Brexit & UK trade, Brexit comment

Brexit or no Brexit – the answer will lie with the EU

UK opposition Labour party leader Jeremy Corbyn meeting Michel Barnier, the EU’s chief Brexit negotiator in Brussels. 13 July 2017.

Guy de Jonquières muses on the ironies of Brexit politics.  A project claimed to restore Britain’s sovereignty has handed control over the country’s destiny to those whose clutches it is trying to escape.


The idea began circulating earlier this summer as rumours and muttering in the corridors of Britain’s Parliament. Then, earlier this month, Sir Vince Cable, a former business secretary and likely next leader of the small pro-EU Liberal Democratic Party, voiced it out loud, telling an interviewer: “I’m beginning to think that Brexit may never happen.”


Tide turning?


It is not hard to see why. Just over a year after a slim majority of the electorate voted at a referendum to leave the European Union, the consequences of their decision are starting to sink in. They appear vastly more costly, more complex and more burdensome than most voters could possibly have imagined when they cast their ballots, while the benefits from Brexit are increasingly hard to identify.


Twenty months before Brexit is due to happen, it is creating deep uncertainty that is already casting a chill over the economy. Growth is slowing; business investment is faltering; banks and other services companies are preparing to shift operations abroad; skilled workers from elsewhere in the EU are returning home; domestic consumption is weakening and living standards falling as earnings lag behind price inflation caused by the steep fall in sterling since the referendum.


Meanwhile, Leavers’ taunts that EU membership “shackles Britain to a corpse” look increasingly ill-judged, as the bloc’s accelerating growth rate outstrips the UK’s. On top of that, this month’s political endorsement of a draft trade agreement with Japan has punctured Leavers’ claims that the EU is too slow-moving to forge big deals and that the UK can do better on its own.


Leave leaders are starting to sense that the tide may be turning against them. Downplaying earlier claims that Brexit will unleash economic boomtimes they are now warning instead – with just as little supporting evidence – that staying in the EU would trigger an angry political backlash. Suddenly, their promises of a better tomorrow have turned into Project Fear. Even Dominic Cummings, who masterminded the successful Leave campaign, has recently called the referendum “a dumb idea” and conceded that Brexit could, after all, be a mistake.


Leavers’ hopes that Brexit will trigger the break-up of the EU have also been confounded by Emmanuel Macron’s victory in the French presidential election and by ebbing support for right-wing populist movements elsewhere. David Davis, an enthusiastic Leaver and the minister repsonsible for negotiating Brexit conceded this month: “’I don’t think anyone is likely to follow us down this route’


Amid all this, Prime Minister Theresa May’s embattled Conservative-led government is struggling to remain afloat, after losing its majority in an election that she called explicitly seek a mandate for Brexit. She now faces an uphill battle to win parliamentary approval for a legislative programme so overloaded with Brexit-related business that it leaves little scope for any other big policy initiatives over the next two years, and possibly much longer.


“Horror show”


Britain’s depleted civil service is also coming under mounting pressure. Brexit will require it to establish dozens of national agencies to replace EU regulators, while having to renegotiate as many as 800 treaties and international agreements covering issues as disparate as aviation and animal health. Unless it does so, vital infrastructure such as air transport and ports could be paralysed overnight when Britain leaves the EU in March 2019, while trade barriers against its exports could rise sharply.


This week, the National Audit Office, the government spending watchdog, warned that poor official co-ordination and inadequate systems could leave Britain unable to impose automated customs controls after Brexit, requiring imports to be checked manually. That, it said, would create “a horror show”.


On any rational assessment of national self-interest, all this might seem to constitute an overwhelming case for abandoning Brexit as mission impossible. That is the view of most economists, of a growing number of businesses and of many of Britain’s European partners, bewildered that a country once renowned for level-headed pragmatism appears to have become a Ship of Fools.


Can the ship be turned around and steered back to a safe harbour before it is too late? The answer is more likely to be found by reading the political runes than in studying the economic odds. On the positive side, the inconclusive election has thwarted Mrs May’s efforts to stampede the country into an extreme “hard Brexit” – a brutal divorce from the EU, for which there is no longer a parliamentary majority – and her ill-considered threats to storm out of negotiations with Brussels. That has, perhaps, created room for fresh options and opportunities for creative compromise.


