September 28, 2018
How to make sense of Boris Johnson‘s challenge to Theresa May
The Brexit battle is coming to a head as Boris Johnson has made his de facto claim for the Tory leadership - in an article for the Daily Telegraph. We are so glad to find that newspapers have found a new role in this day and age.
He does not directly announce a leadership bid, but sets out what we consider the only plausible alternative to the Chequers proposal: a complete exit from the customs union and the single market. For those interested in Brexit, his 4000-word opus is worth reading if only to dispel the myth that the eurosceptics have not thought it through. They have. He presents a lot of technical details that goes much beyond the political discourse. The downfall of his essay is dishonesty and lack of judgement in one specific, though crucially important, point. He is wrong to say that the EU would accept a renunciation of the Irish backstop. The Canada-style option he prefers is a no-deal option. Once you have a border in place, however soft it may appear, incentives might shift. But the EU cannot drop the Irish backstop ex ante because it has invested so much political capital on it.
May will no doubt challenge him on this point. She rejects Canada for that precise reasons. But Johnson makes a number of points that will strike a chord with the Tory party base. One is that Chequers was based on the belief that you can be half-in and half-out. That goes to the heart of the problem. The whole essence of Chequers was to find a solution that would have allowed a degree of technical triangulation, but the EU has concluded that it would give the UK a competitive advantage. We believe that the EU has always had a tendency to overstate the effects of the single market. But what matters is not whether this calculation is right or wrong, but whether it is widely shared - and that seems to be case. By rejecting Chequers, the EU is undermining Theresa May, who will have a tough time defending her Chequers proposal at the conference. The most powerful argument against Chequers now is not that it is intellectually weak (which we admit it is), but that is not feasible once the EU rejects it in its essence. The EU has thus unwittingly given Johnson a boost. The customs union is now the only feasible deal. But politically, it would require a change of government since only the Labour Party supports it.
As we are approaching the Brexit deadline, it is important to lay out the political processes in the UK and the EU with greater clarity. We keep noting a tendency among UK political commentators to console themselves with the observation that there is no parliamentary majority for a no-deal Brexit. But remember that the only mechanism that would have allowed the UK parliament to force the government to change the Brexit negotiations against its will was defeated. The parliament can still express its displeasure at a no-deal Brexit but it has precious few powers to force the government‘s hand. For starters, it is impossible to conduct a referendum before March 2019. So a referendum procedure would require that the EU extend the Art. 50 deadline by unanimity. May said she would never request such an extension. We would not rule out that the UK Supreme Court might empower parliament to give concrete instructions to the government on this point, but the UK parliament cannot force a unanimous decision in the European Council. A recalcitrant May could always enlist the help of a friendly EU partner - Viktor Orbán springs to mind - to veto an extension request if it was forced upon her. The reason why people like Sir Ivan Rogers, the former UK permanent representative to the EU, has been so gloomy about the no-deal scenario is that he understands those mechanisms better than those who focus only on the domestic UK debate.
Following the recent events, the Tory party conference will turn into a contest of two contrasting Brexit alternatives - between‘s Chequers or no deal and Canada or no deal. You don‘t have to be a math genius to determine the precise intersection of those two positions. After the conference, the leadership question may still be open, but we see a great danger that the Tories may be converging towards a no-deal position - a no-deal not so much as a result of a failure to agree, but as an actively sought solution to its multiple Brexit dilemmas. If you read the Telegraph‘s web page, you will find another article further down, by Jeremy Warner, a conservative economics commentator, who is not usually know for extreme views. The headline reads: "there is no point negotiating with the European Union - just ask Yanis Varoufakis.“
What puzzles us is why the EU is ditching Chequers. Maybe they know something we do not. Maybe they are betting on a second referendum. A probable explanation is that they might have miscalculated. They may be misinformed about the rather limited set of conditions under which a second referendum could take place, or how a government can be replaced. We would invite readers to enlighten us on the strategic thinking behind the rejection of Chequers. We are aware, of course, of the concerns that Chequers would give the UK a competitive advantage. But even if that were true, this calculation would need to be contrasted with the alternatives. Would the EU be more comfortable turning the UK into the world‘s largest tax and regulatory haven, which is what Johnson is seeking to do?