tag:theconversation.com,2011:/africa/topics/soft-brexit-32665/articlesSoft Brexit – The Conversation2019-07-25T14:46:01Ztag:theconversation.com,2011:article/1210092019-07-25T14:46:01Z2019-07-25T14:46:01ZSoft Brexit is more likely than ever, thanks to Boris Johnson’s new hardline cabinet – here’s why<p>Boris Johnson’s appointment of a cabinet full of Brexit hardliners will be alarming for anybody concerned about the possibility of a no-deal Brexit, and the stewardship of the UK’s economy and public services. But it’s not the whole story. In practice, the appearance of a hardline stance on EU withdrawal by a Johnson government may be the very thing that unlocks the possibility of avoiding a chaotic break with the continent.</p>
<p>We saw the worst and best of Johnson on his first day in office. The appointment of people with <a href="https://www.bbc.co.uk/news/uk-politics-41172426">highly reactionary views</a>, or those who have shown contempt for both Britain’s <a href="https://www.theguardian.com/politics/2019/mar/27/commons-report-rules-dominic-cummings-in-contempt-of-parliament">democratic system</a> and <a href="https://www.ft.com/content/0256baf2-6c34-11e9-a9a5-351eeaef6d84">national security laws</a>, purely because it suits immediate political interests, paints a disturbing picture of the character of Johnson’s premiership.</p>
<p>At the same time, the assembly of Team Boris may just have demonstrated – no less disturbingly, perhaps – Johnson’s supreme skills as a political operator.</p>
<h2>Johnson’s Brexit</h2>
<p>It’s generally believed that Johnson is not being entirely truthful about his Brexit plans. Conventional wisdom suggests that he will simply rebrand Theresa May’s withdrawal agreement – which he did <a href="https://www.politicshome.com/news/uk/foreign-affairs/brexit/news/102879/numbers-how-every-mp-voted-third-brexit-deal-division-vs">eventually vote for</a> – and force it through parliament with sheer bravado. </p>
<p>But this scenario understates the problem of <a href="https://theconversation.com/brexit-why-is-the-irish-border-backstop-so-crucial-to-securing-a-brexit-deal-113398">the Irish border backstop</a> designed to kick in if alternatives to a hard border on the island of Ireland cannot be found. Without Labour’s support, there will still be enough true-believing Brexiters on the Conservative backbenches to block any deal containing May’s hated backstop – even ministerial resignations would be likely. But the EU will not countenance anything resembling May’s deal without a backstop-like mechanism for the Irish border.</p>
<p>In Johnson’s cunning plan, however, the backstop is likely to become the first stop. I think he will soon signal his willingness for Britain to remain in both the single market and customs union as part of a lengthy transitional period – possibly as long as five years – before a UK-EU free trade deal is agreed. Short of permanent single market membership via the European Economic Area – which the EU will never offer to Britain – this would represent the softest possible Brexit. </p>
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<p>All he requires from the EU is a commitment to this timetable, in return for ongoing budget contributions for several years, and of course payment of the divorce settlement when the UK finally departs from the single market and customs union. </p>
<p>This doesn’t fully alleviate the need for something like the backstop – since even five years may not be enough time to agree a trade deal – but with May’s 21-month “<a href="https://www.theguardian.com/politics/2017/oct/25/brexit-transition-period-likely-limited-20-months-eu-officials-say">implementation period</a>” now irrelevant, it starts to feel purely hypothetical.</p>
<p>Crucially, Britain will still leave the EU in a formal sense on October 31, 2019, relinquishing all political representation. With ironic inevitability, if it leaves with a deal involving a lengthy transition, Britain will become the rule-taking “vassal state” of which Johnson <a href="https://www.youtube.com/watch?v=VuMPS4XX7fo">once warned</a>. An elongated Brexit will be deemed a price worth paying for an irrevocable Brexit.</p>
<p>Johnson’s masterstroke is to tie the key figures of the Leave campaign now in his cabinet to this strategy, while effectively conceding the demands of Tory Remainers. The former know this might be their last chance to secure Brexit, and the latter know this might be their last chance to avoid no deal.</p>
<p>We can then expect a general election to be called, for early November or sooner if the new withdrawal process has been agreed. Johnson’s minority government cannot possibly function beyond Brexit with so many ousted ministers on the backbenches. However, whether he wins a workable majority or not, I also expect the complexion of his government to change dramatically after this point, with the return of senior Remainers such as Jeremy Hunt and Greg Clark, and the promotion of people like Johnson’s brother Jo.</p>
<h2>No deal</h2>
<p>It would be foolish to discount the continuing possibility of a no-deal Brexit, not least because Johnson will prove himself incompetent and indifferent, in equal measure, when it comes to delivering his plan in practice. While his political strategy depends on stuffing his cabinet with hardliners, their ideological myopia renders them ill-suited to the task of managing a major constitutional upheaval, yet perversely over-confident in their ability to do so.</p>
<p>Even the best laid plans often go wrong. And best laid plans, these are not.</p>
<p>Yet it’s worth remembering that nobody on the Leave side in 2016 envisaged a no-deal Brexit. It was May herself who, <a href="https://blogs.lse.ac.uk/politicsandpolicy/the-very-short-history-of-no-deal-brexit/">almost by accident</a>, raised this possibility in her 2017 Lancaster House speech. May quickly backed away from the notion of leaving without a withdrawal agreement, yet accepting the prospect nevertheless became a test of purity among the Brexiters.</p>
<p>The Johnson government will now ramp up planning for a no-deal Brexit, but the fact that this job has been <a href="https://www.thetimes.co.uk/article/boris-johnson-s-cabinet-feud-ends-as-gove-is-given-key-role-in-brexit-plans-pzzkcdr36">handed to Michael Gove</a> – who thwarted Johnson’s leadership ambitions in 2016 – is highly revealing. If we listen only to Johnson’s rhetoric, we could deduce he has appointed Gove to a significant and indeed pivotal role. In practice, it will be a highly demanding job, but one which could end up being rather marginal to the main thrust of the Johnson government’s plans.</p>
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<h2>Immigration implications</h2>
<p>The fate of Britain’s position on immigration is perhaps the most fascinating element of the multi-dimensional debacle. Johnson’s deal is likely to see free movement continue – certainly for several years, and perhaps indefinitely. Do not be fooled by references to an <a href="https://www.theguardian.com/politics/live/2019/jul/25/boris-johnson-new-cabinet-prime-minister-chairs-first-cabinet-as-critics-say-party-now-fully-taken-over-by-hard-right-live-news?page=with:block-5d3988818f08cf92bb776b4c#block-5d3988818f08cf92bb776b4c">Australia-style points-based system</a>, designed only to reassure Tory voters but practically meaningless. Johnson and the <a href="https://www.newstatesman.com/politics/uk/2019/07/britannia-unchained-free-market-book-defines-boris-johnson-s-new-cabinet">“Britannia Unchained” brigade</a> of free marketeers are almost unabashedly pro-immigration.</p>
<p>But we tend to underestimate how much May’s insistence on ending free movement hamstrung her premiership. As such, if he accepts free movement, Johnson risks handing Nigel Farage’s Brexit Party a new stick with which to attack his strategy. This is all the more reason for an early election, before the immigration policy implications of Johnson’s approach become clear among the wider electorate.</p>
<p><em>This article was co-published with the <a href="https://ukandeu.ac.uk/">UK in a Changing Europe</a> initiative.</em></p><img src="https://counter.theconversation.com/content/121009/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Craig Berry is a member of the Labour Party.</span></em></p>What is Boris Johnson’s Brexit plan?Craig Berry, Reader in Political Economy, Manchester Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1149322019-04-10T10:05:40Z2019-04-10T10:05:40ZFive options for Brexit trade explained<figure><img src="https://images.theconversation.com/files/268550/original/file-20190410-2912-ja387r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The British prime minister’s request for another Brexit delay results from the intensity of diverging positions in the British parliament over Brexit. After a series of <a href="https://theconversation.com/brexit-q-a-what-are-indicative-votes-and-how-do-they-work-114229">indicative votes</a>, where no Brexit plan received majority support, we can sum up the five options as: Theresa May’s withdrawal agreement, a no-deal Brexit, staying in the customs union, staying in the single market, and the so-called Common Market 2.0 idea. </p>
<p>Here’s a break down of what those options mean.</p>
<h2>1. Theresa May’s withdrawal agreement</h2>
<p><strong>Strike your own trade deals? Yes.</strong></p>
<p><strong>Freedom of movement? No.</strong></p>
<p><strong>EU budget contributions? Yes.</strong></p>
<p><strong>Does it solve the Irish border issue? Yes.</strong></p>
<p>May’s withdrawal agreement is unpopular in the UK but has been approved by the EU. As it stands, things would remain the same for the time being, until a trade deal is organised. It avoids the need for an Irish border until then, as the UK and EU would form a customs union. In the meantime, the UK and EU would negotiate their future relationship. The broad shape of this is set out in a non-binding <a href="https://theconversation.com/brexit-political-declaration-what-it-means-for-the-future-uk-eu-relationship-107256">political declaration</a>, which suggests the future relationship will be a comprehensive trade agreement. </p>
<p>In this scenario, the UK would not be bound by EU freedom of movement requirements – a <a href="https://www.ft.com/content/49dc02dc-c637-11e7-a1d2-6786f39ef675">fundamental principle of the EU single market</a> that allows goods, money, services and people to move freely within the bloc. The UK would also be able to sign free trade agreements with others, as Brexiteer MPs demand. The UK would make contributions to the EU budget to participate in selected programmes of interest. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/268552/original/file-20190410-2909-46kdoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">May’s withdrawal agreement has been rejected three times by parliament.</span>
<span class="attribution"><span class="source">Alexandros Michailidis / Shutterstock.com</span></span>
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<p>However, the withdrawal agreement specifies that if no satisfactory technological and regulatory solution is agreed for the Irish border to avoid a return of a hard border in Northern Ireland and respect the Good Friday Agreement, the UK would retain regulatory alignment with the EU. The <a href="https://theconversation.com/brexit-why-is-the-irish-border-backstop-so-crucial-to-securing-a-brexit-deal-113398">infamous Irish backstop</a> is an insurance mechanism and would cease to exist as soon as adequate alternative mechanisms are viable to operate customs checks without a physical border. </p>
<p>The prime minister’s deal places the UK on a path to a future trade agreement with the EU, the extent of which is, at present, uncertain. But whatever form it takes it will represent less access to the EU’s single market, especially for services, than at present, and some form of increased transaction costs for businesses. Remaining in a customs union or in the single market would avoid some of these, while allowing the UK to exit the formal political institutions of the EU. Yet, both options have pitfalls. </p>
<h2>2. Customs union</h2>
<p><strong>Strike your own trade deals? No.</strong></p>
<p><strong>Freedom of movement? No.</strong></p>
<p><strong>EU budget contributions? Yes, but limited.</strong></p>
<p><strong>Does it solve the Irish border issue? Yes.</strong></p>
<p>Remaining in a customs union would resolve the Irish border matter, and would meet May’s red line regarding ending the free movement of people. But it would commit the UK to applying the same external tariffs and restrictions on goods as the EU, and to adopt the same <a href="https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm">rules of origin</a> for goods, as well as regulations in areas related to the customs union. </p>
<p>This would curtail the UK’s ability to negotiate independent, preferential trade agreements as it would have no leeway to alter EU tariffs. The flip side is that the UK would have preferential access to any country that has negotiated a trade agreement with the EU. Crucially, this would apply to goods, but not, in the absence of an agreement on services, secure access to the EU market for UK services sectors. Contributions to the EU budget would be limited to participation in specific programmes the UK may be interested in.</p>
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<img alt="" src="https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/268551/original/file-20190410-2909-mvsd9s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Irish border is a sticking point in Brexit negotiations.</span>
<span class="attribution"><span class="source">Kevin J. Frost / Shutterstock.com</span></span>
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<h2>3. Single market</h2>
<p><strong>Strike your own trade deals? Yes (although there would be some constraints on their content).</strong></p>
<p><strong>Freedom of movement? Yes.</strong></p>
<p><strong>EU budget contributions? Yes.</strong></p>
<p><strong>Does it solve the Irish border issue? No. Some checks may be necessary.</strong></p>
<p>Membership of the single market would improve the prospects for the UK’s services sector. But it implies accepting the four freedoms of movement that form its basis – including movement of people. It will also entail budgetary payments to support participation in the single market’s programmes. European Free Trade Association (EFTA) states are members of the single market through the European Economic Area (EEA) with the EU, but can strike their own preferential trade agreements, so the UK would too. </p>
<p>Single market membership reduces the need for certain checks at the Irish border, but if there are different tariffs in place on each side of the border, some form of checks could be required. It could be that some technological customs is viable that eliminates the need for checks at the border and minimises business disruption, however, there will be more transactional costs than at present.</p>
<h2>4. Common Market 2.0</h2>
<p><strong>Strike your own trade deals? No.</strong></p>
<p><strong>Freedom of movement? Yes.</strong></p>
<p><strong>EU budget contributions? Yes.</strong></p>
<p><strong>Does it solve the Irish border issue? Yes.</strong></p>
<p>A cross-party panel of MPs presented a compromise solution, dubbed <a href="https://theconversation.com/brexit-with-brie-common-market-2-0-proposal-explained-through-the-import-and-export-of-cheese-114330">“Common Market 2.0” proposal</a>, aimed at combining some of the benefits of the customs union and single market options. Common Market 2.0 involves accepting the current withdrawal agreement but renegotiating the political declaration, committing the UK to join the European Free Trade Association (EFTA). </p>
<p>EFTA states, as part of the EEA, respect the four freedoms of movement of the internal market, including people. They also make contributions to the EU budget to the programmes and agencies they participate in, and towards reducing economic inequality amongst EEA states through EEA grants. This is the relationship Norway has with the EU.</p>
<p>Where the Common Market 2.0 proposal differs from Norway’s relationship (which is why it’s also called the Norway+ model) is that it commits the UK to entering a special customs arrangement with the EU. It is unclear if this would be a customs union, which would curtail the UK’s ability to negotiate preferential trade deals, or something else. This presently does not exist between EFTA and the EU, has not been agreed by Europe yet and is not guaranteed to happen.</p>
<h2>5. No-deal Brexit</h2>
<p><strong>Strike your own trade deals? Yes.</strong></p>
<p><strong>Freedom of movement? No.</strong></p>
<p><strong>EU budget contributions? No.</strong></p>
<p><strong>Does it solve the Irish border issue? No.</strong></p>
<p>If no agreement is reached, the default position is a no-deal Brexit. Outside the EU, the UK would no longer need to abide by EU freedom of movement requirements, nor would it have to contribute to the EU’s budget. The UK would be able to negotiate preferential trade agreements, no longer bound by EU tariffs and rules.</p>
<p>Negotiating trade agreements is a lengthy process and the UK will find it hard to negotiate better deals than the EU gets. Plus, the EU is the UK’s biggest trade partner and it would immediately face a number of trade barriers if it defaults to WTO rules.</p>
