Paul Krugman: Breaking Up is Hard to Do

As the October 31 deadline for Brexit — Britain’s exit from the European Union — approaches, things are getting wild. The wildness isn’t driven by concerns about Brexit’s long-run economic impact, although the professional consensus is that this will be negative but not catastrophic.

After all, Canada literally spent generations not having an open border with its giant neighbor to the south. In fact, it still doesn’t: NAFTA establishes free trade, not a customs union, so trucks crossing the border still have to present manifests certifying that they’re carrying U.S. or Canadian goods, not stuff transshipped from, say, China. Yet Canada hasn’t turned into a howling wilderness. Neither will Britain, in the long run; the best estimates suggest that once there’s been time to adjust, Brexit might take something like 2 percent off Britain’s G.D.P.

Instead, everyone is focused on the morning after — the first few weeks or months after Brexit (which still might not happen.)

Why is the short run scary? Being a member of the European Union doesn’t just mean zero tariffs on your neighbors, it means more or less frictionless movement of goods. Even goods from outside the E.U. pay tariffs at the port of entry, say Rotterdam, and can move freely once they’re inside Europe. Trucks arriving in Dover haven’t had to present a customs manifest to be reviewed before entering Britain, because there weren’t any customs. So they could just drive through. And the whole British economy has been structured around the expectation that goods could flow freely.

Given sufficient time and preparation, imposing new frictions wouldn’t have to be a huge problem. Britain is a modern country with a highly competent civil service. It could hire lots of customs inspectors, have sophisticated computer systems in place, and so on. Wait times for goods crossing the U.S.-Canada border are minimal, and eventually Britain should look the same.

But Britain isn’t ready. Last week the Times of London (as opposed to The New York Times) reported on a leaked version of Operation Yellowhammer, the British government’s contingency planning for a hard, no-deal Brexit. The expected consequences were scary: shortages of fuel, food, and medicine, a three-month “meltdown” at the ports, and more.

In response, officials in Boris Johnson’s government claimed that the leaked documents were out of date, and that more recent analyses were much less disturbing. And they announced that they would reassure the public today by publishing extracts from an updated version of Yellowhammer.

But plans for the release have been called off, reportedly because after scrambling over the weekend to produce a more benign scenario, officials still ended up with something grim enough to scare the public. This is the opposite of reassuring.

And it’s hard to see any legitimate public interest in keeping Brexit contingency planning secret. Why shouldn’t people and businesses be able to make plans based on the best available information? No, the secrecy is all about politics: the Johnson government doesn’t want the public to know what’s likely to happen.

Now, the truth is that it’s hard to know what will really happen (and the research economist in me is, rather ghoulishly, eager to find out.) I used to know a very good manager who had a sign on her desk that read, “When all else fails, lower your standards.” Can’t Britain mitigate the short-run disruption by making customs checks fast and sloppy? Of course, the outcome also depends on what happens in Calais — and we don’t know much about the E.U.’s contingency planning.

And the whole thing may yet be called off: I know nothing about British politics, but it does appear that there might be a snap general election before the Brexit date, and an opposition victory could put the thing on hold.

Anyway, interesting times.