Via Zerohedge

Authored by Steven Guinness,

Little has been made of Brexit since the UK ceremoniously left the EU on January 31st and entered into a transition period. Amidst the coronavirus outbreak, multiple rounds of negotiations on the future trading relationship have taken place, with round three having culminated earlier this month.

Rounds one and two yielded no tangible progress. The third instalment was a similar story.

Britain’s chief negotiator, David Frost, confirmed as much after talks concluded:

The major obstacle is the EU’s insistence on including a set of novel and unbalanced proposals on the so-called “level playing field” which would bind this country to EU law or standards, or determine our domestic legal regimes, in a way that is unprecedented in Free Trade Agreements and not envisaged in the Political Declaration. As soon as the EU recognises that we will not conclude an agreement on that basis, we will be able to make progress.

Frost labelled the EU’s position as an ‘ideological approach‘, one that must change by the time the fourth round of talks begin on June 1st.

The EU’s lead negotiator, Michel Barnier, countered Frost’s perspective by declaring that ‘without a level playing field there will be no economic and trade partnership agreement.’

To make progress in this negotiation – if it is still the United Kingdom’s intention to strike a deal with the EU – the United Kingdom will have to be more realistic; it will have to overcome this incomprehension and, no doubt, it will have to change strategy.

In the public eye negotiations are deadlocked. Both sides are insisting that the other must change course with just six months of the transition period remaining. As part of the withdrawal agreement, Britain has the option of requesting an extension to the transition, but must do so by the end of June. Failure to do so will mean that if a new trading relationship is not ratified by the end of the year, the UK and EU will trade on World Trade Organisation terms come the start of 2021, a consequence of which will be higher tariffs.

But extending the transition is not as straightforward as just asking for more time. When the withdrawal agreement became law, the government also wrote into legislation that the transition could not be extended beyond this year. To go back on this, Boris Johnson’s administration would have to repeal a law that they themselves devised and put into place.

As Britain was preoccupied with Covid-19 lockdown measures, IMF Managing Director Kristalina Georgieva (who supported ratification of the withdrawal agreement) took the opportunity to effectively recommend that the transition period be extended if the UK and EU fail to agree terms in the short term.

My advice would be to seek ways in which this element of uncertainty is reduced in the interests of everybody, the UK, the EU, and the whole world.

Georgieva’s warning followed on from the cautious words of the President of the European Commission, Ursula von der Leyen. Even before the transition period came into effect, von der Leyen was extending overtures to the UK, insisting she would be satisfied to prolong negotiations into 2021.

I am very concerned about how little time we have. It seems to me that, on both sides, we should seriously consider whether the negotiations are feasible in such a short time.

I think it would be reasonable to take stock in the middle of the year and if necessary, agree on an extension to the transition period.

As it stands, there is no sign that the government will roll back on their own legislation. An indication of this came immediately after Kristalina Georgieva’s intervention, when the Prime Minister’s spokesman told the media that extending the transition past 2020 would ‘keep us bound by EU legislation at a point when we need legislative and economic flexibility to manage the UK response to the coronavirus pandemic‘.

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Britain’s chief negotiator David Frost concurred:

We will not ask to extend it. If the EU asks we will say no. Extending would simply prolong negotiations, create even more uncertainty, leave us liable to pay more to the EU in future, and keep us bound by evolving EU laws at a time when we need to control our own affairs. In short, it is not in the UK’s interest to extend.

Here is where Brexit and Covid-19 begin to converge. Last week it was announced that government borrowing for the month of April, all in response to the Coronavirus, came to £62.1 billion. By comparison, borrowing in April 2019 amounted to £10 billion. The untold pressure on public finances has reinforced the government’s position of not seeking any extension to the transition period. The prevailing narrative now is that the country can no longer continue paying into the EU budget at a time when all economic resources need to be concentrated into responding to Covid-19.

Leaving the EU with no new trading agreement has been made more likely because of the financial fallout of the pandemic.

You might expect then that with negotiations floundering, those who pushed for a second referendum on the withdrawal agreement would now be campaigning for the transition to be extended. Whilst some on the margins of British politics are doing that, one significant figure has stopped short of calling for more time. His name is Keir Starmer, leader of the opposition Labour party and member of the elitist Trilateral Commission.