<p>This would be <a href="https://theconversation.com/no-deal-seven-reasons-why-a-wto-only-brexit-would-be-bad-for-britain-102009">highly disruptive to businesses</a> in the UK and EU, and entail serious economic consequences for both sides. And, in order to ensure that the appropriate tariffs are applied at the borders in a relationship governed by WTO terms some form of border control would be required between Northern Ireland and the Republic of Ireland. This would be necessary to guarantee the integrity of the single market and avoid Ireland becoming a back door for third party goods.</p><img src="https://counter.theconversation.com/content/114932/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maria Garcia has received funding from the ESRC and EU in the past. She is affiliated with UACES (the academic association for contemporary European studies).</span></em></p>These are the five options for Brexit: Theresa May’s withdrawal agreement, staying in the customs union, staying in the single market, the so-called Common Market 2.0 idea or a no-deal Brexit.Maria Garcia, Senior Lecturer in International Relations, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1150962019-04-09T10:46:29Z2019-04-09T10:46:29ZHow a ‘hard’ Brexit would harm US banks, carmakers and drug companies<figure><img src="https://images.theconversation.com/files/268237/original/file-20190408-2924-1hvlp0s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A 'hard Brexit' appears increasingly likely. </span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Britain-Brexit/f621fde2e2b448ca8c541ba38249ce5a/14/0">AP Photo/Kirsty Wigglesworth</a></span></figcaption></figure><p>Nearly three years have passed since <a href="https://theconversation.com/us/topics/brexit-9976">British voters chose to leave the European Union</a>, a decision that created uncertainty and risks that have become a focal point of <a href="https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=EMAFIKRE">economic forecasters like me</a>. </p>
<p>Yet the U.K. <a href="https://theconversation.com/3-days-3-key-votes-and-no-end-in-sight-for-brexit-113515">still doesn’t know</a> what sort of <a href="https://theconversation.com/us/topics/brexit-9976">Brexit</a> it wants. Does the U.K. want a <a href="https://theconversation.com/us/topics/soft-brexit-32665">so-called soft Brexit</a> that allows it to keep most of the benefits of EU membership without certain requirements like the open movement of people? Or a <a href="https://theconversation.com/if-the-conservatives-want-to-win-the-next-election-they-should-avoid-a-hard-brexit-leader-heres-why-114939">hard Brexit</a> that essentially isolates the U.K. market from the EU’s? Or something in between?</p>
<p>As a result of this indecision, it has become increasingly possible that the U.K. will not be able to negotiate a favorable withdrawal agreement before the revised deadline of April 12 – <a href="https://www.bloomberg.com/news/articles/2019-04-08/eu-said-closer-to-brexit-delay-deal-as-core-leaders-plan-talks?srnd=premium">though that might be extended</a> by several months, a year or longer. If negotiators can’t agree, that could force a type of <a href="https://theconversation.com/mps-vote-against-no-deal-brexit-but-what-does-that-actually-mean-113492">hard Brexit</a> in which the U.K. crashes out of the EU. While <a href="https://www.itv.com/news/2019-02-10/blair-warns-of-devastating-impact-of-no-deal-brexit-on-ni-peace-process/">politicians</a>, <a href="https://www.economist.com/britain/2019/02/20/what-would-a-no-deal-brexit-mean-for-the-economy-and-financial-markets">economists</a> and <a href="https://www.teenvogue.com/story/young-activists-fighting-brexit-stay-in-european-union">others</a> expect such an outcome to be costly for the U.K. and Europe, it’s much less clear what the impact would be for U.S. companies. </p>
<p>I’ve been <a href="https://ibrc.kelley.iu.edu/analysis/outlook/index.html">forecasting the outlook</a> for U.S. businesses for more than a decade as part of the <a href="http://www.ibrc.indiana.edu/ibr/2018/outlook/international.html">Indiana Business Research Center</a> and also co-author of its annual global economic outlook. </p>
<p>I believe American companies most exposed to Brexit are those with operations in the U.K. and in three specific industries: financial, auto and pharmaceutical. To understand why, it’s important to first learn the U.K.’s special place in the EU for American companies. </p>
<h2>America’s top market in the EU</h2>
<p>The EU is an integrated market that has essentially eliminated all internal trade barriers between its 28 member states. Capital, goods, services and labor move freely across members’ borders. Regulations have been harmonized. And members share a common set of market rules. </p>
<p>This means that every port of entry into the EU – whether in the U.K., Germany or Bulgaria – is virtually the same. Businesses based in non-member countries face the same hurdles no matter where they send their products. </p>
<p>In practice, however, this hasn’t been quite true. American businesses have preferred to use the U.K. as their main gateway to Europe. After the <a href="https://europa.eu/european-union/about-eu/history_en">EU was established</a> in 1993, U.S. companies have opened more subsidiaries and gained strategic partners in the U.K. to do just that. </p>
<p>As a result, the U.K. is the <a href="https://ustr.gov/countries-regions">number one destination for U.S. goods</a> and services within the EU and the <a href="https://www.bea.gov/news/2018/direct-investment-country-and-industry-2017">second-biggest recipient</a> of American investment. The U.K. is also the <a href="https://www.bea.gov/data/intl-trade-investment/foreign-direct-investment-by-country-and-industry">biggest investor</a> in the U.S. </p>
<p>The reasons why may be rooted in the fact that the U.S. and the U.K. share a common history and a common language and have cultural ties. For U.S. businesses, removing the <a href="https://www.sciencedirect.com/science/article/pii/S0165176510003617">language barrier</a> makes the U.K. a relatively low-cost entry point into the EU market. </p>
<p>Few sectors have gained more from this close relationship than financial institutions, carmakers and drug manufacturers. That also means they have the most to lose if Brexit gets messy. </p>
<h2>1. Banks and the end of ‘passporting’</h2>
<p><a href="https://blogs.lse.ac.uk/brexit/2018/01/09/passporting-remains-the-best-option-for-uk-financial-services-industry-post-brexit-or-new-york-may-have-the-last-laugh/">One of the reasons</a> London became the EU’s largest financial center – and the primary conduit to Europe for U.S. banks – is because of something known as “<a href="https://www.investopedia.com/terms/p/passporting.asp/">passporting</a>.” </p>
<p>Passporting allows a company granted regulatory permission to undertake certain activities in one member state to do the same business in every other EU country. In practice, this has meant a U.S. financial company could simply open up an office in London to have access to the entire market. U.K.-based employees were then free to work in any other country in the EU.</p>
<p>But a hard Brexit would change that. U.S. banks with U.K. subsidiaries <a href="https://www.cbsnews.com/news/brexit-how-a-messy-eu-divorce-could-hit-u-s-businesses/">may need to obtain a new license</a> from regulators in every EU country they operate in, which would disrupt operations. </p>
<p>While this is a problem American companies in many industries are facing – including car and drug manufacturers – it would affect financial firms most because they operate in a sector that’s entirely service-based, which means labor is their biggest risk. If employees can’t travel and do their jobs freely throughout the EU market, the costs could be significant. </p>
<h2>2. Auto industry and thick borders</h2>
<p>U.S. carmakers have their own problems. </p>
<p>Auto companies such as Ford Motor Co. have invested billions of dollars in U.K. manufacturing plants, which give them tariff-free access to other European assembly plants. Ford has located its engine production in the U.K., which needs to be freely connected to plants across Europe that assemble vehicles.</p>
<p>The growing possibility of a hard Brexit <a href="https://www.independent.co.uk/news/business/news/ford-no-deal-brexit-uk-car-manufacturing-investment-steven-armstrong-a8851356.html">is stoking worries</a> among American carmakers that production could be severely disrupted as parts distributed among EU members suffer greater U.K. border delays and currency risks. </p>
<p>In regards to border delays, Ford operates its factories on a <a href="https://www.inboundlogistics.com/cms/article/the-evolution-of-inbound-logistics-the-ford-and-toyota-legacy-origin-of-the-species/">“just-in-time” basis</a>, which means that most parts only arrive as needed in the production process to keep inventory costs at a minimum. For this process to work, however, the whole delivery system has to be frictionless, which may not be the case after Brexit. </p>
<p>In regards to currency risk, it is a double-sided risk. If the pound depreciates, the parts needed to make an engine at a U.K. plant will become more costly to import from a EU country. And if the pound appreciates, the engine assembled in the U.K. will be more expensive to export back to the EU.</p>
<p>Ford estimates that a hard Brexit could cost the company <a href="https://www.reuters.com/article/uk-britain-eu-ford/no-deal-brexit-would-cost-ford-up-to-1-billion-idUSKCN1PI1VD">US$500 million to $1 billion</a>. To minimize the cost, Ford has begun preparing for these potential disruptions by <a href="https://www.reuters.com/article/us-britain-eu-ford/brexit-leaves-ford-at-crossroads-on-long-term-british-plans-idUSKCN1RE10I">stockpiling parts and engaging in currency hedging</a>. </p>
<p>A third risk is what happens if the EU and U.K. follow different safety, emission and other performance standards. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/268231/original/file-20190408-2935-1h5z5qa.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The EU’s equivalent of the FDA is relocating to Amsterdam from London.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Netherlands-EU-Medicines-Agency/8327d86f58054594926a776ff94eefb8/5/0">AP Photo/Peter Dejong</a></span>
</figcaption>
</figure>
<h2>3. Drugmakers face new hurdles</h2>
<p>While the problem of dealing with potentially two different sets of standards will certainly affect companies in other industries such as carmakers, it’s a significant worry for pharmaceutical manufacturers, who face strict laws for selling their drugs in the EU. </p>
<p>The <a href="https://www.ema.europa.eu/en/about-us/united-kingdoms-withdrawal-european-union-brexit">European Medicines Evaluation Agency</a>, which is the EU’s equivalent to the U.S. Food and Drug Administration, allows pharmaceutical companies to submit a single application to obtain authorization to sell a drug throughout the common market. Since its inception, the agency has been located in London, which led many U.S. drugmakers to base their EU operations in the U.K. The agency is now relocating to Amsterdam, <a href="https://www.newstatesman.com/politics/health/2017/04/what-happens-when-european-medicines-agency-leaves-uk">putting foreign drugmakers in a bind</a>.</p>
<p>EU law requires that drugs be tested on EU soil. Since the U.K. will no longer be in the EU after Brexit, U.S. drugmakers may have to relocate their testing facilities. If they don’t, they will face higher costs and obstacles getting their products to EU customers. Pfizer, for example, is estimating that it will incur <a href="http://fortune.com/2018/09/04/pfizer-uk-brexit-cost-100-million/">Brexit costs of $100 million</a>, including changes to clinical trials and stockpiling of drugs for emergency supplies.</p>
<p>Since no EU member state has previously decided to leave the bloc, there is no precedent for this situation, making the ability to forecast the implications near impossible. The good news is that Brexit’s disruption will only be felt temporarily in the transition period. Eventually U.S. companies will get to a new normal of doing business with the EU.</p>
<p>The bad news? The longer that Brexit gets dragged along, the more these transition costs will accumulate.</p><img src="https://counter.theconversation.com/content/115096/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elham Mafi-Kreft does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>American companies still face enormous uncertainty about how they’ll be doing business in the UK and EU in the coming years, particularly as the April 12 Brexit deadline draws closer.Elham Mafi-Kreft, Clinical Associate Professor of Business Economics, Indiana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1146632019-04-05T11:44:37Z2019-04-05T11:44:37ZWhy cross-party Brexit talks are probably heading nowhere – and are a major risk for Corbyn<p>The decision by the UK prime minister, Theresa May, to <a href="https://theconversation.com/brexit-breakthrough-may-and-corbyn-will-meet-to-seek-a-compromise-114662">engage in talks</a> with the Labour leader, Jeremy Corbyn, in an attempt to settle Brexit took everyone by surprise. It cheered those seeking a soft Brexit, while enraging Leavers in her own party. May claimed she was forced to seek a cross-party compromise after failing <a href="https://theconversation.com/theresa-may-loses-another-brexit-vote-heres-why-april-12-is-now-the-key-date-to-watch-114543">three times</a> to get her withdrawal agreement with the EU agreed in the British parliament. </p>
<p>Eurosceptic Tory backbenchers in the European Research Group (ERG), together with the ten MPs of the Democratic Unionist Party (DUP), had voted with the opposition to defeat the deal May had negotiated. In looking for a cross-party solution, May hopes to sidestep the ERG and the DUP.</p>
<p>Yet there are doubts over whether anything will come of the May-Corbyn talks. Labour has its own Brexit divisions, with Corbyn, an old-style Bennite eurosceptic, leading a party whose membership is strongly pro-Remain. Labour supports a <a href="https://theconversation.com/uk/topics/eu-customs-union-42601">customs union</a> with the EU, but one in which the UK would have a say. As an actual working policy, that is unrealistic. But as a party-management tool, it has successfully held Labour’s different Brexit tribes together by avoiding the need to take a hard decision on a genuine policy.</p>
<p>Negotiating with May risks causing a split between those Labour MPs who would back staying in the EU’s customs union (without a full say for the UK) and those for whom only remaining, via a second referendum, will suffice. While many Labour MPs representing Remain-voting constituencies in London and the South support a second referendum, others in Leave-voting seats in the Midlands and the North do not. Officially, Labour backs a second referendum but Corbyn has done little to advance the cause. Consequently, there is an uneasy stalemate inside the party. The May-Corbyn talks could turn that stalemate into open warfare. While the shadow foreign secretary, Emily Thornberry, wants any deal that emerged to include a second referendum with “Remain” on the ballot, others in the shadow cabinet, such as the party chairman, Ian Lavery, are <a href="https://www.bbc.co.uk/news/uk-politics-47814353">hostile</a>.</p>
<p>A cross-party deal would, moreover, be limited to the government’s non-binding political declaration, which sets out the UK’s ambitions for its future relationship with the EU. May’s legally binding withdrawal agreement is not up for negotiation. The risk for Corbyn would be that he splits his own party and takes co-ownership of an unpopular withdrawal agreement. Any deal that emerged from the May-Corbyn talks would aggravate Labour’s internal Brexit divisions. For that reason, there must be a strong chance that the talks will fail.</p>
<h2>Back to the House?</h2>
<p>If the talks do fail, there could be a third round of indicative parliamentary votes on Brexit to settle the matter. Neither previous round delivered a majority for any option but if there were a run-off system of ballots, a winner would emerge. On the basis of the second round of votes, the most popular options were a customs union, single-market membership (<a href="https://theconversation.com/brexit-with-brie-common-market-2-0-proposal-explained-through-the-import-and-export-of-cheese-114330">“common market 2.0”</a>) and a second referendum – although May’s negotiated political declaration with the EU would join any third round of votes.</p>
<p>At this point, May’s problem with her own party becomes clear. In the second round of indicative votes, Conservative MPs overwhelmingly opposed a customs union (236 against, with 37 in favour), “common market 2.0” (228 against, 33 in favour) and a second referendum (253 against, 15 in favour). The DUP also opposed all three proposals. Support came primarily from opposition parties. It stretches credulity to believe there will be a huge U-turn by Conservative MPs. If May tried to adopt any of them, it would be in the face of large-scale and intense Tory opposition.</p>
<p><strong>Parliamentary votes on Brexit</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=349&fit=crop&dpr=1 600w, https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=349&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=349&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=439&fit=crop&dpr=1 754w, https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=439&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/267800/original/file-20190405-180044-1kzwms2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=439&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">‘Other parties’ include SNP, Liberal Democrats, Plaid, Greens and independents. DNV = did not vote. IV = indicative vote. Cabinet and approximately 20 Conservative MPs abstained in IVs.</span>
<span class="attribution"><span class="source">Tom Quinn</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>One option that May seems to have ruled out is a no-deal Brexit. Yet that is precisely the direction that Conservative MPs have increasingly been heading. In the first set of indicative votes, 157 Tories backed a no-deal Brexit – over half of the parliamentary party. Reports emerged this week of a letter to May, signed by 170 Conservative MPs, calling for no deal. If May tries to force through a soft Brexit or a second referendum on Labour votes she could catastrophically split the Conservative Party, just as Robert Peel did over the <a href="https://theconversation.com/the-messy-history-of-british-party-politics-61835">Corn Laws in the 1840s</a>.</p>
