The pressing question now in the what-happens-next game of Brexit watching is whether a transition extension will be agreed in June. In April I thought the prospects of an extension were about 50:50, now I think they have fallen to around 30:70. The table summarises my take on the current position and the various possible outcomes. Broadly, I still think some kind of deal by the end of the year is more likely than no-deal, indeed I argue in this blog that the government do actually want a deal rather than no-deal. But the situation remains difficult to read with any degree of certainty.
The continuing bellicose posturing of the government towards the EU in the negotiations does not signal much hope of an extension. But this in itself is not the principal reason why I’m less optimistic.
I sense that fewer commentators now think an extension is likely compared to recent weeks. Peter Foster of the FT, for example, has said that it is now all ‘about the Autumn’, ie the run up to the 31st December deadline, whereas on March 24th he said ‘the UK will have no choice but to seek an extension’ by the end of June. It is true that public opinion continues to favour an extension (despite the right wing newspapers doing all they can to discredit such an idea) and a few pro-Brexit commentators are sympathetic, but I’m seeing less hope among those who have high level contacts behind the scenes. These people do not necessarily have more foresight than the rest of us (some of them, such as Robert Peston of ITV, last year wrongly thought a no-deal EU withdrawal was the most likely outcome), but they can get an advance sense of the way the wind is blowing.
There is also the unclear double deadline (30th June for the extension decision and 31st December for the end of the transition period). This is especially problematic given the government’s determined cliff-edge strategy. Although some say that no-deal is much more likely after 30th June if there is no extension, it is not a severe cliff-edge as there is still time afterwards.
An extension after 30th June would be much more difficult, but there are ways in which it could be achieved. A Treaty change is possible if all member states support it, though that would be difficult in the current circumstances as the EU has far bigger issues on its plate. Alternatively a good dose of creativity could enable a de facto extension. A possibility I’ve outlined in a previous blog is an interim outline agreement, with some temporary bridging arrangements and an agreed programme for further negotiation. This could be sold by Johnson as ‘getting Brexit done’ with the further negotiations presented simply as technical issues of implementation.
While I remain doubtful about how much leading Conservatives want or are willing to accept no-deal, it is fully clear that the government are determined to play their game of brinkmanship. They want to go up to the last minute to show they are fully serious, and then, in their simplistic worldview, they hope the other side will back down. In a tweet David Davis, former Brexit secretary and hard Brexiter summed up this macho mindset: ‘it is likely the EU will change stance … if we stick to a firm line’. For this they require a single simple deadline – agree now or all is lost. The 30th June deadline is not really a cliff-edge.
The government do want a deal
It is now frequently observed that the government and Conservative party are ultras who want no-deal. At heart they are ‘disaster capitalists’ looking for opportunities for a small number of wealthy people to make even more money out of chaos. The current Chancellor of the Exchequer, Rishi Sunak, is an example of someone who made millions from the financial crisis of 2008-09. Despite his veneer of competence (in short supply at the top of this government), and his willingness to use the state in a big way to get us through the current crisis, he massively benefited from the financial crisis that caused huge social harm. Like many I find this behaviour despicable – these people deserve to rot.
Some in government may well be disaster capitalists who want no-deal. But the government have expended a lot of energy on criticism of the EU in the negotiations. Why do this if they want no-deal? Why not just walk away?
They have for example strongly accused the EU of being ‘ideological’ – pursuing the European integrationist project over and above the economic interests of their states and economies. They have also invoked the ‘sovereign equal’ argument (see blog by Prof Chris Grey). Britain, like Canada and Japan, is a sovereign state and therefore equal. If Canada and Japan have a comprehensive trade deal with the EU (without any stipulations such as the Level Playing Field rules) then why can’t Britain? This, however, is a hugely flawed argument as it implies that economic and political powers and geography have no impact on trade negotiations. It is as if, as Grey argued, trade negotiations with a country like Chad would be conducted in the same way and with the same expectations as negotiations with the US.
Brexiters also still hold to the belief that the German car makers and other continental economic interests like the French cheese and wine producers will ride to the rescue. They will force EU leaders to shift from their ‘ideological’ stance on the European project to support for the major industries who want to maintain their export markets to the UK. Of course, for their own ideological reasons they fail to understand or to openly accept that the European project itself has supported continental economic and industrial interests. Again why do Brexit supporters get so worked up about this if they want no-deal?
Another important factor is that last week the government quietly backed down from its denial of the need for Irish Sea border checks that the Withdrawal Agreement – an international treaty – requires. This suggests an attempt to lower the temperature in their relations with the EU. Lying about the need for these checks did a job in the December election for Johnson, but now threatening to renege on the Treaty is not good for reaching an future relationship agreement. Again this shows that they do in fact want an agreement.
Perhaps the energy expended on criticism of the EU is a blame shifting strategy for domestic political consumption. When the damage of a no-deal Brexit hits the UK it can be blamed on the EU. But as the economic slump from the coronavirus is exacerbated by a no-deal Brexit it would take an enormously confident government to blame others and believe it can ride through unscathed. It would need to be certain about its own political messaging, the continuing support of the mainstream media, and the lack of an effective opposition.
And we have to ask what do they want from a no-deal Brexit? To trade on WTO terms as the world moves away from WTO globalisation? Or even to become a colony of the US? (I’m not entirely unserious about the latter – many of the ‘UK independence’ obsessives really want to be subordinate to the US, for reasons of Anglo-Saxon supremacism, and being a de facto colony is more realistic than becoming the 51st state).
Prominent Brexiter Jacob Rees Mogg believes it may take up to 50 years for the economic advantages of Brexit to become evident. Even if his free market simple-ism allied to British exceptionalism has any credibility, the Conservatives will have to rely on political messaging, rally-around-the-flag nationalism, and the vague long term hope of sunny uplands in order to win the next one or two elections.
To conclude, all this doesn’t mean I think that the risk of no-deal at the end of this year is very low. No-deal is clearly a central element of the government’s strategy. This is partly the obvious bluff and brinkmanship strategy to which all Conservative MPs have signed up. Beyond this, some Conservative MPs and ministers seem willing to actually go through with no-deal. For many of them though, I argue it is not because they actually believe in the sunny uplands of a no-deal Brexit, but because they believe the EU will ‘come to its senses’ after no-deal and come back to the negotiating table having dropped their ‘ideological’ demands. But in the context of current huge economic uncertainty, there’s little evidence that the EU will really care about the relatively small economic hit they would suffer from a no-deal Brexit.