We always must prepare for a no-deal outcome. But we do not need to expect oneby Raphael Hogarth / June 24, 2020 / Leave a comment
When Theresa May said that she thought no deal was better than a bad deal, plenty of people complained but few truly believed her. Hers was a cautious government, desperate to maintain the confidence of MPs, most of whom were desperate to avoid the economic shock of no deal.
Boris Johnson’s government is nothing like that. Whereas May seemed allergic to risk, Johnson is a man of appetites, and a risk appetite is among them. He has a big majority so there is no chance that MPs will compel him to avoid no deal. When he evangelises about the virtues of a sovereign Global Britain, freed from EU tyranny, he sounds like a true believer, not like a closet heretic reproducing the prevailing orthodoxy for fear of excommunication.
Those are some of the arguments that it is more likely that the post-Brexit transition period ends in “no trade deal” than it was that the pre-Brexit Article 50 period ended in “no deal.” Here are three more. First, “no trade deal” now is less intrinsically frightening for everyone than “no deal” was then, because it is reversible. A withdrawal agreement can only be granted to a member state. If it leaves without one, the moment is gone, and only the opportunity for mini-deals to mitigate the damage remains. But a trade deal can be given to any state at any time. So, the EU might think, why not let the UK leave without a trade deal, do its penance with some economic pain, and return, chastened, to the negotiating table?
Second, “no deal” is not so scary in a Covid-19 world. Trading on WTO terms used to sound like the end of days: shortages of medical supplies, empty supermarket shelves, disrupted travel. Now it just sounds like late March. Third, we will be in a coronavirus-driven recession by the time the no-deal shock hits. Once the economy has lost 20 percentage points of GDP to coronavirus, ministers might wonder, what difference would it make to lose another couple to a no-trade-deal Brexit?
Combine all that with the gulf between the two sides’ positions, and you might start to lose hope for a mutually advantageous deal.
And yet, in the face of it all, the key obstacles to a deal—disagreements…