Prime Minister Theresa May's speech at Lancaster house in January 2017 had been clearing the air from all illusions. She made clear that there was no will to stay in the Single Market, nor in the Customs Union, leaving a Free Trade Agreement as the only solution in town. But the she embarked on a long process of self-delusion. The British government believed that there must be a "third way", a bespoke solution only for Britain. This is spelled out in detail in the later White paper of the British government, but had always been debated before.
But it was a very strange debate: it took place between British parties and persons, but not with the Europeans who had to guess what the British government really wanted. Since there was no logic in the proposals but instead manifest contradictions, this was not seen as a helpful contribution. But European views were just ignored and the British press spoke about the debate as if the British government had to negotiate Brexit with the most europhobe Tories but not with Michel Barnier.
With the Lancaster speech the doors were definitely closed for all "soft Brexit" solutions like membership in the European Economic Space together with Norway and Switzerland. Theresa May seems to have believed that Britain could avoid such solutions and get the privileges of Norway and Sitzerland without the duties linked to that.
Brexit means Brexit – Theresa May has spoken
January 18, 2017
© Georg Boomgaarden
Brexit means Brexit – Theresa May has spoken
No longer Theresa May Be: her message was clear. Brexit means not leaving half way but going out of all structures linked to the EU. Call it hard Brexit or clean Brexit – that doesn‘t really matter. Membership in the single market has never been on offer without the four freedoms including free movement of persons. The Prime Minister recognized that fact and draws the conclusion that consequently she has to leave all of the EU and negotiate a free trade agreement with the EU.
The referendum did only ask if remaining in the EU or leaving the EU was preferred, after David Cameron pretended success of his very limited negotiations. Possible alternatives to membership were never debated during the campaign. Neither was any reform of the EU debated. The campaign went out of conservative control and became a UKIP campaign mainly against immigrants from other EU countries, against EU-jurisdiction (although the main thrust was against the European Court on Human Rights in Strasbourg ,which has nothing to do with the EU), and against paying a share into the common budget. The remain campaign was quite flawed but still got 48% of the votes.
Theresa May is basing her decison on the assumption that the people expect her to do what the leaving campaign preached. She said Parliament put this decision into the hands of „the people“. But this is a very flawed argument, because there was no referendum about having a soft or a hard Brexit. So this question has to be put to Parliament for a democratic decision – the courts still work on this question. But whatever the courts decide: Parliament is abdicating its sovereignty if it leaves such a crossroad decision to a flawed interpretation of the referendum.
The Prime minister said, the result of the Brexit negotiations will be put to Parliament for ratification. But at that point there is nothing left to decide for Parliament. They could only choose between the negotiated Brexit and an exit from the Union without an agreement. The real decision has to be taken now: shall Britain leave the EU once and for all or keep links to the single market and therefore keep the four freedoms and rather control immigration from outside the EU?
If there is any chance of Parliament to regain sovereignty for parliamentary democracy against populist referendum democracy it is now. There are reasons why Parliament could come to similar conclusions as Theresa May has come to. But it could also be more courageous and put Britain‘s long term interest higher than the result of a referendum based on lies. Members of Parliament will reflect the mood in their constituencies. However they would have to balance the advantages of closer (not ever closer) links with the EU against the xenophobic wave rejecting EU immigrants.
Just basing the decision on the Prime Minister‘s interpretation of the referendum result is not enough. Whatever Parliament decides, it will be the only way to give legitimacy to the decision. It is up to the Parliament in Westminster to stand up now and to raise its voice.
Theresa May said that she does not want a kind of half-in half-out status. British EU-membership has been an uneasy affair from the start, and it became more so after the EU embarked – not without British pressure – on the huge effort of enlargement to the east. Britain was the first country to open up its labour market for the new members immediately in 2004 although there was an option to wait for a seven years transition period. This was not forced upon the United Kingdom. The British government even criticized other member states for being too timid with EU-immigration.
However Britain too often insisted on a special status: getting a special rebate on the EU budget, not joining the Euro, not joining the Schengen zone, rejecting the Banking Union and opting out of many other rules. This was all compatible with membership but certainly not helpful for British influence inside the EU. So the United Kingdom was in fact half-in, half-out for most of the time.
Many partners in other EU member states were often quite desperate about the lack of European spirit in Britain. But Britain made pragmatic and positive contributions to the Union, Margaret Thatcher became one of the patrons for the single market, Tony Blair was giving Europe important impulses before he embarked on his Irak adventure. One could argue that British pragmatism was incompatible with any sentimental European Unity ideology. However the europhobes were extremely ideological and there were no signs of British pragmatism on their side.
