Brexit: EU Negotiators Are Running Out of Time, and Patience

EU's PULSE, WEEK ENDING 11 NOVEMBER

STALEMATE IN THE WESTERN FRONT

The deadline for agreeing on how Brexit will be implemented is getting closer. The European Council has set as its target-date the next Summit of the heads of state or government of the Union, on 14-14 December 2017. But Brussels is getting impatient, after last Friday’s bilateral meeting between the EU and British negotiators.

The meeting was, indeed, cut short, as it seemed that London was not prepared to offer anything new, according to the European chief negotiator Michel Barnier. Barnier has been accusing his British counterpart David Davis of stalling and being vague.

What is certain is that the two parties use different negotiating techniques. Brussels approaches the ‘divorce’ with a technocratic mind, going through ‘rights’ and ‘obligations’, with as much quantification as possible.

London, on the other hand, does not believe in the rounds-based negotiations (last Friday was the sixth round)—which are reminiscent of box matches, or of past negotiations between the West and Saddam’s Iraq or the Ayatollahs’ Iran. Westminster wants to have continuous, rather than fragmented, political discussions and bargaining among equals, instead of ‘accounting’ jargon.

Barnier, however, appears to be focused on money, primarily. Before getting into any political talks, he wants to get a firm commitment from Theresa May’s cabinet that the UK will pay in full its 13% contribution to the EU Budget, of about €30 billion, and to the pension scheme for the EU’s staff, estimated to be close to another €9 billion.

David Davis, UK Brexit Chief Negotiator (below):
Easy does it.

Other issues at the top of Brussels’s agenda are (a) commitment by Britain to observe EU citizens’ rights after the Brexit—particularly family reunification across borders, repatriation to EU states of social security rights by EU workers in Britain, and the supremacy of the European Court of Justice in resolving related disputes; (b) commitment by London to keep the borders between Northern Ireland (UK territory) and the independent Republic of Ireland open, without the built-up of any ‘infrastructure’—that is, without customs and police stations between the countries. It is difficult to imagine London agreeing to such demand, considering that the UK will be no longer part of the Customs Union, and that one of the mandates of the pro-exit voters to their government is to keep tight control on immigration!

EUROPEAN PARLIAMENT: “YES TO AGRICULTURAL CARTELS!”

The European Union seems to be moving towards a totally unexpected direction: it is planning to introduce a set of laws to enable farmers cooperate and fix prices in view of protecting their revenues from the disproportional bargaining power of major intermediaries and distributors.

In a rare move, the European Parliament  (‘EP’) has taken the initiative to bypass the Commission and work together with Member States’ governments to put an end to practices by large food distributors which it suspects as being abusive vis-à-vis the producers.

The starting point in this thinking pattern was apparently a public declaration by French President Emmanuel Macron that France in 2018 will pass laws to improve the economic conditions of farm owners by letting them get around the distributors and sell collectively their produce at a higher profit.

French farmers claim that their income has dropped by 15% in 2015 and 2016 because of aggressive negotiating techniques and unfair distribution practices by supermarkets.

French Peasant Girl: Souvenir de Picardie.
Painting by Jean-François Millet (19th c.).

Allowing the farmers to create collaborative enterprises that will fix prices means accepting selectively the creation of cartels. This is formally against the core principles of the Internal Market of the EU, and of EU Competition Policy—a cherished and heavily protected domain by the Commission (see Treaty on the Functioning of the European Union (‘TFEU’), Articles 101 and 102). There is, however, scope for a window of exemption in the legal texts, generally applicable in the public interest (Article 101(3) TFEU).

Meanwhile, the food distribution industry has just started a campaign to counter the intentions of the EP. Its lobbyists, in Strasbourg and Brussels, are at work to prove that both the consumers and the farmers will lose from any new configuration of the food industry. Prices, they claim, will go up, while the producers’ net profits will nosedive, as they will have to engage in distributing and marketing. Moreover, they argue, EU agricultural subsidies should be abolished, since the farmers will now become an active commercial actor—which, in a free market, should swim or sink on its own merits.

