Brexit – A Retrospective

Now that a little time has passed since the remarkable vote by the denizens of the United Kingdom let’s see if we can refocus some perspective. The decision was carried to “leave the EU” (and not to “remain a member of the European Union”). The legal wigs have been busily determining that the decision of the people was absolutely not to abandon the single market – the free trade area within the EU. How, after all, could ordinary people know of the single market free trade area? Lorries pass in the middle of the night and cross borders without inconveniencing consumers.

It makes no sense for any country to turn its back on its nearest and its biggest market. The EU is by some considerable distance the UK’s biggest trading partner. It would be political and economic suicide for the UK not to be part of the single market. And make no mistake the EU wants the UK to stay in the free-trade area – it is beneficial to both parties.

If the political dynamic drives the UK to extremes (unlikely) then the UK may as well declare unilateral independence and become a pariah state. It is much more feasible to believe that there will be lots of huffing and puffing but one way or another the UK will continue to trade freely in the single market. Politicians are good at this kind of fudging so they’ll think of something. Brussels will appear to act tough in negotiations and London will publicly seek the very best deal but, ultimately, it will be cosmetic – the UK leaves the EU and stays in the single market.

This compromise is entirely workable and there are many precedents. To some extent or other Norway, Switzerland, Iceland and Liechtenstein all have access to the single market and none are EU members. The real difficulty for the negotiators is overcoming the absolutely inviolate tenet that access to the single market means the UK would have to keep its borders open to people, trade, services and capital. There are also potentially intractable issues that the UK will be forced to contribute to the EU budget and to accept EU directives while having no seat at the top table. Again we’ll leave that one to the politicians to conjure with.

MMPI is bemused at the 2-year timeframe that gets mentioned as if it were a maximum negotiation period. This is not true. The right of an EU member state to leave the EU was first introduced in the Lisbon Treaty. Article 50 of the Treaty does not set out any substantive conditions for a member to leave. It allows for negotiations on the withdrawal agreement and if no agreement is reached within two years the state’s membership ceases automatically unless the European Council and the member state decide to extend this period.

Legal negotiations are difficult – trade negotiations are torturous. The Doha round of the World Trade Organisation negotiations began in 2001. They have yet to be concluded. Just for the record Article 50 of the treaty consists of 5 short paragraphs and 256 words. It is clear that the authors did not anticipate any departures – ever. A second referendum anybody??

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