The financial crisis made more integration inevitable – the ever closer union, subscribed by the British government when the country joined the EEC, became an imperative. The anti-EU-campaign of a europhobe press and a strong Tory minority had become so strong that Britain was no longer able to accompany other countries on a way to deeper integration.
Since I do not believe that Parliament will change the course, the debate may be over for now. Brexit means Brexit and the most pragmatic thing to do now may be to prepare negotiations for a free trade agreement. After the divorce Britain will just be a normal non-EU country like all countries of the world except the 27 member states. To speak of punishment or discrimination while being treated like all the others would be a bad show of self-pity. WTO rules, created to facilitate trade, will apply. Countries like China, the US or Brazil have a huge amount of trade with the EU under these rules.
Theresa May wants a strong and fair Britain in a global world. Some commentators dismissed this as warm words covering a cold reality. However when Britain has to struggle on its own outside the EU then doing everything to make the country strong and fair is absolutely legitimate – even more: it is the duty of each British government. But is has to be taken into account that the 27 former partners have the same goal for themselves. Selfishness is not enough to foster friendly relations.
The advantage of the EU was that under the common rule book everybody shared the strength of a near to 500 Million market place. It could be attractive to conclude a bilateral free trade agreement between the EU and Britain similar to the CETA Treaty just concluded with Canada. If a free trade agreement is negotiated the different areas of trade will be negotiated chapter by chapter seeking for common ground and common interest.
The Prime Minister has tried to outline several points where Britain has something to offer to the EU. And she put on the table what she wants to get in return. But she knows quite well that the British position is not that strong towards the twenty-seven and the EU Commission. Trade and investment flows may change directions and not just in favour of the UK. To become a global player outside of the financial sector will not be easy. I wish that the UK will be successful – but it will come at a high cost.
Theresa May knows how tricky the Brexit makes life for Northern Ireland. The only way I see for Northern Ireland is to enter into a customs union with the EU and Ireland and establish a customs border between Northern Ireland and the rest of the UK. Otherwise a hard border may be inevitable, because I do not believe that Ireland wants to leave the EU and go back into the backyard of the UK.
Her comment on Scotland will not make Nicola Sturgeon happy. To offer the Scottish government to participate in debates inside ministerial structures in Westminster is not really compatible with the spirit of devolution (the Tories never really understood). The right way would be to have a task force where the British Prime Minister and the First Ministers of the devolved governments sit together and debate the form of Brexit.
Hard Brexit is going against the vote of a huge majority in Scotland – so the whole fundament of the referendum in Scotland of 2014 has been eroded and a new referendum may be the only way to give Scotland a vote in the new situation. I am by the way not sure that Scotland will vote for independence – but it will only have major influence on how Brexit will be negotiated if a referendum is pending.
And Britain should stop to predict that Spain would veto Scotland being in the EU: It should be left to the Spanish to decide who know quite well the difference between independence against the constitution, as the Catalan government pretends, and independence based on an agreed separation as it would be in case of Scotland.
In times where a US president says that NATO is obsolete, the EU will be under high pressure to further develop its own identity also in security policy. The best thing to do would be to discard all the Turkish obstruction against an ever closer cooperation between the EU and NATO and contribute to our common European security through NATO channels. This is a consequence of British NATO membership, Brexit must not really have any effect on this, as long as the United Kingdom sticks to NATO as the main guarantee for peace in the transatlantic sphere.
The fight against terrorism is another topic where common interests do not depend on membership in the EU. This is a global problem asking for global solutions. However Britain will certainly be out of the area of the European Arrest Warrant when leaving the EU. Fighting crime will be a great priority for the future EU and it would be very important if Britain could participate. The exchange of intelligence has been privileged for the five eyes outside the EU – when Britain wants to use data gathered in the EU it must offer more than it did before when the US got more intelligence from Britain than any EU partner.
Britain wants to be free to negotiate free trade agreements with third parties. This is legitimate but certainly not compatible with being in a customs union with the EU. This would also contradict WTO-rules. So a customs union can be excluded. The advantage of the EU is to pool the power of the 27 members in trade negotiations. The EU can offer a very big market. When negotiating with big trading partners like China or the US this made a difference – size matters! And size will also matter in negotiating an agreement with the UK. It has to be observed that the EU has agreed – in line with WTO rules – a most-favoured nation status in many trade agreements. That means that no big trading partner is allowed to give third parties – even not Britain- a better status as it gave to the EU.
It is good that Theresa May proposed to try to negotiate as much as possible market access for both sides. Even under WTO rules most duties are rather low today. However it may well be in the British interest to keep duties low unilaterally. Modern companies have global production networks. Any custom‘s duties would make that network more expensive and could lead to excluding a high tariff country from that network. The additional bureaucracy due to customs procedures will be enough deterrence for business.
