“Brexit means Brexit,” Theresa May said in July 2016 when she replaced David Cameron as Britain’s prime minister. Since then, May has continued to insist that Brexit will mean Brexit, but without offering even a taste of what Brexit means. Would it be a “hard Brexit,” cutting Britain off entirely from Europe’s markets? Or would it be a “soft Brexit,” in which Britain regained control of its borders and parliamentary sovereignty, while retaining membership in the single European market?
As of January 17, we know that May meant what she said. Speaking at Lancaster House in London, the prime minister laid out a 12-point program for the restoration of Britain’s sovereignty. “The United Kingdom is leaving the European Union,” she said. “My job is to get the right deal for Britain as we do.” Her plan amounts to a soft path to a hard Brexit. How hard is up to the other 27 states of the EU.
Britain, May said, will regain control of its borders and create a system of “controlled” immigration: “You cannot control immigration overall when there is free movement to Britain from Europe.” The jurisdiction of the European Court of Justice will be canceled: “Because we will not have truly left the European Union if we are not in control of our own laws.”
May acknowledged that if Britain recovered control over immigration policy and legislation, it could not remain in the EU’s single market, and would have to leave its customs union too. She seeks to negotiate new terms, a “bold and ambitious free trade agreement” that would give British companies “the maximum freedom to trade with and operate within European markets—and let European businesses do the same.”
Members of the EU’s single market are not allowed to make trade deals with nonmember states. Once Britain leaves, it will be free to negotiate with the rest of the world. Talks are already afoot with China, Brazil, India, Canada, Australia, New Zealand, and the Gulf states. Prospects for the biggest prize, a trade deal with the United States, have improved since last April, when President Obama warned the British that if they dared to vote for Brexit, they would find themselves “at the back of the queue.” With the Trump administration imminent, Britain, May said, is at “the front of the line.”
Still, as May and the EU negotiators know, the short-term consequences of Brexit will depend on the terms of Britain’s economic exchanges with the EU. In 2015, Europe accounted for 44 percent of Britain’s export trade: 220 billion pounds out of 510 billion. The percentage has fallen from 60 percent in 2000, due to the growth of non-European markets and the weakness of the eurozone, but Europe remains essential to British exporters. May wants to sustain the “frictionless” transit of goods and services in both directions across the English Channel, and between the Republic of Ireland, which will remain an EU state, and Northern Ireland, which will leave the EU along with the rest of the United Kingdom.
“Our policy is having our cake and eating it,” foreign secretary Boris Johnson promised last September. Britain, Johnson said, could obtain a deal that would limit the movement of workers and immigrants, but retain tariff-free terms for the movement of goods.
Yet EU leaders have been adamant that this will not be possible. Some have suggested that Britain should be punished, pour encourager les autres. “There must be a threat, there must be a risk, there must be a price,” French president François Hollande asserted in October. If the union allowed the British to benefit from leaving, then other countries might follow.
After Johnson expressed his desire both to possess and ingest the cake of prosperity, Donald Tusk, president of the European Council, called “the cake philosophy” a “pure illusion.” Tusk had a gastronomic proposal of his own. “To all who believe in it, I propose a simple experiment. Buy a cake, eat it, and see if it is still there on the plate.” Britain was either in or out of Europe, with no deals or concessions. “The only real alternative to a hard Brexit is no Brexit, even if today hardly anyone believes in such a possibility.”
After May’s speech, there is no real alternative, and nobody believes in no Brexit. Tusk did not respond sweetly to May’s speech. “No cakes on the table for anyone,” he threatened, “only salt and vinegar.” Guy Verhofstadt, the EU’s Brexit negotiator, added some edible metaphors of his own on Twitter: “the days of UK cherry picking and Europe a la cart [sic] are over.”
Presumably, Tusk was not referring to salt and vinegar potato chips. This British delicacy does not form a significant part of the country’s exports to the rest of the EU. The suspension of free trade between Britain and the other 27 EU states may, however, cost a great deal in tariffs. But if that happens, it is Mr. Tusk and the people of the EU states who will be getting the salt and vinegar. According to an October projection by the think tank Civitas, Britain will get the biggest slice of the tariff cake.
If May cannot negotiate a trade deal with Brussels, trade exchanges between Britain and the EU will probably default to the World Trade Organization’s Most Favoured Nation terms. Based on 2015 figures, tariffs on British businesses exporting to Europe would total 5.2 billion pounds. But they would cost EU businesses exporting to Britain 12.9 billion pounds—more than twice as much.
Apart from being a net contributor to the EU’s budget in Brussels, the U.K. is also a net importer of EU goods. In 2015, when Britain’s exports to the EU were worth 220 billion pounds, Britain paid 290 billion for EU imports. Tariffs would cost the economies of 22 of the 27 remaining EU states more than they will cost Britain. German businesses will pay 3.4 billion pounds on exports to Britain, but British businesses selling exports to German businesses will pay 0.9 billion. French businesses will pay 1.4 billion pounds on exports to Britain, but British businesses selling to French companies will pay 0.7 billion. Depreciation in the value of sterling might increase these imbalances, by reducing the cost of British exports.
May cautioned that the imposition of tariffs by the EU would be “an act of calamitous self-harm.” The leaders of the EU are aware of the trade figures. She also warned against “trying to hold things together by force, tightening a vise-like grip that ends up crushing into tiny pieces the very things you want to protect.” This, though, is the logic of the EU, a brazenly undemocratic entity whose animating principle is not the freedom of its citizens or the profit of its businesses, but the perpetuation of its own power.
May has an alternative plan for the worst-case scenario: “change the basis of Britain’s economic model.” Britain could deregulate its financial sector even further. EU businesses would lose access to the financial markets in the City of London, and the City would become an offshore bank for European tax-evaders.
“The British people are not going to lie down and say, ‘Too bad, we’ve been wounded,’ ” May’s finance minister Philip Hammond told the German newspaper Welt am Sonntag on January 15. “We will change our model, and we will come back, and we will be competitively engaged.”
And what will happen if an already unpopular EU passes the cost of teaching the British a lesson to its taxpayers? Let them eat cake.
Dominic Green, a fellow of the Royal Historical Society, teaches politics at Boston College.
