EU-UK Agreement Kicks Brexit Can Down the Road

The United Kingdom and the European Union reached initial agreement on three major Brexit issues, but as the British prime minister once said, “Nothing is agreed until everything is agreed.” The agreement covers rights for UK or EU citizens living in either place, a €55 billion financial settlement from the UK, and the UK border with Ireland. Substantial decisions on trade and potential complications on the three points of agreement remain for negotiators, explains Jolyon Howorth, a visiting professor at Yale University. “Both the Tories and the EU leaders were keen to avoid a mutually destabilizing ‘cliff edge’ scenario, under which the UK would leave in 2019 with no agreement,” he explains. "The two sides therefore engineered the concoction wheeled out on 8 December.” Unforeseen consequences and costs continue to pop up, including a vote in parliament requiring lawmakers' approval of the final agreement, and hope lingers in some camps that Brexit might be cancelled. The uncertainty prompts many foreign businesses and professionals giving up on Great Britain as an open and cosmopolitan economy, a home or place for doing business. – YaleGlobal

EU-UK Agreement Kicks Brexit Can Down the Road

EU and UK leaders demonstrate a willingness to cooperate with Brexit agreement, but great uncertainty remains
Jolyon Howorth
Thursday, December 14, 2017

To exit or not:  The start to a successful settlement with the European Union on Brexit as shown by Theresa May and Jean-Claud Juncker received a blow from the British parliament.

NEW HAVEN: “Nothing is agreed until everything is agreed” was a caveat widely cited after the United Kingdom and the European Union reached an agreement on 8 December. That agreement covered the main terms of the divorce settlement and had been imposed by the EU as a necessary preliminary framework – and hurdle – before opening more substantial negotiations on the UK’s future relationship with the bloc. These start in February.

In principle, three main issues at the heart of the divorce are alleged to have been resolved:

·      Status of EU citizens in the UK and of UK citizens in the EU will remain as before Brexit with two exceptions: Questions remain over the status of family members, and most expats would need to obtain formal recognition of their permanent residency. Both situations would create major headaches for families and rich pickings for lawyers.

·      The UK’s financial obligations are seemingly settled with London stumping up around €55 billion after Theresa May had initially offered €20 billion. But David Davis, the UK negotiator, immediately reeled this back by insisting that the payment is contingent on the EU accepting a trade deal. That deal is precisely what must be haggled over next year. European Council President Donald Tusk warned darkly: “the most difficult challenge is still ahead. We all know that breaking up is hard but breaking up and building a new relation is much harder.”

·      Finally, on the thorniest issue of all, the “hard” border between Northern Ireland and the Republic of Ireland, the agreement hinges on an outright contradiction. To satisfy Dublin, May has stated that there will be no hard border across the island of Ireland. But the prime minister’s political fortunes depend on 10 votes in the House of Commons with Belfast’s Democratic Unionist Party, DUP. To satisfy them, she also stated that there will be no frontier between Ireland and the mainland. Borders, like boiled eggs, tend to be either hard or soft. A hard Brexit demands a hard border and to square that circle, May has “agreed” that, if necessary, the entire UK will remain within the regulatory framework of the single market and the customs union – precisely the status that a “hard Brexit” rules out. It’s a strange reversal of fortune when Ireland dictates political choices in London. One DUP spokesman stated: “This is a battle of who blinks first — and we've cut off our eyelids.” 

Before and after: If British banks fail to obtain access to the EU market post-Brexit, the country could lose 17 percent of its banking system, up to 30,000 staff and £1.5trillion of assets (Data: Bruegel)

May’s cabinet colleagues demonstrated a rare instance of unity with leading Brexiteer Michael Gove hailing the agreement as a “win” and Chancellor Philip Hammond hailing avoidance of the ruinous cliff-edge scenario feared by business. In reality, May caved in to EU demands on every front. After the disastrous electoral gamble in June, her negotiating leverage effectively vanished. She has been likened to a pilot flying the plane from the ejector seat, or to Monty Python’s dead parrot, nailed to its perch, lifeless but still standing. Little about the negotiations makes sense.