Catalàn Separatist Leader Addresses 200 Mayors in Brussels--Pressure on the EU

LIVE BLOG

Carles Puigdemont has called for an extraordinary meeting in Brussels to address 200 mayors from the region of Catalunya. The gathering began two hours ago and is ongoing. The former Catalàn President and leader of the independentist movement spoke earlier, in Catalàn, English and French. Among other remarks, he questioned the vision of the EU in respect to the various regions of Europe:

"Mr Juncker [President of the Commission], Mr Tajani [President of the European Parliament]: Is this the Europe you want? A Europe with a [Catalàn] government in prison?

The mayors have been arriving since the morning by air from Barcelona and other regional airports. They plan to also issue a petition to the Belgian authorities and to the EU institutions aiming at putting pressure on Madrid's government to free the Catalàn MPs who were incarcerated last week.

Other speakers, and probably Puigdemont too, will intervene this evening.

Live streaming from Brussels here. Source Reuters, courtesy of LaVanguardia

Africa Buongiorno: EU's New Focus Area

"THE MEDITERRANEAN IS A LINK, NOT A SEPARATION LINE", SAYS EP's PRESIDENT

EP President Tajani (left) with Tunisian President Beji Caib Essebsi

Africa is ranking these days high on the Union’s agenda. Antonio Tajani (IT-EPP), President of the European Parliament, made an official visit to Tunisia on 30-31 October to discuss with the country’s leadership some of the common challenges with the EU—migration, economic growth, terrorism.

Addressing the Tunisian Parliament, Tajani praised the people of Tunisia for having solved rather peacefully the political crisis of the Arab Spring, but urged them to remain vigilant and persist on maintaining democracy and the rule of law.

“Let us be the guarantors of the democratic pact [concluded among the political movements of Tunisia at the end of the conflict]. We should strengthen it, because the only alternative to democracy is chaos,” said Tajani.

Tunisia has in the current decade served as departing point for thousands of political and economic refugees from failed African states, such as Libya. Tajani’s visit was, therefore, aimed at persuading the Tunisian authorities to engage in a closer collaboration with the EU in general, and Italy in particular, in order to halt the flux of migrants towards southern Europe.  

But the European Union cannot isolate herself from Africa. Trade and political ties between the two continents go back to longer than four millennia, and African population is expected to at least double in size between 2017 and 2050, according to a United Nations study published in June.

For instance, Nigeria, world’s seventh country in terms of population, will surpass the U.S. in the same timeframe and become the third most populous state.

African American family

The European Parliament envisions a ‘buffer’ role for Tunisia and other Northern African countries, which are willing to cooperate. EU officials are particularly eying Egypt, Algeria and Morocco. Thus, in Tajani’s view:

“The Mediterranean should not be a separation, but a link between the European Union and the African continent because the Mediterranean is the crucible of the values of our civilisation and Tunisia plays a fundamental role in this particular relationship.”

Some of the projects floating in Brussels for controlling immigration from Africa—sponsored primarily by France and Italy—include the creation of safe geographical zones on the African continent for repatriated refugees, sustainable development in the countries that are responsible for this exodus, and financial incentives to local governments and, especially, to those of the ‘transit’ states of Northern Africa.

However, these measures are unlikely to reduce (a) population growth, although the number of births per African woman has declined from 5.1 (2000-2005 period) to 4.7 (2010-2015), per the UN; and (b) propensity for young people to emigrate. The main reasons for this are the permanent very low per capita income, which increases the gap in living standards between Europe and Africa, and the endemic corruption of the leaders of the African continent. The latter phenomenon is, obviously, the cause of the former. The usual EU ‘soft Europeanisation’ approach may, in this case, prove both expensive and ineffective.