<h2>A long extension</h2>
<p>An alternative to a Brexit deal now is a long extension to Article 50. That also faces Conservative opposition. Fully 188 Tory MPs opposed the prime minister’s motion last month calling for just a short extension to Article 50, with the motion passed on Labour votes. Yet the likely success of Labour MP Yvette Cooper’s bill, which dramatically navigated the Commons by 313 votes to 312 on its third reading, would compel the prime minister to seek an extension if the withdrawal agreement is not passed by Exit Day on April 12. Parliament would decide what length of delay to request. The EU has most recently been indicating that it would be open to a year-long extension although May’s latest request is to extend just to June 30.</p>
<p>The EU would require a reason for granting a long delay – a “new political event”, as it has previously described it. That could mean either a referendum or an election. Tory MPs are strongly opposed to a referendum and most will be aghast at the thought of May leading them into another election after she lost the Conservatives their majority in 2017. The party would have to decide whether to include the withdrawal agreement in its manifesto. If it did, scores of Conservative candidates could end up signing pledges never to vote for it in its current form.</p>
<p>May’s cross-party switch might have appeared a bold judgement call. In reality, it was a desperate move that prioritises her withdrawal agreement over <a href="https://ukandeu.ac.uk/the-brexit-deal-and-party-divisions/">party unity</a>. But Tory MPs are rapidly running out of patience and the government appears on the brink. There is talk of imminent mass resignations by ministers and even the prospect of some ERG MPs opposing the government in a confidence motion. There is a strong sense that we are approaching the moment when something has to give.</p><img src="https://counter.theconversation.com/content/114663/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tom Quinn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After the initial relief that the party leaders were working together comes the realisation that they both risk splitting their parties if they strike a deal.Tom Quinn, Senior Lecturer, Department of Government, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1146622019-04-02T19:42:36Z2019-04-02T19:42:36ZBrexit breakthrough? May and Corbyn will meet to seek a compromise<p>There is some good news about Brexit. The magic eye picture of Britain’s policy is beginning to emerge from the random pixels of the referendum campaign’s promises and threats to a shadowy image of compromise. But there are three problems: parliament is looking at the picture from a different angle to the government; the picture is still more of a blur than a portrait; and time is running out fast. </p>
<p>In parliament on April 1, the speaker – in the face of some criticism from Brexiteers – made the day’s proceedings a floorshow for the resistance. MPs were to undertake a second round of indicative votes to show which options they would support. Conservative backbencher Kenneth Clarke sought a customs union; his colleague Nick Boles proposed the <a href="https://www.bbc.co.uk/news/uk-politics-47639946">“Common Market 2.0”</a>, which effectively amounted to staying in the single market. Two more options proposed another referendum and stopping the whole Brexit process if there is no deal.</p>
<p>All four options failed to attract majority support. But each lost by smaller margins than when they were last voted on the week previously. Clarke’s customs union proposal lost by just three votes. We have learned that the idea of a softer Brexit is measurably more popular in the House Commons than leaving without a deal or the prime minister’s deal (when one considers that cabinet ministers were not able to vote on April 1).</p>
<h2>Crisis talks</h2>
<p>Next, the cabinet met for eight hours on April 2, amid reports of deep splits, many made evident in public statements. Justice secretary <a href="https://www.politicshome.com/news/uk/foreign-affairs/brexit/news/102918/cabinet-minister-david-gauke-warns-theresa-may-not-">David Gauke</a> urged the prime minister to follow parliament’s lead towards a customs union while treasury secretary <a href="https://www.bbc.co.uk/news/av/uk-politics-47772592/brexit-no-deal-still-on-table-liz-truss">Liz Truss</a> told the Today programme that “no deal” was still on the table. </p>
<p>The collective conclusion after this marathon meeting was that May must meet opposition leader Jeremy Corbyn to try to hammer out a <a href="https://www.heraldscotland.com/news/17539911.former-tory-cabinet-nicky-morgan-minister-says-brexit-may-require-a-national-unity-government/">common position</a> to present to parliament. This is as close as the PM has come to a <a href="https://www.heraldscotland.com/news/17539911.former-tory-cabinet-nicky-morgan-minister-says-brexit-may-require-a-national-unity-government/">government of national unity</a>, which others have said may be necessary. Meanwhile, May will seek an extension to the extension of the UK’s departure from the EU, but not one so long as to embroil the country in EU parliament elections.</p>
<p>What are the portents for success? The optimist sees that May is under increasing pressure from parliament and from some cabinet colleagues to cut a deal using Labour’s support. That might suggest conceding a customs union but not single market alignment. This would just about secure the only positive entry in the British history books still possible for May – Brexit with a deal.</p>
<p>The doubters can point to the fact that no modification of the prime minister’s plan has gained a parliamentary majority, and several cabinet ministers have threatened to resign if any is granted. May and Corbyn have met several times without any substantial policy outcome, and neither is a noted pragmatist. May is already touting fallback strategies for more parliamentary votes if the talks fail. Meanwhile, EU chief negotiator Michel Barnier is talking up the prospect of no deal while French president Emanuel Macron is losing patience with the British in public.</p>
<p>May could still take most of her party with her if she acts with skill. This makes her job easier than that of Robert Peel, the founder of the Conservatives with whom she has been compared because of the way he split the Tories to end the <a href="https://theconversation.com/brexit-lessons-from-britains-19th-century-push-for-free-trade-79400">Corn Laws</a>.</p>
<p>On the other hand, Peel was distinctive in being prepared to end his career by handing credit and power to his political opponents in the national interest while he walked into the wilderness. Whether that is true of May will be the test of her premiership.</p><img src="https://counter.theconversation.com/content/114662/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Cole does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After a full day with her top team, the prime minister says she wants to thrash out a deal that both she and the opposition can live with.Matthew Cole, Teaching Fellow, Department of History, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1089342018-12-20T10:42:49Z2018-12-20T10:42:49ZCould George Osborne have helped Britain avoid a no-deal Brexit?<p>It’s nearly two and a half years since the moment which will, I am increasingly certain, be seen as a key turning point in British political history. Forget Brexit. I am talking, of course about Theresa May’s decision to sack George Osborne as chancellor of the exchequer on July 13, 2016. This moment was only conceivable because of that other moment, three weeks earlier, but it has shaped quite profoundly the political implications of the vote to leave the European Union.</p>
<p>I teach a course on economic policy-making, and my students will testify to the fact that I am mildly obsessed with the former chancellor. Barely a lecture goes by without me mentioning his enormous influence on the recent development of British economic policy, during a seismically significant period for the economy.</p>
<p>Let us be clear: Osborne’s economic stewardship was <a href="https://www.theguardian.com/commentisfree/2018/dec/14/nine-jobs-george-poverty-british-workers-failing-wages">ruinous</a>. Yet he is substantially better at politics than he ever was at policy. May’s decision to sack Osborne also had little to do with his record as chancellor, or indeed his opposition to Brexit. He was replaced by Phillip Hammond, who is as committed as Osborne to both austerity and EU membership.</p>
<h2>Osborne’s Brexit</h2>
<p>What Britain lost when Osborne was sacked was a focal point, within government, for soft Brexit. Hammond lacks the political skills, or alliances, to play this role. Osborne was never really loved by Conservative Party members – but he was respected. Had David Cameron decided against holding the EU referendum, as Osborne <a href="https://www.ft.com/content/e4267e06-ea33-11e7-bd17-521324c81e23">advised</a>, then Osborne would have been the only serious candidate to succeed him as leader.</p>
<p>Osborne’s vision for the future of the British economy is, however, largely the same as that of the leading Brexiters. He was keen to recast the UK-EU relationship as an economic one. As Chancellor, he pursued “Global Britain” through the internationalisation of the City, and saw the EU’s new zeal for bilateral trade deals, enforcing deregulation, as consistent with, and indeed central to, his agenda.</p>
<p>Osborne’s understanding of the chaos that Brexit would cause explains his support for Remain, but as May’s chancellor, he would undoubtedly have seized the opportunity to push for a firm decoupling of the UK from the eurozone’s political integration, while situating Britain as the leading member of an emerging outer ring of the European single market.</p>
<p>This perspective has been thoroughly marginalised within the Conservative Party since 2016. But many of the party’s 2010 and 2015 intake of MPs – remainers and leavers alike – owe their careers to Osborne. It’s not difficult to imagine Osborne acting as a vital conduit between the prime minister and the parliamentary party.</p>
<p>Brexiters such as Boris Johnson know as well as anyone that leaving the EU will do little to advance the <a href="https://theconversation.com/why-brexit-is-really-about-competing-visions-of-capitalism-100274">ideological agenda</a> he shares with Osborne. He chose to lead the Leave campaign purely for political expediency, because rebranding himself as an authentic eurosceptic was his only hope of beating Osborne to the leadership or, more likely, once the referendum had been lost, securing a top job in a future Osborne cabinet.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/250944/original/file-20181217-185255-obbbzj.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Well, Osborne the construction firm does, at least.</span>
</figcaption>
</figure>
<p>Johnson has created a beast he lacks the werewithal to control. By leading the Leave campaign, he lent euroscepticism a veneer of centrist, cosmopolitan respectability. But without a coherent plan for soft Brexit emerging from the Conservative ranks, Johnson and co. have been increasingly caught between the rock of Theresa May’s vacuous vision and doomed leadership, and the hard place of Jacob Rees-Mogg’s jingoistic and economically illiterate ultra-Brexit.</p>
<h2>The genesis of ‘no deal’</h2>
<p>And thus we arrive at the absurdity of a no-deal Brexit. It has quickly become a political cliché, but it is worth restating that nobody voted for “no deal”. What the Leave campaign offered was a very comprehensive free trade deal as an alternative to EU membership. It was essentially an accelerated version of the path Britain was on anyway, as long as it remained outside the eurozone.</p>
<p>No deal was a fringe agenda, peddled only by marginal figures such as John Redwood. It only really entered the lexicon of mainstream politics after May’s Lancaster House <a href="https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech">speech</a> in early 2017, in which she argued that “no deal is better than a bad deal”. How quickly we have forgotten what she was actually talking about. The “no deal” of the speech was referring to the prospect of a future trade arrangement – not the prospect of leaving the EU without a withdrawal agreement. The speech was a misguided and futile attempt to encourage the EU to negotiate both deals at the same time.</p>
<p>It was quickly consigned to irrelevance, as the EU understandably pointed out that unless Britain agreed an orderly withdrawal from the union, there could be no prospect of agreeing a new trade relationship. The EU cannot negotiate a trade deal with a country that is still a member of the bloc.</p>
<p>An orderly withdrawal meant, above all, finding a way to prevent Brexit wrecking the Irish economy, and jeopardising the Northern Ireland peace process – hence the need for an insurance policy (or “backstop”) should the trade deal take longer than two years to agree. Given that the Brexiters have frequently claimed that a new UK-EU trade agreement would be “<a href="https://www.bbc.co.uk/news/av/uk-40667879/eu-trade-deal-easiest-in-human-history">one of the easiest in human history</a>”, their indignation over the backstop is either senseless or duplicitous.</p>
<h2>The lesser evil</h2>
<p>In the absence of a genuine leader, coupled with a failure to communicate the difference between the withdrawal process and a subsequent trade deal, May has been cast as the chief advocate of soft Brexit, and vilified as a result. Yet her <a href="https://theconversation.com/theresa-mays-deal-is-almost-exactly-the-brexit-the-uk-voted-for-107040">opposition to free movement of labour</a> makes her vision for life outside the EU a lot “harder” than anything most of her Brexiter critics, who have few concerns about immigration, would have advocated.</p>
<p>Crashing out of the EU may be unthinkable, but that does not mean it will not happen. Osborne deserves his political wilderness, since his policies did so much to <a href="https://theconversation.com/how-austerity-took-britain-to-brexit-61761">cause the divisions</a> which produced the Brexit vote. His soft Brexit would, over the long term, probably have been just as destructive. But set against the avoidable tragedy of no deal, it might have been the lesser of two evils.</p><img src="https://counter.theconversation.com/content/108934/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Craig Berry is a member of the Labour Party</span></em></p>The former Chancellor was no economist, but he was better at politics than Theresa May.Craig Berry, Reader in Political Economy, Manchester Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/996072018-07-09T14:54:39Z2018-07-09T14:54:39ZThe Brexit plan that could bring down the British government – explained<p>Two years after the referendum, the UK government briefly appeared to agree on its vision for the future UK-EU relationship. A <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/723460/CHEQUERS_STATEMENT_-_FINAL.PDF">three page document</a>, outlining the UK position, was published following a long meeting of cabinet ministers at the prime minister’s country retreat of Chequers on July 6.</p>
<p>The new position aims to address the Irish border issue and potentially offers a softer version of Brexit than was <a href="https://www.gov.uk/government/speeches/pm-speech-on-our-future-economic-partnership-with-the-european-union">previously talked about</a>. It has prompted the <a href="https://www.bbc.co.uk/news/uk-politics-44770847">resignation</a> of three ministers. The Brexit secretary, David Davis, and his number two at the Department for Exiting the EU, Steve Baker, stepped down just 50 hours after the publication of the three-page document. This was followed by foreign secretary, Boris Johnson. Such dramatic developments raise serious questions for the UK’s Brexit strategy and the future of the government itself. </p>
<p>So what was agreed to at Chequers and why has it led to these resignations? Davis stepped down <a href="https://ig.ft.com/david-davis-brexit-letter/">because</a> he felt the new plan cedes too much control to the EU. Notwithstanding, the new plan should be understood as only the starting point of negotiations over the future UK-EU relationship. In that sense, we should expect the UK position to further evolve in the months to come.</p>
<h2>Previous proposals</h2>
<p>The government’s new position has substantially evolved from its previous proposals for the UK’s future economic relationship with the EU. It has been dubbed a “third way” between the <a href="https://www.gov.uk/government/news/new-customs-proposals-laid-out-by-government-in-new-paper-on-future-relationship-with-the-eu">two proposals</a> that the government published in August 2017.</p>
<p>The first was a highly streamlined customs arrangement that came to be known as <a href="https://theconversation.com/can-technology-and-max-fac-solve-the-irish-border-question-expert-explains-96735">“max-fac”</a> (short for maximum facilitation). It aimed to simplify the UK’s customs arrangement with the EU by using a variety of IT solutions to avoid a customs border between Northern Ireland and the Republic. Jon Thompson, head of HM Revenue and Customs <a href="https://www.ft.com/content/2f0d89f2-6011-11e8-ad91-e01af256df68">estimated</a> that the cost of building the necessary infrastructure for this option would be about £20 billion.</p>
<p>According to the second model, a new customs partnership, the UK would mirror “the EU’s requirements for imports from the rest of the world” as if the UK was still a member of the EU’s customs union. The UK, under this model, would still be free to pursue its independent trade policy. </p>
