What happens if no Brexit deal is reached?

Md Sharif Hasan
Published : 16:23, Oct 13, 2018 | Updated : 16:27, Oct 13, 2018

Md. Sharif HasanBrexit has been at the forefront of British politics since the country voted in a referendum for a divorce from the EU in June 2016. It’s a crunch time for Prime Minister Theresa May. She has travelled to Salzburg recently to try to reach a breakthrough with EU leaders on the UK's terms for the exit, but many have already pushed back her Chequers plan. Brussels chief negotiator Michel Bernier is saying it would spell the end of the EU project. And, just six months ahead of the deadline for a Brexit, the head of the International Monetary Fund Christine Lagarde has given a stark warning that leaving the EU with no deal could be costly for the British economy.
It took the UK government a long time to settle on an approach to the Brexit negotiations and when the Chequers plan came out a couple of months ago it was very late in the process. What the UK has proposed in Chequers is a very clunky system where countries collect border taxes on behalf of each other and where there is also a common rulebook across the UK and the European Union for the movement of goods specifically.
Now, whether that breaches redlines on the EU’s part in terms of splitting up the pillars of the single market remains to be seen.
There’s certainly something in Chequers over which there is room for negotiations. But we need to see how far each of the parties is willing to go.
The single market as far as the EU is concerned comes as a package. And, the EU states are in cohesion on this very point. Michel Barnier, the new EU Brexit negotiator, says that 80% of the withdrawal agreement is wrapped up. It’s the remaining 20%, there’s the clincher. If Theresa May insists on her Chequers plan that doesn’t include the free movement of people, the EU can’t accept it. And, she has boxed herself into a corner because she insisted that there can be no free movement of people. But, if she continues to maintain that line there can be no Chequers either.
The IMF has been quite consistent as long before the Brexit vote it warned about the negative impact it could have on the UK. Now, Christine Lagarde is painting an even bleaker picture if there’s no deal. So, what does Theresa May do at this point?
It’s all very well to talk about the economics of the argument but really it’s all about the politics. Whether the deal is going to succeed or fail depends upon whether Theresa May can convince her own parliament of the merits of the Chequers plans: let alone in ITS negotiations with the EU.
And, Christine Lagarde did say that although it would be bad for the UK, it would also be bad for the EU. Again, there is a politics versus economics that goes on as a calculation on the EU side as well. So, we can’t purely look at this in just GDP or unemployment terms although clearly, that will be significant if both UK and EU don’t get a deal. If we’re looking at what’s going to happen and how it’s going to pan out we have to look at the politics of this.
There’s a huge difference between Deal or No Deal. And, if it’s a Deal it depends on what the nature of that Deal will be. Chequers plan is certainly an improvement on No Deal. But, it leaves services outside the single market of the European Union and that will make it difficult for services to trade within the European Union. In the case of No Deal, the big problem here is that the EU will be obliged under WTO rules to impose tariffs on what it imports from the UK. And that will make British producers very uncompetitive as they try and export their products to the European Union. That threatens employment, jobs, pay, and GDP growth in the UK. So, No Deal would be a very bad solution indeed for the UK and also it would be a very bad solution for the European Union.
Theresa May obviously is in a very difficult situation. This is the problem of having a minority government. It’s also the problem because although 52% of the UK population voted to leave more than half of the parliamentarians in the UK’s parliament voted to remain. In fact, more than half voted to remain. So, there’s a friction there that has always dogged these negotiations and unfortunately was made a lot worse by that election last year where she was of course gunning for a big mandate. And, unfortunately, she got the exact opposite. So, in terms of picking and choosing, yes, there’s often a lot of criticism around what the UK is putting forward in terms of having its cake and eating it. In any negotiation as anyone would have gone through, one’s to put certain things forward knowing one might get pulled back from what it is that one really wants.
It’s tough to criticize May’s Chequers plan necessarily on cherry picking because a line had to be drawn somewhere and she had to draw it based on the fact that her party had fundamentally split and of course the nation is fundamentally split and that it necessitated trying to draw these red lines. That means both Britain and the EU are in a quite tricky situation with the clock ticking. Undoubtedly, there’s basically a raft of poor options left and it is a question of just how bad is the final outcome going to be.
Md. Sharif Hasan teaches international relations at University of Rajshahi.

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