One Day After Theresa May’s Brexit Plan Fails By One Of The Biggest Margins Ever, The British Prime Minister Survives A No-Confidence Vote…

Huh? (Also, What’s In It For Trump?)

British Prime Minister Theresa May defends her Brexit efforts in Parliament

Look, we’ll admit we are pretty confused by the Brexit story. Here’s a pretty clear explainer from Reuters. But a lot of the other stories we’ve read assume some pretty deep knowledge going in. So we thought we’d just try to walk through a few key points, as we try to sort it out for ourselves as well.

Tuesday’s vote to reject May’s Brexit deal under which Britain would leave the European Union was 432-202. Wednesday’s vote to keep May on as Prime Minister was 325-306. Perplexing?

May’s Brexit deal was absolutely intended as a compromise. Instead, it made people angry. By definition, a compromise means no one gets exactly what they want, but they don’t walk away totally disappointed either. But that’s not what happened. The no votes came from all directions: politicians who felt it didn’t go far enough separating Great Britain both politically and economically, and others who felt it went too far, and still others who felt they were committing only to a process without having any visibility about the intended eventual outcome.

As May put it, in what may be one of the biggest understatements ever:

“Now MPs have made clear what they don’t want, we must all work constructively together to set out what parliament does want.”

The EU, which initially was hoping for a kind of Brexit-in-name only, where Britain would go it alone politically, and on some economic issues, but trade would remain mostly the same, is also angry. According to the Independent, that’s in large part due to the deliberate actions of Foreign Secretary Boris Johnson (equivalent to the U.S. Secretary of State). He was one of the major architects of the Brexit effort, but then showed no interest in becoming Prime Minister, perhaps correctly anticipating that’d be career suicide. Instead, he worked to irk European leaders to ensure the result wouldn’t be anything close to “business as usual.”

So what are the options now? There are at least four:

  1. Somehow renegotiate the current agreement (with the EU having very little taste for it or reason to do it.) A first step in that might be to try to negotiate a delay in Britain’s departure date, now set on March 29th.
  2. Do a “softer Brexit”, where Britain would keep very close economic ties with the EU including a permanent customs union with the EU, and a virtual continuation of a single market. This might win over the Labour Party and some others who voted against it.
  3. Do a “no-deal Brexit”, where Britain and the EU split up and curtail open or relatively open cross-border trade, which might win over some of the hard-liners who voted against it. Financial markets seem to warn that could lead to economic disaster for the U.K., as the value of the British Pound plunges every time “no-deal Brexit” seems to be a real possible outcome. (Britain never adopted the Euro as its currency, which makes all this jockeying a whole lot easier or a whole lot harder, depending on how you want to look at it)
  4. Do another vote on the original referendum, which in some ways would be the easiest way out, because were it to be voted down in a 2nd vote, then nothing would need to change. At the same time, it would mean a capitulation by Conservatives who fought long and hard for it and count Brexit among their biggest political victories.

What’s in it for Trump? Well, other than his noted support of Brexit from the beginning, and his interest in seeing it succeed because it fits with his world view and its backers are his backers, it could pose a huge challenge for the World Trade Organization, which Trump has been trying to find a way to blow up. Trump falsely claiming the WTO is very unfair to the U.S., when the U.S. prevails in most of its complaints. Which makes sense, because American corporations and the U.S. government tends to be more fair-dealing than China or Russia. At the same time, the WTO moves very slowly, and Trump has a valid point criticiz ing that; a lot of time by the time decisions are reached the damage has already been done. Still, the main reason he dislikes the WTO is it takes trade disputes out of his hands and puts in into an independent, international body. Globalism.

The reason Brexit could prove a major challenge for the WTO has to do with the border between Ireland, and Northern Ireland (which is part of the U.K.) That’s the only spot where Great Britain has a border with another country that is not separated by a body of water. (There has been talk that Scotland might break off and remain part of the EU, but that hasn’t happened yet.) So what are the British going to do? Put up a wall? No. That is too risky economically. And–even though nobody really talks about this directly–there are unbelievably big political risks as well. The “Good Friday Agreement” that ended decades of strife has now held for 20 years. So Britain is vowing the Irish border will remain open, even if there is no deal.

And that could land it in the WTO, because if another country claimed that practice is unfair to them, it might violate WTO rules. But the WTO has no enforcement mechanism. It can’t build a border or customs house on its own. When it works, it does so on the basis of agreement between it’s member countries. So if the WTO rules against the U.K., and the U.K. tells it to go away, that could weaken the global trade group further. Just what Trump wants.