Shadow-boxing against a “no deal” Brexit is counter-productive


Theresa May’s letter stated that H.M. Government seeks “a deep and special partnership” with “a bold and ambitious Free Trade Agreement” that covers financial services, where we “have to align with rules agreed by institutions of which we are no longer a part”, and “manage the evolution of our regulatory frameworks to maintain a fair and open trading environment”.

The closest model would seem to be the Deep and Comprehensive Free Trade Agreements (DCFTAs) that the EU has already negotiated with Ukraine, Moldova and Georgia, and has offered to Tunisia, Morocco, Egypt and Jordan. Since all these jurisdictions account for a smaller share of EU exports than the UK, (e.g. Ukraine’s share is 0.8% against the UK’s 8%), it is realistic to expect similar terms to be readily offered to the UK.

A “no deal” scenario on Brexit was never taken seriously by the EU institutions, and is not on the agenda.  Exiting with no agreement on terms of departure or successor trade deal at all would harm the UK’s prospects of securing favourable future trading arrangements not only with the EU, but also with other countries.  It would probably result in British GDP falling by something like £1,700 per household, thereby risking tainting the Conservative Party with economic mismanagement. Had Mrs May seriously sought or expected a “no deal’ scenario, she would not have wasted political capital and risked her credibility seeking to negotiate a new trade agreement alongside an exit deal; it would rather have been to her advantage to leave more quickly and suffer an economic shock in 2017, in the hope that the economy was reviving by the time of the next election. 

A DCFTA would leave the UK having to adopt EU rules and standards or ‘equivalent’ ones, with scant ability to influence how they evolve. It would also entail institution of customs controls, and loss of EU regional development funds and land management subsidies. However, it would meet many of the Brexiteers’ demands: for the CJEU not to have direct jurisdiction over the UK (an ad hoc tribunal would have to be set up instead to determine whether a party had breached its obligations), for an end to free movement of workers, for the UK to be free to conclude trade agreements with third countries, for payments to the general EU budget to end, and for the UK to regain jurisdiction over its fisheries policy.

Ukraine’s DCFTA is 2,135 pages long. Advantages for Ukraine include reciprocal rights to establish a business and to supply services (with a few notable exceptions that would be highly detrimental if applied to the UK including air transport, audio-visual services, weapons and nuclear industries). They also include reciprocal rights of companies to transfer only employees who are “key personnel” for up to 3 years, and ‘graduate trainees’ and ‘service sellers’ for up to a year.  Independent professional service providers have reciprocal residence rights for no more than 6 months in any 12 month period. The agreement requires Ukraine to continue to apply multilateral environmental and labour agreements to which it is a party, and not fail to enforce, nor ‘weaken or reduce the environmental or labour protection afforded by its laws to encourage trade or investment’. Such a clause in a UK trade deal would meet some of the Labour Party’s conditions for a Brexit agreement.  Dispute settlement is by consultations and, if these fail to resolve the dispute, a binding ruling by an ad hoc arbitration panel.

The current focus on the drawbacks of a ‘no deal’ scenario is not just misplaced because that prospect is remote: it is also strategically short-sighted.  Playing up the risks of a worst-case ‘no deal’ scenario will prove counter-productive once a deal is reached.  It will enable Mrs May to capitalise on relief that she has been able to reach a deal at all, and to portray a DCFTA, or indeed an even less advantageous transitional exit deal, as a triumphant, hard-won, honourable and responsible compromise rather than what it really is: a major downgrade in influence, and an abdication of control over our terms of trade.

An Article 50 notification may well be unilaterally revocable, as a matter of law, though this is disputed. Politically, it is not realistic to expect revocation in two years’ time unless public opinion decisively changes.

The only choice on offer to Parliament from the Government would be between an exit with no deal and an exit with a transition to a DCFTA. The Conservatives have a majority in the Commons. Whether to reopen negotiations would be a question of confidence in the Prime Minister. The Conservatives would lose credibility if their MPs sought to reopen negotiations after having supported their Prime Minister’s policy for 2 years, so Tory MPs will not rebel lightly.

The Labour Party currently claims that it would not support any deal that did not provide ‘the exact same benefits’ as the Lisbon Treaty, but it is a fantasy to suppose that any deal on offer would meet that test. Keir Starmer, in the very speech setting that impossible condition for support, also said, “exiting the EU without a deal…is the worst of all possible outcomes. It is, in the words of the Director General of the CBI, a “recipe for chaos”.’ It is implausible in the extreme that Labour would wish to be blamed for a ‘no deal’ scenario after claiming that it would be the worst possible outcome. It is clear from the way they voted on the European Union (Notification of Withdrawal) Bill after being told that the Government did not want to remain in the single market, and even after their own amendments had been defeated, that Labour MPs would be willing to vote with the government.  Only 33 Labour peers voted with the Lib Dems to make Brexit conditional upon continued membership of the single market. Notwithstanding their rhetoric, Theresa May can therefore count on Labour’s support.

Polling shows that the British public remains evenly divided over Europe, while 45% consider there to be no need for a referendum or Parliamentary vote before exit, and 69% consider the government duty-bound to leave the EU. After the UK exits the EU, particularly if there was a deep, comprehensive free trade deal in the pipeline, the Union would have little incentive to expend resources on re-accession talks if there was a substantial prospect that the UK would again vote to leave, even if there was a willing UK government.

