Brexit Deal Series: Which Brexit Deal: Mad, Implausible, Plausible or Desirable?

Anton Muscatelli | 19 November 2018

© 2018 European Union

The political maelstrom which has engulfed the UK had been widely anticipated, with the UK government struggling to sell the draft agreement with the EU to its own cabinet and to both the Tory backbenches and the DUP. The next few weeks will mark a period of intense debate on the terms of the draft deal. And we will see if the deal survives during the turmoil – something that is very far from being certain.

While politically what has been proposed appears doomed from the beginning, from an economic and technical perspective, what reflections are possible on the agreement?

The first point is that the ‘deal’ is made up of two distinctive elements. The first is the detailed 585-page Withdrawal Agreement – the legal document sanctioning the terms of the UK’s withdrawal from the EU. The second is the much shorter outline political declaration, which is not a binding international treaty and sets the outline of where the UK and EU might set off in their negotiations after 29 March on their future relationship.

Much of the controversy since the deal was made public has actually been as much about the draft political declaration and the direction of travel after 29 March 2019, as about the withdrawal agreement.

Indeed, it should be recognised that, given the highly restrictive red lines which the UK government unwisely set at the start, the withdrawal agreement is as good a deal as the EU could have offered. In some respects, the UK civil servants led by Olly Robbins negotiating the deal actually achieved more than expected. The EU negotiators conceded a temporary customs arrangement to nest the Irish backstop provisions within a wider UK-wide agreement, and a joint review process of this arrangement.

For those who support a softer Brexit, such as continuing membership of the single market and customs union (Norway+) outcome, the main problem is that the political declaration leads us into a ‘blind Brexit’. We would be on an uncertain path towards an unknown destination.

As we do not know when the temporary customs arrangement will come to an end, it’s difficult to estimate the economic impact. However, we do know that unless the UK continues to align its regulations with the EU there will be significant losses in goods trade such as manufacturing. With Northern Ireland continuing to be in regulatory alignment with the EU, this will lead to some issues of managing the parallel NI and GB markets. For services, the political declaration mentions work on equivalence measures, but it is very vague indeed on where we will end up.

Those who favour Norway+ will point out that all this uncertainty about the future framework and the intellectual gymnastics of the withdrawal agreement could have been solved by setting a clear destination in the political declaration: single market plus customs union. Of course this involves accepting freedom of movement, and the jurisprudence – if not the direct jurisdiction – of the CJEU.

To those who argue that it is impossible to renegotiate the deal at this late stage, actually a soft Brexit along these lines would be relatively simple to negotiate, as it mainly involves setting a clear direction of travel in the political declaration, without interfering too much with the withdrawal agreement. So this is a ‘plausible’ alternative to the deal negotiated by the prime minister.

Are other solutions possible even at this stage? There is one ‘desirable’ route and two routes which can be best marked ‘impossible’ and ‘mad’.

The desirable route, for those of us who know that there is no better deal on the table than staying in the EU, is to seek to remain. Even at this late stage, it’s clear that in these circumstances the EU27 would be willing to delay the article 50 process. In recent weeks, the ‘People’s Vote’ campaign have shown how this outcome could be achieved through UK parliamentary procedure – and polling evidence is increasingly showing this to be popular.

The ‘impossible’ route is represented by some in the Labour Party who think that there is a better deal to be struck, but who have yet to come up with that formula. There is a smorgasbord of variants, involving tinkering with the customs union or, even less likely, by arguing that there is some theoretical position ‘close to but not inside the single market’, or more recently promising the same benefits as EU membership without being a member.

While in normal times, the luxuries of opposition may have seen space for woolly or wishful thinking of this kind, we are not in normal times – we are fast entering a time of national crisis, and we need an opposition willing to engage with reality and act in the national interest. The ‘we could have negotiated a better deal’ line is getting rather tired, and as we approach March will become as credible as a pot of gold at the end of an Irish rainbow.

The ‘mad’ route is advocated by those, primarily in the European Research Group and DUP, who continue to believe that ‘no deal’ is a better outcome. Actually this is the case for which the economic modelling was always very clear. Most estimates of the long-run effects of operating under WTO rules were that UK GDP could suffer by 7-8.5% relative to remaining in the EU by 2030.

But we now know that the short-run disruption would be much bigger and involve many non-economic disruption costs as well as huge short-run economic dislocation. If there is no deal we would all suffer, as the two parties try to recover from a collapse of the negotiations.

For me, as an economist, the interesting aspect of the ‘no deal’ proposal is how business has quickly aligned behind getting any Brexit deal, no matter how poor the deal is long-term for the UK economy, because the consequences are too appalling to consider. This is of course understandable, but business and others should not be bounced into believing that the only alternative to the plan is no deal.

It is not a case of deal or no deal. There is not only one alternative. There are other paths UK politicians could feasibly embark on. One route may be mad and another impossible – but in the midst of the chaos at Westminster, the plausible path of maintaining membership of the single market and customs union, as well as the most desirable option of halting Brexit are very much up for grabs.

This would require political leadership and a sustained lobbying effort from those with the national interest in mind – but it can, and should, be done. The consequences of failing to do so would be too great. ‘Mad’, ‘impossible’, ‘desirable’ or ‘plausible’? Which route will our politicians choose in the weeks to come? We can only hope that they will put country before party, and the welfare of the people before personal ambition.

Anton MuscatelliAnton Muscatelli | Twitter

University of Glasgow

Prof Sir Anton Muscatelli is Principal and Vice Chancellor of the University of Glasgow. He is Chair of the First Minister of Scotland’s Standing Council on Europe and Advisory Board member of the Scottish Centre on European Relations.