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  • Some years ago, when exchanges with other countries were viewed favorably, the United States imported a television game show from Holland. The name was changed in transit from “Hunt for Millions” to “Deal or No Deal,” but the concept remained the same. Contestants selected one from a number of briefcases filled with unknown sums of money, and then eliminated the others one by one.

    As the contents of each briefcase were revealed, the contestant got a better idea of how much money might be in his or her valise. At each turn, the host would offer a certain amount of money to end the game. Accepting an offer too soon risked missing out on a better outcome. Waiting too long might leave the contestant (sorry for the pun) holding the bag.

    It has more than two years since the Brexit vote, and the world is getting anxious about whether there will be a deal, or no deal. Both sides seem to be waiting the other out, hoping for a better outcome. But with key deadlines coming up soon and political unrest on both sides of the negotiation, the possibility that there will be no deal has been rising. That would be an exceptionally costly outcome for all concerned.

    The United Kingdom delivered its letter of intent to leave the European Union in March 2017, which set March of next year as the departure date. British Prime Minister Theresa May talked tough at the outset, suggesting that “no deal is better than a bad deal.” Her negotiating team sensed weakness, and expected their counterparts to be anxious for a deal.



    But it has become painfully apparent that Britain did not fully appreciate the complications involved, or the resolve of the EU. As these have been clarified, Brexit remorse has expanded. The sentiment in favor of a new referendum has risen sharply. (Given the complications that would surround a new vote, this remains an unlikely outcome.)

    There have been surprisingly few direct negotiating sessions between the two sides. The only major agreement reached was the establishment of a 21-month transition period from the current arrangement to the new one, to avoid any abrupt change of terms. Unfortunately, the transition period only applies if negotiations on all other fronts are concluded successfully.

    The time frame for doing so is getting frighteningly short. The outline of a new cooperation was to be ready for the European Council to discuss at its mid-October meeting, but a recent proposal from the U.K. was quickly rejected by the EU. Even if both sides agree to terms, they will have to be approved by the British Parliament. With the Tory party deeply divided over Brexit and the Labor Party waiting opportunistically in the wings, ratification may be a long shot.

    If they fail to reach a deal, the abrupt end to EU membership could have a long series of difficult consequences for Britain:

      • The United Kingdom would immediately be removed from trade agreements negotiated by the EU with nothing to replace them. Commerce would be governed by the World Trade Organization, which is struggling with a huge caseload of grievances and dwindling international support.


      • The employment status of EU workers in Britain (and vice versa) would fall into limbo.
      • A checkpoint would have to be created between the Republic of Ireland and Northern Ireland. As we discussed, this would have disastrous economic and political
        ramifications.
      • British service firms, including banks and insurance companies, would be vulnerable to increased restrictions in doing business within the EU.
      • The approximately 60 EU regulatory agencies that currently cover commerce in the United Kingdom would immediately have to cease coverage, leaving Britain to fend for itself.
      • Shipments of all manner of goods could be held up at the U.K. border. The British government has assembled plans to stockpile medicine, just in case.

    The accumulation of these hindrances would take a substantial toll on the U.K. economy, and the pound, already in retreat, could find itself in free fall.



    Neither side is anxious for an abrupt separation. Extending the deadline is certainly possible, but the EU would have to approve the extra time and would probably want concessions for doing so. The stability of the U.K. government is in some question, and the longer negotiations go on, the higher the likelihood of new elections. This would be a setback, as a new government could seek to re-open discussions on entirely different terms.

    To a certain extent, the impasse is understandable. Britain was deeply divided over the decision to exit, and its internal politics reflect that. It has been almost impossible to define a negotiating platform that mediates between those who want a clean break and those who have fear of fracture. On the other side, the EU was never going to make exit convenient or costless; this would send the wrong message to other countries who might seek “á la carte” membership.

    But the discussions have regressed over the last six months, and the resultant uncertainty has already taken a significant toll. Europe has often come up with economic resolutions at the 11th hour, but as the Brexit clock nears midnight, there is no clear way forward.

    Climbers are often cautioned about peering over the cliff’s edge, which can be frightful and disorienting. In the case of Brexit, however, it might be useful for policymakers on both sides to look down into the canyon and appreciate its depth. That might prompt them to step back from the precipice, and back to serious negotiations. No deal would be a very bad deal.