28 August 2017

Bloomberg: Brexit is beginning to look like no Brexit

[...]Britain's leaders have been fighting over Brexit for years. Now the difference between the Labour stance and the government one is simply rhetorical. Essentially, the government is trying to hold onto its base of Leave voters while seeking the same interim outcome as Labour. 

For now, both the U.K. government and the opposition are talking about a finite transition period. Labour would like to see it last up to four years, potentially extending it beyond the next election, to be held in 2022. The most enthusiastic Brexiters in the government, such as International Trade Secretary Liam Fox, are talking about two years, with the cutoff before the next election.

In the context of U.K. politics, that difference is substantive rather than rhetorical -- Fox and his allies want to deny the current opposition any control over the final, post-transition arrangement. But in reality, British leaders have little control over the length of the transitional period.

It will last as long as it takes the U.K. and the EU to agree on a new trade deal; otherwise, a transition is pointless. But the U.K. cannot dictate the pace of the negotiations, and the EU isn't interested in dictating it as long as the transition period preserves current arrangements. The EU, after all, didn't initiate Brexit; it's happy for the U.K. to stay on current terms, and if it loses its vote, too, that'll only be a bonus.

More than ever, the EU has the upper hand. With the U.K. eager for a transitional period, chief EU negotiator Michel Barnier doesn't need to back down on any of the initial issues, such as protections for EU citizens in the U.K., the eventual exit bill, or the EU's demand that the European Court of Justice supervise any transition. The U.K. will have to accept Barnier's terms to assure it doesn't face a cliff edge in 2019.

Unless the U.K. government suddenly reverts to Prime Minister Theresa May's earlier contention that "no deal is better than a bad deal," the net effect of the Brexit vote and the resulting hullabaloo may just be that the U.K. will simply lose its vote in the EU. The rest will remain as it is now for an indefinite period during which a new trade deal will be discussed in the standard EU fashion -- slowly, deliberately, with each of the 27 EU countries working through its own agenda until there's a consensus. And even then, the result may not be much different from the current one -- or from Norway's relationship with the EU, which includes an emergency brake on immigration (something the EU was willing to give the U.K. before it decided to leave, anyway) but not much economic or legal leeway.

One could argue that the Brexit vote has alarmed EU citizens enough to consider leaving the U.K. or simply staying away in the first place. But "Brexodus" may well be a myth. Though the latest data show a substantial drop in net migration from Eastern Europe, there is still a net inflow. Perhaps, for some Brexit voters, this reduction in immigration is adequate compensation for the current uncertainties and the loss of the U.K.'s vote. But for the rest of us, Brexit is beginning to look like a classic case of a mountain giving birth to a mouse.

Full article on Bloomberg

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