Now that Brexit is beginning to sink-in for Britons and for UK politicians entrusted to carry out the will of ‘The People’ it seems that a so-called ‘Hard Brexit’ might be orders of magnitude more difficult than first imagined, while a so-called ‘Soft Brexit’ might be preferable to all parties, which appears to be an elegant solution at the point where the people’s interests intersect with the UK economy.
Because Philip Hammond’s economy is doing well considering everything that’s happened since 2008, PM Theresa May can relax about the economy and get on with her part of running the United Kingdom — namely, the political arrangements for a Soft Brexit now (let’s call that Brexit Stage I) and possibly a Hard Brexit later (let’s call that Brexit Stage II) if that part is approved by voters in the next UK election on May 7, 2020.
Soft Brexit vs. Hard Brexit. Image courtesy of J.P. Morgan Asset Management.
Soft Brexit probably equals mild uncertainty in the markets, while Hard Brexit might cause economic chaos
Since 1973 when Britain joined the European Community and it’s various and later governmental structures, the policies in all member nations have largely been set by common agreements forged with those organizations. There are literally hundreds of thousands of laws and regulations to replace in a post-Brexit UK. It will be a humongous task.
Even Greenland, with its total population of 56,196 took three years to exit the European Union. The UK with it’s $2.8 trillion (GDP) advanced economy has hundreds of thousands of EU laws, trade laws, tariff controls, manufacturing standards and immigration rules, that guide industry, the UK government, and Britons — all of which might take 5-10 years to replace with UK-centric legislation. Industry simply can’t function without proper regulations which leaves only one choice for many organizations; Leave Britain. That’s not in the best interests of Britons, the government, nor of UK industry itself.
A brilliant plan, is one that allows the UK to rejoin the EEA and the EFTA (as in the Norway or Swiss model) and it’s actually doable.
Have you seen Norwegian or Swiss economies? Let’s just say that on a per capita basis, they beat every European economy every year.
And, sure, some commenters will try to make things more complicated than they really are. But it isn’t complicated unless you desire it to be that.
With proper stewardship the UK economy can perform as well as any non-EU-member-nation noted in the links below. Check out their world-leading per capita income and low unemployment rates!
Norway Economic Outlook
Switzerland Economic Outlook
If Switzerland and Norway (for two examples) can have EEA and/or EFTA membership, and bilateral agreements with the EU, and booming economies — there’s no reason the UK can’t.
It’s not rocket science. Brexit does NOT mean the end of trade with the EU. That would cause long-term recession in the EU (likely leading to its dissolution) and a long-term case of the economic doldrums for the UK. The two blocs need each other whether some like it or not. So, get on with it!
UK Prime Minister Theresa May needs to stop everything(!) and get warm approval for EFTA membership accession from all four EFTA member nations.
Not to mention appointing a Minister for Scotland (a ‘Scot’) a Minister for Northern Ireland (a ‘Northern Irelander’) and a Minister for Wales (a Welsh resident) to shore-up relationships with the UK’s devolved regions, and also appoint a Minister for England.
And gain approval for Brexit among the remaining 27 EU member nations which must unanimously approve Britain’s exit from the European Union.
Accomplishing all of that would be five-years’ worth of dedicated work for any British Prime Minister! Even former Prime Minister extraordinaire Sir Winston Churchill, might’ve found a challenge in that.
UK Conservatives (with significant help from UKIP) have gained a mandate for Soft Brexit but I don’t think 52% is enough of a mandate for Hard Brexit. Which is why I support ‘Soft Brexit’ for now — and if approved by voters at the next election — ‘Hard Brexit’.
In the meantime, there’s an unimaginable amount of work left to secure a stable, fair, and expeditious Soft Brexit that solves some of the deficiencies of Britain’s EU membership, while leaving only free movement of labour and persons, and certain trade matters to negotiate, if it ever comes to Stage II Brexit.
Related Article:
- Philip Hammond becomes standard bearer of Soft Brexit (Financial Times)
- Hard Brexit would damage ‘almost every sector’ of UK economy (The Guardian)
Letter to Britain 
Came across an online article “Free Trade Agreements Between EFTA and Third Countries: An Overview”. EFTA as a group has trade agreements with nonmember countries. In addition, individual EFTA members are allowed to have bilateral agreements with nonmember countries.
Hi Tim,
So that’s why the EFTA is so successful and with no drama, they succeed!
