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What if Mrs May had a strategy for Brexit, and her divided opponents had not?

By Franklin Dehousse (2017-01-17)

In Commentaries

A few observers objected to my presentation of the Brexit negotiation as finally not so complex. As a matter of fact, the thesis was that this negotiation would have some complex aspects, but far from other well known episodes. In my eye, until now, the main problem lies with the approach rather than the substance. This however requires simply that you become realistic.

(Photo credit: Pixabay)

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What if Mrs May had a strategy for Brexit, and
her divided opponents had not ?

What are the objectives ?

What are the essentials ? Let’s apply Fisher and Ury’s “getting to yes” approach. (1) Everybody will be better with a deal than without one. (2) The EU needs a deal, but must protect whatever the costs the structure of the single market. This has nothing to do with reprisals against the UK, but you can’t pay for a UK deal by unravelling the whole structure. (3) The UK government needs a deal, but wants to exit according to the red lines already defined by Mrs May in October 2016 : no free movement of people, no contribution to the EU budget, no submission to the European Court of Justice.

Here, one could fail to understand all those who present Mrs May as indecisive or having no strategy. She has taken positions. She progresses carefully. She intends to invoke Article 50 TEU not too quickly (as advised by Brexiteers and Corbyn) and not too slowly (as advised by Remainers). She keeps a majority on Article 50 until now. The opposition is divided, and strongly weakened by the electoral system. And, by the way, implementing a referendum 52/48 with a divided country, divided parties, divided regions, divided classes, and at the end of an economic cycle, is far from being a piece of cake. One does not see around many British titans able to pull this. Additionally, most people describing Mrs May as “clueless” are themselves clueless about any alternative government. In a democracy, you need a government to negotiate. Finally, do not underestimate that Mrs May’s departure without a coherent alternative could provoke a bigger economic shock in the UK than the referendum itself. So presently she seems the only game in town.

Let’s believe one minute the unbelievable, that we have here a politician who says what she means. No free movement of people, no budget contribution, no submission to the European Court of Justice. Can we get a deal that requires exactly the complete opposite : free movement of people, UK contribution to the EU budget, and submission to the European of Justice ? This would be highly difficult. Mrs May would lose all credibility. This would also relaunch an endless and poisoned debate in the UK, and certainly wreck the Tory party (while reboosting UKIP) before likely elections.

Customs union as the logical solution

The logical conclusion is that these three criteria exclude any kind of EEA deal, and thus a UK participation to the single market, in the eyes of the EU. So what is possible ? This is when we discover the existence of the customs union alternative. The example is provided by the 1995 EU/Turkey agreement. What are the characteristics ? Well, you wouldn’t believe it. There is no free movement of people, no EU budget contribution, and no submission to the European Court of Justice. So we have here a mechanism that satisfies the objectives of the EU (maintening trade in goods, without compromising the single market, this being proved by 20 years of EU/Turkey customs union). It also satisfies all Mrs. May’s objectives.

Besides, for the UK government, there are immense collateral benefits. (1) According to a 2013 study, re-establishing customs controls only would cost British enterprises 3 billion £ per year. (2) Maintaining EU tariffs and quotas reduces considerably all renegotiations in the WTO framework. As far as goods are concerned, nothing changes. More money, more simplification. (3) This also eliminates largely the need to re-establish national customs offices. More money, more simplification again. (4) This eliminates the need to compensate all industries that threaten to delocalise. More money, more simplification again (especially since there are constraints on subsidies at the WTO level too). (5) The Conservative government is presently quite far from the business position on brexit. The customs union option would substantially reduce the problem. (6) Finally, Mrs May’s government needs to reconnect with the Remainers. This could become an essential part of a “One Nation” strategy. Brexit will then mean brexit, but not the severance of all trade connections.

