Why there may be no Brexit deal

As a rule I don’t like it when journalists report events before they happen, rather than waiting for a few days when facts start to emerge. When The Economist reports on most elections across the world it usually does does so before polling day, and rarely bothers afterwards beyond a brief update in the weekly summary. So why don’t I wait to see whether a deal is reached between the United Kingdom and the European Union for trade and other matters after the Brexit transition period ends on 31 December? Well there is a lot of kerfuffle and maybe it will help to make sense of it.

Optimism has been widespread that a deal with be reached, after the usual theatrics, because both sides will be damaged if not. But over the weekend I started to become pessimistic. The British Prime Minister, Boris Johnson, lacks the skill to pull it off, I thought. The New Statesman‘s Stephen Bush articulated the anxiety much better than me in the magazine’s Morning Call, a daily email update on British politics which well worth subscribing to if you follow British politics closely.

Mr Bush’s point is that in order make the compromises necessary to push such a deal over the line, leaders must have a clear idea of critical priorities (and, therefore what other matters reopen to compromise). For example with his predecessor Theresa May it was immigration and the Northern Ireland border; she was less concerned with the “level playing field” concerns of the EU. With Mr Johnson, he either has no such clarity, famously wanting to have his cake and eat it, in the English expression, or if he does it is focused entirely on maximising the country’s legal sovereignty, which any substantial trade deal is bound to constrain, Britain not being the United States of America.

This last point chimes with a point being made more and more loudly by Conservative MPs and Lord Frost, Britain’s lead negotiator. The EU, they say, doesn’t understand that we are a sovereign nation. In any relationship breakdown one or both sides usually claim that the other simply doesn’t understand them. The louder this claim is made, the more sceptical detached observers become. These government supporters are protesting too much. It is they, surely, who are failing to understand the priorities of the other side.

If so, there would be plenty of precedent. British Eurosceptics are often very knowledgeable about the EU, but rarely understand it, and susually to predict how it develops. I remember clearly in the 1990s how many knowing Britons told me that monetary union would never happen, for example. Others were convinced that the Euro could not survive the debt crisis of 2011.

But there are two sides to this. Am I failing to understand the Eurosceptics? In fact they have plenty of grounds for annoyance with the EU side in this negotiation. One of their leaders, the Tory MP Bernard Jenkin, claimed yesterday that the EU offered a deal like Canada’s without tariffs, and have rowed back. In particular the EU are now asking for enforcement provisions well in excess of the Canada deal, where disputes go into the World Trade Organisation’s resolution system. I have heard two arguments made about why Brexiteers’ hopes for a Canada-type deal are unrealistic. One is that the volume of trade with the UK is much higher and so the EU has more at stake; the other is that it still involves some tariffs, whereas the Britain is asking for none. That may be, but I suspect Mr Jenkin is right: that the EU side did suggest that “Canada plus” was on the table, but have backtracked under pressure from the French government in particular. Furthermore it is hard not to bristle at the enforcement provisions suggested by the EU (as reported by not entirely trustworthy sources, it must be admitted). It allows the immediate imposition of retaliatory tariffs without resort to preliminary dispute resolution. This is the sort of thing we expect from Donald Trump’s America (for example in its dealings with China), and not those fair-minded former allies at the EU, the Eurosceptics somehow don’t manage to say.

So the ire from the British government side is understandable. But perhaps they and their supporters should have seen it coming and been better prepared. Here is where trying to understand the EU would help. It is not a settled and and stable institution, like most mature nation states. Its progress resembles the flight of the bumble bee, in a constant series of stalls. But this gives it a sort of dynamic stability that the Anglo-Saxon mind struggles with (and doubtless many Latin ones too). The EU is constantly under existential threat, and its institutions and member governments must constantly seek ways to head these threats off. Brexit presents one such threat, as many a Eurosceptic has gleefully pointed out. Others may follow where Britain leads. A deal where Britain manages to have its cake and eat it would give this threat substance. This is not so much from the EU’s newer members like Hungary and Poland (with their large EU subsidies), but from the older countries, who might ask what they get in return. Far right parties, like France’s Front National, remain a potent threat to the political establishment. That threat will be compounded if the EU doesn’t seem to have done enough to protect struggling communities such as France’s fisherman, never mind one that allows their cross-Channel competitors to feed off state subsidies. Mrs May’s favourite mantra was that “No deal is better than a bad deal”. But that applies more strongly to the EU side than to the UK.

But surely the EU would not want to threaten its trading surplus with the UK? Wouldn’t a no-deal hurt them more? This was a favourite argument of Brexit supporters during the referendum campaign. But that surplus is concentrated among a small number of better-developed countries. These countries, Germany in particular, are better able to withstand the shock than others. And they are quite used to subordinating economic considerations to political ones, as has been shown by their willingness to apply sanctions to Russia. Besides Britain doesn’t have a lot of choice as to where it gets many of its imports. EU national governments, Germany and Ireland in particular, are more calmly strategic that many have given them credit for.

Meanwhile Britain has not helped itself by its government interpreting its new-found sovereignty as the right to renege on any foreign treaty it likes. Its attempt to wriggle out of the Withdrawal Agreement enacted a year a go with respect to the Northern Ireland border is very striking. Doubtless this is viewed by the government as a piece of hard-ball negotiation to increase the costs to the other side of a failure to conclude a deal. But when Britain suggests that the EU has nothing to fear from a looser British enforcement regime for the EU single market, the automatic response is to ask how the country is to be trusted without waving a big stick at them. One of the many ironies, though, is that British exceptionalism probably doesn’t present a big threat to the Single Market. Nobody loves petty rules and high regulatory standards more than the British, and they are wary of state subsidies too. Indeed, healthy competition is a more likely outcome.

The Eurosceptics’ optimism is based on the idea that Britain can gain a strategic advantage by causing tactical problems for the other side. But nobody is fooled. Do they care? Many eurosceptics advocate a “clean break”, and describe a scenario without a trade deal as the “Australian option”. There will be a bit of short-term disruption, for sure, but the country will adapt soon enough.

Those actually in the government are less sanguine of course, and that’s why a deal of some sort is still on the cards. Only a minority of the country was ever convinced that Brexit was the right thing to do, after all; they formed a narrow majority only by persuading more sceptical voters. That does not mean that a no-deal Brexit will be fatal for the government – though it won’t help handing Scotland. After all the deed will done and Britain can’t go back to where it was before. But a cruel reckoning is on its way and we should all worry about that.