It’s actually a healthy dose of common sense that EFTA members be ‘allowed’ by the EFTA partners to engage in bilateral trade agreements with non-member nations.
I hope that, post-Brexit, the UK will embrace working, existing models, such as the EFTA association. Certainly, it seems to be working on many levels for the EFTA members.
Best regards, JBS
Online article regarding EEA-“The EEA Option Emerges Into The Light”.
Hi Tim,
Thank you for posting these article titles here at Letter to Britain.
I will give them a read.
Cheers, JBS
Perhaps EU officials would agree to a soft Brexit if:
Britain goes from being a member to being a satellite of the EU.
Britain appears to be disadvantaged in its new status.
Whatever the details of soft Brexit, it is important that Britain have the option of making trade deals with countries outside the Single Market. Diversifying trade away from the EU is crucial to a better future.
Which will take time. I understand that trade negotiations typically requires years of talks. Hopefully, soft Brexit could buy time for this.
Hi Tim,
I agree with your assessment.
The parochial and internecine squabbling between the European littoral states is the one thing that amazes and confounds people who’ve lived in North America for any length of time. It’s so unnecessary.
It was such feudalistic behavior that was responsible for two World Wars, and if that wasn’t enough, the entire Cold War! The Cold War simply wouldn’t have occurred without the full chain-of-events of; WWI, the overcompensating and overly harsh punishment of the Treaty of Versailles(1929) which inevitably led Europe’s states into WWII, which just as inevitably led to the Cold War.
It seems that Europe can’t survive without a ‘Dad’ (a ‘Father-figure’ or ‘Referee’ a.k.a. ‘The United States’) to keep them from blowing themselves up in massive and heart-wrenching world wars, or in today’s political smashups.
Depending upon how much patience President Donald Trump can muster, the United States might need to ‘impose’ a solution (as was done after both world wars and the Cold War, and in regards to ‘The Troubles’ in Northern Ireland, which problem had continued for many decades until President Bill Clinton decided that America would solve it — and he did it within 30 months) or the United States having lost patience with Europe this time around, might let Russia’s President Vlad Putin enforce order.
Either way, if the Europeans can’t handle their own problems (again) it’s going to strengthen the United States’ hand in Europe (again) and strengthen Russia’s hand in Europe (again) to the detriment of the Feudalistic States of Europe — which is what I intend to call them forevermore if they can’t manage a clean and decent divorce, in this, the 21st century.
The leaders of Europe are either big enough people to solve Europe’s problems or they aren’t. We’ll soon see.
Always great to read your comments Tim, here at Letter to Britain!
Cheers, JBS
The obvious place(s) to start with are the Commonwealth/Anglosphere/NAFTA. These would be the easiest for the British to negotiate with, have large resources in aggregate, and collectively offer a large market.
And BFF (“best friends forever”) may help the British get a half decent deal. Because governments will perceive Britain as desperate for trade deals, and therefore negotiating from weakness.
Most governments may try to force bad deals on Britain.
Eventually, negotiating from a strengthened position, Britain may be able to get decent trade deals with others, such as Russian, the Pacific Alliance, etc.
(BTW, check out City Datas “BFF” thread, for the relationships between countries).
Hi Tim,
Your thoughts are well-received here!
Certainly, goal #1 for Britain must be the freedom to pursue it’s own trade deals. Otherwise, what’s the point really, of leaving the EU?
Joining NAFTA is probably quick and clean, while creating a new trade deal similar to the 8-year(!) negotiated CETA deal between Canada and the EU is a terrifying thought for me. (Think of all the things that could go wrong in the interim)
The UK, along with Australia and New Zealand, should join NAFTA the day after official Brexit. And then, the UK could begin bilateral trade talks with every nation on the planet and do it much quicker and better than the 8-year(!) CETA deal.
Sorry, I just can’t get over how long it takes for the 27 littoral states to get anything done. Winston Churchill could’ve had it done in 6 months, although the language and optics might not’ve been as ‘pretty’ — yet as they say, ‘When your ship is sinking (relative to other economies) it really doesn’t matter how ‘pretty’ your bailing bucket is.’
Pretty or not, sometimes the important thing is to get the job done.
Thank you again for your thoughtful comments and the interesting links you add to these pages.
Best regards, JBS
Interesting comments, John.
I am not any sort of legal expert…..
If Brexit should be soft instead of hard, could Britain sign up with another trade bloc, or sign a trade deal with a another bloc?
For example, if Britain had EEA or similar status, would Britain be free to join NAFTA, or sign a trade deal with NAFTA?
