EU Referendum

Brexit: the fantasy of the "no deal"


It is rather appropriate that David Davis, the serial fantasist, should yesterday be standing up in the House of Commons to defend another fantasy, the so-called "no deal" scenario.

The occasion was a statement to update the House on the fifth round of Brexit negotiations, when he also reviewed the progress of the five negotiation rounds to date. But it was Keir Starmer, Davis's shadow, who first raised the issue, declaring that we needed "to drop the nonsense about no deal". 

Starmer then added: "Only fantasists and fanatics talk up no deal. No deal is not good for the UK, is not good for the EU and is not what the Secretary of State wants, but he must now realise that the slow progress of these talks raises the risk of no deal".

Davis, typically, denied that he was "talking up no deal". "I cannot think of a time, a day, a moment when I have talked up no deal", he said. "We are in the middle of a negotiation, and we want to negotiate in good order and with good faith on both sides, but if we do not prepare for all outcomes, we will leave ourselves exposed to an impossible negotiation".

Then it was the turn of Peter Grant, the SNP for Glenrothes. "The Secretary of State assures us that he has never talked up no deal", he asserted, "but he has not talked it down, either". Thus, he said: "Other influential voices in his party talk up no deal all the time. The Prime Minister still has not withdrawn her claim that no deal is better than a bad deal. Rather than just not talking up no deal, will the Secretary of State absolutely rule out no deal today as the worst of all possible deals?"

When Neil Coyle, the "The hon. Member for Bermondsey and Old Southwark, from a sedentary position", charged that Davis was "talking up no deal", the Secretary of State reacted sharply. "No, I am not", he said. "I am dealing with scaremongering and I am knocking down scaremongering, so I think the answer there is no".

But it was then down to Anna Soubry to put the boot in. Did he (Davis) "agree that it is not just within this House where there is no majority for no deal, but that by their vote on 8 June the British people did not give this Government any mandate for no deal, because not only would it be bad for everybody in England, Wales and Scotland, but it would be particularly bad for our friends in Northern Ireland?"

And then it came. Davis retorted that the election "gave us a bigger mandate than it gave the Opposition", adding: "we are seeking to get a deal, as that is by far and away the best option. The maintenance of the option of no deal is both for negotiating reasons and for sensible security; any Government doing their job properly will do that".

How revealing that was. The "no deal" scenario is not real. It is being kept in reserve for "sensible security" but primarily for ""negotiating reasons". But, if it is a bluff – and that's what Davis is admitting it is – does he not realise that the EU negotiators will be just as aware of that as he is?

The issue, of course, is that no one who has done any serious analysis can be under any illusions that the "no deal" scenario is a non-starter. We are not the only ones to have suggested that, as a ploy, it is akin to Davis threatening to shoot himself if we don't get our own way.

Yet, even if Davis seems to be breaking out of his fantasy cycle, this new-found reality is apparently not shared by his ministerial colleague, Liam Fox. He recently told the BBC that there was no reason to fear the impact on the economy of no deal being agreed. It "would not be the Armageddon that people project", he said.

This is matched by the insouciance of John Redwood who insists that the UK will be "fine" if Britain walks away from Brussels without a deal.

Writing recently in The Sun, though, we see the shape of his pitch, extolling the advantages of Brexit and the options afforded by leaving, but never addressing the "day one" issues of how we continue trading with the EU after we have left.

We see the same myopia with the likes of the IEA, which adopts the same narrowly focused optimism without dwelling on the details.

Representing the IEA, we see Julian Jessop, chief economist and head of the IEA's Brexit Unit tell us that a "no deal" scenario does not have to be the "catastrophe" that many fear. "There would be", he writes, "some new barriers to trade with the EU, but these should be manageable". 

Leaving the Single Market and the Customs Union would, Jessop adds, "simply put the UK in the same position as other members of the World Trade Organisation (WTO) with whom the EU does not have a bespoke deal, such as the US and China".

One could scarcely do justice to the claim that the "new barriers" should be "manageable" but, like Redwood, Jessop offers no detail. Nor indeed does Roger Bootle, another "no deal" fantasist. These people never do.

One of the sustaining myths is that we already trade under WTO rules with the likes of China and the US (something also asserted by Redwood), which allows the Jessops of this world to ignore the reality that most nations have multiple trade-relevant agreement with the EU, even if they are not specifically free trade agreements.

Also underwriting the case is another lie, on which we remarked upon in May of this year. This was when we noted Lee Rotherham argued that within the context of a "no deal", we could still make "separate agreements" to "remove specific, thematic or sectoral barriers, just as they are regularly done in EU bilaterals".

This has emerged into the full-blown concept of the "no-deal deal", where we somehow walk away from the Article 50 talks and yet still expect to conclude agreements with the EU on a host of other issues.

This is precisely the line taken by Jessop who concedes that "There are many other agreements that would also need to be renegotiated, including access to EU aviation markets, mutual recognition of pharmaceuticals, and cooperation with EU-led organisations such as Euratom".

These arrangements, he then argues, "do not depend on accepting the obligations of EU membership" and then – effectively contradicting himself about other countries trading under WTO rule, states that participants "already include plenty of countries which are not even in Europe, let alone the EU".

Thus, "no deal" on the Single Market or Customs Union, Jessop asserts, "would not therefore prevent the UK and the EU from continuing these (mutually beneficial) arrangements on essentially the same terms as today, based on agreements made separately from the Article 50 process".

So there you have it – the fundamental dishonesty writ large, where "no deal" is not actually no deal, and working under WTO rules is not working under WTO rules, but on a regime of additional agreements.

The idea of a "no deal" scenario, therefore, remains a fantasy, but it is also one which even its advocates cannot sustain without inventing a supplementary reality. In this world, having walked away from the EU, we return to Brussels whence the "colleagues" willingly sign up to a whole raft of agreements which previously they had refused to discuss.

Back in the real world, though, the negotiations are constrained by Article 50 and the European Council guidelines. Yesterday, we cautioned that the next indicator that we would get as to where we were going there would come with the General Affairs Council, which met yesterday in Luxembourg. And right on cue, we got the cue that there had been "insufficient progress" for the talks to proceed to phase two.

Thus, we have a situation where the advocates of the "no deal" scenario are refusing to engage with reality, arguing for something that they don't actually want, in the hope of getting something better which they can't actually get.

In taking this line, these people risk getting only that which they didn't want, which will turn out to be precisely the disaster which they say it won't be, because it isn't actually what they made it out to be and is what they say it isn't.

Locked into their fantasy world, these people cannot see the absurdity of their own positions, or the danger to which they are exposing us all. And, if we allow them free rein, they will bring us all down.