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Brexit Brinksmanship May Yield a Soft Result

Summary:
A conclusion to the long-running drama over Brexit appears likely to be delayed yet again, perhaps until May or June. But by postponing the day of reckoning for Parliament to come up with an exit plan by the original March 29 deadline, Prime Minister Theresa May could finally get a majority for her much-derided Brexit deal or open the way for the softer Brexit supported by the Labour Party and a number of Conservative pro-EU members of parliament (MPs). The delay was signaled when Prime Minister May recently accepted a party proposal to put off the original deadline for a deal if no majority materializes in Parliament by March 12. That move increases the political pressure on her own Brexit-supporting backbench MPs. They are now on notice that unless they support her Brexit

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A conclusion to the long-running drama over Brexit appears likely to be delayed yet again, perhaps until May or June. But by postponing the day of reckoning for Parliament to come up with an exit plan by the original March 29 deadline, Prime Minister Theresa May could finally get a majority for her much-derided Brexit deal or open the way for the softer Brexit supported by the Labour Party and a number of Conservative pro-EU members of parliament (MPs).

The delay was signaled when Prime Minister May recently accepted a party proposal to put off the original deadline for a deal if no majority materializes in Parliament by March 12. That move increases the political pressure on her own Brexit-supporting backbench MPs. They are now on notice that unless they support her Brexit deal, a potentially lengthy delay of Brexit is possible. Labour Party leader Jeremy Corbyn's shift to support a second referendum adds additional pressure. Conservative Brexiteers increasingly realize that if they do not support their prime minister's deal, they may end up with a much softer Brexit, or no Brexit at all.

The lingering unsolved problem in the negotiations remains the so-called Irish backstop, the provision in the Brexit Withdrawal Agreement that would ensure an open border between the Irish Republic in the European Union and Northern Ireland in the absence of agreement on other terms. Ardent proponents of Brexit opposed this backstop arrangement because it would perpetuate a customs agreement between Britain and the European Union. Negotiators now seem focused on finessing the issue with ambiguous language over the legal force and timing of the arrangement.

Despite these negotiations, there should be little optimism that an accord in Parliament can be reached on the backstop, which is fundamentally a black-and-white issue. The backstop idea must be open-ended to be meaningful. It cannot have a legally binding or even implicit end-date. Nor can the deal give any party a unilateral exit option.

The EU27 members are highly unlikely to yield ground on their unwavering support of the backstop arrangement. Conservative Brexiteers will therefore have to stomach the political indignity of supporting something they emphatically rejected only a few weeks ago. Many probably will, but it is unclear if their support will supply May with the majority necessary to approve her proposal. Certainly the EU27 will never countenance any legally binding treaty-level clause that overrides the Withdrawal Agreement and provides an exit from the backstop, which some Brexiteers are now demanding in return for their support. If that is what May has to deliver to get her deal through parliament, she will likely fail.

The EU27 has no political incentive to offer the UK government any concessions on the Irish backstop. The fact that pro-EU MPs and ministers in May's own party forced her to acquiesce to extending the withdrawal agreement deadline shows that the risk of a "no deal Brexit" remains very low, even if her Brexit deal fails in Parliament again in a few weeks.

Recent parliamentary events suggest a cross-party coalition of MPs could come together around Labour's softer version of Brexit, including a permanent customs union and continued de facto membership in the EU internal market. That approach seems more plausible now that the Trump administration has acknowledged the difficulty of negotiating a future US-UK free trade deal.

The EU27 has little to gain from continued uncertainty about the long-term economic relationship with the United Kingdom lingering on into 2020, when even under May's deal, the issue would have to be settled ahead of the expiration of the planned Brexit transition period at the end of the year. Far better to push the UK parliament into the corner of having to commit to a closer long-term relationship in the form of Labour's soft Brexit now. Such a deal would also lead to a modest relief rally in UK assets and gain the support of the British business community.1

A soft Brexit would also signal to EU critics throughout the region that leaving the union is not a realistic option. And the domestic political ramifications in the United Kingdom of such a soft Brexit should please Brussels, Berlin, and Paris. It would probably speed up the process of the United Kingdom's eventual request to rejoin the European Union in the future by causing a split in the Conservative Party.

After having failed to extract any EU27 concessions on the Irish backstop vote in May's deal, thereby dooming it, Brexiteer MPs seem likely to fall back on a politics of victimhood and stab-in-the-back mentality in the event of a soft Brexit. A Conservative Party rift seems inevitable.

Notes

1. My colleague Sherman Robinson and coauthors have recently completed an evaluation of available modeling of the economic impact of Brexit, highlighting the costs of a no deal outcome. The support of the British business community for any alternative is therefore easy to understand.

Jacob Funk Kirkegaard
Jacob Funk Kirkegaard, senior fellow, has been associated with the Institute since 2002. Before joining the Institute, he worked with the Danish Ministry of Defense, the United Nations in Iraq, and in the private financial sector. He is a graduate of the Danish Army's Special School of Intelligence and Linguistics with the rank of first lieutenant; the University of Aarhus in Aarhus, Denmark; the Columbia University in New York; and received his PhD from Johns Hopkins University, School of Advanced International Studies.

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