Brexit – where next?

Brexit – where next?

Theresa May has seen the biggest government defeat in British history. Her Withdrawal Agreement has been kicked into touch. The grieve amendment means that she has to bring Plan B back to parliament next week. Where do we go from here?

It is worth reflecting for a moment how we got here. May took office after David Cameron resigned, the 2016 EU Referendum result not going the way he wished. The subsequent leadership election managed a couple of rounds before the anticipated final run off. Andrea Leadsom withdrew, leaving May clear to take on the premiership, Leadsom earning herself a cabinet position.

The referendum campaign had been a cross party issue. Of the highlights, was a TV debate, featuring Boris Johnson and Andrea Leadsom sharing a platform with Gisela Stuart. Against them were Nicola Sturgeon, Amber Rudd and Angela Eagle.

Within 9 months of her anointing, May invoked Article 50, the mechanism for withdrawing from the EU. A month or so later, she called a general election, apparently leading in the opinion polls by some margin. The result was that she lost her overall majority.

From becoming leader to invoking Article 50, it might be argued that May made her first crucial mistake. Having been a cross party issue, May neglected, whether actively or passively, to draw on the cross-party nature of the Brexit campaign and vote.

The 2017 general election saw both major parties pledging to honour the referendum. The result was that over 80% of the electorate supported Conservative and Labour parties. Again, May failed to seize the opportunity to seek cross-party involvement, making Brexit, to a large extent at least, a party issue. This was with a divided party.

At the same time, under the fixed Term Parliament Act, May denied the population of the opportunity to voice an opinion in the scheduled 2020 election. With a 552:13 vote to call the election, opposition parties were complicit in derailing what should have become the natural course of events.

It might be argued that May made a second fatal mistake. Negotiations began with the EU, agreeing to a timetable for progress. The problem was that the chronology was that which was presented by the EU. A “divorce bill” was achieved in principle, a “backstop” agreed. It was decided to seek a withdrawal agreement, a “future relationship” deal to follow. The initiative was handed to the EU. The UK can make no free trade agreements without the consent of the EU.

The third arguable fatal flaw came at Chequers in July 2018. It emerged, confirmed in subsequent select committee reports, that May had been working to her own agenda, with the help of her `consiglieri’ Olly Robbins. The Chequers plan formed the basis of what led to what May called “my deal”, the withdrawal Agreement presented to parliament in December 2018, then suspended and finally rejected on 15th January 2019.

In between presentations, when the Withdrawal Agreement was clearly going to be rejected, May had sought a final compromise from EU personnel. Ambiguous assurances were offered. The EU were not prepared to make any alteration to legal text.

It will be recalled that May’s first DexEU minister resigned after Chequers, his resignation letter here. Davied Davies made clear his objection to some of the key points. Subsequently, he clarified during BBC Question time in December 2018 that he had simultaneously been discussing a Canada +++ style deal with his EU counterparts.

It is now a matter of record that May’s Withdrawal Agreement has resulted in the biggest ever government defeat in the House of Commons. The most mentioned reason as mentioned in speeches was the backstop, remaining in the customs union until an unspecified date in the future, aligned with EU rules but with no say. This would be accompanied by a divorce bill of £39 billion, budget contributions growing over time.

So where from here? There are several options.

Subject to parliamentary procedure, the default position would seem to be an exit on 29th March 2019 under what one side calls “no deal”, the other “WTO rules”. Ostensibly, there is little support in the House of Commons to allow this and it remains to be seen whether MPs can nullify this option. Indeed, having been presented with the offer to discuss a way ahead with Jeremy Corbyn, the latter has ruled out the “no deal” option.

Interestingly, May’s language over the withdrawal date, by 14th January, had already moved the firm commitment “we are leaving on 29th March 2019” to “that is what we are working for”.

That brings us to a first possibility, that the Article 50 time period could be extended, which is provided for. The request would have to be agreed unanimously the remaining EU 27, by no means a foregone conclusion. Whilst having initial appeal, it could also be argued that if an acceptable alternative has not been agreed after almost two years, then would any extension merely result in more procrastination?

At a time when Germany’s industrial production indicates that they might be leading the EU into technical recession, this might be the time for the UK to exert a position of relative strength.

An apparently popular position in the House of Commons is to lobby for a second referendum, the so called People’s Vote. This would of course be in direct contravention of the positions taken in both major parties’ manifestos in 2017.

Remainers have a variety of arguments. The demographic profile of the electorate has changed. It is a fair point but goes against the promise that the first referendum was a “once in a lifetime decision”. It might be true that people did not know what they were voting for, despite the wealth of both information and propaganda made available from both sides.

It might also be true to highlight that the economic projections from `Project Fear’ have proved false, the prospect of a European Army is not, as Nick Clegg said, a “dangerous fantasy”. Did Remainer voters understand the Five Presidents’ Report, let alone anticipate Guy Verhofstadt’s passion for yet further integration and tax rate harmonisation? Did we expect the EU to take selective approaches to Italy’s and France’s budget deficits?

In compiling Project Fear, the closed circle of establishment economists made their own “ceteris paribus” assumptions, deciding among themselves which of the ceteris were to remain paribus.

Polls and anecdotal evidence provide no surety that any referendum outcome would be different next time around. A plethora of evidence suggests that a proportion of those who voted to remain value the democratic process and would switch allegiance. In any event, informed sources suggest that logistically a “Peoples’ Vote” could not take place until June, subject to the unanimous approval of a delay by the EU27.

So politicians and the media would have us believe that the EU position is now non-negotiable. Despite protestations for a second vote and an extension of Article 50, these might not be feasible, given the perceived default positions. Withdrawal of Article 50 is a threat to democratic rule and civil obedience.

Is there another way?

There may be two.

Being positive, the House of Commons has indicated what is unacceptable. Brexit, given current parameters, is defined as taking place on 29th March 2019. Preparations have already been made, at least to some extent, for a Canada +++ deal in the longer term. The EU sugest no further negotiation.

May has an opportunity to be a leader. She can present two options. Both depend on highlighting the natural outcome of trading on WTO rules after March. These might involve reciprocal tariffs. The impact on a Germany approaching recession, could be enormous if BMW were to be bought from South Africa, Mercedes from Brazil and VW from India. The impact on Mediterranean agriculture could be enormous for food and agriculture, noting for example the opportunity to remove tariffs on South African or American orange juice.

Option 1 becomes eliminating a withdrawal period and moving straight onto a Canada +++ from 30th March. Since parts of the Withdrawal agreement have been drawn from other EU accession treaties such as with Ukraine, the same exercise can be completed, if indeed a draft has not already been constructed, over the coming month or two.

Option 2 gives more time. A commitment by both parties to reach a Free Trade Agreement gives a different option under WTO rules, specifically Article XXIV. This would allow for continuation of trade on current terms with breathing space to finalise a Canada +++ agreement with a “reasonable period, defined under Article XXIV as up to 10 years. This also allows the UK to negotiate other FTAs.

If neither of those options is agreed then the default position becomes live. The UK withdraws, publishes a reciprocal tariff schedule and despite our efforts to support stability in the EU economies, German cars, EU wine, agricultural output, Polish shoes and so much more besides is immediately subject to those tariffs and global competition with immediate effect.

Either of those options is fair, made in good faith and gives the EU27 an opportunity to mitigate the potential damage caused by refusals to compromise with previous efforts. The welfare of citizens of the EU 27 is up to them. Their surpluses in the balance of trade is in their hands.

We shall make a success of our opportunity to work in a global environment.