Why Britain is putting its Brexit eggs in Three Baskets

It took 18 months for “take back control” to become “managed divergence”. Leaks from last Thursday’s cabinet gathering suggest that Britain will propose a subtle relationship with the EU, one that binds some of its industries to single-market rules, commits others to the same spirit if not the same letter and frees yet a third cluster to deviate over time.

This triptych sketch of Britain's economic future has a quaint name that failed to charm Brussels into even momentarily entertaining its selective approach to the single market – The Three Baskets. It sounds like a pub and contains as much lucid thought.

Which leaves us to wonder why a cabinet of experienced ministers, already chastened by Europe’s refusal of impossible demands over the past year, would again ask for something so fanciful. Politics is a partial answer.

Pro-Europeans should take some comfort. Right now, they are too piqued by the supposed arrogance of the plan to notice how much it flatters their own cause

The plan at least sees the riven Conservatives through another month or so. It postpones the moment of rupture, when Tories must decide between the two stark destinies that have loomed since their own red lines forbade a place in the single market: a mere trade deal with Europe or some form of customs union. The first could harden the Border with Ireland. The second might constrain Britain's sovereign power to negotiate trade with third parties.

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The opposition Labour party's new commitment to a customs union sharpens the dilemma, as the hardest of exits risks defeat in parliament. And so to this best-of-all-worlds proposal, this denial of the real choice.

Fear of isolation

Pro-Europeans should take some comfort. Right now, they are too piqued by the supposed arrogance of the plan to notice how much it flatters their own cause. The baskets idea exposes the fear of isolation from the continental market that lives in the hearts of all but the brashest Leavers.

Ministers as set on exit as Boris Johnson, the foreign secretary, seem to have assented to a vision of the future that allows for only modest divergence from EU rules, and even then only the theoretical possibility of it.

In sectors as large as chemicals and cars, Britain would tightly align with European laws over which it no longer had a say. In financial services, perhaps, it would aspire to the same regulatory goals but reserve the right to depart in some details. In fisheries, agriculture and, well, not much else other than those nascent industries where EU law is undeveloped, such as robotics, Britain would do its own thing.

Now, leave aside the implausibility of the EU ever going along with this fragmentation of its single market. Forget, too, the bureaucratic comedy that promises to flow when the state anatomises a sophisticated economy into three discrete zones and gives each a different regime.

The Three Baskets implies so much enmeshment with Europe as to read like remorse for those impetuous earlier decisions

The real wonder is how much prominent Leavers are willing to give up for the prize of substantial market access. They cherish the legal fact of sovereignty (any alignment would be voluntary), but not the practical exercise of very much of it.

The chest-beating about open seas and untapped riches beyond Europe’s “corpse” of an economy has come to belie a certain squeamishness about going it truly alone. Only the very hardest of Leavers, mostly outside the cabinet, where they are unofficially led by Jacob Rees-Mogg, seem relaxed about the idea.

Cunning plan

Cabinet Leavers will insist that theirs is a cunning plan. Of all the baskets, the one marked full regulatory independence will end up brimming with the most industrial sectors. But their opponents have told themselves the same thing, and with rather more grounds.

This is why there was agreement last Thursday between ministers as recently hostile as Mr Johnson and Philip Hammond, the chancellor: both can claim success until the baskets are unwoven by the EU, at which point both can share the failure.

On Friday, Theresa May will explain Britain's preferred future. If it is managed divergence, the prime minister will be testing European patience, wasting scarce time that could be used to hone realistic demands and, more than anything, inadvertently proving the gravitational pull of the world's largest single market on a medium-sized neighbour.

Had she not boxed herself in with those inviolable rules in her hot-headed rookie phase – no freedom of movement, no European Court of Justice jurisdiction, freedom to strike trade deals – May might now be in a position to go beyond managed divergence and even the customs union to something like single-market membership.

The Three Baskets implies so much enmeshment with Europe as to read like remorse for those impetuous earlier decisions. It is the grudging compliment that Leave pays to Remain. – Copyright The Financial Times Limited 2018