Against that, the political fault lines in Westminster remain deep and complex. Mrs May’s authority and decision-making capacity have been gravely weakened, leaving her and her party prey to the conflicting demands of an ideologically driven anti-EU right wing, a clutch of EU enthusiasts and a mass of  Tory MPs whose views sit somewhere between those two extremes. She must also bend to the wishes of the deeply conservative small Northern Irish party on which she relies for a slender working majority.


The result is a profound muddle that has left Mrs May’s government – more than a year after the referendum – stumbling around in search of a coherent strategy for exiting the EU and lacking any clear vision of or model for the kind of country it wants Britain to be after it does. And, with serious negotiations with the EU 27 still to begin, the clock is ticking.


The opposition Labour party is also deeply split. Jeremy Corbyn, its leader, and some of his senior colleagues appear to favour a “hard” Brexit, though they will also seek to gain political advantage by thwarting government legislation. However, some 30 Labour members of parliament are committed to seeking a “soft” Brexit that would keep closer links with the EU and are trying to build a cross-party alliance to achieve it. They may well find support among the Scottish National Party and the Liberal Democrats, the only party demanding a second referendum on Brexit.


Profound muddle


The party political balance therefore looks inherently unstable. It might not take a lot to tip it – and public opinion – in unpredictable directions. A severe economic downturn leading to a steep rise in unemployment, a sterling crisis or an exodus of foreign investments and jobs to the rest of the EU could all change the public mood and prompt serious second thoughts about Brexit. At worst, though, it could also create fertile ground in which authoritarian nationalism would flourish.


In truth, such is the state of Britain today that nobody knows. But in any event, the harsh truth is that what Britain does or does not want its future relationship with the EU to be has become something of a sideshow. The country can make things much worse for itself, if it chooses. But its capacity to make them better is limited.


If the government gets its act together quickly, it may be able negotiate an agreement that would prevent it crashing out of the EU, with disastrous economic consequences.


It may also be able to secure a transition period during which longer-term arrangements could be thrashed out – though any conceivable deal would be less advantageous economically than staying in the EU.


However, the reality is that that last option is not Britain’s to choose. The only way to stop Brexit would be to revoke its notification under Article 50 of the Lisbon Treaty of its intention to leave the EU.


But it is unclear, to say the least, that the UK is entitled to do that. Though the Treaty does not rule it out, it does not authorise it either: indeed, it is mute on the matter, creating a legal grey area. Many lawyers believe that, if the European Court of Justice were asked to adjudicate, it would simply throw the question back to governments of the EU 27 to decide.


What would happen then is anyone’s guess. Leaders including Germany’s Angela Merkel, France’s Emmanuel Macron and Donald Tusk, president of the EU Council, have hinted that they might be prepared to welcome the UK back if it changed its mind. However, their statements fall far short of firm guarantees. In any case, all other EU members would have to agree and would be likely to set stiff conditions, such as withdrawal of the UK’s budget rebate.


The one certainty is that Britain would have limited influence over events. The whip hand lies with Brussels and with other EU capitals – something that UK politicians have been slow to grasp.


That, perhaps, is the bitterest irony of Brexit: a project claimed by its backers to restore Britain’s sovereignty has handed control over the country’s destiny to those whose clutches it is trying to escape.


Guy de Jonquières is a senior fellow with the European Centre for International Political Economy, an associate with LSE IDEAS and a former World Trade Editor with the Financial Times. He tweets at @guydej1




Views expressed by external contributors to Borderlex are those of their authors only.


One Comment


    You are right on all points, Guy.
    Personally I don’t look beyond the immediate – the three points that the EU has stated must be resolved at the start before one can go into the Art. 50 substance – and only after that will the future trade relationship be discussed. I guess Davis has read this but he seems to be working on the principle that it will all go away if he sticks to his own approach. I very much doubt it, the chances of humiliating U turns are endless.

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