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Brexit – Wherever Next?

BREXIT – WHEREVER NEXT?

On November 14 2018 the United Kingdom Cabinet agreed, following what was described as an “impassioned” debate, to the draft EU Withdrawal Agreement and the associated Political Declaration on the future UK/EU relationship which had been negotiated by officials.  That opened the way for the EU 27 heads of government, to formally endorse both documents.

Where the United Kingdom stands now

But this was far from the end of the story.  As the likely content of the Withdrawal Agreement had progressively become known over the preceding weeks and months it had provoked furious reactions among UK politicians on both sides of the divide.  Brexit supporters reject it because the transitional period, currently scheduled to end on December 31 2020, would keep the UK far closer to the EU and for longer than they are willing to accept, particularly if the so-called “backstop” arrangement of keeping the UK temporarily within the EU customs union has to be activated pending a definitive solution to the Irish border problem. Patriotic pro-Europeans, meaning Remain supporters, also loathe it because although it would keep trade moving, it requires the UK to implement EU rules and regulations without having any say on their content, thus underlining what they see as the self-destructive pointlessness of Brexit.

The dispute was further sharpened in the last days of November by the simultaneous publication by the Treasury and the Bank of England of their independent estimates of the impact on the UK economy of different Brexit scenarios, measured over a variety of timescales.  It was carefully stressed that these were not formal forecasts, but snapshots of what might happen in different circumstances ranging from a “no deal” Brexit to the UK’s remaining within the EU.

Both the Bank and the Treasury concurred that the “no deal” scenario would be the worst outcome for the economy over both the immediate and the longer term.  Both also concurred that the “no Brexit scenario” currently envisaged would be economically better for the UK than leaving.

These publications were immediately denounced by Brexit supporters (but without any supporting data or analysis) as fraudulent and a revival of “Project Fear”.  Anti-Brexit commentators highlighted what they see as the absurdity of the UK Government’s engaging in protracted and complex negotiations in order to make the country worse off.

Parliamentary prospects

Meanwhile the flow of (mostly junior) ministerial resignations from the Government over these withdrawal terms continues, and opposition to the draft Agreement and Political Declaration is building up. The so-called “meaningful vote” on the documents in the House of Commons will take place on December 11. Labour Party members, with a few exceptions, will vote against them in the hope of provoking the collapse of the Government and a General Election. The Northern Ireland DUP, on whom the Government’s wafer-thin operating majority depends, will vote against because the proposed regime for the Irish border involves some elements of differential regulatory treatment as between Northern Ireland and the Republic, and in their eyes infringes the unity of the United Kingdom.  The Scottish Nationalists will vote against, focusing on the longer-term objective of Scottish independence.  And so far some 100 Conservative MPs – approaching one-third of the Parliamentary party – are known to oppose the drafts, though for a variety of different reasons.  There is currently forecast to be no majority in the House of Commons for any Brexit scenario.  Confusingly, Prime Minister May has hinted at the possibility of seeking a second Commons vote if the Government is defeated on December 11, but has given no indication of what the issues or motion for such a second vote would (or could) be.

To add to the confusion, though understandably, there is also said to be no Commons majority for a “no deal” Brexit because of the damage which it is now generally accepted that such an outcome would do both to the UK economy and to the EU. But if, for the sake of argument, the Commons did vote specifically to prevent the Government from withdrawing without a deal there is no indication of what the practical consequence could be.

The only way of implementing such an outcome would be to force the Government back to the negotiating table in Brussels. But that would also require EU agreement, and European Council President Tusk and Commission President Juncker have both stated in terms that the draft Withdrawal Agreement is the most that an institution which rests on the balanced treaty and legal obligations of 27 sovereign governments can agree to.  The Union cannot offer business-style split-the-difference deals.  In practice, of course, it might be possible for the UK to secure a few tweaks here and there on specially sensitive points, but probably no more.

On December 5 the UK House of Lords will initiate a debate on the Withdrawal Agreement and Declaration, on motions which in particular oppose any possibility of a “no deal” Brexit. The outcome of this debate is not in doubt, as the Lords are overwhelmingly against Brexit.  Many peers have profound experience in international and particularly European affairs and may be expected to analyse the issues and arguments surrounding Brexit in great depth; but it is accepted that this debate will be advisory, not binding on the Government, and that decisions must be left to the House of Commons.

It is quite possible therefore that after the Commons vote on December 11 the Brexit issue and with it the Government will be cast into limbo, with no agreement on any positive settlement, an explicit or at least implied rejection of the concept of “no deal”,  but no assurance that the EU27 will be prepared to negotiate further to avoid it, and no firm ideas on any side as to where to turn next.

People’s vote?

Against this background of political impasse a second Brexit referendum or “People’s Vote” looks increasingly like the only way out.  But although in principle desirable and democratic, this could probably not be organised and held in time before the Brexit date of 29 March 2019, which has been legislated into UK law.  Special enabling legislation would be needed setting the terms for a further referendum, to repeal the date of March 29, and to permit agreement with the EU side to extend the two-year negotiating period provided for in Article 50 (and hence to push back the deadlines for the UK’s transitional period).  All the signs are that the EU27 would readily agree to such an extension.