Hi Tim,
I think the UK and EU negotiators could create almost any sort of political agreement they want within the confines of Article 50. The trick is to get it signed by the remaining EU 27 states.
Supposing a Brexit agreement is EFTA-based the UK could regain the right to sign its own international trade agreements, but not have the authority to limit immigration or free movement of foreigners inside their own country. Voilà! Soft Brexit.
Norway, Iceland, Liechtenstein (and formerly, Switzerland, which now has it’s own bilateral Swiss/EU agreements which supercede EFTA) trade internationally and negotiate their own trade deals.
With some goodwill from both sides, the UK could Brexit via the EFTA model, regain the ability to negotiate their own trade deals, remain in NATO (obviously) and leave immigration and free movement for EU citizens within the UK for a later (Stage II, or ‘Hard Brexit’) The trick there, is to get the EFTA nations to allow the UK to join the EFTA, in the first place.
Having said all of that, I think there’s a chance that UK/EU negotiations will be combative and that by May 2019, there still won’t be an agreement.
Which means straight to WTO rules for Britain and full border and sovereignty controls will be restored for the UK. I just don’t think that Brits are ready for that now, nor will they be ready for that in 28 months. Just my opinion.
Perhaps I’m too pessimistic. The EU needs Britain and Britain needs the EU. Let’s hope cooler heads prevail.
Always great to hear from you!
Cheers, JBS
John, I have been looking at different web site regarding soft Brexit options.
Norway may block British membership in EFTA. In which case, soft Brexit would likely involve EEA or EEA like arrangement.
Check out the comments to Independent Britain regarding EEA. It was suggested that an EEA or very similar status is the only realistic option that could be negotiated after Article 50 is invoked. (It would require the consent of all EU countries to extend negotiations beyond two years). Trade negotiations, it seems, typically require years. (7 years for the CETA talks).
If the EFTA option is unavailable, than an EEA type arrangement may be the only option that the EU will permit other than hard Brexit or no Brexit.
BTW, it has been suggested that a soft Brexit may be the only option that will prevent a break up of the UK.
Hi Tim,
I too, have read that Norway might block Britain’s EFTA membership. And I respect Norway’s position on it, but it represents a lost opportunity for the UK.
“Nations have no permanent friends or allies, they only have permanent interests.” — Lord Palmerston (1784–1865)
However, EEA might work by giving Britain freedom to choose it’s future, without whatever restrictions the EFTA happens to have in it’s charter.
I’m anxious to get on with it. There is a window of opportunity now. Leaders change, and it would be catastrophic in my view, if suddenly Angela Merkel or Theresa May were to get voted out of office.
For the present, we have known and reliable leaders in Europe — and that gives comfort, knowing that negotiations will probably be tough but fair — for as long as those leaders are in office.
Best regards, JBS
John, I became interested in this topic when I read an article some years ago. I have to say that it has been frustrating thinking about a situation with unattractive options-it feels like a trap.
With the Anglosphere, there has been the assurance that the UK would have allies and prospective trading partners outside the EU. Most of the other EU members would be out in the cold.
(BTW, I have noticed that Scottish nationalists are now blogging about the same options-EFTA, EEA, and WTO. I suspect that they too will feel frustrated about the options following a second “indyref”).
Hi Tim,
In regards to negotiations in general, there are only two kinds of negotiations; ‘Win-Lose’ (sometimes called ‘The Law of the Jungle’) and ‘Win-Win’.
Hopefully, the leaders of our species are no longer deciding our common future using the same kind of negotiating tactics as the Mountain Gorilla or the Polar Bear — which is to say; ‘Win-Lose’. And if they are, maybe they should go back to the 20th-century where they belong, because in this new century humanity should’ve moved beyond the Law of the Jungle to something more enlightened.
Paying our leaders well and lavishing huge praise on them is only worthwhile if they’re coming up with imaginative and workable ‘Win-Win’ solutions to political or economic problems. To fête them for using the same problem solving modalities as the Mountain Gorilla strikes me as rewarding mediocrity, and the more we (the voters on planet Earth) do that the more entrenched that behavior becomes.
There isn’t a reason in the world that the UK and the EU couldn’t come up with a workable agreement that allows UK citizens to get what they voted for; Brexit, but with access to EU markets and the ability to travel through or live in the EU, or work in the EU should they be offered a job in advance of moving there (and EU citizens should receive the same courtesy in the UK) but does not allow uncontrolled transient immigration levels.
