Into the Brexit Abyss
For the UK, anything short of complete separation from the EU would be akin to the situation in which France found itself after withdrawing from NATO’s military command in 1966. Until France reversed that decision in 2009, it remained bound by the constraints of other NATO members, but lacked any say in political or military decisions.
PARIS – I have a British friend who never travels without his Irish passport, at least not since June 2016, when the United Kingdom voted to leave the European Union. “Just in case,” he likes to say. “You never know what may happen.”
Ever since Brexit, the Irish passport has become something of an insurance policy against irrationality, and represents, for my friend at least, the possibility of retaining his European identity. If things turn out badly in London, he reasons, there is always Dublin.
Hedging has become a favored approach of those seeking to make sense of the British divorce from the EU. The agreement reached this month between UK and EU negotiators has only heightened the unease. On the one hand, that “breakthrough” set the stage for talks on the post-Brexit relationship trade to commence, seemingly making separation inevitable. On the other hand, there is a belief that nothing is set in stone, and that finality will come only after many thorny issues are resolved.
The physical boundary between Northern Ireland, which is part of the UK, and Ireland, which will remain in the EU, remains among the most complex problems. That issue risks becoming the twenty-first-century equivalent of what the Schleswig-Holstein question was for European diplomats in the nineteenth century – a recurring nightmare.
My friend is clearly divided between hope and fear. Paradoxically, his optimism stems from a conviction that the threat of chaos will push the British to reconsider their choice, as John Bull’s pragmatism ultimately returns and prevails. A second referendum, he and others believe, might even be in order.
Beyond placing hope in the revisionist power of chaos, the “Remain” camp is betting that “Leave” supporters will ultimately realize the folly of a “soft” Brexit, and retreat. Anything short of complete separation from the EU would be akin to the situation in which France found itself after withdrawing from NATO’s military command in 1966. Until France reversed that decision in 2009, it remained more or less bound by the constraints of other NATO members, but lacked any say in political or military decisions.
Today, Britain appears to be following a similar trajectory. A “soft” Brexit will not necessarily ease the economic pain of divorce, but will undoubtedly be politically frustrating for both supporters and opponents. And, after having been asked to express their preference, voters could conclude that anything but a “hard” Brexit would be illegitimate and leave the UK stuck between two stools.
The Brexit debate reveals one of the major dilemmas of democracy. What is to be done when a country is deeply divided on a key, even existential, question?
Authoritarian regimes do not face this quandary, at least not outwardly. The leadership decides. However rash a policy might seem to those with representative governments, the “people” in an illiberal order either bend to authority, or mobilize to break it.
In Britain, a small majority voted in favor of Brexit, plunging the country into a state of confusion, which is bound to continue, regardless of what happens in negotiations with the EU. Earlier this month, a study published by YouGov found that British citizens remain as divided on Brexit as they were when they voted last year. It is as if the debate has simply become frozen.
This is partly because views on European integration are tied to education, social status, age, and geographic location. No matter how talented UK and EU negotiators are, there is no compromise that will close these gaps completely. The objective, therefore, should not be to find the best solutions, but the least bad ones. What these will look like remains to be seen; but, at the very least, the “Leave” camp must feel that their votes were respected, while “Remain” supporters need to be convinced that the worst has been avoided.
For now, Britain seems to have accepted that the EU’s demands are not irrational or unacceptable. The UK will pay a premium – some £40 billion ($53 billion) – for its divorce from Europe. In return, the UK will have two years to untangle the numerous threads that tie Britain to the continent.
For those who place their faith in chaos, it is hard to see how that will help. A party of “Bregretters” – those who regret Brexit and could push for its reversal – does not exist. Nor has a strong political figure emerged to lead such a coalition. Former Prime Minister Tony Blair might have pulled this off earlier in his career; after his disastrous decision to support the Iraq war, however, his image is in tatters.
So, despite recent progress and commitments to move Brexit talks forward, nothing about the process is certain, except, perhaps, that it will become more, not less, chaotic as the two-year clock ticks down. That could be bad news for Britain, for Europe, and for democracy. Then again, as my friend with the Irish passport likes to say, you never know what may happen.
Fake Brexit or No Brexit
If a hard Brexit is economically unacceptable to British business and Parliament, a soft Brexit is politically unacceptable to EU leaders, and a fake Brexit is unacceptable to almost everyone, just one alternative remains: no Brexit. That would mean revoking Britain’s withdrawal notice under Article 50 of the Treaty on European Union.
