England reached the semi-finals of the World Cup early this week for the first time since 1990 but there was little cheer on Downing Street. Following a cabinet meeting at Chequers where British Prime Minister Theresa May won support for a “soft Brexit,” heavyweight Brexiteer David Davis resigned as Brexit secretary, followed soon after by Foreign Secretary Boris Johnson.
With Davis accusing the Prime Minister’s plan of making “supposed control by Parliament illusory rather than real” while handing control of “large swathes of our economy to the EU [without] returning control of our laws in any real sense,” these departures throw the stability of May’s government into question.
The proposal agreed on by cabinet aims to establish a “UK-EU free trade area for goods” and maintain “a common rule book for all goods including agri-food” and a “combined customs territory,” though worryingly it is silent on trade in services. The move has drawn backlash from other Brexiteers: Jacob Rees-Mogg, a Eurosceptic Tory leader, worried that the proposal would turn out to be “a punishment Brexit, that it is keeping us in the European Union in all but name.”
Many in the “Leave” camp fear that further concessions will be made to secure a Brexit deal. In his resignation letter, Boris Johnson lamented with his usual melodrama, “[The Brexit] dream is dying, suffocated by needless self-doubt.”
EU negotiators have also been skeptical. Despite the concessions offered by May, Britain’s position still contradicts the Brexit “guidelines” laid down by Brussels, especially with regards to the “indivisibility” of the single market. A senior European leader even told the Financial Times that May’s plan “is not a customs union, it is not the single market, it looks like something horribly complicated where she marries the wishes of both sides. I don’t see how it can ever survive.”
It has been two years since the fateful Referendum of 2016, yet Brexit remains as divisive as ever. May, already damaged by a disastrous General Election in 2017, struggles to hold together a cabinet divided between “hard” and “soft” Brexit. Ministerial infighting has led to incoherent policies that have weakened both the UK’s negotiating position and its international credibility. The recent departures, especially that of Johnson – who commands a large following among the Tory faithful – have only worsened political instability, leading to rumours of a leadership challenge within the Conservative Party.
Meanwhile, time for negotiation is fast running out: the 29 March 2019 Brexit deadline is less than a year away. While the announced deadline is March, the practical end date is even sooner, as the EU side needs time to approve the final deal.
While a “soft Brexit” may not be ideal, a “no-deal Brexit” would be catastrophic. British agricultural and automobile exports could face EU tariffs of up to 40% and 10% respectively. Trade in services would also be adversely affected by a loss of passporting rights, which allow British businesses to sell services Europe-wide without having to obtain a license from individual members. Significant trade disruption would be also ensue as the UK replaces the EU Customs Union and various European regulatory agencies with local equivalents.
The British public is growing weary of this long-drawn fiasco: a YouGov Poll suggests that 69% of Britons think that Brexit is going badly thus far. Another poll suggests that if the referendum were held today, Remain would win – 45% of the public now feel that it was wrong for the UK to vote to leave the EU as opposed to 42% who thought otherwise. Though most Britons oppose a second referendum and believe that the UK should proceed with Brexit, this seems more out of a belief in the democratic legitimacy of the vote than real enthusiasm for a split.
Theresa May has vowed to fight a leadership challenge should one emerge, though her victory is far from certain. While destabilising politically in the short-run, an open confrontation could end the uneasy truce within her party, weakening dissenting voices by legitimising a more consistent consensus position. If the Tories rally behind May or one of her “soft-Brexit” allies, the British government may be able to advance a more coherent and possible even conciliatory stance. This will hopefully smooth negotiations with Brussels, lending a greater degree of certainty to the withdrawal proceedings.
Should hard-line Brexiteers like Johnson or Environment Secretary Michael Gove capture the party, however, the impasse between the UK and the EU will likely worsen into the final months of talks. For this faction, “no deal is better than a bad deal”: they will prove far less willing to compromise with Brussels to prevent a “bog-roll Brexit” betraying the wishes of their supporters. Not only would global markets be in for a rough few months, the likelihood of a “no-deal” Brexit would also sharply increase.
A third General Election in five years may be called if May is ousted. With the Labour Party neck-and-neck in opinion polls with the Conservatives, it is not impossible that a Labour government could be elected to punish Tory incompetence. This is unlikely to improve the situation – while less Eurosceptic than the Conservatives, Labour is similarly divided on Brexit and free trade, campaigning without a clear Brexit policy to maintain the fractious truce between its rival Left and Centrist wings. Difficult Brexit negotiations could expose these fissures, leading to yet another infighting cabinet.
For Europe, this latest development could not have come at a worse time: already distracted by the US-China trade war, it now has to deal with upheaval in Britain as well. As the Atlantic powers – once stalwart defenders of open markets – grow ever more inward-looking, Brussels finds itself (alongside Beijing and Tokyo) one of the last bastions of global free trade, even as it struggles to contain protectionist sentiment at home. With global economic powers switching long-held stances on trade, we are witnessing a historic revision in the post-war global economic order.
Amidst this uncertainty, one thing is clear: the time of “having your cake and eating it too” is over. In a rare show of decisiveness, the Prime Minister has shown her hand. There will be no more vacillating or half-measures – ministers can either support “soft Brexit” in cabinet or oppose it publicly outside. While this assertiveness is certainly admirable, it remains to be seen if the Prime Minister has sufficient political capital and resolve to survive a seemingly imminent trial of strength.
***This Talking Trade post was written by Ng Qi Siang, Research Intern, Asian Trade Centre, Singapore***