<p>This could potentially lead to differences in its tariffs with the EU ones. To deal with this problem, an unprecedented and untested repayment mechanism was proposed. According to it, imports to the UK would pay whichever was the higher of the UK’s or the EU’s tariff rates and traders would claim “a refund for the difference between the two when the goods were sold to an end user in the country charging lower tariffs”.</p>
<p>Apart from the cost and the feasibility, the biggest problem of the previous two proposals was that neither of them addressed effectively <a href="https://theconversation.com/backstop-option-for-irish-border-after-brexit-the-difference-between-eu-and-uk-proposals-explained-97963">the Irish border conundrum</a>. Neither could secure a frictionless, invisible border, given that the UK’s intention is to leave the single market and the customs union after Brexit.</p>
<h2>The new proposal</h2>
<p>As the UK government had <a href="https://www.gov.uk/government/publications/technical-note-on-temporary-customs-arrangement">previously conceded</a>, upholding its Irish border commitments required regulatory alignment. Without the same regulatory standards on the two sides of the border, checks would be required on the various products that would be crossing it to ensure the integrity of the single market. </p>
<p>This is why the new plan proposes to establish a free trade area for goods between the UK and the EU where “a common rulebook for all goods including agri-food” will exist. The UK will commit, by international agreement, “to ongoing harmonisation with EU rules on goods”. This echoes the <a href="http://www.skoutaris.eu/blog/2016/8/2/the-day-after-the-referendum-before-possible-alternatives-to-eu-membership-1">mechanism</a> of the European Economic Area whose members have to adopt the new or reformed regulations that the EU institutions produce. </p>
<p>At the same time, the government contends that parliament can guard the UK legal order from future EU legislation in an arrangement that somehow resembles the EU’s relationship with Switzerland. Given the <a href="https://www.politico.eu/article/eu-switzerland-stuck-on-immigration-free-movement-single-market-europe-migration/">ongoing crisis</a> in EU-Switzerland relations over the issue of free movement of people, the UK government is right to recognise that such action might lead to unforeseen consequences. At the same time, it effectively <a href="https://www.theguardian.com/politics/live/2018/jul/09/david-davis-resigns-as-brexit-secretary-live-updates?page=with:block-5b4321c9e4b0cb7e6f6c375d">puts into question</a> whether the UK parliament would have real power to diverge from EU regulations on goods. </p>
<h2>The starting point of negotiations</h2>
<p>The proposal that came out of Chequers is not the <a href="https://www.telegraph.co.uk/politics/2018/07/08/britain-has-put-forward-sensible-brexit-proposal-eu-would-risk/">definitive end state</a> of the future UK-EU relationship, as some have suggested. </p>
<p>But even if the resignations of Britain’s main negotiator and the foreign secretary do not lead to a political crisis, the Chequers deal should be understood as the UK starting position in its negotiations with the EU.</p>
<p>The Chequers proposal does not sit comfortably with the models for the EU-UK relationship that the EU has already suggested. It is not a Canada-style free trade agreement with the Northern Ireland <a href="https://ec.europa.eu/commission/sites/beta-political/files/draft_withdrawal_agreement.pdf">backstop option</a>. Nor is it an economic relationship that allows the application of all four fundamental freedoms of movement, as <a href="https://theconversation.com/is-brexit-a-good-idea-lessons-from-norway-on-the-advantages-of-eu-membership-40652">the “Norway” option</a> does. </p>
<p>Still, it is the first comprehensive position that the UK has put forward. So the UK will be hoping that the EU will consider it. </p>
<p>Even if the EU does not reject the UK position outright, the government should expect that issues such as its contribution to the new EU budget and the role of the European Court of Justice are raised and seriously considered in the months to come. This is still only the beginning of the process that will hopefully lead to an orderly Brexit and mutually beneficial future with the EU.</p><img src="https://counter.theconversation.com/content/99607/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nikos Skoutaris consults GUE/NGL parliamentary group of the European Parliament for Brexit-related issues. He has received funding from UACES and UEA's HEIF Impact Fund for the organisation of a conference on the 'De-Europeanisation of Border Conflicts: The Brexit Effect on Territorial Borders</span></em></p>Two years after the Brexit referendum, Cabinet members apparently agreed on the country’s vision for its future relationship with the EU. But it has already led to a flurry of resignations.Nikos Skoutaris, Lecturer in European Union Law, School of Law, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/987292018-06-21T14:20:44Z2018-06-21T14:20:44ZA hard Brexit is looking increasingly likely – according to behavioural economics<p>Gloomy forecasts for the post-Brexit economy, and a psychological tendency to gamble rather than accept certain losses, may boost public support for a giant leap away from the EU – despite the fact that most experts are advising a cautious small step.</p>
<p>Parliamentary rebels have tempered their demands for a vote <a href="https://theconversation.com/tory-rebels-back-down-on-brexit-vote-but-what-does-that-actually-mean-98671">on the final Brexit deal</a> and abandoned an earlier <a href="https://theconversation.com/lords-brexit-defeats-are-forcing-mps-to-face-crucial-choices-96482">House of Lords attempt</a> to keep the UK in the European Economic Area. Attempts to maintain <a href="https://www.independent.co.uk/news/uk/politics/brexit-latest-customs-union-uk-eu-theresa-may-tory-deal-rebels-a8394371.html">membership of the customs union</a> and <a href="https://www.theguardian.com/politics/2018/jun/21/may-risks-row-with-brexiters-over-plan-for-single-market-for-goods">single market</a> by Brexit’s opponents have seemingly failed. </p>
<p>But in keeping up pressure to stay as close as possible to the EU, they risk driving Britain further away from it. Anti-Brexiteers now risk colliding with one of the harshest lessons of behavioural economics – once people are determined to leave, any scare about the next step may just prompt them to run further away.</p>
<p><a href="https://theconversation.com/the-cost-of-brexit-and-how-much-you-should-trust-the-forecasts-explained-by-an-economist-91172">Most independent studies</a> point to bigger economic losses the more the UK distances itself from present EU trade arrangements. So does <a href="https://www.gov.uk/government/publications/hm-treasury-analysis-the-long-term-economic-impact-of-eu-membership-and-the-alternatives">the Treasury’s own</a> analysis, unless the UK gains a remarkably generous bespoke deal. </p>
<p>But the same studies also suggest there will be losses even from the smallest step away. And the error around these calculations gets bigger as they move further from present arrangements, so that the gloomier forecasts are also hazier. This allows Leave campaigners to agree with “Remoaners” that an ultra-soft Brexit is worse than remaining – and to draw the opposite conclusion: that only the most radical departure will do. </p>
<h2>Double or nothing</h2>
<p>People are generally risk-averse when it comes to potential gains. They tend to opt for guaranteed receipt of a certain amount (say, £50), rather than the chance to gamble for a larger amount (say, a 50% chance of getting £100) while getting nothing at all if they lose the bet. The expected outcome (to someone who’s risk-neutral) is £50 in both cases. But, as the proverb goes, a bird in the hand is worth two in the bush.</p>
<p>By contrast, most people are risk-preferring when it comes to potential losses. Instead of definitely losing £50 they would prefer to gamble on a 50% chance of losing £100 and a 50% chance of not losing anything. Although the mathematically expected loss is £50 in each case, most of us will run the risk of worsening that loss if that brings a comparable chance of escaping it altogether. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/224251/original/file-20180621-137725-x4hcr0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">£100 on red.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>The evidence that people routinely gamble to avoid guaranteed losses, while playing safe with guaranteed gains, was assembled by cognitive psychologists and turned into an elegant “<a href="http://www.open.edu/openlearn/money-management/management/leadership-and-management/making-decisions/content-section-6.4">Prospect Theory</a>” by Amos Tversky and Daniel Kahneman – who won the <a href="https://www.nobelprize.org/mediaplayer/index.php?id=531">economics Nobel for it in 2002</a>.</p>
<p>An important consequence of this asymmetry is that people may react differently to a choice that is functionally the same, if it is re-framed in terms of losses <a href="https://thedecisionlab.com/bias/framing-effect/">rather than gains</a>. You might, for example, prefer the surefire gain of £50 if you perceive the alternative (gaining £100 or £0, with equal probabilities) as a lottery. </p>
<p>But if you are loss-averse, you might also part with £50 – calling it an insurance premium – to avoid risking an equally probable loss of £100 or £0. So, stating post-Brexit outcomes in terms of GDP loss, compared to the status quo, may have worked out to the Brexiteers’ advantage. </p>
<h2>The Remainers’ dilemma</h2>
<p>Faced with a certain loss from the “soft” option, those (the majority) who voted for Brexit will inevitably be drawn towards the “hard” alternative. It might be a huge gamble, but it seems worth taking if it brings some chance of ultimate gain, against the certain loss from a soft Brexit.</p>
<p>While the hard Brexit risk may be very high – with potentially even bigger economic losses, according <a href="https://www.theguardian.com/politics/2018/feb/07/brexit-north-east-west-midlands-hardest-secret-analysis">to leaked government analysis</a> – a bigger break creates room for radically different and rosier scenarios. It’s always possible that, after a transitory tussles with Brussels, a clean break from EU rules sparks a British social and economic renaissance. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/224252/original/file-20180621-137734-1gybcz6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Losing hope?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/97214336@N05/28057544395">Garon S/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>This could come from fully embracing <a href="https://www.economistsforfreetrade.com/">globalisation and free markets</a> (the preference of those on the Right), or from a return to social, industrial and economic policies <a href="https://briefingsforbrexit.com/">lost to past liberalisation</a> (preferred by those on the Left). These are opposing and incompatible approaches, but they coalesced to swing the referendum in 2016. </p>
<p>For those with no wish to stay, a giant leap with the distant possibility of landing on higher ground will tend to seem much more appealing than a small step that’s bound to lead downhill. And developments since the referendum may be reinforcing a <a href="http://www.open.edu/openlearn/society-politics-law/politics/straight-talking-collides-cyclical-preferences">pattern of preferences</a> by which voters who never wanted to Leave now embrace the “hardest” way of doing so, once they’ve definitely lost the option to Remain. </p>
<h2>Behavioural trouble</h2>
<p>This isn’t the first time that Prospect Theory has loomed behind Brexit-related decisions. The original Leave vote in 2016 can be explained as <a href="http://www.cognitionandculture.net/blog/christophe-heintzs-blog/does-prospect-theory-explain-trump-and-brexit-votes">a battle of gain/loss framing</a>, which the Brexiteers won by exploiting discontent with people’s present situations. </p>
<p>Remainers unsuccessfully tried in 2016 to persuade voters that EU membership brought a net gain – through trade, unrestricted travel and work opportunities. They wanted the UK to stick with these sure gains, rather than gamble on a step into the unknown outside the EU which might result in great loss. </p>
<p>The Leave campaign successfully re-framed EU membership as a sure loss – of money (since the UK is a net contributor), sovereignty (since the EU sets rules) and external links (since the common external tariff blocks the UK from doing its own trade deals). Convinced that they were losing under the current arrangement, many voters saw leaving as a way to avoid this sure loss, even if not entirely believing Brexiteer predictions of instant gains once outside. </p>
<p>So having persuaded a majority of referendum voters that they could only avoid a certain loss by leaving, hard Brexiteers will now exploit the same behavioural trait to propel the UK as far away from the EU as it can go. The risk for Remainers is that by framing the soft Brexit option as damage limitation, they may simply propel people towards the hard alternative – as the only way their decision to Brexit can possibly do them any good.</p><img src="https://counter.theconversation.com/content/98729/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Shipman receives funding from the British Academy/Leverhulme Foundation. </span></em></p>A psychological tendency to gamble rather than accept certain losses, may lead to a surge in support for a harder Brexit.Alan Shipman, Lecturer in Economics, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/922282018-02-26T10:33:03Z2018-02-26T10:33:03ZThe five alternatives to EU single market and customs union would all make UK poorer<figure><img src="https://images.theconversation.com/files/207821/original/file-20180226-140184-mlntva.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/container-ship-berthing-port-127403000?src=KpbMEHT1SPYi-uIj89nipQ-1-21">shutterstock.com</a></span></figcaption></figure><p>Concerns are intensifying over the UK’s economic future, thanks to the lack of clarity over what kind of relationship it will have with the EU after Brexit. If the UK were to leave the <a href="https://theconversation.com/should-the-uk-remain-in-the-eu-customs-union-after-brexit-63179">single market and customs union</a>, there are five obvious alternatives. </p>
<p>We looked at each of these <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2993069">in a recent study</a> and found the UK’s real GDP will drop by 2.63% if there is a shallow free trade agreement in place with the EU (akin to Canada’s). If the UK manages to also conclude a free trade agreement with the US, the effect of leaving the EU will be -2%. And an agreement with the largest Commonwealth countries will make it -1.93% worse off than staying in the EU. </p>
<p>In the case of a hard Brexit, reverting to World Trade Organisation (WTO) free trade rules, the predicted losses will grow to -4.78%. A free trade agreement with the US will reduce predicted losses to -4.13% and, alternatively, a deal with the Commonwealth countries would lessen the blow to -3.96%. </p>
<p>This will not take place abruptly. The losses will occur over a long period, but it’s clear that signing new trade agreements with other countries cannot entirely compensate for leaving the EU. We also found that the trade creation effect of the EU (where trade deals spur more trade between countries after they sign a trade agreement) gets stronger over time and has currently reached its peak. This suggests that our estimates of Brexit are quite optimistic. </p>
<h2>Global shifts in world trade</h2>
<p>Over the last century, the UK has gone from being a global trade power to an “awkward partner” in the EU, before rejecting its EU membership outright. This nationalist tendency is in contrast to the moves of many countries towards forming mega-regional trade blocs like the the <a href="https://theconversation.com/uk/topics/tpp-7972">Trans-Pacific Partnership</a> (TPP) between the US and 11 countries around the Pacific, and the 16-nation Regional Comprehensive Economic Partnership (RCEP) – and, of course, the EU.</p>
<p>Negotiating these blocks requires large-scale trade diplomacy and prolonged discussions. They take years to negotiate.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=353&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=353&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=353&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=443&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=443&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=443&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Global trade deal groups.</span>
<span class="attribution"><span class="source">Oleksandr Shepotylo and Karen Jackson</span></span>
</figcaption>
</figure>
<p>While UK policy makers have been keen to highlight the opportunities of signing new trade deals, it is becoming increasing apparent that negotiating an <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/680366/Technical_Note_-_International_Agreements_in_the_Implementation_Period_-_CLEAN.pdf">implementation period</a> to do so is an important next step. Hence, the UK Brexit secretary, David Davis, <a href="https://www.gov.uk/government/news/david-davis-teesport-speech-implementation-period-a-bridge-to-the-future-partnership-between-the-uk-eu">has called for</a> a time limited period after Brexit where the EU’s trade agreements with third countries continue to apply to the UK. </p>
<p>In other words, it is starting to become clear that <a href="https://vimeo.com/252854131">grandfathering agreements</a>, where agreements that apply to the EU would be rolled over and apply to the UK, is not quite as simple as it may have first appeared. </p>