LONDON – Since last year’s Brexit referendum, the United Kingdom has been likened to a suicide who jumps off a 100-storey building and, as he falls past the 50th floor, shouts “so far, so good.” This comparison is unfair to suicides. The real economic and political message today is “so far, so bad.”
The “deal” to begin negotiations for a post-Brexit relationship, announced at the EU summit on December 15, followed Prime Minister Theresa May’s capitulation on all of the demands made by European leaders: €50 billion ($59 billion) of budget contributions, European court jurisdiction over the rights of EU citizens in Britain, and a permanently open border with Ireland.
The last concession was a game changer. The open border in Ireland has forced May to abandon her promise to “take back control” from the EU and its regulatory framework, as confirmed in the summit communiqué: “In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation.”
The result of this crucial concession on Ireland is that both scenarios usually proposed for Britain’s relationship with the EU can now be dismissed. With no parliamentary majority to revoke the agreement, a “hard Brexit,” in which Britain breaks free of EU regulations and trades simply on the basis of World Trade Organization rules, is no longer possible. And a “soft Brexit,” which attempts to preserve the commercial benefits of EU membership without the political obligations, is equally impossible, because European leaders reject any such “cherry-picking” – and now have the whip hand over Britain.
If hard and soft Brexit are both excluded, what other options are there? The obvious one, apparent after May’s failed election gamble, is some form of associate EU membership, similar to Norway. Britain would retain many of its current commercial privileges, in exchange for complying with EU rules and regulations, including free movement of labor, contributing to the EU budget, and accepting the jurisdiction of EU law. While May foolishly rejected all three of these conditions early this year, the likely result of the Brexit negotiations will be to blur all her “red lines” out of existence.
While businesses, investors, and economists would welcome such a Norwegian-style “fake Brexit,” it would carry a huge political cost. Britain would have to adhere to EU laws, regulations, and legal judgments in which it would no longer have any say. Instead of a rule-maker, the United Kingdom would become a “rule-taker” – or, in the emotive language adopted recently by Brexit hardliners, Britain would be reduced from an imperial power to a “vassal state” or a “colony” of the EU.
This “rule-taker” status is what the UK has already requested for a two-year “transition period,” beginning in April 2019. May claims that this will be a “strictly time-limited” arrangement, while she negotiates a free-trade agreement with the EU. But the EU has repeatedly made clear that two years is too short a period to negotiate even a simple FTA, never mind the “imaginative, bespoke” deal that May is seeking.
In truth, there is almost no chance of Britain ever negotiating the “deep and special partnership” May has promised. It is simply inconceivable that European leaders would offer Britain’s service industries access to the EU single market without imposing the legal and budgetary conditions accepted by Norway and Switzerland.
What, then, will happen at the end of the transition period in April 2021? The only plausible answer is a further transition, if only to avoid an economically devastating rupture in trade regulations just before the UK general election due in 2022. And, assuming the transition is extended from 2021 to, say, 2023, aren’t further extensions likely, probably evolving into a quasi-permanent arrangement? Norway’s EU relationship via the European Economic Area, also designed as a brief transition, has now lasted 24 years.
This “Hotel California” scenario, in which “you can check out any time you like, but you can never leave,” would ultimately enrage both Brexiteers and Remainers. So what are the other options?
If a hard Brexit is economically unacceptable to British business and Parliament, a soft Brexit is politically unacceptable to EU leaders, and a fake Brexit is unacceptable to almost everyone, that leaves just one alternative: no Brexit.
It is still entirely possible to abandon Brexit by revoking Britain’s withdrawal notice under Article 50 of the Treaty on European Union. This decision would have to be made by Parliament before the treaty deadline of March 29, 2019, and it would probably have to be ratified by another referendum.
A necessary condition for this sequence of events would be the collapse of May’s government, perhaps caused by a Brexiteer revolt against the “vassal state” conditions imposed by the EU during the transition period. Under these circumstances, a general election would almost certainly produce a Labour-led coalition based on a promise to “think again” about Brexit. This was exactly the scenario suggested last month by one of May’s few remaining loyalists, Health Secretary Jeremy Hunt, who became the first senior Tory to admit publicly that Brexit might never happen if zealous Euroskeptics ever rebelled against May.