If they can’t get that done in a reasonable timeframe, we’re overpaying them.
Best regards, JBS
Could there be a Greenland option for Scotland and Northern Ireland?
Check out “Scottish Labour seeks possibility of staying in EU and UK” on line.
Hi Tim,
In a word; No.
As the entire UK joined the EC as one entity in 1973, it would need to exit the EC/EU as one entity. This seems to be the accepted legal view.
Whatever happens after that, will be determined by the voters of the UK government and the voters of the devolved governments.
However, it’s deeper than just that:
Scotland isn’t an economically viable economic unit. For one very telling example of this, it would cost $10 billion to (militarily) defend and protect Scotland — which, at a time when oil prices were $100 per barrel — would cost three times the gross petroleum revenue of Scotland.
Put another way, if the petroleum prices were again $100 per barrel, resulting in a gross revenue for Scottish oil and gas of $2.8 billion, it would cost three times that to militarily defend and protect Scotland.
Separate from the energy sector in Scotland, everything else contributes as much as it takes from the economy.
(70% of the economy is service-based, so that money simply recycles through the economy, without any appreciable economic increase)
So, in a time of $50 per barrel oil, and with more than half of Scotland’s oil reserves depleted, how can Scotland economically survive?
If Scotland paying to defend Scotland is uneconomical — why would the EU want to sink 30 billion euros into yet another black hole, economically-speaking?
(10 billion euros to defend Scotland, and covering the present 15 billion pound Scottish deficit)
I realize that it isn’t a Grecian-scale black hole, but still, that’s a lot of money to pay for a diminishing resource-based economy.
I admire and appreciate the great Scottish people, but their economy isn’t self-supporting. The UK supports the Scottish economy, but it is a ‘free rider’ on the UK.
The last thing the EU economy needs is another ‘free rider’ — especially one where the mid-size petroleum reserves are already half depleted, and in a time of $50 per barrel oil.
In 20 years, Scotland will have zero petroleum reserves left and probably triple the government spending of today — just to maintain human-based services like government pensions, unemployment insurance, welfare schemes, etc. and the then-existing infrastructure.
I will be writing about Scotland later this week… please check back.
Here’s a link for you, in the meantime: https://www.theguardian.com/society/2016/aug/24/scottish-finances-worsen-fall-oil-revenues-15bn-deficit
Cheers! JBS
Indeed, John. Actually, I expect that several different governments would work to block Scotland’s EU aspirations.
The German, to prevent an added burden on German tax payers.
Spain, to check the aspirations of Catalonia.
Perhaps a model for soft Brexit can be found in Mercosur, the South American customs union. Regarding “associate” status rather than full membership: “Associate members receive tariff reductions but do not enjoy full voting rights or complete access to the markets of Mercosur’s full members”.
Hi Tim,
Yes! Yes! Yes!
That is exactly the example that I would support the most!
Now that you’ve got me thinking about it, I will write a blog about it over the next week.
A million thanks for capturing the thought so well!
Best regards, JBS
A blog post by Andre Sapir, “Beyond hard, soft, and no Brexit”. Different options are listed and described in a table.
I find the “Continental Partnership” concept very speculative. And improbable, because it assumes people acting rationally instead of emotionally.
Hi Tim,
Yes, after the spectacle of the bust-up at 10 Downing last week between JC Juncker and Theresa May, I think the EU politicians have clearly shown that they are overly defensive and even more overly emotional = irrational.
While Theresa might be the epitome of cool, detached candor, clearly the other side isn’t that.
I know this seems a stretch now, but if the EU doesn’t stop acting like a jilted lover, Marine LePen (yes, Marine LePen) will win the French election and that will be the end of France in the EU, shortly thereafter.
I know it’s a shocking statement, but in this deeply interconnected world, what happens in London is reported in Paris only minutes later — and vice versa.
The more it appears the UK is getting ‘hammered’ politically by the EU, the more likely French voters will choose to leave the bully bloc, IMHO.
For me, it’s a simple case of causality. One thing results in the other.
It’ll be interesting to see how this plays out.
If I’m right, as long as PM May keeps a cool head, and as long as EU politicians act like jilted lovers seeking revenge, the UK can’t lose at this.
All the best, JBS
[…] John Brian Shannon. (2016). Learning toward “Soft Brexit” Instead of Chaos? [Figure 5]: Retrieved from <https://lettertobritain.com/2016/12/15/soft-brexit-instead-chaos/> […]