<p>In the face of such difficulties it is somewhat predictable that the US and Commonwealth get mentioned as the light at the end of the tunnel. Certainly the Commonwealth remains as a group of member states. But re-establishing it as a trading club headed by the UK, or the UK signing a collection of bilateral trade agreements through it, may prove difficult. </p>
<p>After World War I, the UK defence of imperial preferences was seen by some as a desperate attempt to maintain a powerful position in the world-trading environment. More recently, African countries <a href="http://www.thecitizen.co.tz/News/Signing-EPA-with-Europe-is-bad--declares-Magufuli/1840340-3828048-jqq8bi/index.html">have been reticent</a> to sign up to EU trade deals amid accusations that they are a type of colonialism. Meanwhile, India is backing their “Buy in India” programme <a href="https://theconversation.com/why-britain-cannot-bank-on-india-for-post-brexit-business-66246">rather than looking to trade with the UK</a>.</p>
<h2>Five alternatives</h2>
<p>Our research highlights the losses stemming from the lower bargaining power of the UK as a standalone country, rather than as a member of a powerful trading bloc like the EU. </p>
<p>Signing free trade agreements with countries that are farther away, such as the US or Commonwealth countries (Australia, Canada, New Zealand, India, Pakistan, South Africa) cannot compensate for these losses, as some commentators suggest. But it reduces the blow by about 0.65 to 1.1%, depending on the scenario. A hard Brexit would generate losses from 4.1% to 5.3% of real GDP – that’s roughly £77 billion to £99 billion.</p>
<p><iframe id="OKLoc" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/OKLoc/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Again, it’s important to recognise that these losses will not be immediate, nor will a hard Brexit cause a catastrophic decline in trade flows between the EU and UK. These are long-run forecasts and these changes would occur gradually after Brexit has taken place.</p>
<h2>The multiplier effect</h2>
<p>To understand how the effect of trade deals influence trade creation over time, we studied all free trade agreements around the world over the period 1960-2014. Several important trends emerge. First, the positive effect of a free trade agreement (or negative effect of exiting it) accumulates over several decades. Second, preferential trade agreements, in particular, the EU common market are currently having the strongest impact on trade in the European region.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=551&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=551&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=551&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Dynamics of regional trade agreements (RTA) and the EU, 1960-2014.</span>
<span class="attribution"><span class="source">Karen Jackson and Oleksandr Shepotylo</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Countries benefit from integrating into large regional trade and economic blocs. Those that do not, experience significant economic losses. Even if a country outside the bloc is a more efficient exporter, they lose out to less efficient exporters that are in the trade group. Similarly, countries in trade blocs give each other preferential treatment, causing those outside the group to decline in importance. </p>
<p>So a resurgence of the Commonwealth group as a mega-regional would be beneficial, but not to the extent that it would compensate for the losses associated with Brexit. That’s assuming it would be possible to sign a free trade agreement with the largest Commonwealth countries. A US-UK free trade agreement would also face significant political difficulties and, if realised, the benefits would not outweigh the negative effect of Brexit.</p>
<p>The UK decision to step outside the EU framework and embark on independently negotiating trade deals is a risky endeavour and likely to bring significant losses. Signing TTIP would further weaken the UK’s position. Instead, the UK would be wise to negotiate a way it can play the new mega-regional game as part of the EU bloc.</p><img src="https://counter.theconversation.com/content/92228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Leaving the EU single market and customs union cannot be compensated for by free trade agreements with other countries.Karen Jackson, Senior Lecturer in Economics, University of WestminsterOleksandr Shepotylo, Lecturer in Econoimcs, University of BradfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/911722018-02-05T14:11:35Z2018-02-05T14:11:35ZThe cost of Brexit and how much you should trust the forecasts – explained by an economist<figure><img src="https://images.theconversation.com/files/204809/original/file-20180205-19921-1ox9hsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/717456961?src=tfuApU69IwYneVQ63hC7sg-1-0&size=huge_jpg">shutterstock.com</a></span></figcaption></figure><p>Brexit is like a box of chocolates: you never know what you’re gonna get. The latest surprise is that Downing Street has <a href="http://www.bbc.co.uk/news/uk-politics-42938672">ruled out</a> staying in the <a href="https://theconversation.com/should-the-uk-remain-in-the-eu-customs-union-after-brexit-63179">customs union</a>, which allows uninhibited trade in goods within the EU. It follows the leak of the government’s pessimistic assessment of the economic impact of Brexit. The leaked document reinforces the <a href="https://theconversation.com/why-is-the-academic-consensus-on-the-cost-of-brexit-being-ignored-59540">academic consensus</a> on the costs of Brexit and shows that staying in the customs union would be better for the UK economy.</p>
<p>The full report is not yet available to the public. Instead, it was leaked in two instalments. The <a href="https://www.buzzfeed.com/albertonardelli/the-governments-own-brexit-analysis-says-the-uk-will-be?utm_term=.gqwmoO3XB#.qxVzRy8YE">first</a> shows that Brexit will be economically damaging in every scenario – including the scenario the government says it prefers, which seems to be somewhere between membership of the single market like <a href="https://theconversation.com/is-britain-the-new-norway-stance-on-ecj-suggests-london-seeks-a-softer-brexit-82862">Norway</a> or a trade deal <a href="https://theconversation.com/what-is-the-canada-trade-model-and-could-it-work-for-a-post-brexit-uk-58098">like Canada</a>. The bottom line is that after Brexit, the UK will be inexorably poorer.</p>
<p>The <a href="https://www.buzzfeed.com/albertonardelli/the-leaked-brexit-analysis-shows-how-cutting-eu-immigration">second</a> instalment showed not only that migration has been beneficial to the UK economy, but also that its Brexit-driven reduction will be costly. To add insult to injury, it also showed that these losses will not be compensated by gains from a free trade agreement with the US. The net benefits from migration may be small but as the leaked report shows they are significantly larger than the gains from free trade agreements with countries on the other side of the globe. </p>
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<img alt="" src="https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204811/original/file-20180205-19921-wh6t60.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Immigration is good for the UK economy.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/prague-czech-republic-december-2017-passport-789007057?src=m2McGItshCn4qEfg9yMQVQ-1-10">shutterstock.com</a></span>
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<p>It will not be at all shocking if there is a third instalment. It may show that EU regulations have been beneficial to the UK (the benefits <a href="https://theconversation.com/is-eu-regulation-really-so-bad-for-the-uk-83193">have long been overlooked</a>). Or maybe that Europe does not need the City of London to sustain high rates of economic growth. Or that there is not a single region in the UK that would clearly benefit and that the ones that will be hurt the most <a href="https://qz.com/1162733/how-will-brexit-affect-me-uk-regions-that-voted-leave-could-be-worst-affected/">are the ones that voted Leave</a>.</p>
<h2>Don’t shoot the messenger?</h2>
<p>The choice the government has is how to leave. Leaving like Norway, the report estimates, will make the UK roughly 2% poorer (Nobel-prize winning and economics expert Paul Krugman <a href="http://krugman.blogs.nytimes.com/2016/04/23/boris-is">has written</a> that, in this context, “2% is a lot”). Leaving like Switzerland will make the UK 5% poorer and leaving like Russia, 8% poorer. Unsurprisingly, this last figure is in line with the estimated benefits the UK <a href="http://voxeu.org/article/how-rich-nations-benefit-eu-membership">historically enjoyed from its membership in the EU</a>.</p>
<p>In fact, the leaked scenarios have not moved us an iota away from <a href="https://voxeu.org/article/looking-back-ex-ante-estimates-costs-brexit">what we knew pre-referendum</a>. There is mention that a new method was used, but that is highly unlikely. There is no time, energy nor capacity in the civil service to develop a new model amid this chaos. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-is-the-academic-consensus-on-the-cost-of-brexit-being-ignored-59540">Why is the academic consensus on the cost of Brexit being ignored?</a>
</strong>
</em>
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<hr>
<p>Otherwise, there is no meaningful difference between the figures in the leaked report and analysis carried out before the referendum by the Treasury or economists at the LSE, NIESR, or the <a href="http://www.independent.co.uk/news/uk/politics/brexit-economic-impact-uk-autumn-statement-debt-loss-household-1250-institute-for-fiscal-studies-a7437131.html">IFS</a>. </p>
<p>The only thing that is different is that this time the message is coming from the Department for Exiting the European Union, DExEU. And it’s very much in DExEU’s interest to make Brexit work. </p>
<h2>Forecasting cliffs</h2>
<p>Nonetheless, you may ask: how can we trust these forecasts? One of the key Brexit ministers, the MP Steve Baker, claims that Whitehall economic forecasts are <a href="https://www.theguardian.com/politics/2018/jan/30/brexit-minister-says-whitehall-economic-forecasts-are-always-wrong">always wrong</a>. Many point to how the UK economy has <a href="https://www.theguardian.com/business/2017/jan/05/chief-economist-of-bank-of-england-admits-errors">weathered the Brexit vote</a> and not fallen off the cliff edge that was supposedly forecast.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/204810/original/file-20180205-19944-1yrvhti.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A false portrayal of Brexit?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/blindfolded-businessman-walk-cliff-business-concept-560053792?src=9T8UGZdUhBqXxBTs9Hlruw-1-26">shutterstock.com</a></span>
</figcaption>
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<p>But the forecasts published in the run up to the Brexit vote have not been disproved. First and foremost this is because the UK has not yet left the EU. When it does, what these forecasts predict is not that the economy will collapse, shrink or self-destroy. <a href="https://theconversation.com/brexit-100-days-on-and-wheres-the-economic-armageddon-66300">They predict</a> that because the UK will grow more slowly and the gap compared to an average EU member (treated as an approximation to a “UK that remained in the EU”) will increase. </p>
<p>This prediction was based on three important assumptions. The first was immediate withdrawal from the EU – this hasn’t happened yet. The second was that the UK government remains <a href="https://voxeu.org/article/how-european-integration-builds-state-capacity">stable</a>. The snap election and hung parliament meant this did not happen either. </p>
<p>And the third assumption the forecasts are based on is that the economic performance of the rest of the EU would remain similar to what it was before the referendum. In fact, Britain’s economy has been helped <a href="http://www.huffingtonpost.co.uk/entry/jim-oneill-brexit-eu_uk_5a65ca6ee4b002283004747b">by a buoyant EU and global economy</a>. </p>
<p>So what happens next? <a href="http://www.politics.co.uk/comment-analysis/2018/02/02/brexit-cost-analysis-loss-to-economy-would-pay-for-2-5-milli">Reactions</a> to the leaked report seem to be that those sceptical of the EU – and “experts” – will remain that way. Hard Brexit supporters are keen to undermine the report.</p>
<p>What’s different now compared to before the referendum, though, is that the political and economic elites are no longer on the same side as the media, which was <a href="https://voxeu.org/article/looking-back-ex-ante-estimates-costs-brexit">skewed toward Brexit</a>. Although media coverage can still only be described as lukewarm at best, there is now more consensus among political elites against a hard or no-deal Brexit. Moreover, <a href="http://www.cbi.org.uk/news/cbi-calls-for-greater-clarity-and-urgency-on-brexit-trade-and-on-transition/">business has said loud and clear</a> that it fully concurs with the conclusions from the leaked report – that the UK needs to stay in the customs union.</p><img src="https://counter.theconversation.com/content/91172/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nauro F. Campos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The leaked government Brexit report reinforces the academic consensus that the harder the Brexit, the worse it will be for the UK economy.Nauro F. Campos, Professor of Economics and Finance, Brunel University LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/793642017-06-13T10:32:28Z2017-06-13T10:32:28ZBritain’s Brexit options – a refresh<figure><img src="https://images.theconversation.com/files/173568/original/file-20170613-19222-bokfih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Brexit means Brexit.</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>The <a href="https://theconversation.com/so-what-does-brexit-mean-64980">meaning of Brexit</a> is once again open to question. Theresa May’s failed election gamble appears to have done away with her mandate for a hard Brexit. She had previously <a href="https://theconversation.com/how-to-read-theresa-mays-brexit-speech-71359">committed</a> to leaving the EU’s single market and customs union. That means a number of trade options appear to be back on the table.</p>
<p>Since the referendum on Britain’s EU membership was called, The Conversation has published a series of articles analysing what the UK’s future relationship with the EU might look like. </p>
<p>For those who are short on time, here’s a summary of the <a href="https://theconversation.com/four-options-for-uk-trade-after-brexit-62363">four models for UK trade after Brexit</a> by trade expert Maria Garcia from the University of Bath. They are Switzerland, Norway, WTO-only and Canada, which recently signed a comprehensive trade deal with the EU known as CETA. None offer a smooth road ahead, as our academic experts explain below.</p>
<h2>Canada</h2>
<p>Negotiating CETA <a href="https://theconversation.com/what-is-the-canada-trade-model-and-could-it-work-for-a-post-brexit-uk-58098">was a rollercoaster</a> writes the University of Liverpool’s Andrew Smith, an expert in Canadian trade. It offers a lesson for the UK in negotiating a free-trade agreement with the EU and makes it clear that the process <a href="https://theconversation.com/ceta-was-brexit-rather-than-the-walloons-behind-trade-deal-stutter-67800">will be long and difficult</a>.</p>
<h2>Switzerland</h2>
<p>So what about the Swiss model of cooperation with the EU? Switzerland is not a member of the single market. Instead it has a number of bilateral deals with the EU. The University of Kent’s Clive Church <a href="https://theconversation.com/what-is-the-swiss-model-of-co-operation-with-the-european-union-58817">explains</a> why it makes for a complex and messy model, again featuring endless negotiations.</p>
<h2>Norway</h2>
<p>Norway offers a model of what it’s like to remain in the single market, but not be in the EU. <a href="https://theconversation.com/why-the-norway-model-is-a-flawed-blueprint-for-brexit-64404">This article</a> by Newcastle University’s Francesco De-Cecco points out that a Norway-style arrangement comes with a democratic deficit. It would not mean “taking back control”, as it means accepting freedom of movement and laws of the market that are made in Brussels. Meanwhile, <a href="https://theconversation.com/is-brexit-a-good-idea-lessons-from-norway-on-the-advantages-of-eu-membership-40652">research by Nauro Campos</a> at Brunel University finds that Norway’s economy would have done better if it had political, as well as economic, membership of the EU.</p>
<h2>WTO-only</h2>
<p>The alternative to these models is the WTO-only arrangement. If the UK leaves the EU without concluding a trade deal, it will be treated the same as any of the 164 WTO members. This means tariffs on trade and the full gamut of non-tariff barriers. For QUB’s Billy Melo Araujo it is the <a href="https://theconversation.com/brexit-britain-and-trade-this-is-where-it-gets-tricky-74481">nightmare scenario</a>.</p><img src="https://counter.theconversation.com/content/79364/count.gif" alt="The Conversation" width="1" height="1" />
With the UK government in disarray, the type of Brexit that Britain faces is again open to question.Annabel Bligh, Business & Economy Editor and Podcast Producer, The Conversation UKLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/788112017-06-07T16:48:32Z2017-06-07T16:48:32ZWhat the UK election means for Brexit and America<figure><img src="https://images.theconversation.com/files/172769/original/file-20170607-29582-swluiy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">How each U.K. party leader would drive Brexit is the key issue on voters' minds.