Accepting this would be a concession from the EU, since the problem is first a British one. And in all fairness the present regime of the EU/Turkey customs union is somewhat limited for a big partner like the UK (especially if one decides to extend it to agricultural products). But it will be difficult for the EU to refuse the UK the same treatment than Turkey, the EU industry will support this too, and the solution could contribute to the general economic stability. Additionally, one must think about the future, because there could be other exits. Everything that we do now constitutes a precedent for future negotiations. In that long term perspective, everybody needs a structured and cooperative process.

A general outline

After that, what remains to negotiate ? The proper topics of Article 50 TEU. The rights of residents will be confirmed on the EU and UK side until March 2017. More money, more simplification (this will reduce the threat of limitless litigation everywhere, and facilitate the parliamentary trail). The rights of UK former public servants in the EU institutions will be protected. In the context of a global agreement, the UK will respect its huge budgetary commitments for various reasons (remaining payments, various participations to programs, etc.) but this will be prolonged on a period of 10 years.

The negotiations about the future regime for trade in services between the EU and UK could be opened simultaneously. There is no reason to wait for the final exit. According to Article 50 TEU, the exit deal must be done in the framework of future relations, which allows a discussion about them before its conclusion. These negotiations will be complex, of course. However, as I indicated before, most people underestimate the added value of the existing templates. This has been confirmed most recently by coming President Trump. If the US considers the present TTIP draft as a template for its coming negotiation with the UK, can the EU be very far from the same position ? And after that it will also become the simplest option of other third countries.

The transitory period will be essential. The immediate impact of the remaining budgetary contributions will so be reduced. The customs union will be established for the same period (with a possible renewal thereafter). Finally, the negotiation for a free trade agreement will take place during the same period. Meanwhile, the UK could create internal transitory mechanisms allowing the evaluation (and possible shadowing) of new EU regulations regarding services. This will allow both sides to evaluate the new reality. Possibly, at the end of the period, the UK could decide either to remain in the WTO framework, or to conclude a free trade agreement (possibly the TTIP also concluded by the USA), or to enter the EEA club (possibly with adapted modalities). It could even have a national debate on a new adhesion. Who knows ?

To conclude, as soon as utopia is abandoned, it becomes much easier to discover the broad outline of the brexit negotiation. And, as we see here, some options implicate strong simplifications (this constitutes even one of their main charms). So, one could ask, why is utopia not abandoned now ? Why don’t we begin to discuss seriously ? The answer is quite simple. First, in a negotiation you weaken your position if you indicate at the beginning what could be your final compromise. Second, the brexit referendum was a tremendous shock for the British society. It provoked a lot of polarisation. Many Brexiteers cry democracy and want to exit from everything. Many Remainers still re-discuss the referendum result on a weekly basis. Compromises are often presented on both sides as sheer treason. One needs to navigate such treacherous waters very carefully. Time is required to calm them. Negotiations are also an educational process. When people will have calmed and absorbed their lessons, the hour of compromise will arrive.

Then, Mrs May’s three criteria will simplify a lot of things. But why do these criteria all exclude the participation to the single market, and all support the participation to the customs union ? There, you have two options. On one hand, you can believe that all this results only from a wonderful happenstance. On the other hand, you could also suppose that Mrs May, who seems to enjoy spending evenings on files, had the opportunity to read and consult a lot between June and October, and that she now bides her time, and talk the talk. So either Mrs May is very naïve or very secretive. Take your pick. In any case, one thing is sure. If she succeeds into reaching such a compromise and having this approved by most Brexiteers and Remainers, and then the EU, she will have improved strongly the incredible mess she inherited from her predecessor. (Moreover, having essentially realised UKIP’s dream, with Labour in the doldrums, she could even try to win an election). Not bad for someone presented repeatedly as “indecisive”, “clueless” and “incoherent”. Her place in history could then become solid. As you will have guessed now, personally at this stage I wouldn’t write her off yet.

Franklin DEHOUSSE,
Professor at the University of Liège
Former Special Representative of Belgium
Former judge at the Court of Justice of the European Union