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  • Charles Wyplosz

Brexit: three overlooked facts

The Brexit process is truly fascinating. Some new drama unfolds nearly every day. As a result, maybe, some very basic facts tend to be overlooked, probably because they would undermine the dramatically entertaining value of these events. It all seems crazy and, in a way it is, but the process is more reasonable than it looks.

The first fact is that nothing much will happen on B-day, with or without a deal. As is often said, the focus of past negotiations has been on the divorce, not on future relations. This is why the deal foresees a two-year transition, to allow for negotiating future arrangements with the EU. There are zillions of decisions to be taken within the broad framework of the deal. They range from what exactly happens at the borders to the status of EU citizens working or living in the UK and of British citizens working or living in the EU and to mutual recognitions of standards for each and every good or service that will be traded. Without a deal, all of these things will also have to be negotiated, even if they is no explicitly agreed framework. Because geography implies that there will be a lot of trade and movement of people between the EU and the UK, a no-deal Brexit will require a transition period as well. During this period, little will actually change, simply because no one wants to see total disruption, even the hardest of the hard-Brexiters who still have to grasp the day-to-day implications of what they wish for. One way or another, a standstill will have to come.

The second fact is that the British economy has become totally integrated into the EU economy over more than forty years. As a consequence, European laws govern everything that concerns trade within the UK and with the EU, commerce with third parties, consumer protection, anti-trust and more. The UK will have to build from scratch a new legal apparatus. British firms will have to disentangle a myriad of links with their European partners. Non-national residents will have to reorganize their lives. Even if the EU is not a perfect arrangement, it works reasonably well. This implies that it will be best for the UK to retain many of existing EU laws and for firms in the EU and in the UK to maintain much of existing links. Brexit is a huge disturbance with limited long-run practical effects. Meanwhile, firms face a massive uncertainty and postpone productive while some have relocated or downscaled their activities in the UK. Eventually post-Brexit UK will not differ much from what it now is.

The third fact, which may be lost in the spectacular debates that we have seen over the last few weeks, follows from the previous observation: Brexit is impossible, or nearly so. Much has been said about the stability and pragmatism of the British democratic institutions but, all of a sudden, it seems to have become highly dysfunctional and irrational. Of course, the referendum should not have been called, or the question asked should have been better designed. So, yes, a huge mistake was made. It is worth asking how can a stable and pragmatic democracy manage an impossible task. A poorly functioning democracy would just have made Brexit happen, without second thoughts. The convulsions that we observe reveal the more or less conscious efforts of the British system to deal with the situation. Theresa May famously said that “Brexit is Brexit” but then she discovered that things are not so simple. Part of her predicament was to negotiate a reasonable deal, much more complex than what she had envisioned, but she also faced a Parliament that rejected every single proposal that she made. The inability of Parliament to come up with alternatives is often described as the ultimate proof that it is totally dysfunctional. Alternatively, it may be that it simply recognized that there is no good way of leaving the EU. Millions of citizens marched to ask for a second referendum, one where the alternatives would be well specified. The former fringe Tories who are now in power reject this natural step, but they seem overwhelmed by the resistance that they face. All of that makes a lot of sense. We do not know yet how it will all end up.

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