Brexit's Downsides Are Caused by Our Own Government

Authored by George Pickering via The Mises Institute,

Of all the many failures of Theresa May’s management of Brexit so far, none is so symbolic as the fact that the UK is currently preparing to participate in EU Parliament elections on May 23rd, even though Britain was originally scheduled to leave the European Union in March. This very public symbol of the failure of May’s Brexit strategy — to which she agreed as a condition of the current ‘flexible extension’ of the UK’s EU membership until at least October 31st — has not only caused a near-total breakdown of support for May’s leadership from within her own party, but has also led to a widespread surge of public interest in third parties.

Most notably, Nigel Farage has emerged from dormancy to become the leader of the newly-formed ‘Brexit Party’, which has shocked pundits by surging to first place in the pre-election polling. One recent poll indicates that as much as 30% of the British public intends to vote for the Brexit Party in the upcoming EU elections, fully 9% ahead of their closest rival, and over 20% ahead of the new pro-EU party ‘Change UK’, which was formed at around the same time as the Brexit Party and received equivalent if not greater media attention.

This fracturing of Britain’s usual two-party paradigm is certainly a welcome trend, especially given the Brexit Party’s explicit support for a ‘hard’, no-deal Brexit, which I have argued in previous Mises Wire articles would be the least-worst option. However, if the Brexit party do receive as much of the final vote as the polls are predicting, it will likely re-spark the public debate about the benefits and drawbacks of a no-deal Brexit, and when that debate arrives it will be important for no-deal advocates to have their argument straight about what those benefits and drawbacks are.

While it might be tempting to portray no-deal as an unambiguously positive scenario, the reality is that an institutional disruption of that kind will not be without its difficulties, and no-deal advocates might appear discredited if they attempt to deny or ignore these. The important point which no-deal advocates should understand before crafting their arguments is that, even though there probably will be some negative consequences of a no-deal Brexit, those negative consequences would exclusively be penalties and restrictions arbitrarily inflicted by governments, rather than inherent problems with Brexit per se.

For a concrete example, one need look no further than arguably the central issue of the Brexit negotiations: tariffs. The European Union is defined by the punitively-high trade wall erected around its borders, which inflicts all manner of taxes and restrictions on imports and exports to and from the bloc. When Britain finally does exit the tariff wall, its trade with the rest of the world will certainly be benefitted, allowing a greater number of international goods to be imported and sold at lower prices, and making British goods competitive abroad. However, the other side of the coin is that Britain will now be outside the EU’s wall, and so will have to pay those high tariffs when trading with the EU. While this would admittedly be a downside to a no-deal Brexit, it is important to emphasise that there is no inescapable law of nature which dictates that the EU has to maintain those tariffs, nor is it simply an existential fact of the universe that countries which leave the EU must be excluded from the single market. In other words, yes, the tariffs will inflict economic harm on Britain, but the culprit is the tariffs themselves, not Brexit. If Brexiteers emphasise this fact rather than trying to deny or ignore it, they might not only avoid appearing discredited when the negative consequences do arrive, but also manage to promote public understanding and discussion of this important economic issue.

It would likewise be tempting for Brexiteers to place the blame entirely on policies inflicted by the EU bureaucracy, but the truth is that harmful post-Brexit policies are equally likely to be imposed by the UK’s own government. This is particularly true for the issue of ‘regulatory harmonization’. Although UK policymakers had initially been considering significant deregulation as a possibility in the case of a no-deal Brexit, this option was taken off the table due to Theresa May’s commitment to transpose the bulk of EU regulations into British law. This would mean that, even in the event of a no-deal Brexit, UK consumers would miss out on the economic boost and quality of life improvements that could otherwise have resulted from abandoning burdensome and unnecessary EU regulations. Again however, the key point is that the true culprit is the policy of regulation itself, not Brexit, and Brexiteers should be no less quick to point this out simply because the source of the harmful policy is the UK government, rather than the EU.

Once Brexiteers adopt this shift in perspective, it becomes clear that the vast majority of the difficulties and downsides surrounding Brexit - from the disagreements surrounding the rights of UK citizens living in the EU, to the general economic uncertainty during this negotiation period, and so on - are actually the result of unsound policies, negotiating strategies, and demands being made by the governments involved, rather than inherent flaws in the idea of Brexit itself, or decentralization more broadly.

While some readers might regard this sort of distinction as nit-picking, its significance is that it has the potential to shift Brexiteers away from the hopeless position of trying to argue that a no-deal Brexit would have no downsides, back toward the broader task of pointing out the harmful consequences of EU policies, and of State intervention in general, which is an argument they have a much better chance of winning.