BREXIT OR NO BREXIT?
In November last year, Mrs May refused to rule out a no deal Brexit if Parliament voted against her deal, but Labour leader Jeremy Corbyn told ITV that "nobody is going to allow 'no deal'".Brexit Secretary Stephen Barclay has said the cabinet had agreed that "preparing for a no deal will be an operational priority within government but our overall priority is to secure a deal".
Britain’s exit date was 12 April but the Prime Minister requested to extend Article 50 to give herself more time to get her deal approved by Parliament. Theresa May had wanted a short extension until 30 June but this idea was rejected by EU leaders during late-night discussions in Brussels.
She now has more than six months to break the Brexit deadlock in Parliament and get a deal approved. She now has more than six months to break the Brexit deadlock in Parliament and get a deal approved.
The Government’s stance has always been that it wants to avoid a no deal. But with a draft deal that has been incredibly divisive, resulting in resignations and strong take-downs from across the political parties, ministers have been preparing for leaving the EU without any deal whatsoever.
Political differences on the terms of leaving have been rife for months and hardcore Brexiteers in Conservative ranks have repeatedly said a no-deal Brexit would be better than a soft Brexit.
“On 29 March next year, the UK would leave the EU and everything associated with that would come to an end,” according to Dr Simon Usherwood, a reader in politics at the University of Surrey. “[A no deal] doesn’t stop the UK leaving but it means there is absolutely no clarity about what happens.”
While it is a possibility, in reality neither the UK nor the EU would favour a no deal because it signals a poor political relationship, he adds. One of the key issues with a no deal scenario is the uncertainty it would lead to for life and work in Britain.
The UK would revert to World Trade Organisation rules on trade. While Britain would no longer be bound by EU rules, it would have to face the EU’s external tariffs. The price of imported goods in shops for Britons could go up as a result.
Some British-made products may be rejected by the EU as new authorisation and certification might be required. Manufacturers could move their operations to the EU to avoid delays in components coming across the border.
The UK would be free to set its own controls on immigration by EU nationals and the bloc could do the same for Britons. There could be long delays at borders if passport and customs checks are heightened.
The fate of expats – there are 1.3 million Britons in EU countries and 3.7 million Europeans in Britain – in terms of their rights to live and work would be unclear. It is likely that expats will seek to register as residents in whatever country they are living in.
Relevant EU laws would be transferred over so there would be no black holes in Britain’s lawbook. Britain would no longer have to adhere to the rulings of the European Court of Justice but it would be bound to the European Court of Human Rights, a non-EU body.
The Government would not have to pay the annual £13 billion contribution to the EU budget. However Britain would lose out on some EU subsidies – the Common Agricultural Policy gives £3 billion to farmers. It is likely that both the EU and the UK will have to honour financial commitments under the 2019 budget.
The Irish border
The issue of the border between Northern Ireland and the Republic would remain unresolved. While physical infrastructure has been vetoed, the border would become an external frontier for the EU in the event of a no-deal Brexit. There would be pressure to enforce customs and immigration controls.
But the UK Government has said it would aim to avoid a hard border and, for a temporary period, there would be no new tariffs on goods crossing the border from Ireland into Northern Ireland.
Britain would be able to broker trade agreements with other countries?
The current deal on the table would allow Britain to start trade negotiations with other countries after 29 March 2019 but any deals would not be implemented until after the transition period of 21 months.
With a no deal, Britain could implement the deals whenever the fine print is ready. But deals take years, not months or weeks, to broker. Therefore the UK is not gaining anything by having no transition period in this instance.
“It’s worth making the point that trade deals are about agreements with states. If the UK left without a deal showing it was unable to have constructive conversations with close trading partners [the EU], it would not be a great incentive for third parties,” says Dr Usherwood.
How likely is a ‘no deal’ Brexit?
There was a long-standing impasse between Britain and the EU over certain key Brexit issues, which made a no deal very likely. Mrs May’s initial Chequers plan – which split the Tory Party – was dismissed by EU leaders, who said it “will not work”. In response, the Prime Minister insisted the EU brings fresh proposals for the Irish border and trade to the table.