The advantage of the EU has always been that business needs only one rulebook. Britain may have to create quite a complicated new rulebook with a lot of exemptions if it does not want to shoot in its own knee and deter investors and loose others.
The Prime Minister explicitly mentioned the financial services. There are some rules she cannot neglect: trading Euros will be repatriated to Euroland – even to keep it in non-Euro Britain was already a concession to the UK. Those banks and non-banks that want to do business in the EU have to pay taxes and to offer jobs in the EU. The so called passporting for foreign banks that could operate all over the EU when seated in one of the EU countries – now mostly Britain, will no longer apply to the United Kingdom. So at least the units operating inside the EU have to change their location to the continent. This leaves a lot of room for London to keep the global business on board as long as it is not an EU business. The free flow of capital has come under severe scrutiny after the financial crisis since 2008. For the EU free movement of capital is one of the four pillars of the single market – but only inside the European Union.
A free trade agreement will rather not include services because competition there depends on a lot of common rules and guarantees for consumer protection. Therefore it was never easy to have a common sphere of services inside the EU. Before agreements with third parties on services can be concluded, we may have to wait for completing further integration inside the EU.
The result of any negotiations will not only depend on the balance of interests and power but also on the factor if trust can be built up between the new partners. With Boris Johnson this may become a problem because his campaign and his later grandiloquence are all but a confidence building measure. Cherry picking was an option as long as Britain participated in harvesting the common cherry tree. Now it will have to negotiate the price of the cherries with the grocer in Brussels.
British citizens traveling to the EU will have to go through passport controls and in the future also customs controls, their suitcases will be opened. This is normal for a third-country status. But it is today very unusual inside the EU. In the Schengen zone there is no passport control, all over travellers are accustomed that nobody is touching their luggage. Traders will also need a lot of additional paperwork for trading. This will make procedures rather tedious. It is the advantage of the EU that all this bureaucracy vanished inside the single market.
Theresa May offered to negotiate about the people from EU countries actually staying in the UK and British citizens staying in EU countries. This will be much more complicated as it looks on a first sight. The easiest part of it would be to extend an unlimited right to stay in the countries where they stay today. Since many do not register there we may get a problem of proof. Many Brits who live in Spain did not register. They may loose the right to stay longer than 3 months without getting visa for permanent residence.
Since I know that British bureaucracy can be very unpleasant I suppose that others may reciprocate that. The bigger problem will be that Britain will have to negotiate social security treaties or British citizens in EU countries (many of them elderly) loose their access to health services. This is less a problem for EU citizens in Britain who often have private insurance.
The Prime Minister made clear that the success of the EU is also in the British interest. I am sure that Britain‘s success is also in the interest of the EU countries. The best way to get to this succes would be to rejoin the EU. But that may not be acceptable neither for the UK nor for the rest of the EU for the next decade.
It is now up to the EU to work on its own success. This includes cooperation as well as competition with others. One of the others will be Britain. Unfair competetion will be fought with anti-dumping procedures foreseen in the WTO rules. Most member states continue to be convinced that they fare better inside than outside the EU. As long as this conviction prevails the EU can progress on its way to an ever closer union now unimpeded by British reserves against more integration. Without Britain the EU may become more careful with more enlargements and prefer to deepen the union.
Helmut Schöps says (18. Januar 2017 um 16:55 Uhr)
Vielen Dank für die interessante Analyse. GB wäre also künftig ein nur den WTO-Regeln unterworfenen Drittland wie der Rest der Nicht-EU-Welt. Gibt es aber nicht dennoch Raum für engere Beziehungen, wie sie derzeit die Schweiz oder Norwegen zur EU unterhalten bzw. ist klar, dass die GB-Regierung solche Beziehungen nach dem Brexit nicht will?
Translation:
Thank you for the interesting analysis. In the future, GB would be a third country subject only to WTO rules like the rest of the non-EU world. But isn't there still room for closer relationships like those Switzerland or Norway currently have with the EU, or is it clear that the GB government doesn't want such relationships after Brexit?
Meine Antwort: (18. Januar 2017 um 17:20 Uhr)
In der Tat hat Theresa May die Modelle Schweiz und Norwegen ausdrücklich zurückgewiesen, weil damit noch eine teilweise Unterwerfung unter den EuGH und auch Freizügigkeit verbunden wären. Auch will UK seine Handelsabkommen selbst schließen. Das geht nur ohne Zollunion.
Translation:
Indeed, Theresa May expressly rejected the Swiss and Norwegian models because they would still involve partial submission to the ECJ and also freedom of movement. The UK also wants to conclude its own trade agreements. This is only possible without a customs union.
Georg@boomgaarden.org