Brexit, Part 1: No … It Hasn’t Gone Away

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Few national stories preoccupy the newsfeeds day in, day out — short of war or rebellion — quite like Brexit has in the U.K.

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The irony is little progress has been made on the terms of Britain’s separation from the European Union since the decision was taken in June 2016. In the intervening months, not a day has gone by without some tedious detail of the squabbles between London and Brussels, or reports of indecision and lack of leadership at No. 10 Downing Street.

So, when news that Catherine, Duchess of Cambridge, had gone into St. Mary’s hospital in London for the birth of her third child, the country (and even more so the media) went into raptures of delight. With the baby boy successfully delivered, the hot topic was then what he will be named.

But even before the news broke, the media was getting back to business as usual, reporting the so far non-event that has been Brexit for the last two years.

However tedious as it may feel, the date is fast approaching — Oct. 18-19, when the two sides have to sign off on a withdrawal treaty. The treaty will supposedly include a free trade deal, if there is to be one, the structure of the Ireland/Northern Ireland border, and matters like the respective rights of citizens in the U.K. and E.U. and financial commitments.

On some points, progress has been made.

Britain’s divorce bill is largely agreed upon, and citizens’ rights are becoming clearer. However, the nature of the Irish border and whether the U.K. will remain within the customs union appear as far from settled as ever.

And therein lies the heart of the problem for the British economy: the two thorny issues of tariffs and remaining inside the customs union.

Arguably, tariffs are less of a problem than the customs union. If importers have to pay 4-5% on the value of goods imported, it may not be the end of the world, or for Nissan or JLR to pay 4-5% on every car they export, the devaluation of sterling has more than compensated exporters for such price changes.

The real problem is the customs union.

Currently, goods flow freely across borders; there are no delays, holdups or additional paperwork.

If Britain does not stay in the customs union, that will all change.

Brexiteers still cling to the twin mantras that technology can get around such issues and that the opportunities being outside the E.U. will give the U.K. will outweigh the disadvantages putting up such barriers with the U.K.’s nearest and largest market would create.

This is naïveté, at the very least.

The benefits of free trade deals with the rest of the world have already been shown to be very limited and to misjudge the damage a return to hard borders would cause importers and exporters shows a failure to grasp the realities of modern, just-in-time international trade flows.

The nature of the Northern Ireland border is essentially the question of Britain’s border with the E.U. in microcosm. The E.U. — and it must be said, Ireland, too — are sticking firmly to their guns that an open border is only possible if Britain remains in the customs union. Or, if in the case of Ireland, if at least Northern Ireland remains in the customs union should the rest of Britain leave, effectively meaning it will leave the U.K. and a border will be erected across the Irish Sea.

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The Conservative government of Prime Minister Theresa May is being propped up by Northern Ireland’s DUP party in parliament. The DUP has said it will bring the Conservatives down if they try erecting a border between the U.K. mainland and Northern Ireland. Likewise, a minority within the Conservative party have said they will do the same if May tries to stay inside the customs union, because to do so would require the U.K. to accept and observe all E.U. laws, without having any ongoing say in their formation or amendment.

Editor’s Note: Stay tuned for Part 2, in which we’ll discuss potential alternatives, a hard exit and more. 

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