For the time being, the threat of a Labour government has been sufficient to intimidate Brexit hardliners. But the forced quiescence of the Euroskeptics makes it more certain that May will negotiate a “vassal state” transition that evolves into the Euroskeptics’ nightmare of an inescapable “Hotel California,” based on the Norway model.
As the Brexit hardliners grasp this logical conundrum, they could well decide to bring down May and risk a general election rather than collaborate in Britain’s demotion to “vassal statehood.” The suicide jumper is still falling, and, until he passes the first-floor window, we will not know whether he is attached to a bungee cord.
The UK’s Multilateral Trade Future
With Brexit looming, the UK has no choice but to redesign its future trading relationships. As a major producer of sophisticated components, its long-term trade strategy should focus on gaining deep and unfettered access to integrated cross-border supply chains – and that means adopting a multilateral approach.
CAMBRIDGE – As the United Kingdom negotiates the terms of its divorce from the European Union, it would be wise for the country’s leaders to begin looking further into the future to determine what approach to international trade relations would serve it best. Does the UK really want to hang its future on bilateral agreements with a long list of individual trade partners? Or would it be better off joining existing mega-regional free-trade agreements, while working to strengthen the global multilateral system under the World Trade Organization?
The bilateral approach would demand a huge amount of time and resources, with UK negotiators engaging in a series of discussions with each and every country with which they wanted to do business. The end result would be a tangled network of deals that would only exacerbate the balkanization of the international trading system.
This approach limits gains from trade. For example, the Inter-American Development Bank reports that the trade gains from Latin America’s 33 small regional trade agreements have been meager. The key to boosting those gains, according to the IADB, is to adopt a new strategy that expands access across and within markets.
This suggests that, for the UK, mega-regional trade agreements – which provide access to multiple markets, but entail lower levels of fiscal and regulatory integration than the EU – are the best way forward. After all, it is this approach that would enable UK firms to position themselves in well-developed and integrated supply chains, serving much larger markets than those to which a bilateral agreement would grant them access.
The argument can be made that a multilateral approach is not just the better option; it is the only one. Consider the recent challenges faced by Bombardier, a Canadian multinational that produces 100-150-seat passenger jets using globally sourced parts, including wings made by Bombardier UK, the largest manufacturing employer in Northern Ireland.
Bombardier negotiated the sale of up to 125 of its jets to Delta Air Lines. But the American aviation giant Boeing challenged the sale, alleging that, enabled by subsidies at home, Bombardier was selling the jets at below-market rates, giving the company an unfair advantage. Despite loud protests from Canada and the UK, the US Department of Commerce now seems set to impose an extremely high import tariff of about 300%. The effects of that duty will radiate throughout the supply chain, hitting the 4,200 employees of Bombardier UK.
This experience demonstrates the limitations of bilateral agreements, especially in a world where supply chains and markets extend far beyond the countries involved. The UK may negotiate a bilateral free-trade agreement with, say, Canada, but UK firms will secure few benefits, unless Canadian firms can sell products with UK components to their other trading partners.
The Bombardier episode also highlights the importance of engagement in – and reform of – the WTO, under whose rules the US-initiated proceedings against Bombardier are taking place. The impact of WTO rules and resolution mechanisms is far-reaching, as 164 countries worldwide subscribe to them.
Yet WTO rules have their flaws. For example, they allow exporting countries to provide financial support and subsidies to specific industries; but they also give importing countries the right to use tariffs to offset these subsidies. The WTO has heard countless disputes over its subsidies and dumping rules, and it is now sure to hear one more, over the Bombardier case, because the US and Canada have different ideas about how to interpret these rules.
Though no one is happy with the current WTO rules, efforts to reform them have so far ended in deadlock. But recent high-value cases involving high-tech products like airplanes, semiconductors, and green technologies, including solar panels and biodiesel, make clear that the problem cannot be ignored. And the fact is that concerns over state aid and competition policy can be addressed only in a multilateral forum like the WTO.
Because the UK has historically shown far less appetite for industrial subsidies than its trading partners have, it stands to gain from clear international rules on industrial support and anti-subsidy tariffs. Given this, the UK has a strong incentive to engage with – and help to upgrade – the WTO.
