Daily Times

British Prime Minister Theresa May is leading the United Kingdom toward a very “hard” Brexit in 2019 – and potentially off a cliff, if the UK leaves the European Union without an exit or trade deal. In her recent speech, May outlined her objectives for negotiating with the EU, and made it clear that she will prioritise hardline Brexiteers’ demands over the country’s economic interests.

It isn’t surprising that May would choose a Brexit variant whereby Britain leaves both the EU’s single market and its customs union: she knows little, and cares even less, about economics. Her ultimate objective is to survive as Prime Minister, and she believes that controlling immigration – a longtime personal obsession – will endear her to “Leave” voters, and that ending the European Court of Justice’s jurisdiction in Britain will pacify the nationalists in her Conservative Party.

This stance rules out continued membership in the single market. Until now, Brexiteers had denied the existence of any political tradeoff between rejecting free movement and maintaining free trade with the EU. As Foreign Secretary Boris Johnson fatuously claimed, Britons could have their cake and eat it. May has now belatedly admitted that this is impossible.

Economically, this is a lose-lose proposition for the UK, which will now forego the benefits of free exchange with the rest of the EU, as well as the contributions of hard-working, tax-paying EU migrants. UK-based services providers, notably financial firms, will lose the “passporting” privileges that allow them to operate freely within the EU.

May was less honest about the implications of leaving the customs union. She wants Britain to set its own tariffs and other trade commitments at the World Trade Organization, and then independently negotiate preferential arrangements – misleadingly called “free-trade agreements” – with some countries.

But this will entail customs controls on trade between Britain and the EU, including goods and services crossing the border between Northern Ireland and the Republic of Ireland. A new border bureaucracy will have to check customs compliance, calculate import duties depending on where goods are deemed to have originated, ensure payments, verify that goods comply with EU standards, and so forth. This will be particularly costly and disruptive for manufacturers with complex, just-in-time supply chains: cars that are “made in Britain” actually include many components that cross borders repeatedly during the manufacturing process.

Rather than come clean about this, May is seeking “frictionless” trade through “associate membership” in the customs union, even though this directly contradicts her assertion that Britain does not want to be “half-in, half-out” of the EU. Either way, such an arrangement is politically implausible, logistically impossible, and illegal under WTO rules. May’s promise to pursue an exit and a trade deal simultaneously – and both within two years of the formal start of the withdrawal process (which she aims to initiate by the end of March) – is similarly unrealistic. For starters, the EU insists on settling the divorce terms before discussing any future relationship. This is no mere formality: While both sides could agree that EU citizens already in the UK, and Britons in the EU, can remain, an attempt by either side to use these people’s status as a bargaining chip could backfire. What’s more, the EU is seeking up to ?60 billion ($64 billion) from the UK to settle outstanding liabilities.