Analysts call Brexit the great divorce, a slow-motion car crash, a political crisis, a constitutional crisis, a wrecking ball, a mess and a delusion. Brexit is all of these and more. The uncertainty has already caused substantial economic displacement and the hurt continues. As Britain’s parliament meets this week it’s natural to ask the question, “What in the world is going on?”
Brexit passed in 2016 with support from 51.9% of voters. In the years since, division in the House of Parliament has grown wider than the English Channel. Deadlines have been missed and multiple Brexit votes have failed. Prime Minister Theresa May has been called a “dead woman walking” because of her policy and leadership failures. Her administration lacks any significant domestic policy achievements, and she has lost control over much of her cabinet and party. The Economist magazine wrote this week, “Mrs. May was dealt a bad hand in Brexit; she has played it extraordinarily badly.”
I was in London last week when news spread that May would resign after the passage of a Brexit vote. She said, “I am prepared to leave this job earlier than I intended in order to do what is right for our country and our party." This declaration prompted a political commentator to opine that May is “too weak to resign.” The divisions within parliament, her cabinet and the conservative party are so severe that the system can’t handle a resignation right now. That’s a sobering thought.
The European Union, or EU, has given the United Kingdom until April 12 to agree to an exit strategy or there will be no deal. The U.K. faces four options: no deal (also called “hard Brexit”), a customs union (also called “soft Brexit”), a single market (also called the Norway option) or a confirmatory referendum. I favor the last option.
The no deal option was unthinkable just a few months ago, but increasingly the hardline Brexiteers have expressed a willingness to leave without any concessions from the EU. The U.K. would revert to trading with the EU under the terms of the World Trade Organization. There would be no preferential access to the EU market and the U.K. would have complete freedom in setting up its own trade policies.
Under the customs union approach, or soft Brexit, the U.K. would adopt the EU’s common external tariff on goods coming from outside the EU, but benefit from tariff-free trade within the EU. The U.K. would not have the freedom to negotiate their own trade deals outside of the EU and be required to comply with a host of product regulations.
A third approach is a single market approach, also called common market 2.0. This option mimics the relationship Norway has with the EU. The U.K. would leave the customs’ union, but would stay in the EU single market. To do this the U.K. would have to continue to abide by the EU’s four freedoms, including freedom of movement. The U.K. could pursue its own independent trade policies, but would lose representation in the European Parliament that makes the rules.
The final approach, and the one I like best, would be a confirmatory referendum. Parliament would agree to a compromise withdrawal agreement from the EU, but would seek a public vote to confirm. The vote would allow the public to vote to support the House of Parliament deal, support no deal, or stay in the EU. Another option would be a straight up-down vote on whether to leave.
One of the first principles of economics is that people face tradeoffs. You can’t leave or stay within the EU without paying a price. You can restrict immigration from Europe without leaving the single market. You can’t create your own regulatory rules without erecting barriers to trade.
Some public policy deliberations require leaders to push the reset button. The time has come for the U.K. to do just that, so the Brexit discussions don’t last longer than World War II. It’s time for the U.K. to seek another vote of the people.