© Frank Augstein/Pool via REUTERS

After the Brexit negotiations is before the Brexit negotiations. The first phase was difficult enough. The major difficulties stemmed from the UK’s side: Theresa May suffered more parliamentary defeats than her five predecessors together, and Boris Johnson also lost his theoretical majority within a few weeks. Only the snap elections at the end of 2019 provided clarity, after which the United Kingdom was able to leave in an orderly fashion after all on January 31, 2020.

The EU-27, on the other hand, were characterized by unusual unity. The Withdrawal Agreement secured the rights of EU citizens in the UK and the British commitments to the EU budget, and set a transition period until the end of 2020 and how to deal with the special situation in Northern Ireland. However, only the divorce issues of this complex separation are sorted out, with the exception of Northern Ireland. Now the real question of the Brexit needs to be answered: under what conditions should the EU cooperate with this ex-member, Europe’s second largest economy and a close NATO partner?

The political context for the next negotiations has changed significantly. First, Brexit has become irreversible, at least in the medium term. Until the end of January, remaining within the EU was still a possible outcome for the UK. According to the ruling of the European Court of Justice, London could have withdrawn the withdrawal notice at any time before the country had formally left the EU. The opponents of Brexit therefore focused on a second referendum: time and again, MPs in the House of Commons fought over whether Brexit should happen at all, and less about what should happen afterwards. This political struggle has now been decided.

Second, the negotiations are taking place under even greater time pressure than before. Article 50 set a two-year deadline for the withdrawal negotiations, which because of the internal political blockade in London had to be extended three times in order to prevent a no-deal Brexit. Partly because of these extensions, the transition phase set for the end of 2020 shrank to just eleven months, during which the future relationship is now to be negotiated. This is very ambitious compared to the average duration of about five years in EU free trade negotiations.

Moreover, the post-Brexit agreement is intended to regulate many more complex areas: economic cooperation in all its facets (goods, capital, services including financial ones, data, energy, mobility of persons, transport, aviation, fisheries), internal security (operational cooperation, data exchange), external security (foreign policy coordination, sanctions, CSDP operations) and a common institutional framework. Nevertheless, Prime Minister Johnson has publicly rejected the legally available option of extending the transition period and had it anchored in law that the UK shall not use it.

Danger of a No-Trade-Deal Brexit

The negotiators will thus have to finish a new accord within the remaining few months. At the end of the transition period, however, the threat is no longer a chaotic “no-deal Brexit”—after all, the UK has already left the EU in an orderly fashion. Instead, “only” a no-trade-deal Brexit looms, i.e. the UK leaving the EU single market and customs union without a trade agreement in place. It would be possible to avoid major chaos, but the economic consequences of the reintroduction of customs and border controls between the EU and the UK would be significant, in particular for the UK. However, London is playing down concerns about this outcome: Johnson now speaks of an “Australia model” as an alternative to a trade agreement. Australia does not have a fully-fledged trade agreement with the EU, but it does have arrangements for regulated dealings, for example regarding aviation. The political conclusion is paradoxical: precisely because the consequences of a no-trade-deal Brexit are less than those of a no-deal Brexit, political inhibitions are lower so the scenario has become more probable

Last but not least, the domestic political conditions in London are completely changed. Until December 2019, the British government, parliament, and society were deeply divided on Brexit and could not agree on a clear negotiating position. Compromises agreed by the UK government in Brussels rarely survived the infighting in the Conservative Party. The House of Commons in particular rejected a no-deal Brexit, but also voted down the Withdrawal Agreement, a second referendum, or any other Brexit option.

No Tory Rebels Left in Power

Although British society is still divided—a narrow majority now views Brexit as a mistake—the Brexiteers have achieved a resounding domestic success. With the slogan “Get Brexit Done,” Johnson captured the mood of the British electorate and won a clear majority in parliament. The much-contested ratification of the Withdrawal Agreement became a formality. At the same time, Johnson decisively triumphed in the Conservatives’ internal power struggle over their European policy, which has lasted for over 30 years. All members of the government and Tory deputies have had to subscribe to a policy of hard Brexit. Since the latest reshuffle, all major ministerial offices in cabinet were given to politicians who supported Brexit before the 2016 referendum.