Then after months of negotiations, Mrs May announced she had brokered a draft deal that offered a future relationship with “a breadth and depth of co-operation beyond anything the EU has agreed with any other country”. “We can choose to leave with no deal, we can risk no Brexit at all, or we can choose to unite and support the best deal that can be negotiated,” she said.
However the proposed deal was widely criticised across the parties. Although the Government has been ramping up preparations for a no deal, Downing Street has always said the “top priority” was to deliver Brexit under the terms of the deal struck by Mrs May with Brussels.
Mrs May’s proposed Brexit deal has been rejected by Parliament twice now. And the Withdrawal Agreement document – which forms part of the deal – has also been rejected.
To avoid a no deal exit on 12 April, Mrs May asked the EU to delay Brexit until 30 June. This was rejected and instead EU leaders granted an extension until the end of October to allow the UK to “find the best possible solution”.
When asked about the likelihood of a no-deal Brexit, politics professor Tim Bale says: “Almost every conceivable outcome seems just as likely as unlikely! But – best guess – a no-deal Brexit, even though on paper it’s the default outcome seems the most unlikely… the Prime Minister is probably (and many of her Ministers are certainly) opposed to ‘crashing out’.
“The short-term disruption would be somewhere between significant and immense – and for no very easily-achievable gain even in the long term,” adds Prof Bale, of Queen Mary, University of London
Are Voters Ready To Leave With No Deal?
Another week, another (supposedly) round of votes in the Commons on Brexit. But with just three weeks to go until the UK’s scheduled day of departure, maybe not another week in which nothing changes. Perhaps by Friday the immediate future of Brexit at least will be a little clearer.
The Prime Minister has promised MPs up to three votes this week. On Tuesday, there should be another ‘meaningful vote’ on her deal, however amended in the wake of the negotiations that have been taking place ever since the deal was first voted down by MPs in January. The government has to win such a vote at some point before it can present the EU withdrawal treaty to Parliament for ratification.
But if, as is currently widely anticipated, the meaningful vote is lost, then MPs have been promised another vote on Wednesday on whether or not the UK should be prepared to leave the EU without a deal. And if the Commons rejects the idea of leaving without a deal (as it has already done once before), then on Thursday the Commons has been promised it will get the chance to say whether or not it thinks that the UK should seek an extension of the Article 50 process, that is, to delay the scheduled departure date.
To complicate matters further, one or more of these days may also see votes on amendments that propose some of the widely-canvassed alternatives to the government’s current Brexit strategy, including forging a future relationship with the EU not dissimilar to that enjoyed by Norway and putting the issue to a second referendum in which voters are invited to choose between Mrs May’s deal and remaining in the EU.
To date, however, we have paid less attention to public attitudes towards leaving without a deal. Given that this is one of the decisions potentially facing MPs this week, it is whether or not voters back such a step on which we will focus here.
Two principal strategies have been adopted by the polls in attempting to assess the popularity or otherwise of leaving without a deal. The first is to pit the idea against one or more alternatives, and ask voters which would be their first preference. Inevitably, exactly how popular no deal appears to be depends in such polls on which other options are included.
Even so, there is one conclusion at least that it would seem safe to draw – among Leave voters leaving without a deal is the single most popular course of action.The relative popularity of leaving without a deal has been repeatedly demonstrated by Opinium. It has now asked its respondents on no less than nine occasions to choose between five different possible ways forward given the rejection of Mrs May’s deal by Parliament.
Each time leaving without a deal has been the single most popular option, on average securing the backing of 26%. That support comes almost entirely from those who voted Leave, as many as 47% of whom have on average identified it as their first choice.
Still, it might be objected that in practice the choice facing MPs is not so wide-raging as that canvassed by Opinium. Rather, as the Prime Minister would put it, it is in reality between deal, no deal or no Brexit. When polls have presented voters with that choice, it is no Brexit that has emerged as the single most popular choice. However, at the same time, no deal has usually emerged as more popular than Mrs May’s deal (or indeed anything similar thereto).
