Broadly there are three possible outcomes – a deal, no deal or extended transition. There are many hundreds of possible variations of a deal. The table below gives an outline of three possibilities – two are fairly substantial deals covering a wide range of trade and non trade issues. While both parties are likely to give way on some issues, one deal may involve the UK caving in significantly and accepting EU demands for Level Playing Field regulations. In a second deal the EU caves in and accepts the UK government’s demand for regulatory autonomy.
A third possible deal is very limited and would involve the introduction of tariffs on some goods and agreement on little more than the most essential non-trade matters.
I give a indicative probability of each outcome – a quantitative indication of a qualitative judgement. It is of course impossible for anyone to give a true quantitative probability – there are too many unknowns.
I’d say that the consensus of opinion among commentators is that the chances of no deal are higher than I say (3/10) and the chances of a deal (5/10) in which the UK accepts the EU’s level playing field demands are lower.
Many commentators now think that Johnson is fully serious about no deal unless the EU backs down in a big way on the Level Playing Field regulations (the EU shows no signs of a big climb down – unless the famous German car makers come to the rescue!). They think Johnson is serious because he has fully signed up to the Dominic Cummings’s ‘disruption’ agenda. Also they think Johnson couldn’t give a damn, he won the election big, he can get away with anything.
Perhaps. But I’d argue that it’s entirely plausible that it’s an elaborate bluff. Textbook hard-headed negotiation strategy is that a bluff has to appear entirely serious – not just in words but actions. You have to do all you can to make it appear you’d walk away, even if at the last minute you wouldn’t. This is surely exactly what the government is doing, though of course we don’t know for certain what they’ll do at the last minute.
As evidence for this I’d point to last year. Many commentators – for example, ITV’s Robert Peston (and the many loudmouths on Twitter full of their own certainties) repeatedly said no deal was the most likely outcome. Sure, the circumstances are different now and I certainly think no deal is more likely this year than last. But there would still be huge consequences of no deal that could massively affect many natural supporters of the Conservative Party (as well as the recent Conservative converts in the Midlands and the North). There is great concern, for example, among many farmers and industry groups about the consequences of no deal.
Perhaps Johnson has lost it completely and he doesn’t care. Perhaps he is not going to respond to any of the affected groups. Perhaps he thinks the government has to be strong and hold out against the opposition. They have another 4 years with a big parliamentary majority after all. They might see it as their 1980-81 (or perhaps less so 2010-11) when, in the Conservative party narrative, things were very difficult, but a strong leader held her nerve and 2-3 years later convincingly won the election. But it could be 1992 when the economy and government credibility soon began to collapse.
Notes on the possible outcomes
A fairly substantial trade and non-trade deal
The trade deal will include zero tariffs and quotas for goods. There will be some new non-tariff barriers (regulations), but a moderate degree of access to the single market. There’ll be a cooperation agreement on non-trade issues such as security, data, defence, policing, agencies/programmes eg – Chemicals, Euratom, Europol, medicines, air safety, research, innovation, education.Many areas of single market regulation and non-trade issues may not be settled (lack of time). Some kind of temporary bridging arrangement set up to allow for future negotiation. There could be some limited disruption on January 1st 2021.
The Level Playing Field demands include state aid to industry, workers’ rights, social and environmental regulations.
Thin trade and non-trade deal
This would be a little more substantial than WTO trade rules, but there would be new tariffs on goods. There would be some limited regulatory cooperation to allow market access, but significant new non-tariff barriers for goods and services. The UK government would get regulatory and policy autonomy.Little would be agreed on non-trade areas. Perhaps just some basic issues of security cooperation and on transport to keep things moving. Possibly some bridging arrangements and agreement on future negotiations, but likely to be significant disruption on 1st January 2021.
No deal
The negotiations break down. This could possibly happen before 1st July – the PM has already threatened to ‘walk away’ (though negotiations could start again before the end of the year). There could nevertheless be some mini deals, eg on transport and security, to keep basic things moving. There would almost certainly be big disruption in 2021.Transition extension agreed before 1st July 2020
The Withdrawal Agreement (Article 132, p197) allows for an extension of the transition period of ‘up to 1 or 2 years’ to be agreed before 1st July 2020.Transition extension agreed after 1st July 2020
If no extension is agreed before the deadline, some way of extending the negotiations might be found later in the year. Negotiators can be creative and flexible when deadlines loom.
Brexit Bad 