22 May 2020

FT's Martin Wolf: A no-deal Brexit amid the pandemic would be disgraceful

The UK government is, it seems, set on ending its post-Brexit transition without a deal at the end of this year.

This would seem inconceivable if the government were not led by Boris Johnson. The idea seems to be that, in the midst of the pandemic, nobody would notice the additional disruption imposed by an overnight break in economic relations with the country’s most important partners and eternal neighbours.

Here are seven reasons why this is a disgraceful idea.

First, it is not what the Leave campaign actually promised. The country was repeatedly told it would be easy to secure an excellent free trade agreement, because it held “all the cards”. A no-deal exit is far from such a deal.

Second, the notion of some economists that Brexit would lead to unilateral free trade has also proved a fantasy. The UK has published a tariff schedule that is far from free trade. This was predictable (and predicted). The political economy of trade and the need to preserve some tariffs for use as negotiating chips in future trade deals made this outcome almost inevitable.

Third, the UK is breaking its word. In order to reach his exit deal last October, Mr Johnson agreed that Northern Ireland would remain in the EU’s customs area and single market. But standard customs and regulatory checks must be imposed in the Irish Sea if the EU’s customs area and single market is not to be vulnerable to transshipment via the UK. Either Mr Johnson does not understand this, which would be stupid, or he does, which means he has wittingly lied.

Fourth, the political declaration accompanying October’s exit agreement stated that: “Given the Union and the UK’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field . . . In so doing, they should rely on appropriate and relevant Union and international standards, and include appropriate mechanisms to ensure effective implementation domestically, enforcement and dispute settlement (my emphases).” Thus, EU demands were known and accepted by the UK.

Fifth, the globalising world economy assumed by Leave in the referendum campaign no longer exists. The world trading system is under mortal threat, given the breakdown in relations between the US and China and the neutering of the World Trade Organization in both its judicial and legislative functions. A “global Britain” will not emerge, but one seeking crumbs from the tables of more powerful trading powers, themselves engaged in vicious squabbling.

Sixth, we are in the grips of a pandemic-induced depression of vast magnitude and unknown duration. It is a good bet that, at the end of 2020, the UK economy will still be very depressed, with damaged businesses and frighteningly high unemployment. That would hardly be a good time to add to the shocks already crippling the economy.

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