Lagos, Nigeria--Hairdresser at work

Technocrats in Brussels will argue that explosion in population, and increasing urbanisation in Africa presents new commercial opportunities for European firms, thus the funds used in convincing local leaders to cooperate should produce solid return on investment. Rationally, this may be accurate. However, the demographic trends in that continent have already attracted some of the EU's main competitors: China, Japan, Turkey. Their presence is already massive in the African countries whose GDP per capita is growing faster, or where there are large reserves of natural resources. 

By the time Brussels's plans are put to work, the EU may be confined to the role of the good Samaritan only.

The Pulse of the EU, Week Ending 4th of November

PARIS TO BEAT SILICON VALLEY IN HIGH TECH--MACRON'S VISION

French President Emmanuel Macron confirmed last week his determination to push forward with his electoral promise: the make of France the world’s new Silicon Valley.

French venture capital firms already began in 2013 intensifying their contribution towards developing a national flora of start-ups, encouraged by former president François Hollande. The effort seems to now be producing results. During the first nine months of 2017 the capital raised for new ventures in the country is 2 billion euros higher than that raised in Britain and Germany. Some foreign technology giants—Cisco and Facebook, among others--have also invested in small technology French companies.

Paris -- City of Light, and of tech start-ups?
(Eiffel Tower, hit by lightning, 2 June 1902 9:20 p.m.)

These good news are, however, insufficient to implement Macron’s vision of a made-in-France Silicon Valley. So his drive will focus on state-funded efforts to ensure that national technology champions can survive and grow quickly. The vehicle for this already exists, in the form of BPI France, state-owned bank, which streams cash to local venture capital firms. It is estimated that in the past four years it has poured 4 billion euros, or one-fifth of the amount consumed by start-ups during that period. BPI France’s scope encompasses, according to its CEO, more than the Hexagon: new tech ventures in Europe and the U.S. have also benefited from its assets.

Other tools in Macron’s bag are: liberalisation of visas and work permits in France for talent from third countries; reduction to 30% of the tax on capital gains for new companies; change of the national labour law as of January 2018 to enable hiring and firing of workers much easier than it is now; facilitation of establishment in France of foreign-owned start-ups; and a few other administrative incentives. France has been considered, indeed, for decades one of the world’s strongest bureaucracies for business undertakings.

There are, of course, many challenges ahead that may force Macron’s government to tune down its enthusiasm. The intended changes in the labour law are already faced with strong resistance by the unions and a large number of legislators; state funding and tax rebates will raise objections from the Parliament and EU Institutions, as France’s budget deficit exceeds the norms of the Eurozone; if the ‘carrot’ from Paris becomes too attractive for British and American start-ups, and funds, to relocate, London and Washington will retaliate with counter measures.

More challenging, however, is to fulfil Paris’s aim to create world champions—tech companies with high valuations: today’s rule of thumb is 1 billion dollars for such pearls. The goal is even more difficult to attain in a country where the state mingles with private enterprise more often than elsewhere in the West.

On the latter point, the French government has in recent weeks defended its plans referring to the example of China, where the state has been behind all major entrepreneurial successes.

But, perhaps, the most critical test will be the return on investment for venture capital firms betting on France’s talent and lifestyle charm. French funds have, over the past three years, achieved an internal rate of return of 6.3 %. This is substantially lower than the return obtained by their British counterparts (13.5%), according to a recent study by PwC with BVCA Private Equity and Venture Capital.

Critics of the Macron plan argue that the model Paris intends to use in this ambitious programme is based on the classic Silicon Valley scenario, which is already reaching, apparently, its own limitations. Moreover, the French project contemplates to implement, in a second phase, the strategy throughout the EU, a hypothesis that does not appear to have been seriously considered so far by many of the other heads of state or government of the Union.

There is also a degree of inconsistency between intent and action: while devising new approaches to lure foreign talent and investment into France and Europe, Paris orchestrates the attacks in the European courts against the global giants of the technologies industry, and is in the process to convince the other member states of the Union to impose heavy taxes on digital companies. The obvious targets are Google, Apple, Facebook, and Amazon. But, experts assert, smaller tech players will inevitably pay their own share in this intimidation campaign. Which means that many will have to seek greener pastures for their own (and their investors’) sake and prosperity.

