17 June 2019

Under a no deal Brexit, the UK would face much of the same obstacles as now – only it would be in a weaker negotiating position, argues Georgina Wright.

The battle to win the Tory leadership is gaining momentum and so is the prospect of no deal. In the first round of votes last week, Boris Johnson secured the support of 114 Tory MPs – 71 more votes than the runner-up Jeremy Hunt. Of the six candidates remaining, five have promised to go back to Brussels to renegotiate a deal but also want to keep the option of no deal on the table. At his launch event last week, Boris Johnson added that a no deal Brexit would be the start of new ‘amicable’ negotiations. This is not how the EU sees things. If anything, the EU27 believe a no deal Brexit would significantly weaken the UK’s negotiating hand.

The EU27 expect the UK to come back to Brussels within a few weeks of leaving with no deal

The EU27 do not believe that the UK could cope with a no deal Brexit for very long. It is true that the EU27 and the UK have agreed to a series of temporary no deal contingency measures to cushion some of the impact of no deal, but these measures would be temporary, unilateral and limited in scope.

Practically speaking, it would be up to Brussels to grant British business the authorisations (from data sharing to recognition of UK standards) they need to keep on trading with the EU – and the European Commission could decide to change or revoke them at any point. But even these measures would not eliminate the need for customs checks at the borders. The EU believe that the disruption of a no deal would be so significant that the UK would be knocking on the European Commission’s doors within a matter of weeks, without having had the time or space to come up with a new plan.

The EU27 could opt for an even stricter mandate for negotiations

But in Brussels, the EU27 are discussing how they would approach negotiations under a no deal Brexit. In January 2019, the EU’s Chief Brexit Negotiator Michel Barnier made clear that the EU was preparing for all eventualities. The EU would need a new negotiating mandate for talks with the UK – which could include stricter demands. The EU27 have said that they would refuse to engage in negotiations about the future until the withdrawal issues – that is the money, the Irish border and citizens’ rights – had been resolved up front. They could also insist on rigid sequencing, for example that there can be no agreement on financial services unless the UK agrees to grant EU countries access to its fishing waters.

The demands of national and regional parliaments will make the EU more inflexible

The UK would no longer be negotiating as a member state but as a third country. This will mean new voting rules and the involvement of new players on the EU side. Unlike the withdrawal talks, a new UK–EU deal would need the approval of all rather than just a majority of member states. And if the deal covers areas that fall under EU and national law, such as energy, citizens’ rights and some aspects of the internal market, then national and regional EU parliaments will also need to ratify the deal.

The EU is likely to engage parliaments early on to avoid a repetition of what happened at the end of lengthy negotiations with Canada – where Belgium held up ratification of the deal because one of its regional parliaments had reservations around labour standards. This could constrain the EU’s ability to agree to some of the UK’s demands later on in the process.

The EU27 will not be in any rush to return to the Brexit negotiating table

But a no deal would have unintended consequences too. Some EU governments worry that rowing back on their negotiating red lines to suit the UK would encourage anti-EU politicians in their own countries to use similar tactics to get the EU to change position. With so many difficult discussions on the horizon – from the eurozone to the refugee crisis – the EU will be keen to avoid setting a precedent in the Brexit talks. Member states could try to delay the start of negotiations – even if no deal means economic and political damage on both sides.

Supporting, or not rejecting, a no deal exit may be a viable campaigning strategy – but it is a risky political strategy. Any lingering goodwill between the UK and EU27 would be squandered. It also forgets that the UK would be negotiating from a different starting position. If a new prime minister is serious about securing a Brexit deal, he or she will need to be honest about the trade-offs and how a no deal would inevitably weaken the UK’s negotiating hand.

Comments

A good article, but I would add one critical point:

"and the European Commission could decide to change or revoke them at any point."

As well as this, and the fact that such matters could easily be turned to use as negotiating levers, the situation could actually be far worse!

The Commission is bound to implement, monitor and enforce EU regulations and, in particular, to preserve the integrity of the Single Internal Market. Thus, while it might be tempting to suggest that, for example, things could be allowed to slide for a while as regards the Irish Border until the fog begins to clear, in practice the Commission could very quickly find itself facing formal complaints and legal cases before the ECJ in respect of failure to enforce the rules. Organisations such as citrus grower's associations in Mediterranean countries or those representing large players in the meat industry will already have been consulting their lawyers to ensure that there can be no possibility that the UK could be used as a conduit for products which could potentially affect their interests.

The Irish border is a political problem and to some extend a local economic problem.

But the real Brexit economy problem for the UK and EU is so to speak "at Dover" and hugely more a problem for the UK than it is for the EU27.

The UK will unilaterally set its rules and WTO tariffs, while the EU27 will have to follow its WTO MFN tariffs for import from the UK. This is something the EU commission knows all about how to handle - with an Iron fist in a soft diplomatic glove.

This article could really do with not assuming that the EU27's predictions are correct. What if No Deal is, indeed, far more liveable than they imagine?

What would be the situation then?

You can't just assume that a No Deal would 'inevitably' weaken the UK's position; you have to examine both sides.

No deal might be 'liveable', but it would mean we have no trade deal with our closest neighbours who also happen to be the largest trading block in the world. If Britain post-Brexit wants to be a global trading national striking ambitious trade deals across the world (this is what the Brexiters all say), then why, when it comes to our closest and largest potential market, will WTO terms suffice? If Britain wants to do trade deals, it will want one with the EU, sooner or later. It's just common sense. Imagine telling your kids they can play anywhere they like, apart from in the massive and well-equipped park right next to your house. How long will they stick to that rule? It makes no sense.

So the onus isn't on people like Georgina to somehow concoct a possible alternative scenario for events that from all sane angles look like they'll be a disaster. The onus is on those who think no deal will be 'fine' to explain, for instance, why British businesses deserve to suddenly lose frictionless access to a massive export market overnight, and why they think these businesses will be happy to put up with this for the long term.

Take Scottish fishermen for example. Being out of the EU would mean the end of quotas, which would be great for them, except that the EU is their biggest market. People in the UK don't eat much fish. What will a creel fisherman from the outer Hebrides do with his premium quality, high value nephrops if he can no longer send it to Spain or France? How long is he going to last before he starts kicking up a fuss with his local MP and demanding action? Weeks? Days? Now multiply that by every UK business that has the EU as a key market. Are these people really going to just shrug their shoulders, say 'oh well' and move on?

Of course, all the Brexiters say that we will get a trade deal with the EU, and can negotiate that once we've left. At which point the EU will say 'fine, well first let's get the withdrawal agreement signed - the Irish backstop etc - and then we'll talk trade.' There's no other likely scenario - so again, the onus is on supporters of no deal to explain how they see this unfolding, and what reasons there might be to believe that this isn't going to happen.