The Nissan deal hints at a route for Brexit Britain
The philosopher Friedrich Hegel described historical processes in terms of "thesis, antithesis and synthesis" — an initial phase where one particular view holds, then the opposite, followed by compromise. So far the Brexit debate appears to be dutifully following Hegelian logic.
The widespread assumption that Britain would remain in the EU gave way, after the June referendum, to the antithesis: the prospect of "hard" Brexit.
Now, courtesy of Japanese car maker Nissan, we have glimpsed the possible synthesis: a soft Brexit whereby Britain would retain full membership of the EU single market.
Last week the company announced it would build the next generation of two models at its plant in Sunderland, northeast England. I cannot see how Nissan could have taken that decision without firm commitments from Prime Minister Theresa May, who met Nissan CE Carlos Ghosn two weeks ago.
It makes no sense for the company to build these cars unless they expect to remain in the customs union and the single market.
I believe that May will in the end conclude that this is the best option for Britain, not least because this is where events will pull her. Right now she may overestimate the number of Brexit options.
Last week she admonished an MP from the opposition Labour party for failing to comprehend that "the way in which you deal with the customs union is not a binary choice". The MP is right. She is wrong.
The EU will not offer a sector-specific customs union. It will not split the four freedoms: movement of labour, capital, goods and services. Nor will it allow a split within any of those four. Free movement of cars but not of bicycles is a nonstarter.
Similar logic applies to the final Brexit choices. You can end up in the single market or not — or in the customs or not. In means In and Out means Out.
The EU would surely offer a single market deal if the UK asked for it. The Germans and others might tell British visitors that Brexit will be hard but this is not what the Germans are saying to each other. Germany recorded a €56bn trade surplus with the UK last year. Do you honestly think it they would sacrifice this for anything as lofty as a principled position?
I believe Germans when they say they will not compromise on the four freedoms but I also believe they would be willing to offer a soft Brexit if the UK wanted one — because it would be soft on Germany.
Say, for argument’s sake, that the UK chooses a hard Brexit with no transitional regime. Nissan would then surely have to reverse last week’s decision. There would be no industrial logic in expanding its UK car production capacity in this scenario.
So if you want Nissan and other manufacturing companies to expand in the UK, the only option is to remain in the single market — either as part of a permanent deal or as part of an interim one with an extended transition period. In the case of a car company, that period would have to exceed the life cycle of vehicle model — five to 10 years.
During that period the EU will ask the UK to respect free movement of labour and abide by rulings of the European Court of Justice.
The longer the interim period, the softer the Brexit. That might be the face-saving compromise: 10 years of full single market membership followed by either hard Brexit or an association agreement.
But does May’s promise of immigration control not preclude a European Economic Area (EEA)-type deal, where European states that are not EU members pay for membership of the single market. Yes, if she sticks to this promise with pedantic accuracy. But there is a lot she could do to reduce immigration within the single market.
EU member states are not allowed to discriminate against other EU nationals on the basis of nationality but they are allowed to discriminate on the basis of residence — which amounts to the same for practical purposes.
The government could impose a five-year minimum residency requirement for access to the National Health Service, to welfare benefits, even income tax breaks. This would get the job done. It would constitute a big cut in the disposable income of low-wage immigrants, in particular.
I agree with the proposition that it makes no sense to leave the EU only to pay for membership of the single market as an EEA member. But the UK has already chosen to leave the EU. Starting from where we are, the EEA is the best of the remaining options. It works for Nissan. It works for Scotland and Northern Ireland. And, most importantly, it will work for the prime minister.
As someone who has been on both sides of the Brexit arguments virtually simultaneously, she incorporates both thesis and antithesis. Hegel taught us where that ends up.
© The Financial Times 2016