The great divergence

Today Boris Johnson’s Brexit Deal Bill passed its second reading by 358 votes to 234, so it’s now almost certain the UK (including Scotland) will leave the EU in 42 days’ time. It’s also very likely that the transition period will last only 11 months, so that the UK will leave for real on the 1st of January 2021, only a year and two weeks from now.

For some bizarre reason, many commentators had expected Boris Johnson to move towards a soft(-ish) Brexit after his resounding electoral victory last week – it’s almost as if they had forgotten the prominent role he played in Vote Leave.

All the signs, however, indicate that he’s aiming for a Canada-style agreement – placing the UK firmly in the middle of the Atlantic Ocean. This will suit most of the core Brexiteers because they often seem to wax lyrically about the bonds connecting the English-speaking countries, and anything that will allow close and deep relations with the US will seem like a great idea to them, no matter how high the price.

There are some obvious problems with that approach in the longer term, especially that North America is about 100 times further away from the UK than France (and infinitely further away than Ireland, given that the distance is zero), and economic theory shows that trade is greater the smaller the distance between two countries. It’s therefore unlikely that increased trade with North America can offset the European losses.

There are even bigger problems in the shorter term, however. Because Boris Johnson is stupidly limiting the transition period to 11 months (the EU would be quite happy to extend it by two years), there is simply no time for a good agreement. The Brexiteers are probably still believing the EU will give them everything they want so long as they show willingness to shoot themselves in the foot when the clock runs out, but I don’t buy it.

The most likely scenario is that the EU will write a minimal free-trade agreement that covers goods and access to UK waters for EU fishermen, but excludes services (which is much more important for UK companies than goods), and tell the UK to take it or leave it. No matter how the UK responds, it will be catastrophic. Lots of companies will go bust or relocate to the continent.

I expect the US will at that point offer a trade deal that solves some of the immediate problems for the UK but in the longer term leads to the privatisation of the NHS, market access for chlorinated chickens, and so on.

So the UK will probably start diverging rapidly from the EU in a year’s time. From that point onward, the time required for Scotland to join the EU (or just the EEA if a Norway-style solution is preferred) will grow because the laws will diverge further every year. And independence will also result in an increasingly hard border with England.

I very much hope that the SNP will manage to convince Boris Johnson to pass a Section 30 order as soon as possible. Unfortunately, however, he’s probably also aware that independence gets more difficult the longer he manages to postpone it. And for that reason alone, he’s unlikely to give in.