It is symbolically important that none of the Tory rebels who pushed through the anti-no-deal legislation against the will of the government in autumn 2019 made it back into the House of Commons. Domestically, Johnson now has a largely free hand to set his Brexit policy. The only restraint may come from Northern Ireland and Scotland, as a hard Brexit would exacerbate the pressure on the union of the British state. Nevertheless, the direction for the UK government seems clear—a full break with the EU, with a regular free trade agreement but no conditions that would prevent the UK from setting its own standards, laws, or autonomous trade policy.

The EU and the United Kingdom are thus facing a different round of very critical negotiations. Unlike before, the line of conflict will no longer run through the British Parliament, but between London and Brussels. Although many structural factors are similar, this different political dynamic will fundamentally change the next phase of the Brexit negotiations. Therefore, the EU should not make the mistake of uncritically maintaining its—so far successful—approach. In the short time available for the negotiations, the EU-27 face four strategic challenges.

Developing a UK Model

The overarching challenge is to find a new model for cooperation with a large European third country that does not want to integrate into the EU. Until February 2020, the EU has avoided defining this model and retreated to the position that future relations with the United Kingdom could only be negotiated after the United Kingdom has withdrawn. Politically, the chaos in London and the possibility of a second referendum contributed to the fact that the EU-27 did not have to answer this question. In consequence, the most crucial matters of Brexit remained ambiguous in the first phase of negotiations, with the legally non-binding “political declaration” only sketching in what areas the UK and the EU want to cooperate in the future.

Now Johnson has clearly expressed a preference for a model with the greatest possible distance from the EU. He has also distanced himself from May’s ambitions to negotiate at least frictionless trade in goods, if not services. All the “soft” models of Brexit, from a customs union to deeper access to the internal market, are thus politically off the table. The EU member states, in their mandate for the next phase of the Brexit negotiations, are also aiming for a regular free trade agreement.

Viewed positively, there is thus common ground to start from. However, due to the UK’s geographic proximity, its economic size, and its close economic links to the EU after almost 50 years of joint membership, the EU and its member states want stricter provisions in terms of a level playing field than in other comparable trade agreements. Within the short time frame, the negotiators will therefore have to develop a new “UK model” of partnership―a new balance between close partnership, British and EU sovereignty, more limited access to the common market and to EU programs, and corresponding obligations.

Expanding the Barnier Method

Closely related to this is the second strategic task: to preserve the unity of the EU-27. In the first phase, the EU-27 succeeded in asserting their interests in part because they were more united than ever before. This unity was based on two factors.

On the one hand, the EU institutionally developed a clear, consistent negotiating line with the “Barnier method.” The European Commission and its chief negotiator Michel Barnier were given sole responsibility for the negotiations, and national governments did not conduct their own bilateral negotiations with London. At the same time, Barnier kept everyone on board with high transparency, a lot of technical coordination at the working and political level as well as very regular reassurances of support from the national capitals. On the other hand, the EU-27 also benefited from the political framework of the Article 50 negotiations, in which they were able to agree on a common objective—to protect the integrity of the EU and the internal market—with solidarity toward the special concerns of individual member states (Ireland in regards to its border to Northern Ireland, Central and Eastern Europeans in relation to their citizens in the UK, and so on).

In the negotiations now to come, the Commission will continue with the same method, as Barnier has been re-appointed and given a new mandate. Technically, the EU-27 are again very well prepared. However, it will become more difficult to maintain political unity. The EU-27 will have to make a dual strategic choice— both in terms of the trade-offs outlined above, but also of the priorities to be negotiated in the short transition period. The mandate that the EU states have given to the Commission is extensive, partly because they have not yet been able to decide between different priorities of the member states. Should the focus be on fisheries (important for North Sea countries), the level playing field (important for EU countries with strong economic ties to the UK) or security cooperation (important for Central and Eastern Europe)? Confronted with a British government that is strengthened at home and prepared to play off and promote differences between EU member states, the EU-27 therefore needs, in addition to good technical preparation and negotiation management by Barnier, stronger political coordination of the national governments.

Triangular negotiations

The third strategic challenge lies in a potential struggle with the United States over Britain’s trade, but also foreign and security policy anchoring. With Brexit, the UK is losing its already weakened role as a “transatlantic bridge.” Instead, London needs to reposition itself. From a European perspective, it is important to prevent London from turning fully toward the US.