Another multilateral forum that could prove invaluable to the UK is the Trans-Pacific Partnership, a mega-regional trade agreement that provides for duty-free trade and includes modest commitments in areas like state aid and competition policy, without requiring EU-level integration. Though the TPP suffered a setback last year, when Donald Trump withdrew the United States, last month the 11 Pacific Rim countries remaining in the deal committed to keeping it alive.
The TPP does not have to limit its membership to the Pacific; the UK could engage with it. Given its free-trade credentials and international stature, the UK could help to breathe new life into these and other trade negotiations that have been thrown into disarray by the Trump administration’s protectionist impulses.
With Brexit looming, the UK has no choice but to redesign its future trading relationships. As a major producer of sophisticated components, its long-term trade strategy should focus on gaining deep and unfettered access to integrated cross-border supply chains. That means pivoting away from bilateral deals, toward a multilateral approach that enables the country to rebalance and expand its trading arrangements around the world.
The Brexit Tragicomedy
With the United Kingdom's withdrawal from the European Union looming on the horizon, party politics has become increasingly dysfunctional and divisive. But while Brexit will be bad for the EU, and even more so for the UK, it could also serve as a cautionary tale for other countries in need of a domestic political realignment.
PRINCETON – As the rest of the world looks on with a mixture of amusement and pity, British politics in the age of Brexit has come to resemble a soap opera. Can the chaos that is descending on the United Kingdom be good for Europe, or even for Britain? Perhaps, but only in the sense that train wrecks yield lessons about what to avoid.
British political actors know they are putting on a performance, and they speak candidly about life imitating art. Their model is the backstabbing drama of Game of Thrones or the dark comedy of House of Cards (the British version, not the long-winded American imitation that has been canceled in the wake of sexual-assault allegations against its star, Kevin Spacey).
Unlike in Hamlet, where everyone ends up dead, and an outsider (Fortinbras) shows up to reestablish normality, modern fictionalized political dramas never have a satisfying resolution. The Brexit drama, then, is faithfully imitating art: it cannot have anything but a messy conclusion.
Brexit is not just a political upheaval; it is a revolution. Historically, radical political realignments have been rather rare in British politics. One example is the Glorious Revolution of 1688, which produced a two-party system comprising Whigs, who supported the new settlement, and Tories, who resisted it.
That system lasted for more than a century, until the 1840s, when Whig became synonymous with Liberal, and Tory with Conservative. But then, in 1846, the Conservative Party split over curtailing protective tariffs for grain, which was bad for the party’s rural farming base, but good for manufacturing, and for society generally. The resulting political balance lasted for almost a century, until the 1920s, when the Labour Party replaced the Liberals as the alternative to Conservatism.
Arguably, another political realignment may be past due. In the 2000s, British Prime Minister Theresa May played a crucial role in cleaning up the Conservative Party’s image as the “nasty party.” But her Brexit strategy, in which she has avoided taking any clear positions, has transformed the party into something even worse: a dishonest, divided, weak political cabal whose decisions could prove lethal.
Brexit transcends the old two-party divide in British politics. The Conservative Party’s bloc in Parliament includes a small minority who regard Brexit as a disaster, others who want a well-negotiated compromise, and a substantial group who oppose any compromise and have embraced the idea of a clean break with the European Union.
Labour is similarly divided. The party’s leader, Jeremy Corbyn, is hostile to the EU, because it could prevent him from implementing his utopian socialist program. At the same time, many Labour MPs recognize that the EU plays a central role in providing economic opportunities and social mobility for British citizens.
Because no fundamental issues separate pro-EU Conservatives from pro-EU Labourites, practical cross-party cooperation has started to occur. But for any such parliamentary alliance to have democratic legitimacy, it will have to present itself not just as a coalition of likeminded MPs, but as a new political party, with a program to confront realistically the challenges of technological change and globalization.
Similar shifts have occurred in other European countries when established parties and traditions fell apart. In the 1990s, Italy’s largely bipartisan system disintegrated when Christian Democracy was engulfed by corruption scandals and the Communist Party was pulled apart by the collapse of the Soviet Union. Italian politics has been plagued by instability ever since.
In France, President Emmanuel Macron’s new political party, La République en Marche !, has effectively supplanted the old center-right Gaullist party, Les Républicains, as well the center-left Socialists. Still, Macron rightly recognizes that his overhaul of French politics will not succeed unless it is matched at the European level. If a Europe-wide shift does happen, it will owe much to the cautionary tale playing out in Britain.