</span> <span class="attribution"><span class="source">AP Photo/Matt Dunham</span></span></figcaption></figure><p>Despite the many distractions of a full news cycle, it’s time to start paying closer attention to Thursday’s elections in the U.K. </p>
<p>Much has changed since U.K. Prime Minister Theresa May stunned the world in April by <a href="https://theconversation.com/theresa-mays-snap-election-gamble-explained-76423">calling for snap elections</a>. For starters, after the two recent <a href="https://theconversation.com/as-britain-reels-from-another-terror-attack-political-leaders-wobble-towards-an-election-78824">terrorist attacks</a> on British soil, security has joined Brexit, health care and the economy as a <a href="https://yougov.co.uk/publicopinion/archive/?category=political-trackers">central issue</a> facing U.K. voters. In addition, May’s closest rival, Labour leader Jeremy Corbyn – seen as a long shot back then – has succeeded in <a href="http://www.telegraph.co.uk/news/0/general-election-polls-2017-latest-odds-tracker-maps/">tightening the race</a>. While May’s Tories look set to hold onto their parliamentary majority, they will likely receive a much slimmer mandate than they had hoped.</p>
<p>But by and large, the <a href="https://www.ipsos.com/ipsos-mori/en-uk/ipsos-mori-may-issues-index-sharp-rises-concern-about-nhs-and-education">most important issue continues to be Brexit</a>, as the latest surveys show. And whichever party wins on June 8 will determine how Britain – the <a href="https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017/">world’s fifth-largest economy</a> – defines its economic future, with significant consequences for the United States. For me, a political scientist by trade, this may be the most important election since I began following British politics while studying there in the late 1990s. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172751/original/file-20170607-29614-chbkh5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A floral tribute in the London Bridge area following the attack in London on June 5.</span>
<span class="attribution"><span class="source">AP Photo/Alastair Grant</span></span>
</figcaption>
</figure>
<h2>A tale of two Brexits</h2>
<p>In a much-contested vote last June, the U.K. committed itself to leaving the European Union, the deeply integrated bloc of 28 countries that it joined back in 1973. Though the winners of this election are <a href="http://www.bbc.com/news/uk-politics-39665835">unlikely to reverse</a> Brexit, they would have the power to negotiate the important details surrounding the departure.</p>
<p>May, who supported remaining in the EU during the referendum, has promised to respect the people’s will by negotiating a “<a href="http://www.economist.com/news/leaders/21714986-government-promises-truly-global-britain-after-brexit-plausible-theresa-may-opts">hard Brexit</a>.” She is willing to sacrifice privileged British access to the European single market in order to ensure the country’s control over its borders. For May and the Conservatives, if Britain is going to leave Europe, it should do so fully.</p>
<p>On the other hand, if Labour manages an unexpected victory, we might see a “<a href="http://www.labour.org.uk/index.php/splash/brexit?gclid=Cj0KCQjwpdnJBRC4ARIsAHC6k2I8CKLMpR3llQcDZUFtsObCg30NAbfdlBic9W0TERhOQ61hAkzGmCUaAmIKEALw_wcB">soft Brexit</a>,” one that preserves more mobility across the U.K.’s borders and more connections with the continent. Under Labour, British negotiators would probably push for continued preferential access to the single market. They could be forced by Brussels, in exchange, to <a href="http://www.bbc.com/news/uk-politics-37507129">accept limitations</a> on border control as well as certain European regulations. </p>
<p>Back in April, <a href="http://www.telegraph.co.uk/news/0/general-election-polls-2017-latest-odds-tracker-maps/">polls suggested that the Conservatives would win</a> in a landslide, taking dozens of additional seats in the House of Commons. The latest polling averages, however, show that their lead has narrowed to under 7 percentage points over the Labour Party from about 18 points in April. </p>
<p>Only the Liberal Democrats oppose Brexit and, were they to stun the country and win, might put the brakes on the process. With polls putting them at under 10 percent, that seems highly unlikely.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172754/original/file-20170607-29563-19tcrdm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An open question is what happens to the ‘special relationship’ after Brexit. It will depend on who’s in charge of it.</span>
<span class="attribution"><span class="source">AP Photo/Matt Dunham</span></span>
</figcaption>
</figure>
<h2>What this means for the US</h2>
<p>While it seems nearly certain that Britain will leave the European Union some time in the next few years, the choice between a “hard” or a “soft” Brexit is still up in the air. How will this choice affect the United States?</p>
<p><a href="http://fortune.com/2016/06/29/brexit-u-s-treade-uk/">One argument</a> is that a “hard” British withdrawal from the EU would be a good thing for America. Without a special relationship with Europe, some say, Britain may come to prize its “special relationship” with the United States even more. It may reorient both its economy and its military strategy in a more American direction.</p>
<p>Beyond that, the withdrawal of Britain from the EU, whether “hard” or “soft,” would finally kill the idea that the euro (which the U.K. might have eventually adopted) will someday supplant the dollar as the world’s dominant currency, good news for America’s international economic influence.</p>
<p>While both of these effects may be real, Brexit would also have some serious drawbacks for the United States. For one thing, many <a href="https://www.theguardian.com/politics/2017/mar/08/us-businesses-warn-uk-loss-access-eu-single-market-american-chamber-commerce">American businesses</a> depend on the U.K. as an entryway into the European market. Britain is an English-speaking country with a similar business culture to the U.S., but one that nevertheless has full access to the EU. This will change with a hard Brexit. </p>
<p>American financial and legal firms with large operations in London are already <a href="https://www.nytimes.com/2017/03/30/business/brexit-britain-eu-economy-banks.html">preparing for Brexit</a>, and many will likely shift at least some of their operations to the continent. Other American companies may follow, especially if Brexit is hard and results in a reimposition of trade barriers. The costs of these adjustments will, of course, be more serious for the U.K. than for the U.S., but they could nevertheless be significant for American companies. </p>
<p>On the currency front, while Brexit will likely reinforce the special role of the dollar, it may also <a href="http://money.cnn.com/2016/06/24/investing/brexit-impact-on-american-global-economy/index.html">weaken U.S. exports</a> to Europe in the short run. In combination with the euro crisis, the prospect of British withdrawal has strengthened the dollar mightily against both the pound and the euro, making U.S. exports more expensive.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172752/original/file-20170607-29566-1rx0yxf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">May with European Council President Donald Tusk at 10 Downing Street. Negotiating a breakup with Europe will be one of the toughest tasks for the next PM.</span>
<span class="attribution"><span class="source">AP Photo/ Dan Kitwood</span></span>
</figcaption>
</figure>
<h2>The future of Europe</h2>
<p>Other potential problems for the U.S. transcend immediate economic concerns. Because the British government often shares the American perspective on economic and security issues, its absence from the EU will likely <a href="http://time.com/4383202/brexit-america-fallout-economy-fed/">reduce American influence</a> in Europe.</p>
<p>More seriously, Brexit could lead Scotland or Northern Ireland, both strongly pro-European, to threaten the territorial integrity of the U.K. The Scottish National Party is again <a href="https://www.snp.org/pb_will_there_be_another_independence_referendum">calling</a> for an independence referendum, and there are <a href="http://www.cbc.ca/news/world/brexit-northern-ireland-don-duncan-1.4045368">renewed demands</a> in Northern Ireland to merge with the Irish Republic.</p>
<p>On the European continent itself, Brexit could threaten the cohesiveness of the EU, though this is not a likely outcome given the recent elections in <a href="http://www.telegraph.co.uk/news/2017/05/07/french-election-live-marine-le-pen-emmanuel-macron-presidency/">France</a> and the <a href="http://www.cnn.com/2017/03/16/europe/netherlands-dutch-results/index.html">Netherlands</a> in which pro-EU candidates won. </p>
<p>In any case, the instability that Brexit has introduced into Britain and Europe risks weakening America’s most important liberal allies in the face of resurgent threats around the world.</p>
<p>All of this fallout, while probably to some degree inevitable, would be exacerbated with a harder Brexit. It would also be worsened by drawn-out negotiations that extend the current uncertainty into the indefinite future. </p>
<p>In the final analysis, this election and its aftermath will help determine whether Britain and Europe can quickly return to the economic prosperity and stability of the recent past.</p><img src="https://counter.theconversation.com/content/78811/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While security concerns have punctuated the campaign’s closing days, Brexit remains the most important issue on voters’ minds. How the EU exit is managed will matter a great deal to US interests.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/736882017-03-06T00:17:35Z2017-03-06T00:17:35ZTrump and Brexit won’t kill globalisation – we’re too far in<p>In Donald Trump’s <a href="https://www.yahoo.com/news/trumps-address-to-congress-boasts-of-new-national-pride-sweeping-nation-053605117.html">long-awaited address</a> to Congress, he said a “new national pride” was “sweeping across” the nation. He went on:</p>
<blockquote>
<p>What we are witnessing today is the renewal of the American spirit.</p>
</blockquote>
<p>With Trump’s electoral victory, as well as the Brexit vote, many of the <a href="https://www.wsj.com/articles/globalization-is-here-to-stay-says-panama-canal-ceo-1477494238">assumptions</a> underlying <a href="http://www.nbcnews.com/video/obama-globalization-is-here-to-stay-721921603992">the future of globalisation</a> have been put into question.</p>
<p>This, together with the rise of Pauline Hanson’s <a href="http://www.abc.net.au/news/2017-02-23/indonesia-concerned-over-one-nations-rising-popularity/8298662">One Nation</a> in Australia and other <a>populist parties in Europe</a>, indicates <a href="https://www.nytimes.com/2016/07/30/us/politics/in-time-of-discord-bashing-trade-pacts-appeals-to-both-parties.html?_r=1">large components</a> of the voting population want trade relations severed, borders enforced, and refugees more tightly screened. </p>
<p>So are we witnessing the reversal of decades of globalisation and moving back toward the nation-state as a political and economic ideal?</p>
<h2>A challenge to globalisation</h2>
<p>The term globalisation has been ascribed to capture the improved connectivity between people and places. It’s driven by enhanced trade, mobility, migration, and human interaction that is generally global in scope. </p>
<p>Globalisation is one of the many processes associated with neoliberalism. This is a political and economic doctrine that, since at least the 1970s, has privileged privatisation, liberalisation, and market-oriented logic. It is also strongly associated with “free” trade and reducing barriers to the movement of goods and labour within and between countries.</p>
<p>Several political structures tied to globalisation have challenged the nation-state as the primary political unit. International bodies such as the United Nations, and multi-national blocs such as the European Union, serve to break down barriers between countries through large-scale political regulation.</p>
<p>Trans-border agencies and public-private partnerships have performed much of what nation-states cannot accomplish on their own, as have non-governmental and non-profit organisations. </p>
<p>The rise of multinational corporations in the second half of the 20th century has also posed a series of challenges to nation-states. Annual revenues of some corporations <a href="http://foreignpolicy.com/2016/03/15/these-25-companies-are-more-powerful-than-many-countries-multinational-corporate-wealth-power/">exceed the GDP</a> of many medium-sized countries.</p>
<h2>A return to the nation-state?</h2>
<p>The current political turn reflects a significant counter trend to globalisation. Instead of being broken down, national borders are being reinforced. Trump’s campaign promise to build a wall on the southern border and the UK vote to re-erect barriers to movement across the English Channel represent a stark shift away from globalisation. </p>
<p>Reacting to concerns about “illegal” migrants, and the well-rehearsed arguments about immigrants <a href="http://www.express.co.uk/news/uk/487645/Migrants-take-British-workers-jobs-says-official-study">“taking our jobs”</a>, <a href="http://www.pewresearch.org/fact-tank/2016/11/09/behind-trumps-victory-divisions-by-race-gender-education/">largely white</a> and <a href="http://www.telegraph.co.uk/news/2016/06/24/eu-referendum-how-the-results-compare-to-the-uks-educated-old-an/">older voters</a> favour inhibiting human movement. Populist politicians are attempting to mitigate the “haemorrhaging” of <a href="http://money.cnn.com/2016/03/31/news/economy/mexico-us-globalization-wage-gap/">jobs across borders</a>.</p>
<p>Multiculturalism is being rejected rather than embraced. Driven by the elusive idea nation-states are defined by demographic and cultural uniformity, political nationalism has become a dominant rhetorical device. </p>
<p>The concept of what it means to be <a href="https://www.nytimes.com/2016/06/17/world/europe/european-union-britain-brexit-voters-english.html">“British”</a>, <a href="http://www.politico.com/magazine/story/2016/08/trump-race-white-america-identity-crisis-214178">“American”</a> and Australian in popular imagination has re-emerged as an important topic. </p>
<p>There are serious efforts to redefine the national economy, pushing back against the perceived encroachment of global interests. Trump’s abandonment of the <a href="https://www.nytimes.com/2016/07/30/us/politics/in-time-of-discord-bashing-trade-pacts-appeals-to-both-parties.html?_r=0">Trans-Pacific Partnership</a> parallels the UK’s withdrawal from the continental customs union. </p>
<p>The assumption underlying the “Make America Great Again” campaign was that the domestic US economy was, at some point, a contained territory generating great wealth that had somehow been eroded from the outside.</p>
<p>So is it true? Are we actually witnessing something more significant than an electoral aberration? Will there be a long-term move away from globalisation?</p>
<h2>Probably not</h2>
<p>Several signs actually point to no. The populist trend <a href="https://theconversation.com/america-has-never-been-truly-isolationist-and-trump-isnt-either-71689">is reflective</a> of dissatisfaction with domestic affairs rather than a sustained disengagement with the rest of the world.</p>
<p>While public sentiment regarding changing national identity or political and economic power is very real, de-globalisation is highly unlikely.</p>
<p>We have yet to see a wall being built in Arizona, and a “soft Brexit” may be the <a href="https://theconversation.com/why-a-soft-brexit-is-in-the-interest-of-both-london-and-brussels-67722">most desirable pathway</a> for the UK, given nearly half its good exports are to the EU. </p>
<p>A quick look at national demographic shifts in the US and UK suggests multiculturalism defines the present and future. <a href="http://www.usnews.com/news/articles/2015/07/06/its-official-the-us-is-becoming-a-minority-majority-nation">US demographers are predicting</a> a “minority majority” in the next 40 years. The fact <a href="http://www.vanityfair.com/news/2017/01/tech-leaders-turn-on-trump-over-muslim-ban">Silicon Valley CEOs</a> have so vocally opposed the Trump administration’s “Muslim ban” demonstrates that aside from being unethical, xenophobia is actually bad for business.</p>
<p>A movement toward closed national economies would also be unattainable. Trump has lauded the <a href="http://nypost.com/2016/12/28/trump-says-sprint-is-bringing-5000-jobs-back-to-us/">“re-shoring”</a> of a few American jobs. But there is ample evidence <a href="https://www.nytimes.com/2015/08/03/business/chinese-textile-mills-are-now-hiring-in-places-where-cotton-was-king.html">this was happening before 2016</a> as factory wages slowly equalise with those elsewhere. </p>
<p>Erecting tariff barriers is also likely to be futile, as the rest of the world continues to globalise at a rapid clip. Terms like “domestic” and “foreign” have become increasingly obscure, and for good reason: globalised economic networks ensure that various components of products are sourced from around the world. </p>
<p><a href="http://www.american.edu/kogod/autoindex/">US</a> “domestic” cars, for instance, often contain less than half American parts while “Japanese” cars are often comprised mainly of US parts and assembled in Kentucky or Ohio.</p>
<h2>Fixing internal affairs</h2>
<p>Clearly, many are unhappy with the current state of affairs in the US, UK, and elsewhere in the so-called liberal-democratic world – including Australia. But it is happening in spite of globalisation, not because of it. </p>
