Fore­cast­ing three pos­si­ble sce­nar­ios to fu­ture of Brexit

Belfast Telegraph - Business Telegraph - - News -

The Amer­i­can sports com­men­ta­tor Yogi Berra once said pre­dic­tion is dif­fi­cult be­cause it is about the fu­ture. Bear­ing that in mind, and the per­ceived fail­ures of eco­nomic forecasters, here are con­sid­er­a­tions re­lat­ing to three pos­si­ble sce­nar­ios:

1: The draft with­drawal agree­ment (DWA) is ac­cepted The rea­son why a num­ber of busi­ness or­gan­i­sa­tions have in­di­cated will­ing­ness to ac­cept the deal is the ad­van­tages they per­ceive. No­tably:

Com­pre­hen­sive ‘ le­gal cover’ for leav­ing EU, which keeps the Eurostar run­ning, UK driv­ers’ li­cences in EU, flights by planes etc, etc.

Al­lows for a tran­si­tion pe­riod — March 30, 2018 to De­cem­ber 31, 2019. The UK, in ef­fect, re­mains un­der all the EU rules for a bit longer. We have more time to pre­pare for the exit.

In tran­si­tion and, in­deed, in any op­er­a­tion of the back-stop, North­ern Ire­land plus Great Brit- ain re­main in the EU’S cus­toms ar­range­ments. North­ern Ire­land re­mains in the sin­gle mar­ket.

Nev­er­the­less, the DWA is likely to be as­so­ci­ated with a range of dis­ad­van­tages, some of which are broader in scope. Some re­late to the long-term as op­posed to the short-term:

UK con­tin­ues to pay its dues to EU un­til tran­si­tion pe­riod is over — at least £39bn.

Could the UK ever exit from the cus­toms union type ar­range­ments?

And if it could leave, the EU might oblige it to “leave be­hind” North­ern Ire­land which would then face tar­iff bar­ri­ers rel­a­tive to GB. Checks on Gb-to-north­ern Ire­land sales, which amount to about £11bn an­nu­ally, to en­sure com­pli­ance with EU sin­gle mar­ket reg­u­la­tions.

Could that mean higher costs for gro­cery im­ports? Note that our “im­ports” from GB are sev­eral times higher than those com­ing from the Re­pub­lic plus rest of the EU.

North­ern Ire­land could be­come a pas­sive rule-taker. Would that pro­mote im­prove­ments in com­pet­i­tive­ness and pro­duc­tiv­ity?

The UK in gen­eral, but North­ern Ire­land es­pe­cially, would be un­able to use Brexit as spring­board for global free trade agree­ments. In fact, the DWA

taken to­gether with Sun­day’s 26page po­lit­i­cal dec­la­ra­tion leaves some im­por­tant is­sues re­quir­ing res­o­lu­tion dur­ing fu­ture ne­go­ti­a­tions:

How to avoid the Ir­ish hard border if the UK wants to leave the cus­toms union?

How much ac­cess will EU fish­ing boats get to UK wa­ters?

How far would the UK be al­lowed to seek com­pet­i­tive­ness through de­vi­at­ing from EU reg­u­la­tions (al­lied to the ques­tion of how far in prac­tice the UK would still be sub­ject to the Euro­pean Court of Jus­tice)?

2: No over­all agree­ment, World Trade Or­gan­i­sa­tion and other de­fault ar­range­ments The im­pres­sion is some­times given that this would be the same as be­ing cut off from con­ti­nen­tal Europe/the Re­pub­lic through block­ade or quar­an­tine. In re­al­ity, it is a lot more dras­tic than that.

Most coun­tries around the world are not mem­bers of the EU and most of those non-euro­pean coun­tries do trade with the EU, some very suc­cess­fully.

In the case of Brexit the more re­al­is­tic fear re­lates to the in­cre­men­tal ef­fect on trade through in­creased fric­tions.

The UK would be li­able to pay the EU’S tar­iff on any ex­ports into the EU — for most man­u­fac­tured goods that tax is quite small though tar­iffs on food prod­ucts are higher. It re­mains to be seen how far a se­ries of small scale hold­ing agree­ments could be put in place to main­tain easy eco­nomic flows across the fron­tiers.

3: A third way in­volv­ing re­newed ne­go­ti­a­tions The logic here is that the DWA has left some Brex­i­teers and Re­main­ers feel­ing very un­sat­is­fied. So, why not go back to Brus­sels and ask (de­mand?) more? But, would any such ap­proach re­ceive a favourable re­sponse?

The stated po­si­tion of the com­mis­sions and Euro­pean lead­ers is “thus far and no fur­ther”.

It could be that UK ne­go­tia­tors would get more if, for the first time, they in­di­cated they were will­ing to ac­cept a “no deal” in pref­er­ence to what the EU has of­fered.

A third way be­comes more vi­able if both the UK and the EU27 are will­ing to pro­long the with­drawal process in the sense of push­ing back the March 29 2019 dead­line.

Tech­no­log­i­cal solutions to the Ir­ish border is­sue be­come more fea­si­ble over a longer pe­riod of time.

By­dres­mond­birnie, Se­niore­conomist, Ul­ster­busi­nesss­chool

DUP Leader Ar­lene Fos­ter yes­ter­day meet­ing with mem­bers of the in­dus­try and re­tail sec­tor

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