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Brexit’s sober Lessons


Brexit’s sober Lessons

Brexit’s sober Lessons

Had it not been for the crisp analysis (and ridicule at times[1]) by many reporting on the oversimplifications offered by those who see Brexit as an opportunity to restore national “sovereignty”, as well as the lessons to be learned about the costs involved in dismantling well-functioning trade arrangements, most recent reports about the Brexit process should best be avoided. They are depressing and repetitive.

The Brexit referendum was held on 23 June 2016 and resulted in a small majority of 51.9% voting in favour of leaving the European Union (EU). The terms of the final divorce were, of course, a mystery. The referendum was not legally binding, but the Tory government undertook to honour the outcome. In the words of one commentator this has, from the outset, been chaotic:

The negotiations were said to be simple. But they weren’t. The EU would bend over backwards, it was said, to give Britain’s door to strike trade deals. They didn’t. Not only has the government failed to strike a deal with the EU. It has even failed to reach a coherent agreement with its own MPs.[2]

The criticism of the UK’s Brexit policies is fuelled by exasperation about the paralysis caused by the deep divisions within the ruling party. Brexit happens on 29 March 2019 but there is still no deal about the conditions under which the United Kingdom (UK) will leave the EU, its main trading partner. The Irish border (the Brexit backstop) has become the most contentious aspect of the negotiations with the EU as well as within the ruling party.[3] There is no agreement on how it will work.

If a last-minute deal is reached, the post Brexit transitional period will have to be extended beyond 2020. That is when a future EU-U trade agreement will have to be hammered out.

Uncertainty has become Brexit’s main feature; the dangerous consequences of which have topped discussions between investors, service providers and manufacturers on the one hand, and the government on the other. For many a no-deal Brexit have become the assumption from which to plan future operations. That will force the UK to conduct all its trade under WTO rules.

Of this option, Patrick Low, former chief economist of the WTO has written: “Despite protestations to the contrary from some optimistic Brexiters, the WTO fallback scenario is problematic. It would be wrenching and costly, fraught with uncertainty and not as temporary as some pretend.”[4] He points out some of the consequences: “All intra-EU trade is free from import duties and crosses frontiers in a frictionless manner. Under a crash-out scenario both those conditions cease to exist. Tariffs on UK-EU goods will increase. The average EU tariff is 5.3 per cent and variance is high in some product areas. The UK’s greatest vulnerabilities in terms of post-Brexit access fall on agriculture, food and beverages, the automotive sector, and chemicals and plastics.[5]

What are the lessons to be learned in our part of the world? The most immediate one is about the unforeseen consequences and the costs involved in dismantling well-functioning trade arrangements such as the Southern African Customs Union (SACU). It has been in existence since 2010 and has de facto evolved into much more than a trade in goods arrangement. Trade in services, payments and currency convertibility have been added over time.

A second lesson is about the importance of patience and thorough preparations involving all technical aspects. Do not believe those who preach the virtues of “sovereignty” and regaining control over what happens at “our borders”. This is the 21st century and there are no panaceas.

Brexit contains many lessons, which will continue once a deal (if reached) is being implemented. The acid test will be about the ability of the UK and the EU, in a world where the rules-based order is increasingly under challenge, to deal with international challenges. These range from banking stability and climate change to terrorism. It may be discovered that both were better off together than torn apart.

[1] On 23 October 2018, the Daily Mail described those MPs plotting against the Prime Minister’s proposals to secure a deal on the Irish border as “peacocking saboteurs dragging their party and country towards the abyss”. https://www.dailymail.co.uk/debate/article-6305601/DAILY-MAIL-COMMENT-Saboteurs-endangering-nation.html

[2] ‘The Guardian view on Theresa May’s Brexit: march to stop the madness’: Editorial, The Guardian, 19 October 2018. https://www.theguardian.com/commentisfree/2018/oct/19/the-guardian-view-on-theresa-mays-brexit-march-to-stop-the-madness

[3] The backstop is meant to ensure that, irrespective of what is concluded with the EU, there will not be a hard border between Northern Ireland and the Irish Republic.

[4] ‘No-deal Brexiteers are playing fast and loose with the facts. Prospect Magazine, 11 October 2018. https://www.prospectmagazine.co.uk/economics-and-finance/former-chief-economist-at-wto-no-deal-brexiteers-are-playing-fast-and-loose-with-the-facts

[5] ibid

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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