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Is no deal with EU really better than a bad one?

by Hugo Dixon | 19.01.2017

A deal to quit the EU could conceivably be so ghastly that we should walk away, as Theresa May threatened. But doing so would be awful – for both sides.

The prime minister said in her big Brexit speech this week “that no deal for Britain is better than a bad deal for Britain”. To some extent, this is the sort of sabre-rattling anybody engages in at the start of any negotiations. Unless the other side believes one might walk, it can be tough to get a good deal.

But the scenario that talks could break down cannot be dismissed as mere rhetoric. John Kerr, the former British diplomat who crafted the infamous Article 50 clause, said yesterday he thought there may be a one in three chance of no deal – adding that this would result in “serious economic disruption and a degree of legal chaos”.

One reason to suppose we may end up with no deal is that the talks could get acrimonious, especially if we remind our partners about World War Two and trade threats. Another is that the EU is currently taking the view that we should conclude our divorce – potentially involving us paying it €60 billion – before discussing a trade deal. It will be hard for May to agree to anything like that demand unless she can also tell the hardliners in the Tory party the broad terms of a decent new trade arrangement.

The prime minister is talking up our prospects if we leave the EU without any deal. “We would still be able to trade with Europe. We would be free to strike trade deals across the world,” she said.

Hopefully, May doesn’t believe her own rhetoric. If we quit the EU without a basic divorce deal, the bloc will almost certainly pursue us in court for what it thinks we owe. It’s hard, too, to see it opening negotiations on a future trade agreement until this is cleared up.

We would then have to fall back on World Trade Organisation (WTO) terms. This is vastly inferior to our current arrangements. Not only would many of our manufacturing industries have to pay tariffs on exports to the EU – 10% in the case of car makers. Our services industries would face a raft of regulatory and legal barriers to doing business there.

It might not be simple to slot into the WTO’s arrangements either, as we would need the approval of all the other 160-odd members for the tariffs we plan to impose as well as any subsidies for industries such as farming. Given that each country will have a veto – which they could potentially exercise for reasons nothing to do with trade – we may run into problems even if we take a fairly liberal approach at the WTO.

Finally, while we would be free to strike deals with other countries, clinching them could take years and won’t compensate for loss of business to a market that is responsible for nearly half our trade. What’s more, other countries such as Trump’s America will see our desperation and drive a hard bargain.

Crashing out of the EU without a deal is not something that we or our European partners should contemplate lightly. We should do our damndest to avoid it.

Tags: , , Categories: Post-Brexit

6 Responses to “Is no deal with EU really better than a bad one?”

  • Is this the same May who assured us during the referendum campaign that it was definitely in the UK’s interest to remain a member of the EU?

    • I agree with Neil. The political demagogy without any usable or plausible ideology behind May’s word’s is astounding. Brexit will send UK’s educated middle classes away, UK citizens’ human and workers’ rights will be seriously diminished and I am happy to analyse those with the reasons why they represent such a loss. Imagine also UK without its European roots and identity and even one single day without all the Europeans living cuttently in the country. while Brits applying for the same work permits May will demand from EU citizens and the endless personal, financial, cultural and social limitations that hard Brexit will cause. Add the fate of our children, our low productivity even now due to the endless divisions and fragmention in our society, the healthcare and pension deficit er already face. Who exactly gave mandate to May to do that.? Certainly, much less of the 52 pc Brexit voters , many of whom did not even know what they were voting for. If we could protest against Trump election, why cannot do much better with our disagreement with hard Brexit? Something else should be done now, as next week we will hear the outcome from the Supreme Court judgement on the government appeal to include the Parliament in the drcision-making on Brexit, but this is unlikely to stop MPs protecting their jobs and personal interests to vote for Brexit in March. This is not a demovratic process any more, is it? And what kind of reconciliation will Ms May offer to 48 million voters and their children? Can we have a separate country altogether? This is how absurd hard Brexit is.

  • James it is entirely reasonable to say that Mrs May and others in her Cabinet mislead the electorate and that many feel dismayed by such disingenuous behaviour.