In Germany, the breakdown of coalition negotiations between the Christian Democratic Union, the Christian Social Union, the Free Democrats, and the Greens suggests that a political realignment may be necessary there, too.
In fact, realignments may have a better chance of succeeding elsewhere in Europe than in the UK. After all, Britain’s malaise runs much deeper than party politics. Brexit has ushered in a revolution in a country without a revolutionary tradition. Withdrawing from the EU will require uprooting a thicket of complex legal and institutional frameworks, around which most political norms and conventions revolve.
So far, every alternative arrangement that has been proposed has been problematic. For example, if Britain liberalizes its trade and regulatory policies, British workers could end up worse off than they were under the EU regime. Inevitably, every concrete step out of the EU is bound to lead to deeper factionalism.
Looking ahead, there are two possible scenarios for British politics. The first is the Hamlet scenario, in which the chaos continues until the UK crashes out of the European single market and customs union. The stage will be littered with political corpses, and an economic disaster will ensue.
In the second scenario, common sense prevails: Macron-style pragmatism takes root in Britain, supplanting the Poujade-style populism that fueled the anti-EU “Leave” campaign. This assumes that Macronism succeeds at the European level, so that it can serve as a foil to the dysfunctional, distorted politics of the United States, Russia, and Turkey, and to the new instability in Germany.
That outcome would also be Shakespearian, recalling nothing so much as All’s Well that Ends Well – one of the bleakest “comedies” in Shakespeare’s oeuvre.
Britain’s Road to Perdition
The British political establishment is now converging on a form of Brexit that will satisfy neither the "Leave" nor the "Remain" camp. With this depressing prospect setting in, some are starting to wonder what it would take for Britons to change their minds about leaving the European Union.
LONDON – Full English Brexit is off the menu. Before leaving the European Union altogether, the British government now wants an “interim period,” in which the United Kingdom would retain the commercial rights of EU membership, while still contributing to the EU budget, observing EU regulations and legal judgments, and allowing the free movement of people. This period would last for at least two years after March 2019 – the official deadline for the Brexit process – meaning that until 2021, Britain would essentially be an EU member state without any voting rights.
In the meantime, British Prime Minister Theresa May’s government, having promised to maintain a “deep and special” relationship with Europe, would try to negotiate a new “treaty-based arrangement” with the EU. But Britain will have a vanishingly small chance of concluding a new treaty in so short a time.
Indeed, come 2021, the UK will still be hurtling toward a “cliff edge”: a full break from Europe, with no alternative arrangement in place to cushion the blow. Politically, that timing would pose even greater risks for May’s government than it faces today, since the next general election must be held by June 2022. So the UK may try to extend the transition period beyond 2022. And as past experience tells us, once an extension is granted, it may never end.
The UK seems to be approaching the scenario I outlined three months ago. May’s fateful decision to hold an early election in June has allowed her opponents to demand that the UK negotiate a transitional arrangement similar to what Norway has as a member of the European Economic Area. The EEA was originally created in 1994 as a temporary framework for various countries preparing to join the EU. But because Norwegian voters rejected a referendum on EU membership 11 months later, the EEA has now lasted for 24 years.
Nobody can predict what will happen in 24 years. But the good news for Britain is that the EU may already be moving slowly toward a two-track structure. To prosper, the eurozone will need to establish a political union. This will leave non-euro countries such as Denmark, Poland, and Sweden forming an outer ring of economic cooperation outside the eurozone. These countries would have membership in the single market, but not in the monetary or political union.
A two-track Europe would be very different from the “two-speed” model that applies to Europe today. In the latter, every country is theoretically heading toward “ever-closer union,” just at different rates. In a two-track scenario, by contrast, Britain could comfortably re-join the outer track along with Norway and, perhaps, Switzerland.
Now for the bad news. A transition arrangement for the UK may be unacceptable to both EU governments and British voters. Committed federalists in the EU want Britain out as quickly as possible, because Britain has long given cover for others – such as Denmark, Poland, and Sweden – to resist deeper integration.
Federalist zealots hate the idea of a two-track Europe. They want to force all EU member states to adopt the euro within the next decade, and to embed themselves permanently into a full-scale political and fiscal union. And they rightly believe that achieving this goal will be easier with Britain out of the picture.
