A Deal at what cost?

To deal or not to deal? That is the question. Or the one that has everyone in London on edge. On January 1st, 2021, the transitional period during which British relations remained the same on the level of economics and law will come to an end. There have been false alarms before, and no less than three missed deadlines during the Article 50 process, but in the case of the transition, the British government waived that possibility in June of 2020 when London declined to seek an extension of the transition. Of course nothing is ever final when it comes to the European Union, and it is not outside the realm of possibility that some stitched together extension could be on offer. EU officials have hinted as much. But there are signs that the political will to do so may be waning.

For one thing, with the need for a Covid recovery project, the EU has more important things to concern itself with, while the election of Joe Biden has altered the calculus regarding a number of issues. Internally, it means the EU no longer has to fear US encouragement of Poland and Hungary in their defiance of Brussels over "rule of law" issues. More directly related to Brexit, it means that on the issue of the Irish border, and the upholding of international law regarding the withdrawal agreement, Brussels can count on US support. It was the possibility of a Trump Administration being willing to cooperate with a Britain which violated the withdrawal agreement which pushed Brussels into demanding so many guarantees. If the US as well will not tolerate London treating the Irish border as a purely internal matter, the need for an explicit arbitration mechanism is far less.

The result is a situation in which the EU is simultaneously willing to offer far more generous concessions in order to reach a deal than ever before, but also far more willing to walk away without a deal if need be. If concessions can buy off London, and make the Brexit issue go away, the evidence is that Merkel and Ursula Von Der Leyen are willing to push Barnier to make them, even to the consternation of France and other EU states. Closure is worth the cost, and many of the areas of dispute such as dispute resolution mechanisms for the Irish border, tariffs, and regulatory policies, are far less necessary if Brussels can rely on the United States taking Brussels side on those issues in the future. While French objections are real, the veto threats can be written off as jockeying. That French Prime Minister Jean Castex revealed more during a recent visit to a fishing community when he warned his listeners that "change must come." That the EU is offering greater concessions than at any previous point in the process and should is not in dispute by Paris. Only the extent.

Yet if the EU is ready to offer substantial concessions, it is also much better prepared to walk away. With borders closed and supply lines already disrupted by Covid-19, the immediate impacts of a "No Deal" outcome are already being felt. The additional damage over the first few months of 2021 of a "No Deal" outcome looks a lot less impressive today than it did a year ago. And it is in the timescale of a few months in which European leaders are thinking of a "No Deal" scenario. With Biden in the White House, there is no prospect of a UK-US trade deal without a UK-EU one. "No Deal" would be an inconvenience to the EU, but allow it to move on in terms of relations with China, the United States, Iran and Russia. For London, it would place the UK in stasis, unable to do more than draft standstill agreements with Cambodia and Peru until it came back to the table. The same factors which make the EU willing to grant concessions make No Deal more tolerable.

If the EU's offer now is potentially more generous, it is also more final. Which may be the reason that not only did talks break down, but that Boris Johnson does not seem to have reach a "breakthrough" in his conversations today with Ursula Von Der Leyen. The discussion from the EU perspective was not about reaching an agreement but making clear to Johnson what the choices were.

More generous terms will not be particularly helpful to Johnson when it comes to making that choice, as the negotiating process between Brussels and London has never really been about the substance of Britain's departure from the EU or the future relationship. Rather it has been a political project where various political figures, having no idea what they wanted from the EU, but knowing exactly what they wanted from the issue of Brexit, focused on the abstract idea of the latter and what it could do for them, while ignoring the former. Even the decision to refuse an extension was driven by domestic considerations back in June. Under fire for an unauthorized trip by the Prime Minister's then chief adviser Dominic Cummings to Durham which violated lockdown restrictions, Boris Johnson did not seem to be in a position to undermine his credibility with Leave supporting MPs who had elected him. Cummings is of course now gone, along with many of his associates from the Vote Leave campaign. Depending on who you ask this either makes an agreement with the EU easier by removing the strongest proponents of Brexit from the decision-making process, or harder as Johnson needs to now prove that the removal of Cummings does not represent a turn against Brexit. Even experienced Brexit watchers are indicting confusion over whether a deal will be reached. I will dissent from this view. I think a deal of some sort will be reached because one has to be reached, and because the EU wants one to be reached. Because the UK has never decided what it wants, it has been the EU that has called the shots throughout the process.

The problem facing Britain's leaders has never been what they are able to politically accept from Brexit; last year Boris Johnson showed he could sell a non-agreement in many respects worse than Theresa May's hated "deal" as a triumph. Rather, it has come down to the basic problem that the British elite, having never desired Brexit in the first place, has never figured out what it wanted from it. Critics, including Cummings have been correct in that the entire approach to the process from London has been one of damage limitation. How to keep as much as possible from EU membership at as little cost as can be settled upon. Such an approach was, as Cummings and other "Hard Brexiters" have noted, doomed to end in a situation in which Britain is forced to chose between a deal which leaves it worse off than in the EU or no deal.

