How Brexit can go wrong
We cannot recall any subject that has given rise to so much noise as Brexit. Many people especially in the media are still treating this as a campaigning issue, which they will continue to do until Brexit actually happens in one year's time. There is also noise inside the Conservative Party, where a substantial number of MPs, eurosceptics mostly, want Theresa May replaced by a more robust leader.
Nick Timothy's article on this in the Daily Telegraph is worth reading. Timothy was May's main political adviser until the last elections, so he is biased in her favour. But we fully share his analysis that a change of leadership would be a disaster for the Tory party and may end up frustrating Brexit, the very opposite of the goal sought by those who want to replace May. A new prime minister would face the exact same reality of having to advance the Brexit negotiations while running a minority government. He notes that the Tories have come a long way since the referendum. The former Remain supporters now accept Brexit. And some of the former Leave supporters who wanted to leave without a deal now accept the necessity of compromise. May has taken the middle road of a Brexit outside the customs union or the single market but with future regulatory coordination - the only option which the Tories can unite around. That approach to policy will continue.
But Timothy also makes the point that this procedure is not an auto-pilot. The government needs to deliver on its domestic agenda. And May needs to explain her vision of the future relationship, and how that benefits the UK. The time for her to leave will come. But it is not now.
The FT, meanwhile, reports that senior UK officials described as Brexit advisers were considering the possibility of a customs-union-only deal, which would obviate the need to set up customs procedures and solve the Northern Ireland problem. But the article says this is at the level of discussion only. While we have no doubt that the customs union is supported in large sections of the UK civil service, the key issue is how this would play politically for May. It would be a major climbdown. And it would frustrate the UK's ability to strike third-country trade agreements. More importantly, it would be an inferior option to joining the EEA.
And, finally, we noted a comment by Ambrose Evans-Pritchard who was clearly upset by yesterday's FT article that Brussels wants to impose regulatory and fiscal control over the UK after Brexit. He now advocates an Article 50 agreement with a view to WTO trading rules - which would not require the UK to sign any trade agreement, or make any policy concession. We, too, think that the EU's position is incompatible with a post-Brexit trade agreement. So, the question is whether the EU will back down on this request, or whether the trade discussions will really move in this direction. This is going to be the key issue on which the EU itself will be divided. We know that the French, including Michel Barnier, are obsessed with anti-dumping of all kinds - on labour-market standards, and on taxes. The EU will not easily drop these demands. But there is no way the UK will sign a vanilla Canada-style trade agreement with the EU with these added constraints in place. This means that the Brexit choice is becoming icnreasingly binary as we proceed.
It is important to understand that this is not about the Article 50 agreement, the contours of which are basically agreed. This is about the post-transition trading agreement. We don't think that this problem will be resolved by the time the Article 50 is agreed, so that lawmakers in London and Brussels will have to accept the withdrawal deal with uncertainty about the future trading relationship. But neither side has an interest in a failure of the Article 50 agreement itself.