December 10, 2018 / 11:18 AM / 6 months ago

Breakingviews - Breakdown: Brexit maze has four flawed ways out

LONDON (Reuters Breakingviews) - Britain is trapped in a Brexit maze of its own making. Almost two-and-a-half years after the country voted to leave the European Union - and with just 109 days to go until its 45-year membership is due to expire - politicians are still arguing about the best escape route. Theresa May on Monday postponed a crucial vote on her favoured exit plan that looked destined to end in defeat for the prime minister. The United Kingdom then confronts a baffling range of political options. Despite the confusion, the country essentially has four choices. Breakingviews offers a guide through the labyrinth.

A woman holds a placard as she joins EU supporters, calling on the government to give Britons a vote on the final Brexit deal, participating in the 'People's Vote' march in central London, Britain June 23, 2018. REUTERS/Henry Nicholls

THERESA MAY’S DEAL

The Prime Minister’s plan is the only negotiated deal on the table. That’s both an advantage and a disadvantage. On the plus side, the 599-page draft treaty lays out a multi-year path for withdrawal. This includes a transition during which Britain and the EU can begin to negotiate their future trade agreement. It settles financial claims, ensures the rights of citizens living in each others’ countries, and - crucially - avoids a land border in Northern Ireland.

The problem is that almost everyone hates it. Committed Brexiteers in May’s Conservative party, and the Democratic Unionist Party on which her government depends, believe it binds Britain too closely to the EU. The “backstop solution” designed to solve the Northern Ireland conundrum could end up locking the country into a customs union with the EU which it cannot give up unilaterally. Meanwhile, pro-Europeans dislike that Britain will be forced to follow EU regulations while giving up influence over how those rules are set.

On Monday, May avoided almost certain defeat by postponing the vote and promising to ask for more concessions from Brussels. The EU might offer some tweaks to the document that sets out the two sides’ aspirations for their future relationship. But these would not be legally binding. Demands by Brexiteers to loosen the backstop will almost definitely be dismissed. Besides, it’s far from clear that any concessions would deliver May a parliamentary majority.

BREXIT IN NAME ONLY

If May’s deal fails, other exit routes open up. One approach is to follow the path set by Norway, which maintains tight links with the EU despite never having been a member. Britain would adopt May’s withdrawal agreement, but commit to remaining in the European single market after its departure, by joining both the European Free Trade Association and its subset, the European Economic Area.

This would minimise economic disruption. However, Britain would have to make regular payments to Brussels. It would also have to accept the right of EU workers to live and work in the United Kingdom. That means giving up May’s one clear achievement: gaining control over immigration. And to avoid border checks in Northern Ireland, Britain would also have to join a customs union with the EU - hence the plan’s “Norway-plus” nickname.

Even if such a deal could be negotiated, however, its purpose is questionable. Britain would operate much as it does today, but without the influence that comes with being an EU member. It would have to follow regulations on, say, banking that it could no longer help shape. Brexit would be largely reduced to a symbol.

Opposition leader Jeremy Corbyn appears to favour a version of this plan, though the Labour party’s frustratingly vague formulation assumes Britain could retain some say over EU rules and trade deals, and some control over EU immigration. That seems a stretch.

THE “NO DEAL” GAMBLE

The shortest way out of the EU is for Britain to leave when its two-year notice period ends on March 29 next year. This would rip up almost everything May and her team have spent the past year-and-a-half negotiating. There would be no transition period. Overnight, Britain would become a so-called “third country” when trading with the EU. Many goods would incur tariffs, and the UK’s services sector would not automatically be compliant with the EU’s. Trucks and trains passing through busy ports such as Dover and Calais would face long delays, disrupting supply chains. A border in Northern Ireland would be unavoidable.

Advocates of this approach, who include former Foreign Secretary Boris Johnson, argue that Britain could force the EU into making concessions, for example by holding back some of the up to 39 billion pounds the country has promised to pay as part of the divorce settlement. But that would risk retaliation. Both sides would need to take steps to enable British planes to keep flying to the EU, or European truck drivers to keep delivering goods in Britain. An acrimonious Brexit would undermine cooperation and threaten chaos. The pound would plummet and inflation and unemployment would spike. In the most disorderly outcome, the Bank of England reckons that the British economy would end up more than 10 percent smaller than the central bank expected before the 2016 referendum.

NO BREXIT

Britain’s final option is to back out of the maze by retracing its steps. In legal terms this is simple: the government can reverse its decision to leave any time before the two-year notice period ends in March 2019. The European Court of Justice on Monday confirmed that Britain can do this unilaterally.

Politically, however, it’s far more complicated. To overturn the 2016 referendum, Britain would need to hold another one. The campaign for another “people’s vote” has gained a growing number of endorsements in recent months. Labour now says it will support a second referendum if it cannot force a general election.

But even enthusiasts are unclear about how the referendum would come about. The government would have to agree to pass legislation, and seek permission from the EU to extend Britain’s membership beyond 2019 in order to allow time for the vote to take place. The campaign would open fresh divisions. Even then, the result would be uncertain. Polls suggest the country is still evenly split between staying in the EU and leaving.

WHAT’S NEXT?

The political possibilities are almost endless. If May’s deal fails, she could face a leadership challenge from within her party. Labour will attempt to force an election, or maybe form an alternative minority administration. Parliament could even set up a national government to address the crisis, as it has done during times of war or severe economic crisis.

Yet whatever the political configuration, the four flawed choices facing Britain remain essentially the same. Sooner or later, the country will have to decide which is the least bad way out of its own labyrinth.

(This item has been updated to reflect the UK government’s decision to delay the Brexit vote.)

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