Brexit challenge facing the UK – No deal meant no movement of goods across the EU

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Published: November 20, 2018 4:08:22 AM

No deal meant no movement of goods across the EU. Delays would be endemic. Fruits, vegetables, vital medicines and fuel deliveries would all be delayed as checks would be required.

Brexit, Japan, Great Britain, uk, eu, european unionGood rhetoric, but what was Brexit?

The United Kingdom is going through the most serious political decision making crisis. The referendum to leave the EU was in June 2016. The result in favour of the EU’s exit caused the departure of David Cameron. Theresa May became leader unanimously in the conservative Parliamentary party. She famously said ‘Brexit is Brexit’. Good rhetoric, but what was Brexit? One fantasy was freedom from the EU with the right to strike free trade agreements with the rest of the world, no more immigration of people from Europe, freedom to decide British disputes without the interference of the European Court of Justice and no question of obeying EU rules and regulations.

The reality proved more challenging. Negotiating with the representatives of 27 EU countries, UK began to realise that its options were limited. A major obstacle not much discussed at the time of the referendum was the issue of the border between the two parts of Ireland. The Republic is independent and an eager member of the EU. If UK were to leave the EU, Northern Ireland would be outside the customs union. But then, trade would require border checks of all goods and people moving across. The border between the two parts was declared to be a free border in a previous international treaty and, thus, introducing controls was not possible. Nor could Northern Ireland be left in the customs union while mainland UK was out as that would be partitioning the United Kingdom.

The prospects were of a deal, however bad, or no deal. No deal meant no movement of goods across the EU. This meant no inputs for factories coming frictionless from the continent which are required at the last moment. Delays would be endemic. Fruits, vegetables, vital medicines and fuel deliveries would all be delayed as checks would be required. No deal became a nightmare possibility.

In the end, it was as predicted. Theresa May survived against all expectations while the negotiations were still ongoing. Everyone thought Theresa May was weak. Theresa May survived by leveraging her feigned weakness. She outwitted the big beasts in her Cabinet when, after getting their agreement on Chequers plan, she secured the resignation of David Davis and Boris Johnson. She carried on with Dominic Raab as Brexit Secretary but all the time she was in charge via her point man in the civil service—Olliver Robinson. No one had credited her with leadership.

Now that she has revealed her hand, all hell has broken loose. The ‘Brexiteers’ had fantasised about a clean and hard Brexit or even a no deal Brexit. No one had published an alternative strategy. Now that reality has struck, there is anger, confusion and bewilderment. The politicians realised that it could never have been better. Immigration from the EU has been stemmed except for highly skilled people. But the reality of manufacturing production with its delivery requiring a split second timing means that the UK has to stay in the customs union under one or the other euphemism. So the answer is, we have a transition period until we get a semblance of a free trade agreement when we can come out. How long would that be? How long is a piece of string? How long does it take to negotiate a free trade agreement? It took five years for the EU Canada agreement. That is, the sort of period the UK will be in ‘vassalage’, aka frictionless trade arrangement.

The immediate episode in the Brexit saga is the likelihood of a leadership challenge. It requires 15% of the number of conservative MOs to trigger a leadership challenge. At the time of writing this column, only 21 signatures have been received. It may not even happen. When push comes to shove, there is no credible rival. Theresa May is the best option against Jeremy Corbyn. The prospect of anyone else replacing her and coming back with a better deal is pure illusion. The prudent thing to do is to let her take the flak and wait till the ‘meaningful vote’ has taken place in the House of Commons. If her deal is accepted then that is the end of the matter. If the deal is rejected, then there is another crisis. Theresa May could resign but there is no necessity. She could be tested in a vote of confidence. Under the Fixed Term Parliament Act, it needs a substantial majority—two-thirds—against her to trigger a change of government.

Thus are cans kicked down the road. Theresa May may well survive. Soon, the penny will drop that the deal is an indicator of the much more humble position UK occupies in both economic and political power ranking. It is difficult to say what better deal the UK could have negotiated. In that, at least, if nothing else, the deal is reminiscent of Suez. Then, UK had no choice but to retreat. Now, all there is to do is to sign up and get back to making the best of a bad situation. Theresa May is much like the deal. Not to everyone’s liking but there is no better choice available.

(Author is a prominent economist and labour peer)

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