No Deal is the Worst Deal: Theresa May and the Lose-Lose Politics of Brexit

 

With Brexit negotiations officially commencing today (June 19), the stage is set for the United Kingdom and the European Union to redefine their 44-year long relationship following the UK’s June 23, 2016  decision to depart the 28 nation bloc. However, following the chaotic June 8 general election in the UK, rather than strengthen her hand, Prime Minister May was forced to form a coalition government with the North-Irish Democratic Unionist Party to cling to power. While a great deal has been made of Ms. May’s weakened position and its potential impact on negotiations with the EU, it should be emphasized that the UK has been in an impossible situation from the day Ms. May became Prime Minister, largely as a result of her own actions and rhetoric. The results of the election, while catastrophic for Ms. May personally, do not fundamentally alter the political calculus of Ms. May’s own creation. Despite her bruising loss of a Parliamentary majority, Ms. May will continue to pursue a “Hard Brexit,” while the rest of the world looks to profit from an enfeebled Britain.

In the immediate aftermath of the Brexit referendum and then-PM James Cameron’s shocking decision to step down, the subsequent leadership battle was a no-holds-barred brawl befitting an episode of House of Cards.  One by one, each pro-Leave Conservative candidate withdrew from contention, allowing Ms. May to win by keeping a low profile and letting the competition defeat itself. In contrast to the vocal pro-Leave opponents she outlasted, Ms. May was a quiet supporter of Remain. However, once Prime Minister of a country which had made its voice heard, Ms. May made the fateful decision to double down, promising that the “will of the people” would be carried out.

However, the “will of the people” itself proved difficult to carry out due to a central conflict: the average Leave voter wanted stronger borders, but did not want to be cut off from the European Common Market (CM), which could result in severe economic damage to the UK. However, to maintain eligibility for the CM, a country must adhere to the EU’s “Four Fundamental Freedoms,” one of which is, unfortunately for Ms. May, “freedom of movement and residence,” a provision directly in conflict with the average Brit’s desire for tougher immigration standards. PM May’s history in office has fundamentally been an attempt to reconcile these conflicting desires, and to this end, she tried a number of different tactics, all of which were inevitably doomed to failure.

The first was to explore the possibility of a post-Brexit Britain departing the CM, but remaining within the largely coterminous European Economic Area (EEA). The EEA allows non-EU member states to effectively participate in the CM without being subject to other EU-wide policies such as its customs union, common trade policy, or common foreign and security policy. Such a move could theoretically allow the UK to remain the financial hub of Europe, but would carry the same requirements as the CM. Additionally, EEA countries are not participants in EU rulemaking, an unpalatable prospect for a country hell-bent on reclaiming sovereignty from Brussels. Thus, while a potentially clever means of achieving “Brexit in name only,” the EEA path was effectively closed from the start. Ms. May’s attempts to thread the needle between anti-immigrant sentiment and pro-single market pragmatism were doomed to failure.

Without the ability to remain within the CM, a so-called “Soft Brexit”, Prime Minister May was forced to pursue a “Hard Brexit.” To this effect, she pursued a two-pronged approach to limiting the damage: attempt to bludgeon the EU into a favorable bilateral agreement, while also circling the globe in search of alternative trade partners. To underscore her willingness to play hardball with Europe, Ms. May coined a colossally self-destructive turn of phrase: “No deal is better than a bad deal.” The reason this phrase is so eminently self-defeating is the fundamental truth that no deal is, in fact, the very worst possible deal of all. As an EU member, the UK is currently party to hundreds of agreements, all of which will cease to apply unless a substitute is provided for over the course of the two-year negotiating process. This includes more than 100 current and pending bilateral trade agreements at a time when the UK has no domestic capacity to negotiate such agreements. The resulting so-called “Brexit Cliff” could have devastating consequences for an export-driven economy, as the UK would be forced to default to using its World Trade Organization membership to govern its trading relations. This would result in the UK and the EU placing tariffs on each other, dramatically increasing the cross-border cost of goods which previously flowed freely. This is the worst possible outcome for the UK, which is already seeing financial services jobs fleeing to safe harbors in the EU and a plunging Pound. Defaulting to WTO rules would effectively end the UK’s role as the financial capitol of the world, and to make matters worse, the entire world knows it. As a result, the EU is out for blood, and prospective trade partners are toying with Ms. May, fully aware of the UK’s desperation for trade deals. As a consequence of insisting that “no deal is better than a bad deal,” Ms. May has ensured that the world will give the UK a bad deal, and she will just have to accept it.

Prime Minister May has miscalculated at nearly every step of the Brexit process, from thinking that the UK can have its cake and eat it too, to insisting on a hard Brexit to satisfy fundamentally misguided public opinion. The UK has voluntarily abdicated its role as a global economic power, and the rest of the world is scrabbling for Britain’s remains.

 

Matthew Brewer is an independent analyst and author who covers European Politics and Economics. He holds a Master’s Degree in European Studies and International Economics from Johns Hopkins School of Advanced International Studies and a degree in German Studies from Oberlin College.

Photo by Duncan Hill and art by Banksy

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