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Starmer first appeared on the membership list of the Trilateral Commission in 2018. According to the latest list, dated January 2020, Starmer remains a member. Out of 650 members of parliament, Starmer is the only one directly affiliated with the Commission. Coincidentally or not, he now has an elevated platform within both the political and media spheres.

Rather than repeat myself, I would direct any readers who are interested in learning some rudimentary facts on the Trilateral Commission to a couple of articles I published on the group (Order Out of Chaos: A Look at the Trilateral Commission and The Trilateral Commission: Using Crisis as an Opportunity to Reform).

In an interview held earlier in the month on LBC radio, Starmer was asked by host Nick Ferrari if he supported an extension to the transition period. Here was his response:

The government says it’s going to get negotiations and a deal done by the end of the year. I’ve always thought that’s tight and pretty unlikely, but we’re going to hold them to that and see how they get on. They say they’re going to do it.

I would seek to ensure that the negotiations were completed as quickly as possible. I’ve not called for a pause because the government says it’s going to get it done by the end of the year. So let’s see how they get on.

At this point Nick Ferrari interjected, and suggested Starmer was communicating mixed messages. ‘Are you riding both horses there?‘ asked Ferrari. ‘With respect you’re saying you don’t think it’s practical but then you wouldn’t press pause.’

Starmer replied by saying:

I don’t think it’s practical but we’re a long way from December so we’ll see how we get on. But the government has said we can do it within the 12 months, so let’s see.

Keir Starmer is the man who after many months of prevaricating on the subject came out in support of a second EU referendum, pledging support for staying in the bloc. But now as leader of the opposition, and with the likelihood of a no deal scenario in December having grown, Starmer is not only reluctant to extending the transition period but is willing to watch the government arrive at a situation where they can walk away from negotiations in the autumn and move onto WTO terms. Parliament would have no authority to block this from happening should the time come.

The moment to ramp up pressure for an extension to the transition period is now. The window for extension will be closed in just five weeks time. Yet Starmer sits on his hands.

Keep in mind also that the threat of WTO terms with the EU was one of the reason why Starmer originally came out in favour of remaining in the union. That threat has not gone away. Starmer appears quite relaxed about the little time that remains. He seems as equally relaxed about allowing Boris Johnson’s government to fall on their own sword over Brexit rather than seek to delay the process further.

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For reasons I won’t get into here, I have detailed over the past few years why I believe a ‘hard‘ Brexit scenario benefits global planners. From the evidence I have researched, Brexit has less to do with maintaining the EU status quo at all costs and more about jeopardising pound sterling’s role as a reserve currency. Sterling remains highly sensitive to Brexit developments, and has not recovered from the devaluation seen in the aftermath of the referendum in 2016.

Moves towards a digital currency framework have gained traction over the past four years, to the point where last summer former governor of the Bank of England Mark Carney went on the record as saying that the dollar could eventually be replaced as the world reserve currency by a digital alternative.

The global elite regularly push in their communications the necessity for reforming the ‘architecture‘ of the financial system. What they mean by this is a transition into an all digital construct. To achieve this the current composition of fiat currencies, led by the dollar as well as sterling, will need to be radically changed. This is part of a longer term agenda that ties in with the UN’s sustainable development goals.

In the immediate term we are left with one question: Will the UK renege on their pledge not to extend the transition period? I would say not. I have believed for a while that whatever the end outcome on Brexit, it will be brought about by a political decision made out of the UK.  Global figureheads and commentators alike will say that Boris Johnson had the chance of preventing the imposition of a WTO exit, at a time when the UK is attempting to ‘re-open‘ its economy and repair the damage done to supply chains since the onset of Covid-19.

The EU will continue to offer Britain the opportunity to extend negotiations over the next few weeks, which in turn will largely absolve them of responsibility for the economic fallout of a WTO exit at the end of the year.

Contrary to what some may believe, coronavirus has not made Brexit immaterial. Taken together, Covid-19 and a WTO Brexit are a harbinger for a significant spike in inflation over the coming years.

As the economic devastation brought about by the self imposed lockdown becomes more profound, a WTO Brexit will only compound matters, and put further downward pressure on sterling as a result.