<p>Western political power has been slowly eroded in relative terms since the end of the Cold War. What disquiets the electorate is perhaps not the adverse effects of globalisation, but their countries’ position vis-à-vis the rest of the world. </p>
<p>Domestic issues, particularly the extreme <a href="https://theconversation.com/why-inequality-is-the-most-important-economic-challenge-facing-the-next-president-66806">economic polarisation</a> and inequality of the neoliberal era, are more likely to blame. Globalisation is here to stay, and the economic logic of openness will supersede any cultural or political nationalism.</p><img src="https://counter.theconversation.com/content/73688/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thomas Sigler does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>People are unhappy with the current state of affairs – but this is happening despite globalisation, not because of it.Thomas Sigler, Lecturer in Human Geography, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/714192017-01-18T11:48:27Z2017-01-18T11:48:27ZHow the City of London is preparing for a hard Brexit<figure><img src="https://images.theconversation.com/files/153215/original/image-20170118-3903-1ouqm1r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Standing tall.</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Theresa May has made clear that the UK government’s Brexit strategy is <a href="https://theconversation.com/how-to-read-theresa-mays-brexit-speech-71359">to leave</a> the single market and customs union. It ends months of speculation over whether or not it will be a <a href="https://theconversation.com/explainer-whats-the-difference-between-hard-and-soft-brexit-66524">“hard” or “soft” Brexit</a>. </p>
<p>The one audience that was prepared for this, it seems, was the City of London. In fact, The CityUK, the finance industry’s main lobby group, recently <a href="https://www.thecityuk.com/assets/2017/Reports-PDF/Brexit-and-UK-based-financial-and-related-professional-services.pdf">published a list</a> of its key Brexit priorities for the UK’s financial services industry. It had one glaring omission: it did not ask the government to maintain its financial passporting rights. </p>
<p>These passporting rights are a key consequence of single market membership. They mean that authorisation granted to a banking business in one member state will suffice for operations across the EU. The City had <a href="https://www.ft.com/content/e8b14d60-3a36-11e6-9a05-82a9b15a8ee7">worried</a> for months that if the UK departs from the single market it would lose them.</p>
<p>But clearly it realised before the rest of us that the government could not be convinced to keep Britain in the single market. And this means that, instead of lobbying for a soft Brexit, financial services firms will start lobbying for other ways to recoup their losses. These will inevitably include perks and kickbacks, usually of the tax-cut variety, to stop companies jumping ship when the UK leaves the EU.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1113&fit=crop&dpr=1 600w, https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1113&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1113&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1398&fit=crop&dpr=1 754w, https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1398&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/153222/original/image-20170118-3882-vxc600.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1398&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Philip Hammond.</span>
<span class="attribution"><span class="source">EPA/Facundo Arrizabalaga</span></span>
</figcaption>
</figure>
<p>The government will be more than happy to oblige. As the new chancellor of the exchequer, Philip Hammond, <a href="https://www.theguardian.com/politics/2017/jan/15/philip-hammond-suggests-uk-outside-single-market-could-become-tax-haven">recently indicated</a>, the UK could well take advantage of its anticipated “freedom from EU law” to become a tax haven by “changing its economic model to regain competitiveness” vis-a-vis Europe.</p>
<h2>Restoring balance</h2>
<p>Let’s take Theresa May at her word and assume the UK leaves the single market. The loss of passporting rights will not mean that the heady proportion of GDP contributed by financial services will disappear in its entirety. PwC <a href="https://www.pwc.co.uk/financial-services/assets/Leaving-the-EU-implications-for-the-UK-FS-sector.pdf">estimates</a> that the value of financial services to the economy will decline by roughly 6-10% by 2020, representing a reduction of around £7-12 billion, with some significant (but not overwhelming) corresponding loss of employment.</p>
<p>The reason that an exit from the single market is severe for financial services is rather mundane. It is a matter of increased costs and upset balance sheets. No one is suggesting that banks headquartered in Britain will no longer be able to do business in Europe. It will just cost them more: compliance and administrative <a href="http://www.investmenteurope.net/regions/brexit-loss-of-passporting-rights-could-halve-uk-exports/">costs</a> will increase markedly with the loss of passporting rights. </p>
<p>While this does not mean that banks will close (after all, major banks already have a presence on the continent), it does suggest banks will incur heavier costs. Some funds will need to move to the continent if accounts in euros can no longer clear from London. And, with this, some (but not all) jobs will go. </p>
<p>The cumulative impact of a hard Brexit is that Britain will present a very different proposition to businesses than it does now. This difference amounts to a few billion pounds wiped off the country’s GDP – not apocalyptic, but it is bad and unavoidable if access to the single market is lost. </p>
<p>Nonetheless, the banks now accept this and will work their damnedest to reduce the impact on their balance sheets. Remember, though, that the banks are not so concerned about the impact on the rest of us. While some may bid good riddance to the bankers, there is another knock-on effect of a reduced City: <a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12031950/City-of-Londons-tax-bill-hits-highest-since-financial-crisis.html">tax revenues</a>. </p>
<p>The British purse will face a sharp decline if significant amounts of economic activity migrate to the continent. This, on top of increased budgetary needs due to a deteriorating economy (especially since the UK runs a budget deficit at <a href="http://budgetresponsibility.org.uk/docs/dlm_uploads/BriefGuideAS16.pdf">around 4% at the moment</a>) will hard hit state finances.</p>
<p>Can other business, attracted from overseas, compensate? After all, one could point to banks operating successfully in <a href="http://openeurope.org.uk/today/blog/understanding-regulatory-equivalence-an-effective-fall-back-option-for-uk-financial-services-after-brexit/">countries outside</a> the EU. Before Britain’s referendum on EU membership, many <a href="http://brexitcentral.com/wp-content/uploads/2016/11/ChangeorGo.pdf">argued</a> that reduced connection with Europe frees up options for increased trade in services (including financial services) beyond Europe. </p>
<p>Some non-EU business is certain to come in, but this may not be the sort of business one wants. The UK cannot, and should not, seek to become a big-island tax haven. It cannot jump from being the centre of European finance to <a href="https://www.welt.de/english-news/article161182946/Philip-Hammond-issues-threat-to-EU-partners.html">Singapore-by-the-channel</a>. </p>
<p>The price to pay for attracting international funds would be more tax breaks and sharper tax cuts. This will not compensate for the loss of tax income caused by losing the passport, even if it helps firms retain a presence in London. It certainly won’t make paying for the NHS any easier for the Treasury.</p><img src="https://counter.theconversation.com/content/71419/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The one audience that was prepared for a hard Brexit, it seems, was the City of London.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/677222017-01-04T13:42:46Z2017-01-04T13:42:46ZWhy a ‘soft Brexit’ is in the interest of both London and Brussels<p>London <a href="https://www.thecityuk.com/assets/2016/Reports-PDF/The-UK-Europes-financial-centre.pdf">accounts for</a> 85% of the EU’s hedge fund assets, 78% of its foreign exchange turnover, 74% of over-the-counter interest rate derivatives, 64% of private equity assets and 59% of its international insurance premiums. Plus, 87% of the US investment bank employees who work on European finance live in London. </p>
<p>These are all reasons why London currently ranks first among global financial centres, ahead of New York and Singapore. The next highest ranked European city is Zurich in ninth place. Luxembourg is 12, Frankfurt is at 19, Munich at 27, <a href="http://www.longfinance.net/global-financial-centres-index-20/1037-gfci-20.html">and Paris at 29</a>.</p>
<p>The point of these statistics is to state the obvious: politicians in the UK and the rest of the EU should be constructive about Brexit. If financial service companies move out of London, it is unlikely that many would relocate to another EU city. Financial centres outside of the EU would be <a href="https://theconversation.com/why-london-wont-lose-its-crown-as-europes-financial-capital-63362">more likely to attract the business</a> because other EU financial centres rank so much lower. </p>
<h2>Passporting goes both ways</h2>
<p>Much has been made of the <a href="https://www.theguardian.com/politics/2016/sep/20/passporting-rights-brexit-uk-firms-fca-eu">possible loss of “passporting rights”</a> – which allow its financial companies to sell services across Europe – after Brexit. This covers a range of financial activities, including deposit taking, derivatives trading, loan and bond underwriting, portfolio management, payment services, insurance and mortgage broking. Data from the UK’s Financial Conduct Authority show around 5,500 UK firms rely on passporting <a href="https://www.ft.com/content/9f0824d8-7f17-11e6-8e50-8ec15fb462f4">to do financial business in Europe</a>. However, more than 8,000 European firms rely on passporting to do business in the UK. So the European Commission has as much of an incentive to reach a deal on the free flow of financial services as does the UK government.</p>
<p>So far neither side has behaved constructively. Using belligerent language, the UK government prioritises control over immigration over access to the single European market. The responses from Europe are similarly rough. France’s president, François Hollande <a href="https://www.ft.com/content/5f84e4c4-8c17-11e6-8aa5-f79f5696c731">has been bellicose</a>: “Madame May wants a hard Brexit. That means hard negotiations.” </p>
<p>But despite these publicly stated positions, top UK and European politicians must be aware that the pull away from London in several financial services sectors would be mostly towards the United States. For example, 112 companies from other EU member states were listed on the London Stock Exchange (with a market cap of £378 billion) in September 2016, out of 2,299 firms and <a href="http://www.londonstockexchange.com/statistics/companies-and-issuers/companies-andissuers.htm">a total market cap of £4 trillion</a>. London attracts three-quarters of the EU’s capital markets activity. The main competitor is New York: there are 155 European companies listed on the New York Stock Exchange, valued at £3.36 trillion. Frankfurt and Paris pale in comparison in terms of market size.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/151630/original/image-20170103-18679-2m7fe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Waiting in the wings to pick up any business London loses.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>Another example is insurance, where about 28% of London-based insurance activity goes to the EU. There is no single European market in insurance and the three largest continental European markets are dominated by local insurers: Axa in France, Allianz in Germany and Generali in Italy. Beyond these markets, US companies like Metlife and Prudential and Asian insurers like Nippon Life are the main candidates to increase their market share should Brexit disturb the status quo. </p>
<p>Several other financial service sectors may also look for a home away from Europe, for example Sharia-compliant central bank liquidity facilities, emerging markets wealth management, masala bond issuance, private equity, green finance and fintech. In private equity Vienna may attract some firms focused on Eastern Europe, while Berlin may attract firms investing in Central Europe. The remaining business will likely head to Asia, Dubai or New York. Both the UK and the EU would lose from this.</p>
<h2>Constructive dialogue</h2>
<p>Both the UK government and the European Commission could be more forthcoming in the coming negotiations than they have been to date. To keep its passporting rights, the UK would need to remain in the European Economic Area (EEA) – the trading club that includes the European Union, Norway, Iceland, and Liechtenstein. </p>
<p>The May government has yet to signal this intention. Its <a href="http://www.wsj.com/articles/theresa-mays-hard-brexit-signs-come-with-a-damper-1476389623">rhetoric</a> suggests the government would rather leave the EEA than allow free movement of people. As May has said: “We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.” </p>
<p>If the continuation of passporting is not possible due to restricted movement of EU citizens, the UK may ask for something called <a href="http://openeurope.org.uk/today/blog/understanding-regulatory-equivalence-an-effective-fall-back-option-for-uk-financial-services-after-brexit/">“regulatory equivalence”</a>. This is where the EU allows companies based outside it market access on the condition that their rules and oversight of financial services are as stringent as the EU’s. This should not be difficult for the UK: it already has the exact same regulation as the EU. If UK regulation rapidly diverges, however, equivalence will create uncertainty as it can be withdrawn by the EU at a later stage.</p>
<p>So there are options available to make the coming Brexit negotiations constructive. Such an approach will ultimately benefit both UK-based financial institutions and European companies and consumers seeking financial services. To achieve such benefits, less grandstanding and more attention to detail is needed.</p><img src="https://counter.theconversation.com/content/67722/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simeon Djankov is affiliated with the Peterson Institute for International Economics, Washington DC. </span></em></p>London and Brussels should be constructive about Brexit – for both their financial benefit.Simeon Djankov, Executive Director of the Financial Markets Group, London School of Economics and Political ScienceLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/703042016-12-14T13:37:31Z2016-12-14T13:37:31ZNever mind Article 50, here’s why Article 127 could be crucial to keeping Britain in the single market<figure><img src="https://images.theconversation.com/files/150105/original/image-20161214-32187-xccwjc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Ms Jane Campbell / Shutterstock.com</span></span></figcaption></figure><p>Britain’s membership of the European single market has become the most contentious issue in the post-Brexit debate. And the legal issues involved are proving rather tricky. </p>
<p>Britain’s single market membership is the product of not one, but two international organisations and their rules – the European Union (EU) and the European Economic Area (EEA). This means that interesting questions (and legal cases) are now arising on how Brexit will work.</p>
<p>Most are by now familiar with <a href="https://theconversation.com/what-is-article-50-the-law-that-governs-exiting-the-eu-and-how-does-it-work-60262">Article 50</a> of the EU Treaty – the formal trigger to leaving the EU. But now, it seems there is another article that might need to be triggered – Article 127 of the EEA Agreement – to leave the single market.</p>
<p>Separate to the EU’s rules, the UK is also signed up to the <a href="http://www.efta.int/eea/eea-agreement">rules of the EEA</a>. These have been signed up to by 28 EU member states along with Norway, Liechtenstein and Iceland. Thanks to the EEA Agreement, these three states share Europe’s single market with the 28 EU states. But little else – no customs union, or common agriculture or fisheries policies. </p>
<p>The EEA owes its 1994 creation to the erstwhile European Commission president, Jacques Delors. His idea was that the EEA would be a kind of economic space absorbing European states into the single market, but without allowing them into what is now the EU – thereby allowing the 12 members of the then European Community (now EU) to continue working toward the creation of the euro currency, as well as internal market reform. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150112/original/image-20161214-32183-1ot47ew.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Jacques Delors.</span>
<span class="attribution"><span class="source">Parti socialiste/flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>The EEA worked out, but somewhat differently than anticipated. There are only three non-EU participant states, rather than the large number Delors envisaged. Some (Finland, Austria and Sweden) joined the EU itself. One, <a href="https://theconversation.com/what-is-the-swiss-model-of-co-operation-with-the-european-union-58817">Switzerland</a>, opted out of the EEA entirely.</p>
