The prime minister is right—no deal is better than a bad dealby Peter Lilley / April 28, 2017 / Leave a comment
The prime minister has called this general election to strengthen her hand in the Brexit negotiations. How will it do so?
The most crucial card in Theresa May’s hand is her statement that “no deal is better than a bad deal.” Any negotiator knows that you can only obtain a good outcome if you are willing to walk away from a bad one. However, so long as the Conservatives have a slender majority, the rest of the European Union may calculate that if it pitches the price for leaving so high that she does walk away, parliament will send her back to make concessions.
However, if she and her party are re-elected with a healthy majority on a manifesto backing her negotiating position, neither the Commons nor the Lords could undermine her. So, the EU27 will be less likely to overplay its hand.
That does not guarantee that they will agree to a deal. Undoubtedly the best outcome for both Britain and the EU27 would be a free trade deal continuing zero tariffs and the minimum of new non-tariff barriers. It’s in their interest—the rest of the EU member states sell about £60bn worth more goods and services to us than we sell to them.
Yet such a deal is far less likely than most people assume. This is not because it would be difficult to negotiate in time. Moving from zero tariffs to zero tariffs is infinitely easier than negotiating their removal. And we don’t have to negotiate convergence of rules and regulations as they will start off identical—we just need a procedure (required in similar agreements) for dealing with future divergences in rules.
But for the EU, politics trumps economics. It may be more…