport in Gibraltar. Somebody might be taking back control.

This is shaping up to be a very good couple of years for corporate relocation businesses, and possibly for people looking to sign on at the new headquarters locations replacing folks who were unwilling or unable to leave the UK when their jobs picked up and went.

Brexit and Banks

With Prime Minister May due to trigger Article 50 eight days from now, shit’s about to get real the clock is about to start ticking, not least for the huge financial center in London. Nothing in the present UK government suggests that they will be able to negotiate an amicable separation in the twenty-four months before they are unceremoniously bounced from the European Union. (Less actually, as agreements will have to be finished early enough for the relevant bodies to vote on their approval.) Hard Brexit, here we come.

Likewise, I don’t see any reason for the 27 to let London continue to have the same access to EU financial markets that it had when the UK was a member of the Union. Prudent bankers came to similar conclusions long ago, and indeed Bloomberg finds that plans to move people and capabilities into the remaining EU are taking concrete shape. Frankfurt and Dublin are the likeliest winners: Frankfurt is the largest financial hub on the continent, and home to the European Central Bank; Dublin is the only English-speaking alternative. (At least until Scotland joins the Union.) This was always the way to bet, and reporters’ talks at individual banks are adding micro details to the macro framework.

“Bank of America Corp., Standard Chartered Plc and Barclays Plc are considering Ireland’s capital for their EU base to ensure continued access to the single market, said people familiar with the plans, asking not to be named because the plans aren’t public. Goldman Sachs Group Inc. and Citigroup Inc. are among banks eyeing Frankfurt, other people said.”

Two Japanese institutions Bloomberg spoke with are considering Amsterdam; Morgan Stanley, local patriots, insisted that New York would gain as they and other institutions re-allocated resources away from Europe entirely. Brexit is going to put a huge dent into one of the UK’s most important economic sectors. Taking back control!