But a transition period is no panacea for the UK either. Britons have already started to get a glimpse of the economic costs of Brexit, as international businesses that once used Britain as a hub for their European operations have started to relocate some of their activities. As the UK government tries to maintain the fiction of a strictly time-limited transition, this process will accelerate further. Moreover, the EU will use the transition period to change its own regulations, so that businesses generating employment and large tax revenues will have to move onto EU territory.
For example, the European Banking Authority and the European Medicines Agency are already relocating from London, meaning the many legal, managerial, and lobbying jobs connected to highly regulated activities such as finance and pharmaceutical research will have to relocate, too. A transition period would thus hit international businesses based in Britain with a regulatory double-whammy: they would be subject to the whims of UK and EU bureaucracies at the same time.
Making matters worse, the promise of a long transition could delay the shift in public opinion needed to reverse Brexit before it is too late. After March 28, 2019, the UK will be officially out of the EU, where economic growth has already started to overtake that of Britain. If it ever wants to be readmitted, it will have to settle for far less attractive terms than what it enjoys today. Not only would it no longer receive budget rebates or special treatment on social regulations; it might even be forced to join the euro.
Even the 48% of British voters who voted “Remain” might reject such humiliating terms. Britain would thus be stuck in limbo – like Norway, but without the oil wealth or social cohesion. As the Labour Party’s trade spokesman has aptly put it, a semi-permanent transition period based on the “Norway model” would turn Britain into a “vassal state.” It would still pay large sums into the EU budget and adhere to EU laws, but it would have no say over how that money is spent or how those laws are made.
In the months ahead, the British public may start to foresee this humiliating endgame. The Norway model will satisfy neither Britain’s elderly, provincial Europhobes, nor the young, urban voters who want to preserve the rights of EU citizenship that they have taken for granted all their lives.
With this depressing prospect setting in, British voters could change their minds about Brexit before their leaders go through with it. But for such a Damascene conversion to happen, the country would have to experience a political or economic crisis large enough to shake public opinion out of its fatalistic complacency. As things stand, Britons have been emulating that beloved national slogan, “Keep calm and carry on.” Before things can get better for Britain, they will probably have to get much worse.
Making the Most of the Brexit Deal
A chaotic Brexit, in which key questions about the relationship between the UK and the EU are left unanswered, may be avoided, but severe political and economic harm could still await both sides. What, then, accounts for the evident lack of urgency in taking the necessary steps to avoid such a scenario?
PARIS – On December 8, the United Kingdom and the European Union’s 27 members settled on some key aspects of the Brexit divorce agreement, opening the way for the decision, on December 15, to open a new chapter in negotiations, focused on addressing the future EU-UK relationship and transitional arrangements. This is good news, not least because it averts the worst-case scenario: a hard Brexit. But what lies ahead is much more challenging.
It seemed for some time that Europe would sleepwalk into hard Brexit. With the UK’s ruling Conservative Party deeply divided, and the EU seemingly unwilling to act strategically, the likelihood of a no-deal cliff-edge scenario appeared high.
Yet, in the end, the UK made critical concessions that allowed the negotiations to move forward. It agreed to pay much more to its EU partners than it had initially announced. And it committed to avoid the establishment of a hard border between Northern Ireland (part of the UK) and the Republic of Ireland (part of the EU), even as Northern Ireland retains full access to the British market.
The deal is a bitter pill to swallow for those who campaigned for Brexit in the name of saving money for the UK’s National Health Service. They will find it hard to tell voters that settling existing commitments to the EU will cost each British adult €1,000 ($1,189), if not more. And the latter-day Leninists who regarded Brexit as a way to complete the policy agenda initiated by Prime Minister Margaret Thatcher will find it hard to reconcile their vision of a deregulated Britain with the continued alignment of Northern Ireland’s regulatory regime with that of the EU.
But the fact is that a hard Brexit would have cost both the UK and the EU far more, in terms of jobs and prosperity. Even the threat of such an outcome was starting to cause damage, as private companies put investment on hold. The political consequences of a hard Brexit would have been dire as well. Both the UK and the EU would have lost substantial global influence at a moment when an erratic US administration is seeking to tear down the existing international order and an assertive Chinese leadership is beginning to use that effort to its own advantage.
Had the UK not acted to avoid such a scenario it would have lost the most, especially if it had ended up relying on a crumbling multilateral trade system to ensure access to foreign markets. In any case, because geography matters, the EU will remain Britain’s main market. And, because size matters, the UK will continue to depend on EU regulations, especially in services.
