Deal or no deal?
Recent uncertainty in the Brexit dynamics has reflected the difficulties the British prime minister has been facing over her Brexit choices for more than two-and-a-half years.
She had spent two years negotiating the plan aimed at bringing about an orderly Brexit on March 29, and setting up a 21-month transition period to negotiate a free-trade deal with Brussels. Her deal included both the withdrawal agreement on the terms on which the UK leaves the EU and a political declaration for the future relationship.
It would be important at this juncture to clarify what would be the implications of a “no-deal” Brexit where the UK would cut all ties with the European Union overnight. Theresa May’s government and many others believe this would be hugely damaging and want a more gradual withdrawal.
However, if parliament cannot agree on that, and nothing else takes its place, the UK will have to leave without a deal. This would mean the UK would not have to obey EU rules. Instead, it would need to follow World Trade Organization terms on trade.
Many businesses would also see new taxes on imports, exports, and services, which are likely to increase operating costs -- the prices of some goods in UK shops could go up. The UK would also lose their trade agreements with other countries as a member of the EU, all of which would need to be renegotiated alongside the new agreement with the EU itself. Manufacturers in the UK would also expect to face delays in components coming across the border.
It is true that within this context, the UK would be free to set its own immigration controls. However, some UK professionals working in the EU and UK expatriates could face uncertainty until their status was clarified.
It may also be noted that the European Commission has stated -- even in a no-deal scenario, UK travellers will not need a visa for short visits of up to 90 days. The border between Northern Ireland and the Irish Republic would also become an external frontier for the EU with customs and immigration controls, though how and where any checks would be made is not clear.
The recent parliamentary dynamics has thrown the manner of departure -- and the timing of it -- into further doubt. Several media outlets have reported how the European leaders have reacted with dismay to the latest round of voting on Brexit. They have however not given any indication they were willing to make concessions. Nevertheless, several have also warned of increased chances of a no-deal Brexit, which many MPs fear will cause chaos at ports and damage industry.
Michel Barnier, the EU’s chief Brexit negotiator, said: “Brussels ‘profoundly regrets’ how the UK’s MPs voted, after two years of negotiation based on the red lines of the British government.” European Council President Donald Tusk has also appeared to suggest that the UK should stay in the EU: “If a deal is impossible, and no one wants no deal, then who will finally have the courage to say what the only positive solution is?” he tweeted.
Other analysts have also referred to another important dimension -- while the economic costs might be asymmetric, the impact on the EU and its member states would be far from negligible, with significant losses especially for countries with close economic ties to the UK. As a result, both parties should make positive efforts to mitigate the worst effects through immediate planning at the highest political level both in short-term and mid-term dimensions. This would be the only way to avert logistical chaos and legal uncertainties that might become significant barriers.
It needs to be remembered by the EU 27 that till now they have displayed unity but such harmony is likely to fray in a no-deal scenario, to the detriment of the EU 27. In the countries hit hardest by a disorderly Brexit, it is likely that there will be strong domestic pressure to find quick-fix solutions, even if these go against common EU positions.
Already in the run-up to a chaotic exit, diverging risks are making some member states far more inclined to extend Article 50 than others. In this context, if the UK reneges on its commitments made during the first phase of the negotiations on EU citizens’ rights, financial obligations and the Northern Ireland border -- the potential of disagreement between EU member states might increase further.
It would also be pertinent to point out here that the evolving aspects is likely to lead to the EU being faced with some awkward connotations created by a changing political geography, from Gibraltar to the Channel Islands, to Crown dependencies in the rest of the world, as well as for the EU’s relationship with countries such as Switzerland, Norway, and Turkey.
No deal would also make a second independence referendum in Scotland almost certain. Current opinion polls indicate that a chaotic exit might well be enough to lead to a separation of Scotland from the rest of the UK. This chain of events would most likely be followed by an EU membership application.
Experts are also pointing out that that there might also be other challenges for the EU 27 in its future relations with the UK. There could be competition and conflict pertaining to contested resources and markets in areas such as fishing and energy. This scenario might open the possibility of the UK adopting intensive mercantilist economic policies, potentially based on lower standards. In global trade relations, the UK could also pursue trade deals by undercutting the EU, driven by a necessity to quickly establish new economic relationships.
Similarly, strategic analysts have noted that Europe’s role in the world could possibly also undergo a shift. Current cooperation on issues such as climate change, development or combating tax havens might not then be taken for granted. This would then appear as a challenge in the field of internal and external security for the EU where UK capacities remain substantial within the NATO context.
It has also been observed that the EU could then have to deal also with situations where a major European power might seek separate strategic relationships with key countries around the world, including the US, Russia, and China.
This would then open the door to “divide-and-conquer tactics” that might lead to divergent positions on crucial issues such as the global multilateral trade system, sanctions, or openness to investment in strategic sectors. This would require the EU 27 in advance to create a common strategic “negotiation position” for all eventualities that might result from future tribulations.
Muhammad Zamir, a former ambassador, is an analyst specializing in foreign affairs, right to information, and good governance. He can be reached at [email protected]