During the referendum campaign, May half-heartedly supported the Remain camp. Yet, immediately afterwards, she embraced the “hard Brexit” camp, arguing for a comprehensive break both with the single market and the customs union wth the firm statement: “Brexit means Brexit.” This gamble secured her the key to 10 Downing Street. She subsequently aligned herself with the “hard Brexiteers” at every turn, even as her leverage in Brussels crumbled. Recently, she supported the idea of enshrining “Brexit Day” in law – decreeing that the UK will leave the EU on 29 March 2019 – as she bargained with the EU’s chief negotiator Michel Barnier to allow for a transitional period of at least two years during which the UK remains subject to all EU rules and regulations.

In June, May campaigned in the General Election for “strong and stable government,” a phrase repeated so regularly and robotically that the media dubbed her “Maybot.” Since the election fiasco and May’s party losing its majority in parliament, the government has been weak and unstable, with political chaos overtaking her deeply riven cabinet. There is simply no agreement within the Tory party on what precisely the government will seek to negotiate with the EU.

Both the Tories and the EU leaders were keen to avoid a mutually destabilizing “cliff edge” scenario, under which the UK would leave in 2019 with no agreement. The two sides therefore engineered the concoction wheeled out on 8 December. The Tories hope for breathing space for businesses contemplating relocation of operations from London to another EU capital as the deadline for such decisions was rapidly approaching. UK university leaders also warn that, with no agreement on divorce terms, thousands of faculty members with EU passports would abandon the UK ship. The exodus is already happening, and the hope is to stem the tide.  

EU leaders are confident that the UK’s bargaining chips are so weak that London has no alternative but to accept one of two equally unpalatable choices: Either a total break from the EU, with status akin to that of Canada, which is limited to free trade and excludes financial services – 80 percent of the UK economy. Or explicit alignment with the “four freedoms” of the EU – capital, services, goods, people – including free movement for people, the major “red line” for Brexiteers. This scenario would be tantamount to accepting the status quo ante but with no UK voice in decision-making, precisely the opposite of the “take back control” sentiment firing the Brexit camp.

 

Pending a clear line on the government’s bargaining objectives, May remains in place. This is largely because the Tories cannot agree on who should replace her. Main contenders appear to be Foreign Secretary Boris Johnson, whose unscripted buffoonery has earned him many implacable opponents within the party; Ruth Davidson, leader of the Scottish Tories, who has no seat in the House of Commons; David Davis, minister in charge of Brexit, who recently admitted before a House committee that his ministry saw no need for an impact assessment on British business and the economy of the hard Brexit he favors; and Jacob Rees-Mogg, the foppish and aristocratic ultra-conservative who seems like a caricature of himself.

The younger generation of Tory MPs elected in 2015 and 2017 reject these candidates. Moreover, they have no desire for a leadership contest based on Brexit since this could only tear the party further apart. And a “palace coup” by Tory grandees would almost certainly lead to calls for the new leader to seek legitimacy through a general election – which would likely be won by Labour’s Jeremy Corbin, an outcome that sends shivers down every Tory spine.

Meanwhile, former Liberal-Democrat leader Nick Clegg has joined the “Exit from Brexit” lobby with a campaigning book How to Stop Brexit and Make Britain Great Again. Increasing numbers of Britons expect that Article 50 of the treaty, invoked in March to fire the starting gun for the two-year timeframe ending in March 2019, can be countermanded or even reversed. In a humiliating defeat for the government on 13 December, the House of Commons voted in favor of the eventual deal being put to a full vote of lawmakers. This is widely seen as the first significant defeat for the Brexiteers.

Both the EU and the UK leaders appear keen to play for time, the former because they recognize that time is on their side and the latter because they cannot agree on goals and some hope that public opinion will shift. Thus, the can is kicked down the road. Nothing is agreed until everything is agreed. 

Jolyon Howorth has been a visiting professor of political science and International affairs at Yale since 2002, dividing his teaching among the Political Science Department, the Jackson Institute and Ethics, Politics and Economics. He has published extensively in the field of European politics and history, especially security and defense policy and transatlantic relations – with 15 books and more than 250 journal articles and book chapters. He is the Jean Monnet Professor of European Politics and Emeritus Professor of European Studies at the University of Bath.

Copyright © 2017 YaleGlobal and the MacMillan Center

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