But averting a hard Brexit is just the first step. The question now is what sort of future relationship the two sides can agree on. And the answer is far from clear.
On the British side, the absence of a coherent vision for the future UK-EU relationship is astonishing. Prime Minister Theresa May’s speech in Florence in September remains the closest approximation on offer, but it left many important questions without a clear answer. And, as May’s legislative defeat in the House of Commons on December 13 underscored, the British government remains too divided to agree on a common Brexit agenda.
There is not much vision on the EU side, either. With the recent deal, Michel Barnier, the bloc’s chief negotiator, scored a tactical victory. But a template for future partnership is still nowhere to be found. The guidelines for Brexit negotiations issued last April by the EU’s heads of state and government certainly did not provide one. Instead, they established red lines, emphasizing the “indivisibility” of the “four freedoms” – free movement of goods, services, capital, and labor – that underpin the European single market. The December 15 declaration does not go much further.
For now, the EU’s negotiating stance continues to be shaped largely by the fear that too favorable an agreement would create incentives for other countries to follow the UK’s lead. Beyond that defensive attitude, lack of policy consensus has resulted in a preference for the status quo.
Policy wonks focus on weighing a “Canada option” (a free-trade agreement for goods) against a “Norway option” (a sort of junior membership in the single market). But both are unsuited to the UK-EU partnership. The Canada option would not address any of the fundamental issues concerning trade in services – a critical omission, given that the UK is a major supplier, and their provision requires a complex regulatory framework. And the Norway option would simply assume away the problem by requiring Britain to adopt passively any economic legislation adopted by the EU.
In a 2016 paper, my colleagues and I argued that the EU should regard Brexit as an opportunity to define a new model for partnership with countries that want strong economic and security links, without political integration. We further argued that, at a time when enlargement momentum has been depleted, the EU should work to diversify its relationships with neighbors. We proposed building a “continental partnership” involving deep economic integration based on a common regulatory framework, with the EU, the UK, and possibly others accepting the free movement of goods, services, and capital, but not of labor. We also argued in favor of a permanent process of policy consultation that would, as a counterpart to the UK’s submission to EU economic rules, give the British a voice – but no vote – in the creation of European economic legislation.
In official EU circles, the paper was received coldly, to say the least, with critics deriding the breach of the four freedoms. But the fact is that, while an integrated market for goods and services requires a degree of labor mobility, it does not imply that all people must have the right to cross borders and look for a job in the country of their choice. To pretend that it does is to confuse a citizen’s right (essential, to be sure, in a political and social community like the EU) with an economic necessity. This is bad economics and dubious politics.
Our critics also resisted envisioning a longer-term arrangement before the details of the divorce were settled. But this chapter is now being closed, meaning that it is time for the EU to think outside the box, and make an ambitious offer to Britain.
Any sensible agreement between the EU and the UK is bound to result in the latter losing much of the influence it currently enjoys in European affairs – an outcome that will surely diminish the appeal of following its lead. But even if a current EU member does decide it would be better off outside the EU’s “inner circle,” it is not the end of the world. It certainly isn’t a reason to cling to the status quo.
How Britain Could Change Its Mind About Brexit
Nigel Farage, the former UK Independence Party leader, now says that the June 2016 Brexit referendum could be overturned. He's right, and the first requirement is to dispel the aura of inevitability surrounding Britain's withdrawal from Europe.
LONDON – Will 2018 be the year when the United Kingdom changes its mind about leaving the European Union? Conventional wisdom says that stopping Brexit is impossible. But what did conventional wisdom say about Donald Trump? Or Emmanuel Macron? Or, for that matter, the original Brexit referendum? In revolutionary times, events can go from impossible to inevitable without ever passing through improbable. Brexit was such an event, and its reversal could be another.
Just ask Nigel Farage, the former UK Independence Party leader, who has suddenly said that the June 2016 Brexit referendum could be overturned. “The Remain side are making all the running,” Farage warned his fellow hardline Leavers this weekend. “They have a majority in parliament, and unless we get ourselves organized we could lose the historic victory that was Brexit.”
The votes for Brexit and Trump are often described today as an ineluctable result of deep socioeconomic factors like inequality or globalization. In some ways, this description is right. Political upheavals of some kind were to be expected after the 2008 economic crisis, as I have argued for years.
