Theresa
May walks into a Brexit trap
The
UK prime minister announces she will trigger an exit from the EU
before getting any guarantees
by: Gideon Rachman
https://www.ft.com/con…/7b78f276-8940-11e6-8cb7-e7ada1d123b1
Theresa May has one
great advantage as a politician. She looks serious and responsible.
But appearances can be deceptive. If you examine how the UK prime
minister is handling Brexit, a different sort of politician emerges.
By announcing that
she will start the formal negotiations for Britain to leave the EU by
March 2017, the prime minister has walked into a trap. She has given
away what little leverage Britain has in the negotiations — without
receiving any of the assurances that she needs to achieve a
successful outcome.
The announcement of
the decision about when the UK will trigger Article 50 — the
process by which Britain gives formal notice that it intends to leave
the EU — was made in a statesmanlike fashion. But the actual
content of the decision is reckless and driven by politics, rather
than Britain’s national interest.
Once Mrs May
triggers Article 50, she has precisely two years to negotiate a new
deal with the EU. Senior civil servants have told the prime minister
that it is highly unlikely that the UK will be able to negotiate both
the terms of its divorce and a new trade deal with the EU within the
two-year deadline. As a result, they warned the prime minister that
she must have assurances on what an interim trade agreement with the
EU would look like in the long period between the UK leaving the bloc
and a definitive new deal being put into place.
Mrs May has chosen
to ignore this advice. In doing so, she has knowingly placed Britain
at a massive disadvantage in the forthcoming negotiations.
As soon as Britain
triggers Article 50, the EU can simply run the clock down — knowing
that the UK will be in an increasingly difficult situation, the
longer the negotiations drag on without agreement. At the end of two
years, Britain will be out of the EU — and would face tariffs on
manufactured goods and the loss of “passporting” rights that
allow financial services firms based in the City to do business
across the bloc. The economic damage from this kind of “hard
Brexit” would be severe, blowing a hole in the government finances
as tax revenues from the City shrink, ushering in a new period of
austerity.
The most ardent
Brexiters claim that this is all scaremongering. Why, they ask, would
the EU contemplate the restoration of tariffs when this could be
damaging to its own economic interests? The Leavers can answer that
question by looking in the mirror. It is clear that the main
motivation of the pro-Brexit camp in Britain is political, not
economic. And the same will be true of the EU side in the
negotiations.
In the British case,
the political goal is to restore parliamentary sovereignty and to
regain control of immigration. On the EU side, the goal will be to
make sure that Brexit does not lead to the unravelling of a European
project that has been built up over 60 years. That will mean making
sure that the UK pays a clear and heavy price for leaving the EU. As
a result, both sides will accept some economic damage rather than
sacrifice their political goals.
The difficulty for
the UK is that the economic damage the EU will sustain is likely to
be smaller and more manageable than that borne by the British side.
The fact is that the EU represents a far larger market for Britain
than Britain represents for the rest of Europe. Britain sends 44 per
cent of its exports to the EU, while the UK takes only about 16 per
cent of EU exports.
The negotiation
process itself is also likely to be stacked against the UK. While the
British will need a quick deal to minimise uncertainty for investors,
the EU can afford to spin things out. Even if this is not a
deliberate strategy on the European side, the realities of trying to
secure a common position among 27 nations — and then secure
ratification in all 27 countries, plus regional legislatures and the
European Parliament — will be long and laborious.
Some in Britain
speak blithely of relying on the rules of the World Trade
Organisation after Britain has left the EU. They ignore the fact that
Britain is a member of the WTO under the auspices of the EU. Creating
an entirely separate British WTO membership requires another set of
complex negotiations.
That is a much
bigger problem for Britain than the EU, since the longer the process
is dragged out, the longer Britain is likely to be suspended in a
legal limbo that will discourage long-term investment. For that
reason it was absolutely vital that Mrs May should get some clarity
on what happens after two years of negotiations — if and when the
EU and the UK have failed to reach a definitive new deal. The obvious
solution would have been for Britain to remain inside the EU’s
single market, but outside the EU until such time as a new deal was
struck. By failing to get that assurance, the British government has
severely weakened its position — even before negotiations start.
So why has Mrs May
been so reckless? The short answer is politics. If the prime minister
had delayed triggering Article 50 any longer she might have faced a
revolt from Conservative MPs, who would have feared that she was
backsliding on Brexit. By making her announcement just before the
Tory party conference, she has also guaranteed herself some
favourable headlines and applause in the conference hall. She may
have bought herself another couple of years in 10 Downing Street. But
she has also significantly increased the chances that Brexit will
cause severe damage to the British economy.
gideon.rachman@ft.com
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