THE destination was decided in June, by simple majority: Britain is leaving the European Union. The journey, however, will be complex and perilous, beset by endless opportunities for missteps from the comical to the disastrous.
With 64 million Britons in the back seat, perhaps that is why Prime Minister Theresa May has avoided talking about the road ahead. At the Conservative Party conference this past week, however, she could delay no longer. In a speech that thrilled party activists, she declared that she will invoke Article 50 of the EU treaty by the end of March, triggering a two-year countdown that should see Britain leave the union in early 2019. She also hinted that she would be prepared to steer Britain toward a harder sort of Brexit, involving a wide separation of labor, product and financial markets.
She is at risk of putting her party before her country—with grave consequences. Brexit will determine Britain’s fortunes in the decades to come. If it is to be done at all, it must be done right.
May faces an inevitable tension. Domestically, if she is not to be overwhelmed by the politics of Europe, as so many Tory prime ministers have been before her, she needs to convince those who voted to leave that their victory will be honored. That is why her speech conveyed urgency and why, when it came to immigration, sovereignty and the jurisdiction of the European court in Luxembourg, she took a hard line.
In Europe, however, this domestic rhetoric will impede May’s task of negotiating the best possible form of Brexit. To maximize her bargaining power, May needs time. To get the best deal, she needs to be flexible on immigration.
The centerpiece of the deal ought to be to secure maximal access to Europe’s single market. Brexiteers say that, once outside, Britain eventually would negotiate low or no tariffs on its trade with the EU. Even if it did, though, tariffs are less than half the problem. Without harmonized regulations, British firms will discover that their products do not meet European requirements and vice versa. It also is unlikely that a trade deal between Britain and the EU would cover services, including the financial services that are among Britain’s biggest exports. A study by the Treasury before the referendum estimated that the hit to GDP within two years of Brexit would be nearly twice as large if Britain left the single market than if it remained a member.
May seems to want to carve out a special deal with the EU, whereby Britain would limit immigration and determine product standards—on, say, food labeling—while still operating fully in the single market. Perhaps the negotiations will show that this is possible. However, the signs are that she is overestimating the EU’s willingness to give ground. Each country has a veto over Britain’s status. On almost every issue, from immigration to financial services, at least one of them will be reluctant to surrender its advantages.
If that means that May must give ground on immigration, remember that such “concessions” actually benefit Britain. The supply of workers and students from the EU has helped Britain grow faster than any other member state in recent years. To avoid suffocating industry, ministers already have indicated that they may let in financial-services employees and seasonal agricultural workers. There are sure to be more exceptions as bottlenecks emerge.
The second ingredient of a good Brexit is a sensible transition to the new regime, especially if Britain is about to walk away from the single market. The bureaucracy and cost of a sudden imposition of tariffs and non-tariff barriers would lead to a brutal dislocation. Separation from the EU will involve divvying up EU-owned assets, pensions and much else. Everything from fishing rights to aircraft-landing slots are agreed on at an EU level, so these rules must be redrafted and re-regulated.
Amid the world’s most complex divorce, Britain’s diplomats have another vital task. Through its membership in the EU, Britain is a member of the World Trade Organization and party to free-trade deals with 53 other countries. When it leaves, it will lose all that. Britain therefore must urgently prepare to rejoin the WTO as an individual country—which, again, will require the consent of every other member.
A Brexit of some sort looms and May will determine its course. If Britain is not to suffer a crash, she must ignore the back-seat drivers and fix her eyes firmly on the road ahead.
© 2016 Economist Newspaper Ltd., London (October 8).
All rights reserved. Reprinted with permission.
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