How Will Brexit Happen

Introduction The people of the UK voted to leave the EU in 2016. Article 50 was submitted in March 2017, and discussions since then have focused mainly on how England would trade with the EU once it was formally no longer a member of the EU.

Much of the hand-wringing done since then has been over how Britain would manage the separation: would there be a “soft deal,” a “hard deal,” no deal, a delayed deal? The questions continue to be asked, so it is important to understand what is at stake in each case. This paper will examine the ramifications of the various possible outcomes of what has come to be known as Brexit.

Possibilities Understanding what is at stake first requires an understanding of where the UK currently sits with regard to trade arrangements. Currently, the UK’s trade relationship with the EU is not supportive of protectionist trade policy.

The recent “crisis of legitimization,” however, has led to an increased desire among leaders throughout the world for more protectionist trade stances.[footnoteRef:2] By being part of the EU, England has been able to have direct access to one-third of the world’s largest and most valuable markets and has enjoyed “preferential market access to over 50 countries outside the EU—from South Africa to Colombia to South Korea.”[footnoteRef:3] England’s trade arrangement is often compared to Switzerland’s, but in the EU its trade access is substantially more than that of Switzerland or that of Canada.

As a member of the EU, the UK enjoys the benefit of the EU negotiating tariffs for states that are members of the Union. Compared to Australia, which must negotiate tariffs with a country like South Korea on its own, the EU states benefit from the EU’s ability to negotiate on behalf of them all in a much faster manner.

For that reason, England’s trade with South Korea has, for example, grown by 60% with 6.3 billion pounds worth of exports following the trade deal that the EU negotiated on England’s (and other EU countries’) behalf. The same approach has been taken with Canada, and, in short, if the UK were to remain in the EU, all but 10% of its trade would be settled by the EU.[footnoteRef:4] [2: P.

Bobbit, The Shield of Achilles: War, Peace, and the Course of History (NY: Anchor Books, 2011), 213.] [3: CBI, “10 facts about EU trade deals” CBI, 2016. http://www.cbi.org.uk/business-issues/uk-and-the-european-union/eu-business-facts/10-facts-about-eu-trade-deals-pdf/] [4: CBI, “10 facts about EU trade deals” CBI, 2016. http://www.cbi.org.uk/business-issues/uk-and-the-european-union/eu-business-facts/10-facts-about-eu-trade-deals-pdf/] Soft Deal The benefits of a soft deal are that it would permit the UK to remain close to the EU and maintain access to the markets.

This would allow England to maintain supply chains and offset the risk of any potential harm to trade. The problem is that when the UK voted to leave the EU it did so with the intention being to be free from EU stipulations, including the stipulation that England have essentially open borders for migrants traveling throughout the EU.

In order for a soft Brexit to happen, the UK would have to abide by the EU’s rules on giving access to people moving from one EU state to the next. The UK would have to basically renege on its Brexit referendum—which is why a soft deal is viewed by pro-Brexiters as a total capitulation to EU pressure to remain inside the EU: in essence it would be.

Hard Brexit Ramifications A hard Brexit would mean a total clean break from the EU: England would no longer have access to the EU’s single market, where it could trade without problems, tariffs or restrictions. There would likely be some kind of trade arrangement with a temporary or transitional grace period put into place to allow for trade discussions to continue. The point of the hard Brexit is that it would permit England to have the opportunity to set up its own trade deals.

This is not a good idea for others as they recognize that trade deals take time—which is why the EU arrangement was so appealing for many in the first place.

A hard Brexit would likely lead to a surge in prices of imports, which would weigh heavily on the British economy at a time when the global economy is already teetering on the verge of recession, as key indicators begin flashing from across Asia to the West.[footnoteRef:5] However, a hard Brexit would at least leave open room for negotiations. A no deal situation would not even allow that. [5: Pooi, Ah-Hin, Huei-Ching Soo, and Wei-Yeing Pan.

"Prediction of the start of next recession using latent factors." In AIP Conference Proceedings, vol. 1782, no. 1, p. 050013. AIP Publishing, 2016.] No Deal The deadline for coming to some kind of arrangement with the EU is fast approaching and if the deadline is not pushed back, Britain could theoretically leave the EU with no deal on trade in place and no plans in place to conduct talks or hammer out any differences.