SETTING THE MIDDLE EAST ABLAZE--ACCIDENTALLY

A Controversial Anniversary: Balfour's Letter to Lord Rothschild

Today is a historical anniversary for Britain and Israel. Exactly one century ago, on 2^nd November 1917, the then Minister of Foreign Affairs of Great Britain, Lord Arthur James Balfour, issued a letter to Lord Rothschild, a pioneer of Zionism, promising his government’s commitment to allow the Jewish community--at the time dispersed all over Europe and beyond--establish a “national home in Palestine.” Palestine was at that time occupied by British armed forces, while the Second World War was being fought.

Theresa May

In an official dinner tonight in Westminster, London, British Prime Minister Theresa May will receive her Israeli counterpart Benjamin Netanyahu. In their reciprocal congratulatory speeches the two heads of government will express, live on TV, their countries’ respective views on what that declaration really meant at the time—and now.

The content of that simple letter—the result of a miscalculation by Britain about the influence of the European Jews on Kaiser’s strategic thinking, according to many historians—has become over several decades an item of controversy and of bitter disputes among Israelis and Arabs. London has, in recent decades, systematically been accused of favouring the Zionist cause to the detriment of the rights of the native Palestinians.  

One must, however, examine the controversy with historical accuracy, in order to properly appreciate the role of the UK in the creation of Israel—the final outcome of all this, which is the true root of hatred in that part of the Middle East. As Jonathan Marcus of the BBC pointed in an editorial today:

"Analysis: Competing narratives

"There is a huge amount of fuss being made about the centenary of the Balfour Declaration, in part misguided. 

"For Balfour, and indeed Britain, did not create a Jewish state. In fact in the years leading up to Israel's independence in 1948, Britain, as the mandatory power, did a good deal to thwart Jewish statehood, torn between the competing claims of Jewish and Palestinian nationalism.

"Much of the current focus on the Balfour Declaration is due to the fact that it supports the competing narratives of the Israeli government and the Palestinian leadership.

"For the Israelis it highlights the legitimacy of the Jewish national enterprise, while for Palestinians, it underscores the role of the major powers in helping to create Israel, while - in their view - the legitimate Palestinian aspirations to statehood were ignored or side-lined.

"Thus both sides have a very different interpretation of the declaration's significance - one that serves today's arguments about one of the region's longest unresolved struggles."

*** 

Lord Balfour’s text corroborates the analysis put forward by Marcus. Britain cannot be blamed single-handedly for what happened in 1948 and afterwards. Other ‘great powers’ have been much more influential in reshaping the Middle East—then, and again now!

Lord Balfour (centre).
Lord Edmund Allenby (left), Sir Herbert Samuel (right).
Allenby captured Jerusalem in December 1917.
Samuel was the first British High Commissioner in Jerusalem (1920-25)

The European Union, including Britain while she is still ‘in’, should address the Israelo-Palestinian conflict with lucidity and fairness, based on historical data and on rational interpretation of the intention of Balfour when he signed that document. But this is unlikely to happen. The Union is less united than at any time before, in its 66 years of existence, as ongoing developments in many aspects witness. The vagueness in dealing with the Palestinian issue is but a note in the cacophony. It does not disturb the hearing of the Eurocrats.

Balfour Declaration 1917

November 2nd, 1917

Dear Lord Rothschild,

I have much pleasure in conveying to you, on behalf of His Majesty's Government, the following declaration of sympathy with Jewish Zionist aspirations which has been submitted to, and approved by, the Cabinet.

"His Majesty's Government view with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine, or the rights and political status enjoyed by Jews in any other country."

I should be grateful if you would bring this declaration to the knowledge of the Zionist Federation.

Yours sincerely,

   Arthur James Balfour

Lord Balfour's letter of 2nd November 1917

But who needs Balfour or May today?

U.S. President Trump with Israel's PM Netanyahu, Jerusalem, 23 May, 2017