May’s Brexit Gamble Might Actually Work

(Bloomberg Opinion) -- Theresa May's plan for Britain's post-Brexit relationship with the European Union comes at least 18 months too late. With only a few months of real negotiating time before the U.K. leaves, it has triggered the worst political turmoil yet faced by May, calling into question her future as prime minister. On top of all that, it's a plan that the EU is quite likely to reject.

Believe it or not, that's progress.

The plan May has outlined — a fuller version is promised in a text to be published on Thursday — is at least a plan. That's something Britain has so far lacked. And it's a plan for a softer, hence less disruptive, Brexit than many Tories want. That's good too.

The idea is for a deal centered on a U.K.-EU free-trade agreement for goods. Britain would have to keep its regulatory system for goods in line with Europe's and would give the European Court of Justice at least some role (though not, May insists, "jurisdiction" in the U.K.) in interpreting and enforcing the rules. British companies would be pleased with this, but militant Brexiters see red lines being crossed. Services wouldn't be covered, though, and the U.K. would not agree to the principle of free movement of people between Britain and the EU — so this would not be "Brexit In Name Only."

The proposal also includes a customs arrangement that would see the U.K. collecting tariffs on the EU's behalf for goods entering Britain bound for Europe. This prospect is complicated — some say unworkable — but, together with regulatory alignment on goods, it could avoid the need for a customs border between Northern Ireland and Ireland, or between Northern Ireland and the rest of the U.K. And it would also allow the U.K. to negotiate, albeit with added difficulty, new trade deals with third parties — something that a full customs union with the EU would rule out.

So the plan lies in the middle of the range of possibilities between a hard Brexit (meaning at best a limited free-trade deal like the one the EU has negotiated with Canada) and full single-market membership (meaning almost all EU rights and obligations, including free movement, but no voice in EU policy-making: the so-called Norway option). To be sure, this is nobody's first choice, and the EU may well reject it as unacceptable "cherry-picking." It might nonetheless be the best and most plausible alternative to the hardest Brexit of all, which would see Britain exit the union next year with no deal of any kind.

The resignations of David Davis, the minister who'd nominally been in charge of the Brexit talks, and Boris Johnson, the foreign secretary, aren't a bad thing. Both favor a cleaner separation from Europe — Johnson was a leader of the Leave campaign — and neither was willing to support a hybrid of the kind May is finally advocating. Davis had already been largely cut out of the process, and Johnson, perpetually plotting his bid for the leadership, had nothing constructive to offer. It's much better for May to be rid of them.

Do these resignations, with others perhaps to follow, mean a leadership contest that will bring down May and her government? Possibly — but most likely not. There might be enough support for Tories to be called to a vote of confidence in their leader (48 Tory MPs would have to demand it), but it's doubtful there'd be enough votes to defeat her (which requires a majority of the 316). Another factor: Right now, Johnson and others maneuvering to bring her down couldn't be confident of winning a general election, if that's where this ends up.

At the moment, the party and the country mainly want to be led — and if May, despite the evidence of the past 18 months, begins showing she's up to it, she will likely prevail in the short term. Settling on a plan and defending it with seeming conviction, which she did for the first time in the Commons yesterday, was a belated step in the right direction.

The bigger risk to her leadership, and to Britain's economic prospects, comes not from her party but from the EU. Everything Europe's negotiators have said up to now suggests that they will deem the hybrid she's proposing to be unacceptable. The logic of that position is very questionable. There's no reason why the space between a Canada-style deal and the Norway option should be a void. It's in the longer-term interests of Europe as well as Britain to build the closest partnership that politics will allow. But a marked softening of the EU's position will be necessary even for Europe to call May's plan a basis for negotiation.

If Europe rejects it out of hand, then May's position might indeed be hopeless. Europe's leaders ought to reflect on the consequences. In the U.K., May is now seen as having staked everything on an unpopular compromise. If the EU throws this back in her face and demands, in effect, that the U.K. accept whatever terms it dictates, it might secure a short-term victory. But in the longer term this is the prospect that would most assist Johnson and the other anti-EU coup-plotters. Maybe the EU should think twice before it binds itself more closely to a seething resentful enemy, and see whether a hybrid deal might be done after all.

To contact the editor responsible for this story: James Gibney at jgibney5@bloomberg.net

©2018 Bloomberg L.P.