The figures are remarkably similar to those obtained in response to Opinium’s more complex question. The half dozen most recent readings have put support for leaving without a deal among all voters at 28% on average. Again, most of it comes from those who voted Leave, 54% of whom on average state that it is their first choice.
The second strategy used by the polls to ascertain the popularity of no deal has been simply to ask people in one way or another whether they support or oppose leaving without a deal. In practice this approach confirms the relative popularity of leaving without a deal among those who voted Leave.
However, it also confirms that there is a substantial minority of Leave voters are opposed to the idea, while there is little evidence that those who voted Remain might be willing to accept it. As a result, among voters as a whole opponents outnumber supporters.
YouGov, for example, have asked people on three occasions whether leaving without a deal would be a good outcome, a bad outcome or an acceptable compromise. The results have been similar each time. Only around a third have said that such an outcome would either be good or an acceptable compromise, while around a half feel it would be a bad outcome.
Three-fifths of Leave voters say that it would either be good or an acceptable compromise, but a quarter or so reckon it would be a bad outcome. Meanwhile, YouGov’s data suggest that, at most, only one in ten Remain voters are willing to contemplate such a prospect.
This picture is largely confirmed by further polls from Sky Data and from BMG Research that simply asked voters whether they support or oppose leaving without a deal. They found 71% and 66% of Leave voters respectively in favour of no deal.
However, in both cases 18% of Leave voters were opposed, while just 15-17% of Remain supporters backed the idea. As a result, these polls also suggest that, among voters as a whole, opponents of no deal outnumber supporters.
True, rather more support for leaving without a deal is recorded if voters are asked what should happen if, as Survation have asked, ‘the EU does not change its position on the Brexit deal’, or, as ComRes have done in two slightly different ways (see here and here) ‘if the EU refuses to make any more concessions’.
When the issue is addressed in this way around two in five voters or so express their support, and they may even outnumber opponents. Trouble is, asking such a question invites respondents to express their views about how the EU have handled the negotiations (about which many voters are critical) rather than simply their view of the merits of no deal.
So, it looks as though leaving without a deal is the first preference around half or so of Leave voters and is certainly more popular among them than Mrs May’s deal. It might be acceptable to at least as many as two-thirds of Leave voters. That figure is, in fact, strikingly similar to the two-thirds of Remain voters who support holding a second referendum (while few of them are willing to consider leaving without a deal).
We thus, perhaps, should not be surprised that when voters are asked to choose between leaving without a deal and holding another ballot the two options prove to be more or less equally popular. And it is the fact that the public are so evenly divided – and indeed polarised – between the two ‘extreme’ (and perhaps equally divisive) options in the Brexit debate that helps explain why the choice MPs are expected to have to make this week is likely to prove a difficult one.
A permanent UK-EU customs union would create worse problems that those it would supposedly solve
The most likely effect of Jeremy Corbyn’s announcement that Labour will support some form of second referendum is to increase the probability that the UK leave the EU without a formal trade deal.
That so many Labour MPs have pledged to stick by their election pledge to honour the 2016 referendum means that a second referendum remains highly unlikely. And a good thing too given the serious damage it would do both to democracy and, due to the division and business uncertainty it would bring to the UK economy.
Corbyn’s U-turn will, however, cement the impression in the vital Leave-voting heartlands that Labour is a party of Remain. Just as importantly, it will stiffen the EU’s impression that they have no need to make a serious move on Theresa May’s demand that the unacceptable Northern Irish backstop be re-written.
Why give any ground when so many of our parliamentarians and the official Opposition are stating openly that are prepared effectively to cancel Brexit on 29th March rather than allow the UK to leave without a trade deal?
It should go without saying that if the EU know we will not leave without a deal, then they have no incentive to change the backstop. And with no change to the backstop, the Withdrawal Agreement as it stands looks dead in the water.
Attention now is likely to switch to whether Theresa May will reverse her long-standing promise to leave the Customs Union with the aim of tempting enough Labour MPs to back a Withdrawal Agreement.