<p>Non-EU EEA members are also effectively in what has been termed a <a href="http://www.economist.com/node/3262652">“fax union”</a> – meaning that Norway, Liechtenstein and Iceland basically sit at the end of a fax machine waiting for the EU to send them single market rules to implement.</p>
<h2>The jury’s out</h2>
<p>Awkwardly, the UK electorate was not asked if they wanted to reject the single market – merely the EU. A 52% majority voted to leave that. Before the referendum, many Brexiteers (<a href="http://blogs.spectator.co.uk/2016/06/brexit-leave-britain-worst-worlds-like-norway/">including UKIP’s Nigel Farage</a>) extolled Norway’s EEA-based status. Now, however, many assert that respect for the June 23 vote requires <a href="http://brexitcentral.com/kwasi-kwarteng-mp-continued-membership-single-market-membership-eu-another-name/">rejecting the single market entirely</a>, including EEA rules. They <a href="http://www.telegraph.co.uk/news/2016/12/02/eus-single-market-rip-off-britain-should-keep-far-away-possible/">say</a> voters sought to end contributions, restrict migration, and avoid even the most indirect application of the European Court of Justice decisions – and that these aims would be frustrated by staying in the EEA. </p>
<p>Single market remainers counter that there was no majority to leave the single market: many reasons for voting for Brexit had nothing to do with the single market (such as a belief that money would be saved, <a href="http://www.fwi.co.uk/news/exclusive-survey-reveals-farmers-back-eu-exit.htm">opposition by farmers to the common agricultural policy</a> and <a href="https://theconversation.com/british-fishermen-want-out-of-the-eu-heres-why-60803">fishermen to the fisheries policy</a> – or even <a href="https://theconversation.com/the-eu-has-not-brought-peace-it-is-steeped-in-failure-and-dangerously-anti-democratic-59115">Labour voters to austerity</a>). They note future UK contributions will be required anyway to gain market access (as Brexit minister David Davis <a href="http://www.bbc.co.uk/news/uk-politics-38168942">has now conceded</a>), that restrictions on migration (albeit admittedly limited ones) are possible under <a href="http://www.allenovery.com/Brexit-Law/Documents/Macro/EU/AO_BrexitLaw_-_EEA_Membership_Jul_2016.PDF">Article 112 of the EEA Agreement</a>.</p>
<p>The law is unclear about what will happen to the UK’s single market status if it leaves the EU. The UK government <a href="http://www.bbc.co.uk/news/uk-politics-38126899">asserts</a> that the UK is party to the EEA agreement only in its capacity as an EU member state. So once the UK leaves the EU, it will automatically cease to be a member of the EEA. But that point is arguable. </p>
<p><a href="http://www.efta.int/media/documents/legal-texts/eea/the-eea-agreement/Main%20Text%20of%20the%20Agreement/EEAagreement.pdf">Article 127 of the EEA Agreement</a> expressly provides only one way of withdrawing: giving 12 months notice to other parties. If that provision applies, then just quitting the EU won’t be enough for the UK to leave the EEA’s single market. The UK will have to give express notice to leave the EEA too.</p>
<p>But maybe it doesn’t apply. Other provisions of the EEA Agreement seem to assume EU members (like the UK) are only signed up to it because they are in the EU. Leave the EU, this argument goes, and you cause a “fundamental change of circumstances” or a “material breach” under <a href="https://treaties.un.org/doc/Publication/UNTS/Volume%201155/volume-1155-I-18232-English.pdf">international law governing treaties</a>. So, legally speaking, other states can take the view that you have quit the EEA.</p>
<h2>Legal challenges</h2>
<p>All very confusing. We may soon find out who is right, though. The pro-single market group, British Influence, is seeking a <a href="https://www.theguardian.com/politics/2016/nov/28/uk-government-faces-legal-challenge-over-single-market">judicial review focused on the government’s EEA position</a>. British Influence would like the Article 127-is-needed view to prevail (and parliament to then refuse to consent to Article 127 notice and the UK to live happily ever after – or at least for a very long time – in the EEA).</p>
<p>There are UK law issues here too. And political issues. The Supreme Court is currently weighing up a <a href="https://theconversation.com/brexit-in-the-supreme-court-heres-what-it-all-means-69738">legal challenge brought by Gina Miller</a> regarding whether or not parliament’s consent is needed under UK law to trigger Article 50. </p>
<p>If the Supreme Court say “no”, parliamentary consent will hardly be needed to trigger Article 127 either. That would be the end of the Article 127 story. The government will just give the Article 127 notice and say goodbye to the EEA.</p>
<p>If the Supreme Court say “yes”, then parliament’s consent will be needed for EEA exit too. But here is the catch: parliamentarians may not give it, claiming there has been no referendum on the UK’s single market membership.</p>
<p>Continued EEA membership would have huge consequences for Britain’s economic well-being for generations. So the courts – and potentially parliament too – have weighty issues to ponder. First in the Miller case. And now perhaps in the British Influence case too.</p><img src="https://counter.theconversation.com/content/70304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gavin Barrett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>You might be familiar with Article 50, but Article 127 of another European treaty could be as important when it comes to Brexit.Gavin Barrett, Professor of Law, Jean Monnet Professor of European Constitutional and Economic Law, University College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/688622016-11-17T12:01:57Z2016-11-17T12:01:57ZA second Brexit vote is a real possibility now – here’s why it should happen<p>Thanks to a ruling in London’s high court, the UK appears to be moving towards making a decision about what Brexit means in a more democratic way.</p>
<p>The flaws of the first EU referendum are well known. Despite being only advisory in nature, it was immediately used by the incoming prime minister as a binding mandate. Theresa May was not elected as prime minister and her party was not elected on a Brexit programme. Yet she has tried to impose her own version of a Brexit programme on voters, largely bypassing parliament. </p>
<p>What’s more, that programme currently appears to be based around the desire for a “hard” Brexit, whereby the UK exits the European single market. That is unlikely to be the expression of the will of the majority of the British people. Given how tight the result of the referendum was, if even a small minority of Brexit voters prefer the idea of soft Brexit (by remaining in the single market), then they together with the Remain voters constitute a strong majority against a hard Brexit.</p>
<h2>A second vote</h2>
<p>Crucially, the referendum has only advised in favour of some sort of Brexit. It did not allow citizens to decide which type of Brexit they want. The high court has decided that parliament must be involved before the government can trigger Article 50 to begin Brexit negotiations with the EU.</p>
<p>If that ruling is upheld by the supreme court, parliament will probably adopt a bill prior to triggering Article 50. In that bill, it may set out some substantial choices about which type of Brexit the government aims to propose in its negotiations with the EU.</p>
<p>At the same time it can try to set out procedural steps for involvement during the negotiation stage. That might include a requirement to hold a referendum on the final deal reached with the EU. That gives British voters the right to confirm whether the final deal reflects the type of Brexit they wanted, and the chance to vote to remain in the EU if it is not. </p>
<p>Giving British voters that opportunity is ever more important as it is increasingly likely that negotiations with the EU will result in hard Brexit. </p>
<p>The composition of May’s cabinet and Brexit office, the rhetoric of the Conservative party conference and the hard line the government is taking on immigration have frozen most of what was left of EU goodwill towards the UK. For the EU, access to the single market without respecting the free movement of people is unacceptable so the UK will not be able to stay in the single market without shifting its stance on immigration – as Donald Tusk, president of the European Council has already confirmed.</p>
<p>May’s timing to trigger Article 50 in March 2017 further increases the chances of a hard Brexit. France and Germany will be busy with national elections so the European Commission will probably lead negotiations. </p>
<p>According to the European Commission’s chief Brexit negotiator, <a href="http://www.politico.eu/article/eu-set-for-dirty-brexit-theresa-may-european-council/">Michel Barnier</a>, the agenda of the Article 50 negotiations will be limited to four topics: outstanding financial liabilities such as regional funding and EU staff pensions; the status of EU nationals in Britain and British nationals in the EU; the administrative disengagement, including the future of EU agencies based in Britain; and “special situations” such as arrangements for Northern Ireland and Gibraltar.</p>
<p>If the EU sticks to this position, the negotiated agreement will be a “Hard Brexit minus”. While the UK talks continually of trade deals at the moment, the reality is that this won’t be on the agenda until after Brexit. Article 50 talks will just be for defining the divorce settlement. There will be no deal on future trade relationships.</p>
<p>So, even with a “Brexit agreement” resulting from Article 50 negotiations, the UK will fall back under WTO rules, at least until new trade relationships are agreed, which will take years to negotiate and will require approval by all national parliaments. That can be a long and difficult process – as the recent history of <a href="https://theconversation.com/who-are-the-walloons-and-why-are-they-blocking-europes-free-trade-deal-with-canada-67718">CETA</a> illustrates.</p>
<p>By organising a referendum on the Article 50 deal with the EU, the British people would finally be given a real choice on what is actually on the table, namely “Remain” or “Hard Brexit minus”, instead of the false choice between “Remain” and “pipe dream” offered by the first referendum.</p><img src="https://counter.theconversation.com/content/68862/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stijn Smismans receives funding from the European Research Council for a project on 'Law, Science and Interests in European Policy-Making'. This blog entry is not related to, or funded by, that research project. </span></em></p>Given that a hard Brexit currently looks to be the most likely outcome, the British people need to be given another say.Stijn Smismans, Professor of European Law, Director of the Centre for European Law and Governance., Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/677392016-10-27T16:02:30Z2016-10-27T16:02:30ZHard, soft, smooth, rough – we need better words if Brexit is going to work<figure><img src="https://images.theconversation.com/files/143476/original/image-20161027-11252-13kq7k3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/jonathanrolande/30234604431/in/photolist-oMWky5-JnFWs8-6xu2ZU-Jivxps-N4Jfxi-N9eury-4EtT8T-FZGz41">Jonathan Rolande/https://housebuyfast.co.uk/ </a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Britain’s decision to exit the EU has brought with it an ubiquitous lexicon of new terms. But closer examination reveals that their novelty is deceptive. As a country seeks to tackle a deeply complex issue, it is falling back on simplistic, populist language and imagery, which is preventing the kind of agile, creative thinking urgently required to get us out of the mess we’re in. </p>
<p>It all begins with the ugly but hashtag-friendly portmanteau word itself, Brexit. It initially sounded unusual and vaguely corporate, like the name of a new brand of painkiller, or a UK business specialising in IT. Now it is everywhere, and impossible to dissociate from tension and turmoil. It has spawned a series of further neologisms: Brexiters, Brexiteers, Bremoaners.</p>
<p>Then, clarifying adjectives started to be applied to the original term – most notably “soft” and “hard” Brexit. Arriving to meet her EU counterparts in Brussels, Theresa May, introduced a new variety – the <a href="http://www.bbc.co.uk/news/uk-politics-37734087">“smooth” Brexit</a>. Angela Merkel’s <a href="https://www.theguardian.com/politics/2016/oct/20/uk-will-get-a-hard-brexit-if-may-pursues-tough-approach-hollande">response</a> suggested she immediately understood the binary pattern: “It is going to be rough going, I think”.</p>
<p>Soft, hard, smooth, rough. It sounds as if we’re in smutty joke territory, or descending into the murky psychosexual underbelly of political posturing, the verbal counterpart of May’s kitten heels or <a href="http://www.telegraph.co.uk/news/politics/conservative/11447119/Theresa-May-wears-thigh-high-boots-to-greet-Queen-and-Mexican-President.html">thigh-high patent leather boots</a>.</p>
<p>Reading reports of the build-up to EU negotiations, the unsavoury Brexit foreplay, can be like dipping into a pulp erotic novel. Here’s François Hollande’s <a href="https://www.theguardian.com/politics/2016/oct/20/uk-will-get-a-hard-brexit-if-may-pursues-tough-approach-hollande">response</a> to May’s tough-talking at the Summit: “I said very firmly: Theresa May wants a hard Brexit? The negotiation will be hard.”</p>
<p>It isn’t difficult to envisage a whole range of new clarifying adjectives being adopted. The right-wing press yearn for a quick Brexit, a “snap” Brexit, or (political S&M alert) a <a href="http://www.politico.eu/article/tory-dream-of-a-short-sharp-brexit-theresa-may-conservative/">“short, sharp”</a> Brexit. Would it take much to imagine a rich or poor Brexit? A happy or sad one? A wet or dry one?</p>
<p>But aside from sado-masochistic posturing, the familiar language of Brexit – its Brexicon, if you will – reveals one of the most distinctive and disturbing qualities of this entire saga. The fact is, the debate has been unable to move beyond the simplistic “yes/no” level at which it started. If this continues, it’s likely to lead to disastrous consequences. We live now in a simplistic Gulliver’s Travels world of Bremoaners versus Brexiteers. Except that this is not satire, but real.</p>
<h2>Pleasure in pain</h2>
<p>It’s no accident that “hard Brexit” is the most used phrase, and not simply because this denotes the type of exit favoured by the most vociferous leavers. What is presumably meant by “hard Brexit” is a “clean break”. A hard Brexit means a decisive, irreversible shift, the UK breaking off from Europe like snapping a stick of seaside rock.</p>
<p>This outcome is deemed preferable to the “soft” equivalent – a messy tearing-off, as with a piece of toffee or nougat. The ideal of a hard departure is that nothing would be left behind, barely any evidence of shared history, nothing but a clean, broken edge, a reminder to the rest of the continent that Britain acted decisively, and left it behind.</p>
<p>It’s a fantasy, of course, and one which taps into prevailing right-wing thinking about the value of hardness, of difficulty. This is hard as in: not messy or weak but tough. Don’t mess with hard Britain. </p>
<p>The idea of hard-nosed, right-leaning politicians – straight-talking, authoritative, unafraid to make tough decisions or to tell it like it is – in sneering opposition to soft, bleeding heart counterparts on the left is longstanding in British politics. And the implication is that, yes, this is going to be hard – on the devious migrants, the free-loading, non-contributing EU expats, the lily-livered, soft-bellied, wimpy liberals, the Bremoaners. It may even be hard on everyone, but it’s necessary. The faintly S&M dimensions of Brexit-talk may be explained by this corrective impulse.</p>
<p>In wider society, it is relatively uncommon for someone to insist on the value of anything “hard” – apart from perhaps teachers and personal trainers. In everyday speech, too, “hard” tends to denote something negative or unwelcome. Hard-hearted. Hard of hearing. Hard skin. Hard stools. </p>
<p>The impoverished language may draw on the hard/soft imagery of the right wing, but the unwillingness or inability of political leaders across the spectrum to elevate the debate above the basic level is blocking progress to a workable solution. It impedes productive discussion of a vital, complex issue.</p>
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<p>The discourse of the EU Summit shows clearly that insisting on a “hard” or a “smooth” Brexit as a starting position in any negotiation is going to get us nowhere, for it traps responses in its simplistic, binaristic logic. This immovable discursive position is indeed something unpleasant clogging up the body politic.</p>
<p>What is required is a dose of laxative, so the nation can expel this unproductive element and the system can start to function once more. Ironically, what is needed are pro-remain politicians and leaders to continue with the hard-hitting counter-argument which has begun to flow in recent weeks. It’s complex and nuanced and that’s just what is needed.</p>
<p>A hard rain is falling on Europe, but sustaining a rich counter-debate is the best hope of softening its impact.</p><img src="https://counter.theconversation.com/content/67739/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bran Nicol does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The emerging Brexicon is binary, but this is a deeply complicated situation.Bran Nicol, Professor of English, University of SurreyLicensed as Creative Commons – attribution, no derivatives.