A Brexit deal that rescues Theresa May
Lionel Barber, the FT’s editor, and Janan Ganesh, chief political commentator, discuss the recently agreed divorce deal between the UK and the EU and the outlook for the next stage of negotiations.
Produced by Alessia Giustiniano. Filmed by Petros Gioumpasis.
The first phase of the Brexit negotiations are over. Theresa May has struck a deal on the divorce terms and the size of the bill for the UK's departure. But the question is, what next? What is the end-state between Britain and the European Union? With me here to discuss is Janan Ganesh. Where are we going?
Well, it looks like, in 2018, Britain is going to end up facing a choice between some kind of bare trade deal with the European Union of the kind that Canada currently enjoys, or a more extensive connection partially or substantially inside the single market. Something a bit more akin to the Norwegian arrangement. There are still Conservatives who entertain the option of something in-between, so a much larger trade deal than Canada enjoys. But it looks like the EU will only concede to that--
I think that's known, technically, as having your cake and eating it.
Yeah. And it's also known, technically, as pie-in-the-sky. There doesn't seem to be any enthusiasm from the part of Brussels to entertain a really special arrangement for the UK in which they observe very few of the burdens, but enjoy most of the benefits of European Union membership. I think it was Manfred Weber, the German MEP, who said, it has to be clear to the people of Europe that you are either a member or a non-member, and there is no privileged halfway house.
And obviously the Canada model covers goods but not services, and that, for the British, is something of a disadvantage, no?
Yeah. Like most modern economies, services dominate the British economy, but Britain is actually unusual in the extent to which services dominate, in particular financial services and related business and legal services. So to survive on the Canadian model would be pretty difficult. You also have to remember that Canada, I think, does 10% of its external trade with Europe. We do just under 50%, and actually it went up a bit last year. So we're much more exposed to European trade. Our economy is heavily services dependent. And so, Canada isn't an ideal arrangement for the UK.
Well, the other option is what is known - I believe, again, a technical phrase - as the Norway option, favoured by the so-called "huggers". These are the people who want to stick close to the European Union, stick as close as possible. Now, is that really viable? Where, essentially, you're part of something but you have no control over the rules?
I think what makes it politically unviable is that, first of all, it requires Britain to observe lots of the burdens of European Union membership. And the main one is freedom of movement. And we only had, 18 months ago, a referendum in which the public hostility to freedom of movement was probably the principal reason why they voted against the EU. To preserve that within the future arrangement with the EU, I'd be fine with it. I think a lot of people in the big urban areas of the UK would be fine with it. But the overwhelming body of public opinion is very hostile to immigration and to specifically to European free movement, where you can't even choose the skills of the people coming in.
So I that makes it politically unviable. Britain would also be paying in a lot into the EU budget for that particular arrangement. So I think a big chunk of the Conservative parliamentary party - never mind public opinion - would find that very difficult to wear.
So where does Theresa May - now, by the way feted as something of a winner in the recent Brexit negotiations, at least home - how does she finesse this? Because there hasn't even been a discussion in cabinet, a full discussion, about what the end-state.
I'm not sure it's possible to finesse. And what Britain has been able to do, and what she has been able to do, is essentially make all the other compromises over EU citizens' rights in the UK, over the Irish border, over the budgetary contribution, and delay the ultimate choice, which is, what kind of arrangement does Britain want in the long term, for the very end of the process? But the very end of the process is not that far away. It's March 2019. We assume, really, earlier than that, because the deal needs to be ratified. So perhaps the end of calendar year 2018 is when she has to make a choice. And, I stress, choice, not finesse. I don't think the finesse option is available, because the Europeans aren't willing to give it.
So, at some point, we move from suspended animation to an outcome, which could be very difficult for the Conservatives to manage.
Yeah. Internally, very difficult to sell to Parliament. Externally, they have to reconcile a public, which is split 52-48. What is remarkable is that Theresa May, having been on the edge of losing her job six months ago after the election, is going into the New Year much safer than she has been for a while and can probably count on surviving still through 2018. Janan Ganesh, thank you so much.