For some months, the Labour front bench has taken to endless repetition of the “permanent customs union” mantra as if this is some sort of magic key to unlocking the Brexit stalemate. In fact, nothing could be further from the truth.
The real puzzle is why journalists (as well as Labour backbenchers) do not subject this flagship policy to more scrutiny. As as soon as you do, it becomes clear a permanent customs union does not solve the problems it is aimed at and creates even worse ones of its own.
Leaving the EU Customs Union: what is involved?
A key issue from a trade perspective will be whether or not the UK stays in the EU Customs Union when it leaves the European Union (EU). The Customs Union is an important element of the EU Single Market. Under its rules, the EU operates as a trade bloc, operating common external tariffs and customs barriers, and negotiating trade deals as one. As a member of the Customs Union, the UK is not allowed to negotiate other bilateral trade deals – which is why Liam Fox has argued that it needs to leave.
What would leaving the Customs Union mean for the UK? On the face of it, customs checks at EU borders, including at the border between Northern Ireland and the Republic of Ireland – something that does not seem to be compatible with Theresa May’s comments about ensuring Brexit works for Northern Ireland.
Another implication is that the UK will no longer benefit from the EU’s 56 free trade agreements (FTAs), which provide better access to markets outside of the EU, such as Korea, Mexico and Chile. This may mean that UK exporters face higher tariffs and other trade barriers in these markets.
Of course, there are other possibilities. For example, the UK could leave the full Customs Union and still negotiate some forms of access – Turkey, while not a member of the EU, is part of the Customs Union for industrial goods.
What matters at the moment is that UK ministers appear to be on different pages. The very fact that Liam Fox and his new department have been tasked with striking new international trade deals seems to suggest that the Government does intend to make a clean break from the Customs Union – because, as a member, building these new relationships would not be possible.
But the Prime Minister’s comments in Scotland and Northern Ireland suggest a prioritisation of new trading arrangements that are as close to the status quo as possible. At some point soon, these ambiguous signals will have to be resolved. There is also another important consideration about leaving the EU Customs Union which we haven’t heard much about yet: the UK’s relationship with the World Trade Organization (WTO).
The terms of UK membership of the WTO are currently governed by its membership of the EU Customs Union. So, when the UK leaves the EU, the UK’s existing WTO commitments will have an uncertain status and will need to be redrafted. The quickest option for the UK would be to mirror its existing commitments. However, other countries could object to this approach.
For example, agricultural exporters such as Brazil and Argentina want better access to the UK market, and might see Brexit as an opportunity to push for it. Some elements of the EU’s membership of the WTO, such as the quota for importing New Zealand sheep meat, would also be affected by the UK leaving the Customs Union. So even a simple mirroring of existing commitments could involve complicated negotiations between the EU, the UK and other countries.
Once the UK triggers Article 50 of the Lisbon Treaty, it has two years to negotiate its exit. If the UK leaves the EU without having reached agreement on its new commitments with the WTO, it is likely that the UK will continue to apply its existing trade commitments until the new ones are agreed. This will create uncertainty for UK businesses – over timescales and outcomes.
An important task for the UK will be to start to rebuild its network of trade agreements to replace the ones it will lose if it chooses to leave the Customs Union. Chancellor Philip Hammond recently said that Brexit meant the UK could do trade deals with other countries, including ‘countries like China’. Before he became Secretary of State for Exiting the EU, David Davis said that it would be possible for the UK to negotiate trade deals ‘massively larger’ than the EU.
However, there are big questions about the sequencing of all these negotiations, and how long they will take. Informal discussions could take place, but the UK cannot actually sign new free trade agreements until it has left the EU.
The US Trade Representative has said that informal discussions won’t be possible until decisions have been made about the UK and EU relationship. Even then, many countries will want to be clear about the UK’s membership of the WTO before they open negotiations.
There is no doubt that it is important for the UK to signal that it is still open for business. But there are several issues that need to be resolved before it can start signing new trade deals.
M I Ro
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