But there was nothing inevitable about the specific upheavals that happened. Brexit, like Trump, was a contingent outcome of small perturbations in voter behavior. If just 1.8% of Britons voted differently, Brexit would now be a forgotten joke-word. If Hillary Clinton’s popular majority of three million votes was distributed slightly differently among the states, the phrase “President Trump” would be as laughable today as it was in January 2016.
To stop Brexit in the year ahead, four similarly modest shifts in behavior need to happen. Public opinion must shift slightly further against the Brexit decision, which is already viewed as “wrong in hindsight” by a 4% point margin. Politicians who privately detest Brexit must speak out publicly. Reasoned opposition to government policies must be recognized again as a hallmark of democracy, not an act of treason. And the sense that Brexit is inevitable must be dispelled.
These requirements are interdependent. Politicians will speak out only if they sense public opinion shifting; but public opinion will shift only with credible political leadership. Politicians are cowed into silence if all opposition is branded as anti-democratic. And if Brexit appears inevitable, why should voters bother to think again?
The sense of inevitability, opinion polls and focus groups show, is the most important obstacle to a reversal. About 30% of British voters oppose the EU so passionately that they will always back leaving, regardless of the economic costs, just as Trump’s “base” will always support “their” president regardless of how he behaves.
But these diehard Euroskeptics would never have won a majority without some 20% of voters who cared little about Europe, but treated the referendum as a protest vote. Many of these low-conviction voters are now dismayed that Brexit has distracted attention from their real grievances about health, inequality, low wages, housing, and other issues. Yet, for this very reason, they want the inevitable departure from Europe to happen as quickly as possible so that the country can get back to business as usual.
Now suppose these voters began to believe that Brexit, far from being inevitable, might never happen. They would demand that politicians “should stop banging on about Europe” and start dealing with the people’s real concerns.
The sense of inevitability could be dispelled by recent shifts in the internal politics of both the Conservative government and the Labour opposition.
Labour has begun to realize that its only possible route back to power is by opposing Brexit. Detailed analysis of the 2017 election returns has shown that Labour’s unexpected gains were due almost entirely to affluent young voters whose motivation was the hope of derailing Brexit. Had it not been for these anti-Brexit voters, Prime Minister Theresa May would have won the widely predicted landslide.
If Jeremy Corbyn, the Labour leader, now becomes “the handmaiden of Brexit,” in Tony Blair’s memorable phrase, by shying away from effective opposition, these new voters will feel betrayed, the party will split between the Marxists and centrists, and its hopes of ever winning a general election will be dashed. If, on the other hand, Labour decided to fight Brexit, public opinion would rapidly shift.
Opposition to Brexit would start to be treated as a natural feature of democratic politics. Labour would start to benefit from the government’s negotiating blunders. And the sense of Brexit’s inevitability would vanish.
That, in turn, would give courage to pro-European Conservatives. Tory MPs are unlikely to vote against their party leadership if the absence of Labour opposition allows the government to win anyway. If, however, concerted opposition from Labour created a genuine possibility of stopping Brexit, Tory MPs who put national interest ahead of party loyalty would find themselves praised for their mettle, not ridiculed for folly. They might even calculate that their own careers would prosper if their party reconciled itself to Europe.
This chain of events now seems to be starting. In December, May lost her first important Brexit battle, when Labour MPs united with 12 Tory rebels to pass an amendment requiring a specific Act of Parliament to approve whatever deal is negotiated with the EU. This means that any Brexit plan that arouses serious opposition, either from hardline nationalists or from pro-European Tories, could be used to trigger a new referendum. Following this breakthrough, the first serious cross-party campaign explicitly aiming to stop Brexit, and not merely to mitigate damage by seeking a “softer” divorce deal, will be launched later this month.
To succeed, this campaign will need to persuade disillusioned Remainers that Brexit is not inevitable. It will need to show protest voters that whatever their problems, Brexit is not the answer. It will need to convince Labour politicians that collaboration with Brexit is electoral suicide, and persuade pro-EU Tory rebels that a rebellion would not be futile. Finally, it will need European leaders to state unequivocally that Britain is legally entitled to change its mind about leaving. These requirements are challenging, but not impossible.
David Davis, the pro-Brexit Tory who is now leading the UK’s Brexit negotiations, once said that, “If a democracy cannot change its mind, it ceases to be a democracy.” Britain is still a democracy, and it can still change its mind about Brexit.