The Decline and Fall of Brexit
Whether or not the Commission or the May government yet realizes it, the contradiction between their goals is absolute. The British want the EU to abandon its founding principles in exchange for €40 billion ($46 billion) and no hard border in Ireland. But, given that the UK has already committed to those concessions, the EU has no reason to listen to its special pleading. Were the May government to renege on the commitments it made in December, it would confront a “no-deal Brexit.” The UK would crash out of the EU, and many sectors of the British economy would be decimated.
Three possible outcomes remain, two simple and one complicated. In the first scenario, Britain would abandon its “red lines” and adopt a “Norway-plus model,” remaining not just in the single market, but also in the customs union. In the second scenario, the UK would accept an economic border in the Irish Sea and maintain its red lines for mainland Britain, by entering into a free-trade agreement with the EU. Paradoxically, both the European Commission and hardline Brexiteers could agree on this outcome for mainland Britain, except that the latter refuse to accept a border between the mainland and Northern Ireland.
The larger problem is that neither of these “simple” solutions will be agreed by May before the fall deadline. And the second outcome would spell disaster for British manufacturing, unless the transition period was extended by many years to give businesses time to restructure their operations.
The only way out, then, is through a political crisis. Such a crisis may well occur within Europe, as a result of conflicts between major member states or US President Donald Trump’s attempts to undermine the EU. But a European crisis would not come in time for May to secure a “Jersey model” for the UK as a whole. It is far more likely that before then, Britain itself will experience a crisis as the public grows increasingly aware of the massive economic and social costs of a looming no-deal Brexit.
Once the crisis erupts and British red lines begin to dissolve, any number of possible outcomes could follow. The transition period could be extended to, say, 2025, to be followed by a free-trade agreement and an economic border in the Irish Sea. Or Brexit itself could be delayed for a number of years, with the “Norway plus” model serving as the ultimate goal. Then again, either scenario might lead to a second referendum and a reversal of Brexit altogether. In any event, it is clear that Brexit, as the British side currently conceives it, is simply impossible. If it happens at all, it will not look like anything May has proposed so far.
Copyright: Project Syndicate, 2016.