The no deal outcome would be even more disastrous for the British economy with the Bank of England forecasting a precipitous 8% drop in economic activity and initiate the worst recession in the West since the end of WWII.[footnoteRef:6] No deal forecasts suggest the pound would fall by 25% against USD and that “house prices would fall 30%, while inflation would climb above 6%.”[footnoteRef:7] Interest rates would likely climb by a substantial percentage making it difficult for individuals to use credit and unemployment would likely surge as business growth would falter.

A domino-like effect of bad economic data would trigger a veritable collapse and halt in British production and lead to a stagnation in the English economy. This is the general fear of a no deal exit. [6: Will Martin, “UK economy could slump,” Business Insider, 2018. https://www.businessinsider.com/bank-of-england-uk-economy-drop-8-recession-no-deal-brexit-2018-11] [7: Will Martin, “UK economy could slump,” Business Insider, 2018.

https://www.businessinsider.com/bank-of-england-uk-economy-drop-8-recession-no-deal-brexit-2018-11] Irish Backstop The Irish backstop is a deal that the UK and the EU signed in 2017 regarding the border between Northern Ireland and the Republic of Ireland. The idea is that there would be no “hard” or strictly defined border between Northern Ireland (which belongs to the UK) and the Republic of Ireland (which is a member of the EU).

Were the UK to leave the EU, the lack of a defined border between the Irelands would create the potential for a legal hang-up, which would require the UK to respect the laws of the EU. Thus, the so-called Irish backstop is a kind of legal “ace up the sleeve” that would restrict a hard Brexit from occurring—as the UK would still be tethered to the EU via the “soft” Irish border.

The Irish backstop agreement guarantees that the UK will enjoy the benefits of the EU customs union from the end of 2020 to whenever a new trade deal should be signed—which could potentially be never.

Thus, Brexit would continue to be a thing that is only spoken about in politics, with much hand-wringing taking place over how to proceed in theory, and no actual Brexit would ever take place or need to take place as the Irish backstop would be there to ensure that business as usual is able to be transacted. It would aggravate pro-Brexiteers but without adequate representation in the government, their agitation would not amount to any new changes or developments.

However, as Murphy points out, the Irish backstop is dividing Ireland and leading to the resurrection of more of the old feelings that existed during the day of the Troubles, which are not so far behind that either Ireland or England can afford to forget them.[footnoteRef:8] That fact has led much of Parliament to reject May’s deal because they oppose her backstop plan. [8: Murphy, Mary C. "The backstop is dividing Northern Ireland.

We urgently need new talks." LSE Brexit (2018).] Delayed Deal This is the most likely scenario and would see to the extension of Article 50 beyond the March expiration date. A delay would give more time to negotiate a deal, though there is unlikely to be a deal that appeases both the EU and the UK.

A delayed deal would provide for another year or two of negotiation—or at least the semblance of negotiation, and would likely give the British pound the opportunity of regaining value lost when fears of a no deal Brexit were high.

A delayed deal, on the other hand, may lead to even more stalemate, which could be doubly problematic for England down the line, as it would essentially lay waste to all good-faith negotiations and leave England’s leaders in a position of facing the wrath of voters versus the wrath of EU leaders and markets.

Why Britain Could Not Choose to Go the EEA Route (and Why Norway Would Block Such a Deal Anyway) Britain could not choose to seek a deal that makes the UK part of the EEA countries (Norway, Iceland, Liechtenstein) as that would throw off the balance in the EEA. Norway would not want a big power like Britain influencing Norway’s position and relation to the EU.

Besides, the UK would still have to accept EU policies on the free movement of persons among member states by joining the EEA. EU law would once again apply to the UK, stripping England of the sovereignty that the British voters voted to retake from the EU with Brexit. Jumping into the EEA would be like going from the pot into the fire. The EEA extends the EU market to the member states of the EFTA (Iceland, Norway, Liechtenstein and Switzerland).

By extending the market, there are common rules that the states agree to abide by. The free movement of people is one of the rules, which makes this an unattractive solution for pro-Brexiteers. However, even if the UK were to manage to get the rules changed so that it can be part.