The Trilemma of Brexit

The UK and the European Commission have agreed on a transition period for the UK after March 2019. However, this "agreement” still has many open points, most notably the question of Northern Ireland.

The Trilemma

The conundrum Theresa May finds herself in right now can be framed with the concept of a policy trilemma.

Three political objectives are at the top of the agenda:

1. Take back control (of money, border, laws)
2. Prevent a hard border to arise in Ireland (and thus honouring the Good Friday Agreement)
3. Keep the UK together as a political and economic unit.

Meeting the objectives

Only two of these objectives can be met as I illustrate below.

Taking back control and maintaining the Good Friday Agreement would require Northern Ireland to effectively stay in Customs Union and Single Market, imply a border in the Irish Sea and thus undermine the unity of the UK.

One might see this not only as constitutionally questionable, but also politically infeasible as the DUP (currently in a confidence and supply agreement with the Tory government) would not agree to this.

However, if the UK wants to avoid a border in the Irish Sea and take back control (i.e. leave Custom Union and Single Market), this would imply constructing a hard border in Ireland and thus violating the Good Friday Agreement.

Any alternative plan focused on a technological solution is currently in the realm of dreams and visions.

Finally, maintaining the unity of the UK and avoiding any hard border in Ireland would require the whole UK to stay in the Customs Union and Single Market, a solution also known as Soft Brexit to some and as Brexit in Name Only to others. The UK would stay closely linked to the EU, with no option to do independent trade deals, having to accept free movement and having to pay, but without any formal say.

Which raises the question: what does Brexit mean in this case?

Something has to give

So far, the British government has fudged with this trilemma, mostly with platitudes ("Brexit means Brexit", "taking back control", "red lines" etc.) and the firm intention to keep the peace within the conservative party.

However, the trilemma cannot be talked away: something has to give.

Which will it be?  And when will the decision be taken?  And by which Prime Minister?

Thorsten Beck is Professor of Banking & Finance. He writes about financial research and policy at www.thorstenbeck.com.

^{The views expressed here are those of the academic and do not represent those of Cass Business School or City, University of London.}