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What’s the deal with no deal Brexit

A disorderly Brexit is likely.

No deal was better than a bad deal, but unlikely, until the summer of 2018.

In August, no deal became an “uncomfortably high possibility,” to quote the Governor of the Bank of England Mark Carney. Then it became a 60-40% likelihood, to quote the UK’s Trade Secretary Liam Fox.  As we head towards the Conservative Party Conference in Birmingham (September 30-October 3rd), this has become a desirable scenario.

This week the opposition offered an alternative.

Labour offers an alternative

For the leader of the opposition, Jeremy Corbyn, a disorderly Brexit will be “a disaster.” To emphasise the point, he made his way to Brussels for consultations with the European Commissions’ chief Brexit negotiator Michel Barnier.

Corbyn comes from a Labour Party conference in Liverpool. During his leadership speech on Wednesday, Corbyn asked Theresa May to deliver a deal that entails a Customs union, never mind European environmental and labour rights standards.

Hours earlier, Brexit shadow Secretary Sir Keir Starmer also demanded access to the Single Market.

Unless such a deal is delivered, the Labour Party had made clear that a second referendum is a better than “no deal.” The Labour Party will vote down any deal that delivers less, demanding snap elections or a second referendum.

In a second vote, the option of Remain is on the table.

May’s position untenable

The British prime minister wants no Customs Union, no snap election, and certainly no referendum. She has made a deal in Salzburg and is sticking to her guns.

May does not want a Customs “union,” because that would mean no trade deals with the rest of the world. She wants a “combined” customs territory, in which the UK would adhere to EU standards, pay the divorce bill and go out to sign trade deals with the rest of the world.

In this scheme, the UK’s “concession” will be to retain EU regulation on chemicals, automotive, pharmaceuticals, biocides, which May describes as a “common rulebook.”

The bottom line is that the UK will have effective access to the Single Market with no contributions to the EU budget, no European Court of Justice jurisdiction, and no freedom of movement.

That “plan” is dead in the water. In the words of French prime minister Bruno Le Maire, “any decision that gives European citizens the impression that you can leave the EU and keep all the advantages would be suicidal.”

No deal and hope for the best

Vehemently opposing the idea of a common rulebook with the EU, Conservative backbenchers prefer a no deal scenario. Brexit hardliners push for a deregulation drive that will allow the UK to sign a series of trade deals around the world, beginning with the US.

This tribe of Conservatives wants a Canada Plus deal. The Commission has said, time and again, that what is on offer is nothing more than a Canada Dry Free Trade Agreement, which will not ensure frictionless cross-border movement.

Ireland will be the challenge.

Theresa May has signalled she will not agree to a deal that places Ireland in a special customs status, distinct from the UK. That means she is taking back her December 2017 “backstop” commitment. It also means relations with the EU could get combative.

Still, every day lost in negotiating May’s untenable position means the UK is drawing closer to “no deal.” For a significant part of the Conservative Party that is the point, as no deal secures a neat and clean break from the EU, with no transition period. The basic idea is ‘leave now and hope for the best.’

Bracing for no deal

The clock is ticking, and everyone is bracing for a no-deal crush.

Even if there was a deal, Theresa May would find it difficult to pass it through parliament.

Brussels is preparing, quite publicly. On Wednesday, EU 27 Diplomats were briefed on preparations for a disorderly Brexit. Part of the problem is that a deal may not be concluded in time to be ratified.

British industry is preparing, less publicly.

Car manufacturers are redrawing production schedules, preparing their IT systems for new red tape, and are stockpiling parts in preparation for a crush.

At stake, there are 850,000 jobs working in car manufacturing. From an EU perspective, at stake is the second biggest auto market in Europe that imports 85% of its cars.

Side deals

Because rushing out is plausible, diplomats are now focusing their energies on “no deal” deals that have to be made.

No deal means no transition period. And that will require crisis management. Air traffic controls, airport customs, Irish border controls, commuting in Gibraltar, perishable food transport, insulin and other types of medication are only some in a long list of concerns.

Brussels and London are preparing for those “side deals.” However, there is no denying that “no deal” means crisis.

First Published by New Europe: