World Views | Had enough of Brexit? How about 10 more years

When moments of political drama capture the national attention, one at least expects some clarity to result. Alas, that would be setting the bar too high for today’s Brexit votes in the U.K. parliament [Macau time].

We continually hear (and some of us have repeated the mantra) that Brexit is a process not an event. But that’s not quite right. Processes are orderly and have an endpoint. There is, as yet, no order to Brexit and no endpoint. A sense of chronic impermanence is virtually certain whatever path parliament takes, according to trade specialists and analysts.

“It has the look of a many-years long exercise, however you look forward from here,” says Tony Travers, a professor of government at the London School of Economics. “We are in the rolling foothills of an enormous mountain.”

A no-deal scenario would bring the most uncertainty, leaving the Irish border question unresolved, no trading relationship in place and a great many sore feelings. Since Ireland itself will hold a veto over any future EU trade agreement with the U.K., Britain can’t simply pretend the question of how to maintain an open border between the two countries is Dublin’s problem.

May’s negotiated deal at least sets out a transition period during which the work on a future trade relationship can begin. And yet exactly what shape that takes will be a matter of bitter internal debate and long, iterative negotiations.

If Brexit gets delayed, or May’s deal morphs into a softer customs-union type arrangement, or a Norway-style one that leaves Britain in the single market but with no say in EU laws, extensive negotiations will be required to work out the details of the new relationship and their interpretation – all in a fractious domestic political environment. Likewise, a second referendum or a general election might sate the public’s wish for a say, but the decision must then be implemented – again, via more negotiations.

Even if there was a vote to reverse Brexit, life wouldn’t return to its pre-2016 settled norm.

We have an idea of what the economic costs are from the uncertainty generated by the Brexit vote. How a country of Britain’s size deals with a prolonged period of multi-faceted, multi-front negotiations, however, is impossible to predict. How will 10 or more years of up-and-down, publicly scrutinized negotiations affect domestic spending decisions and taxation, impact elections, reshape the civil services, determine investment decisions and impact consumer choices and voter preferences? We don’t know.

Brexiters blithely claim the impact will be benign – but that is pure guesswork. Their logic is also tortured: If free trade is so desirable that Britain needs to get out of the customs union, leaving the closest possible free-trade deal with your largest trading partner in favor of greater friction and uncertain future relationships has to be acknowledged as a backward step.

And yet, the era of perpetual negotiation doesn’t portend economic doom either. Britain has a robust, diverse, (modestly) growing economy with low unemployment; and for all the talk of constitutional crisis, its venerated democratic institutions appear able to handle the knocks. There is no danger of cardiac arrest if an orderly Brexit can be engineered.

Radical uncertainty – when no historical data or statistics are useful for mapping the outcome – seems axiomatic with Brexit. Maybe it’s more apt to describe the best-case scenario as one of prolonged “insecure stability,” a term Pacific Investment Management Company’s global economic adviser Joachim Fels and former Pimco executive and now Fed Vice Chairman Richard Clarida circulated in 2016.

“It’s with us for another half-generation,” Travers says. “If pro-Brexit MPs feel that we didn’t properly leave, they will go on campaigning for a more determined form of Brexit.” Remainers, too, will be on their toes. “Whether we leave with no deal or not, I’m absolutely sure that a campaign will be set up on March 30,” he says.

We’d better get used to it.

[Abridged]

Therese Raphael, Bloomberg