Accordingly, the only realistic hope for the UK remaining in the EU is a substantial shift in UK public opinion before Brexit, that would prompt Labour and Conservative MPs into a change of heart, or enable the next government to reverse course. The Liberal Democrats need to get to work now to persuade the public of the positive case for full membership, as against a DCFTA.

* David Graham is a Lib Dem member in London

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11 Comments

  • Eddie Sammon 31st Mar '17 - 12:15pm

    I’m late to the cause but I’m coming around to maintaining free movement of labour. Unless what replaces it is a very liberal visa regime, or citizenship one, then finding work in the EU and recruiting Europeans is going to be a lot harder.

    I’m applying for jobs in Paris at the moment and I think most recruiters, at entry level jobs at least, are not interested in people who require visas, hence I’m in a bit of a rush to make use of three years of French study before brexit.

  • I was talking this afternoon to a British lady who has lived since her childhood in Spain, she was asking me about finding jobs in Thailand.

  • David: Thank you for a well constructed post.
    On changing public opinion I would love to see a Libdem think tank approach to each of the key issues of the Leave campaign. 1, Immigration. 2, Cost. 3, Control. In each case I would like to see a comprehensive report. Explain the facts. Be honest. Explain how the negatives can be mitigated.
    I remain haunted by several interviews I’ve seen recently. One was between Tim Farron up in Cumbria. The other was Nick Glegg in South Wales. In both cases our most eloquent and passionate advocates failed miserably to cut through. We need to find a way to bring these people on board.

  • H.M. Government seeks “a deep and special partnership” with “a bold and ambitious Free Trade Agreement” that covers financial services, where we “have to align with rules agreed by institutions of which we are no longer a part”, and “manage the evolution of our regulatory frameworks to maintain a fair and open trading environment”.

    Sounds very familiar: Single Market extended to include financial services, with the UK outside…

    Whilst UK leaving the EU may enable Westminster to claim it has reclaimed ‘sovereignty’, any business exporting to the Single Market will still have to abide by whatever rules the EU/EEA dictate.

  • Divorces are seldom easy, this one is unlikely to buck the trend. You only have to look at the Daily Mail to see the hatred being whipped up. Already the brave Brexiteers are preparing their excuses or finalising their travel plans. Next two years are going to be interesting as reality trashes the brave Brexiteers assumptions.

  • @frankie – agree, it is noteworthy that the media, including the BBC, are already working on the assumption that the EU will give the UK a hard time, regardless of reality.

    The sad thing is that all the EU has to do is to simply state simple home truths to give the Brexiteers a hard time…

  • Antony Watts 1st Apr '17 - 8:56am

    OK so let’s start now to change public opinion.

    40 things the EU has done!!!
    1. Since 1980, the EU turned 13 former dictatorships into democratic countries,
    2. The EU has been providing 57% of our trade.
    3. The EU has been Providing funding to areas hit by industrial decline
    4. Bathe in our rivers or get drinking water from them without getting cancer.
    5. Same for the air. Seen Beijing lately? Neither have the Beijiners.
    6. No lead in petrol. That means less cancer and more brain power too.
    7. The EU has imposed restrictions on landfill dumping.
    8. Now everyone and their dog recycles and it’s a good thing.
    9. The EU is getting rid of extra Mobile charges when travelling.
    10. Open skies agreement, much low cost flights. Compensation if delay or cancellation

    for a start

  • Katerina Porter 1st Apr '17 - 1:24pm

    As for me, I have thought that the EU and the Human Rights Act gave one some protection from our own government and the multinatinals.

  • Andrew Tampion 2nd Apr '17 - 7:48am

    Antony Watts
    1 Where is your evidence that the EU was solely responsible for the former Communist Block countries becoming democracies? How do you deal with the inconvenient fact that some leaders of former commmunist block dictatorships are at best controversial and at worst show dictatorial tendencies?
    2 The EU provides 0% of our trade, the 57% you mention is the aggregate of our trade with the individual members. Nobody wants to reduce the total amount of trade with the EU because the proposal is a free trade deal. If the EU refuses that offer then any reduction in trade is as much their fault as ours.
    3 We give money to the EU which thedy then disperse back to areas in our country in industrial decline. If a future UK government chooses not to provide aid on a similar basis then that is a choice on that governments part for which it is accountable to the electorate. Incidentally since some areas for example Wales have been in receipt of aid for decades with little noticeable improvement then the efficacy of the aid is questionable.
    4 Joseph Bazalgette in the 19th century took steps to clean up water quality in the Thames by sewer works. Nearly a 100 years before the EU was thought of.
    5 The Great Smog of 1952 to lead to the Clean Air Act of 1956, nothing to dop with the EU.
    6 Lots of non EU countries ban lead in petrol
    7 & 8 Ok I’ll give you those but no reason to think these won’t have been done without the EU
    9 & 10 Again I’ll give you those but this could have been dealt with by international negotiations out with the EU

  • Andrew Tampion 2nd Apr '17 - 7:49am

    Katharine Pindar
    The only true protection for overbearing Government (including the EU itself) is the vigilance of electors.

  • Andrew Tampion 2nd Apr '17 - 10:29am

    Katerina Porter apologies for misreading your name in my previous post

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