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22 September 2017

Theresa May makes a fantastic case – for staying in the European Union

The PM set out well why neither of the available flavours of Brexit are acceptable. Perhaps it would be best not to have one at all. 

By Stephen Bush

Listening to Theresa May’s big Brexit speech, I felt an unexpected emotion: sympathy. I, too, have used historical anecdotes from Wikipedia to reach the word count of a column when I don’t really have enough to say, as the Prime Minister did as she described the wondrous history of Florence. I, too, have used excessive amounts of exposition about things we already know to extend my intro, as May did as she laid out, again, why it was that the United Kingdom voted to leave.

And I, too, voted for Britain to stay in the European Union and don’t see how Brexit can possibly work out. May did a good job of setting out the two existing models for relations between the EU and a third country: Norway and Canada.

On the one hand, you have Norway, still in the single market and subject to many of the European Union’s rules, with all the benefits of the four freedoms for capital, goods, services and people. But unlike a full member of the European Union they have no ability to shape European directives – they must simply follow them.

There are two big problems with this approach for the United Kingdom, though. The first is that one of the big drivers of the referendum result was opposition to the free movement of people, and you can’t achieve that in the single market. The second, as May set out in her speech, is that going from being an active member of the European Union, setting the rules of the EU, to simply following them “could not work for the British people. I fear it would inevitably lead to friction and then a damaging re-opening of the nature of our relationship in the near future: the very last thing that anyone on either side of the Channel wants”.

This is (partially) true. The inconvenient truth for the political class in general and the Conservative Party in particular is that actually, most British voters would accept a lasting loss of sovereignty to the European Union in return for an economically pain-free Brexit that allowed an end to the free movement of people. And this deal could be reached, but it would require the following: a) a larger payment to the European Union that the United Kingdom makes currently, and b) for the City of London, the largest financial services hub in Europe, to enter the regulatory reach of the European Central Bank.

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Of course, both of these are asks that the average British voter would shrug off for greater control over the right of people to come to Britain without an economic hit. However, they aren’t acceptable to the Conservative Party, so they are absolutely nothing as far as May or any Tory PM is concerned.

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So what about a Canada-style agreement? The EU-Canada deal is the most sophisticated trade agreement yet completed between the EU and a third country. But as May noted, this trade deal would be such a significant drop-off as far as British access to European markets and vice versa that it would mean a hit to both economies.

The difficulty at this point is that while the PM is 100 per cent correct, she has declared that the United Kingdom does not want the meat or vegetarian option, and there isn’t really another flavour of Brexit on offer. (At least not with the sizeable caveat of “Brexits that are acceptable to the Conservative Party and/or democratic norms”.)

What May is betting on is a third way – that thanks to the pre-existing regulatory relationship between the European Union and the United Kingdom, a new bespoke arrangement can be made out of whole cloth.

This is possible, but once again you hit up against the problem of what the Conservative Party will accept. May’s call for a transition period is hugely sensible – but the proposal of taking just two years to negotiate a trade agreement, particularly one largely covering services, which makes up the bulk of the British economy and is one of the most difficult subjects in trade agreements, only makes sense if your overriding priority is “How long will it take before people around me start getting nervous and calling for my head?”

And thanks to the demands of domestic politics on politicians elsewhere in the European Union and bureaucratic inertia in the structures of the EU, such an arrangement may not even be possible.

Perhaps, given that we find all of the available options unpalatable and are instead seeking a bespoke option that works both for a) the British economy and b) the predilections of the Conservative Party, and there is no Venn diagram large enough to represent the gap between those two circles, might it perhaps not be easier to just stay in the EU?