Sunday, September 26

Even no deal could make more sense than this shaky Brexit deal | Brexit

“NORTHA deal is better than a bad deal. ”We were among those who snorted derisively when Theresa May uttered (and repeated ad nauseam) the infamous phrase. However, perhaps we were too hasty. Perhaps May was really right. she pretended to do.

In our (repeat) analyzes of no agreements, we noted that even a relatively “thin” trade agreement, such as the one eventually agreed, would be less economically damaging than no agreement. That was, and is, very clear from the economy. It was in this context that we were skeptical about the notion that no deal was better than a bad deal. Obviously, “worse” is a loaded term, especially since Brexit was judged by different people on different criteria. While some people prioritized economic problems, others focused on more explicitly political goals such as “control.”

But we were also emphasizing not only what happened on January 1, but what would happen next. Without a deal, we anticipate that subsequent recriminations would mark relations between the EU and its member states on the one hand, and the UK on the other for the foreseeable future. However, we argue that a deal, even an objectively “bad” one, from an economic perspective, would generate goodwill in itself. If all goes well, it could serve as a platform that could be enhanced and complemented by more agreements, on everything from mutual recognition of regulatory standards to cooperation on safety.

That judgment now seems wildly optimistic. Far from generating goodwill and the prospect of further cooperation, the immediate impact has been the opposite. It is true that the Trade and Cooperation Agreement (ATT) has spared traders on both sides of the UK-EU border the need, in most circumstances, to deal with tariffs. However, it has already started to cause a significant disruption, which the UK government has been pleased to see. blame the eu, rather than your own choices.

While recent data on trade between the UK and the EU should be treated with a degree of caution, that is, the kind of sharp decline in trade between the UK and the EU should simply be seen as exceptional or solely explicable in terms of factors other than Brexit. Indeed, there is reason to suspect that these frictions will only increase as the UK government finally puts in place the controls that the ATT entails on its side of the border, and when the bilaterally agreed easements on trade with Northern Ireland are lifted. . Not surprisingly, the political incentives are to reject the deal, while its own authors are eager to reject it.

But instead of looking for the kind of fixes and add-ons to the ATT that could address at least some of these issues, the deal already seems to be unraveling. Most obviously, the Northern Ireland protocol speaks to perhaps its most troublesome aspect, that the UK government signed something that it seems to have no desire to implement. The EU, for its part, seems determined to avoid concessions that facilitate such implementation.

Consequently, the UK has already said that it intends not to unilaterally apply elements of the protocol, and the EU has responded with legal action. In principle, this process could end with the suspension of Brussels of its obligations, not only under the ATT, but also under the withdrawal agreement (except for its provisions on citizens’ rights).

And then we have a stalemate, which implies a considerable disruption to trade and significant uncertainty about how things might develop in the future. It is a situation exacerbated by the UK’s decision to deny full diplomatic recognition to the EU ambassador in London. As a result, UK officials in Brussels are being shunned by their EU counterparts. The current atmosphere may not be exactly war-war, but it certainly is not a jawbone.

And don’t forget that, although unlikely, the risk of not reaching an agreement still hangs over the Brexit process. The European Parliament has not yet ratified the ATT. While it remains unlikely that MEPs will reject the deal while it still enjoys the support of member states, in the current atmosphere of tension between the UK and the EU, there is every reason to anticipate a continued delay in holding the agreement. vote. At best, this would mean a continuous sword of Damocles over our trade with the EU; in the worst case, if the UK decided not to play along, the deal itself would fail.

So what did we mean when we said that May might have been right after all? It is not that the TCA (and the withdrawal agreement) is in its legal and economic provisions worse than any agreement, it clearly is not. But it runs the risk of being an inherently unstable balance, which could have been designed to provoke and exacerbate political and diplomatic conflicts between the EU and the UK. And unstable balances, by their nature, don’t last. In other words, at least given the current political constellation in the UK, no deal can be the only one that works.


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