But a further referendum would itself involve much uncertainty, as UK opinion polls have in the past two years shifted only modestly from a Leave majority towards remaining in the EU.  Crucially, there is no agreement as to what, if a People’s Vote were to be held, the question or questions might be. The choice, which in any case would need to be scrutinised for fairness by the independent Electoral Commission, would depend on the impact of a defeat for the Government’s draft on December 11 and whether ministers then saw any future in persisting with what has been negotiated with the EU up to now.  Would it be (i) The current draft Withdrawal Agreement vs. No Deal?  Or (ii) the current draft vs. Remain? Or (iii) the current draft vs. some renegotiated version (though at present any serious renegotiation looks most unlikely)? Or (iv) No Deal vs. Remain? Or (v) a threefold choice between the current or an amended draft, No Deal, and Remain?  In the case of option (v) it would presumably also be necessary, in order to secure a fair and decisive result, to employ some form of transferable vote, taking second preferences into account. If it comes to a People’s Vote, the arguments over its format will be intense.

And whatever the outcome, it would be intensely controversial. The vote could once again be in favour of Leave, but while we must assume that that would settle the matter in UK domestic politics, the EU27 might very well be unwilling to re-run all or part of what has been a gruelling and time-consuming Brexit negotiation.  That would throw the negotiations back to what has been agreed up to now, if the current draft Agreement remained as disputed as it is now, the result could be to make a “no deal” outcome more likely.  Equally, there is no indication that a decisive majority vote in favour of Remain could be secured in the absence of determined and visible Government action to tackle the real issues of localised social deprivation and of resentment against immigrants which were so important in the Leave vote in 2016.  The result could be stalemate both in UK domestic politics and in UK/EU relations for years ahead, with all the adverse economic effects which that would imply..

Negotiations on the long-term

For the moment, and for the sake of argument, let us assume that Theresa May’s draft Withdrawal Agreement and Declaration are approved by the House of Commons on December 11 and Brexit duly happens on March 29. The disputes and tensions traced above will still form the background to the vitally important negotiation on the long-term bilateral relationship with the EU27.

Political Declaration

The Political Declaration has been roundly criticised on grounds such as that it is imprecise and sets out vague ambitions focused on trying to reproduce as much as possible of the advantages which are currently enjoyed within the framework of EU membership.  Turning these ambitions into practical decisions will be arduous, and goodwill is heavily in deficit.

Formal negotiations on the future relationship must wait until the UK has actually left the Union. This, and the inherent economic asymmetry between the UK and the EU, is likely to leave the UK as the weaker partner. However both sides describe the Political Declaration as politically binding, though not legally binding pending the negotiation of comprehensive treaty provisions by the end of the transitional period in December 2020.  Honourably, therefore, both sides should jointly work to realise the ambitions which the Declaration sets out for deep and close collaboration and minimum disruptions to economic cooperation and trade.  However it is inevitable that along the way complications will arise, including special interests in both the UK and EU member states exerting pressure on negotiators for special treatment.  Very obviously the issue of fisheries rights and mutual access to UK and EU waters will be a major bone of contention.  In aggregate economic terms the contribution of fisheries to UK and EU GDP is a small fraction of 1%, but it is of major social and political importance in fishing localities.  And for example the UK’s reluctant acceptance that it will be excluded from participating in further development of the Galileo satellite positioning system does not augur well for the sort of detailed and technological cooperation which the Declaration claims to offer.

Practicalities

Carefully read, the Declaration is not all just about the virtues of motherhood.  On the practical level, and building on the draft Withdrawal Agreement, it outlines arrangements for joint management and supervision of the partnership including dispute settlement.  It proposes early assessment by the EU of UK data protection standards with a view to early determination of whether the UK standards are acceptable for a bilateral agreement.  Subject to respect for the operation in the EU of the four Freedoms (free movement of goods, services, capital and people) and for the integrity of the Single market, it proposes negotiation of a bilateral FTA with deep regulatory and customs cooperation, no tariffs or quota restrictions on goods, and comprehensive and balanced arrangements on services trade and transport.  It is manifestly in the interests of both sides to sort such things out early.  Other issues of wider import which are also specified in the Declaration, including cooperation in international fora over a wide range of topics from trade sanctions to international development and environmental protection, may be harder to operationalise.

Preparation

The Declaration suggests that preparatory work on negotiations for the new relationship should be initiated before Brexit day on March 29 2019.  That is a useful proposal, because given a constructive approach on both sides, preparatory discussions can be carried out informally, in a relaxed and non-committal manner and covering a wider range of issues.  After 29 March 2018 the UK will on present form have reverted to Third Country status with the Union. Negotiations must then take place under the formal prescriptions of Article 218 of the Treaty on the Functioning of the European Union (TFEU), and inevitably will focus, much less flexibly, on specific mandates adopted by both sides.  But flexibility, accompanied by much goodwill, will be needed if the negotiations are to lead to conclusion of a full bilateral agreement within the 21 months specified for the Brexit transitional period.


About the Author

Michael Johnson

Michael
Johnson

Michael Johnson was a senior official of the UK’s former Department of Trade and Industry, where he worked on international commodity policy, UK bilateral commercial relations with developed country markets, and the UK’s input to EU external trade policy. He is in demand as an independent consultant, and has advised governments of more than twenty developing or former Communist countries on trade policy formulation and on trade-related development projects.


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