Cummings and acolytes erred, however in assuming this was a matter of attitude. It was easy to identify the problem in the loss-limitation approach adopted by the UK negotiators, and to predict its consequences. Much harder was to figure out what they should have done instead. Because the split over Brexit was never between "Brexiters of convenience" who had come over for political advantage either during or after the referendum, and Brexiters of conviction. Individuals like Cummings were a different sort of opportunists who favored Brexit for the disruption it could bring to an existing order, not for anything it could on its own. As a consequence, Cummings spent his year in power steadfastly trying to stir that chaos in other directions whether it was Covid policy, culture wars with the BBC, or an over-due but poorly executed assault on the entrenched civil service. Brexit was left to itself.

The major achievement of a year of talks between Boris Johnson's EU negotiator, David Frost and his EU counterpart Michael Barnier has therefore been to kill time. The UK has been quick to declare redlines, but unlike under May, there has been no effort to establish what they mean except as symbolic. The major issues of contention, fisheries, state aid, and regulatory alignment, are respectively an economic non-issue, and two areas where the UK is demanding a right to do something it has not yet decided it wants to do. Fisheries has always been the easiest to solve because it is so economically inconsequential. It can be bought off elsewhere. The reason state aid and regulatory alignment have become areas of contention is that while Boris Johnson is committed to the idea that the UK is pursuing Brexit achieve autonomy in both areas, neither he nor his government has decided what the purpose of that autonomy is. Is the purpose regulatory alignment to have higher standards than the rest of the EU, as has been implied with regards to animal welfare? Or lower ones, as when Gavin Williamson and Matt Hancock implied, falsely that Brexit allowed the UK to rush approval of the Pfizer/Moderna Covid-19 vaccine? If it was one or the other it would be easier to reach an agreement on mechanisms, and arguably if the UK does want higher standards there would almost be no need for one. The same is true of state aid rules where it is unclear if the UK's objection is to not being able to use state aid itself, or to whether EU states themselves are doing so, resulting in the absurdity of the UK demanding reciprocal limitations on the autonomy of EU members.

Because the UK is not sure what it wants, it has been up to the EU to try and figure out a formula that the UK can accept. If a deal is close now, it is because external changes have altered the equation such that the EU is willing to make substantial concessions if it means putting Brexit behind it.

Those choices are now in London's hands. Politically there may be a case for "No Deal" but it has to be understood it only exists in the form of "No Deal" on January 1st and a deal that looks the same or a bit worse a few weeks or months later. There is no WTO Option with a hostile White House. Perhaps Boris Johnson would gain from painting the EU as bullies who forced him into a surrender, but "No Deal" would still require an eventual surrender. By contrast, it is possible to sell any deal as a victory, as Johnson did last year with the withdrawal agreement.

I am almost certain there will be a deal. This is because Johnson's calculus will come down to purely what he can sell. If he had policy preferences, such as a personal commitment to specific state aid project or regulatory changes, then it would make sense to walk away if he could not achieve them. But absent any specific policy preferences that would be denied by a deal, at least in the short-run, then the choice comes down to politics. Here again, the lack of an alternative is key. No deal would make sense if London had a plan to "win" the resulting fallout politically if not diplomatically. But with Biden in the White House this seems unlikely. If there is nothing of substance being surrendered policy-wise for the British government, and politically the choice is trying to sell a bad deal now or a surrender in a few months time, the cautious course is to make a deal now and try and sell it as a success.

Of course there is always the possibility of going for broke and trying to blame the fallout on the EU, and perhaps a treacherous Biden in Washington who will be "betraying the special relationship." That, however, strikes me as a remarkably un-English course to take, full of high risks, and the need for continuous political investment in messaging. It is also very un-Johnson like. He is a man who has always followed the path of least resistance. A No Deal strategy would require not just a public relations approach to the challenges of January but a sustained campaign which would commit every other branch of government for the remainder of its term. It would require an embrace of economic autarchy, political isolation, and geopolitical non-alignment. There are some British politicians who would find such a prospect attractive. Johnson, however, with his desire to "build up" the Northern "Red Wall" seats recently captured from Labour, to avoid association with the austerity policies of George Osborne, to appease his fiancé's interest in environmentalism, and to flaunt Britain's muscle abroad, it would mean abandoning all of those. For all Boris may appeal to the Blitz spirit, the Blitz represented the commencement of a period of austerity in British life with rationing which lasted a decade. Boris does not strike me as someone with an aspiration to be a 'Hunger PM", despite his backtrack on free school meals, and Rishi Sunak really does not appear to want to be seen as a "Hunger Chancellor." For that reason I think the option of isolation and blaming the EU and Biden is a non-starter.

For this reason I expect a "deal" this week, on terms "better" than what was expected for London earlier this year, but still far worse than continued EU membership.