In trade policy, triangular negotiations are on the agenda for 2020—the UK wants to negotiate simultaneously with Washington and Brussels, and the EU and the US government have also begun talks on a (less ambitious) trade agreement. Although the UK trades much more with the EU than the US, a quick agreement with Washington is of the utmost political importance for the Brexit proponents. US President Donald Trump also has an interest in a success before the US elections in November 2020. Publicly known US negotiating goals include opening up the UK markets for US products that would not be admissible under current EU regulatory standards. Similarly, the EU wants to establish level playing field provisions to ensure that existing European standards are maintained in the UK, if not—as demanded by some national governments—a “dynamic” alignment to EU standards. London wants to use these triangular negotiations to its advantage. The EU will thus also have to consider the global dimension in the negotiations with the British government. Protecting existing standards, for example, may be more in the European interest than a very hard negotiation stance insisting on dynamic alignment, and thus driving London into the arms of Washington.

Albeit under different circumstances, this also applies to foreign and security policy. Remarkably, since 2016, the British government has taken a stronger European stance on foreign policy issues where the Trump government and the majority of Europeans differ. This applies, for example, to dealing with Iran, the Paris Climate Accords or, most recently, Huawei in 5G infrastructure. So far it has also been possible to separate tensions in the Brexit negotiations from foreign policy cooperation. Even after Brexit, the EU states, above all Germany and France, have an interest in involving London in foreign and security policy. This will not, or only to a very limited extent, be achieved through the EU institutions, where the UK as a third country cannot have a seat. What is needed here is close bilateral and multilateral cooperation such as the E3 group on Iran, without undermining the EU framework.

Forging a New Partnership

The forthcoming negotiations with London will be difficult and again tie up a lot of political energy and attention in the EU. The pressure on the unity of EU-27 will increase. The changed political dynamic in London also means that the risk of a domino effect is returning. Until now, the chaos in London encouraged a perception of Brexit as a deterrent in other EU countries. Now Johnson is the political winner, at least domestically, whereas negative economic consequences have not (yet) materialized to such a large extent. In the medium to long term, the UK can become a close partner, but also an economic and political counter-model to EU integration. Even now, hard-core Brexit supporters argue that London should support euroskeptics across Europe.

The EU’s response to this challenge cannot be to “punish” Britain by making negotiations as tough as possible. While the EU should draw a clear dividing line between membership and partnership, it has a vested interest in placing the partnership with London on a lasting and successful footing. The fourth strategic task is therefore ultimately the most important one for the EU: strengthening itself and increasing the attractiveness of EU membership. After all, the best response to the challenges posed by the Brexit would be to demonstrate the advantages of the successful model of European integration.          

The post Wanted: A British Model appeared first on Berlin Policy Journal - Blog.

© REUTERS/Simon Dawson

March 29, 2019 is the date when the United Kingdom will, according to all expectations, become to first country to ever leave the European Union. That’s just eight weeks before citizens in the remaining 27 EU member-states will be called to the polls to elect the next European Parliament.

With Brexit negotiations hitting the wall and political paralysis reigning in London, it is still completely unclear how Brexit will unfold. Even an extension of negotiations beyond the envisaged exit date cannot be ruled out. However, whether it ends up being a “hard Brexit,” “soft Brexit,” or a “no deal,” the UK’s political representatives, including the 73 British members of the European Parliament, will have to leave the EU institutions as soon as Britain withdraws from the EU. This also applies for the transition period—should one be agreed—during which the UK, according to the draft withdrawal agreement, will continue to be bound by EU rules but will no longer be represented in the EU institutions. That won’t just mean the departure of Nigel Farage, the former leader of the UK Independence Party (UKIP). It will also have a noticeable impact on the balance of power in the Strasbourg parliament.

The EPP as Winner

Among the major parties, the European People’s Party (EPP), home to the German Christian Democrats, Chancellor Angela Merkel’s party, is set to benefit the most from Brexit. Since the British Conservatives left the EPP in 2009, Europe’s largest party has had no partner in the United Kingdom. As every other parliamentary group is set to lose MEPs, the EPP’s weight will increase in relative terms. In contrast, the Socialists and Democrats (S&D) will lose the British Labour Party. Labour has not only 20 MEPs, but also reached 40 percent of the votes in the last UK elections—while Social Democratic Parties slumped in Germany, France, Italy, the Netherlands, and elsewhere. The S&D are thus set to lose one of their biggest members. The expected losses for the liberal ALDE group, the European Greens, and the European left will be significantly smaller.

This matters for the balance of power in the European Parliament. Combined with the expected losses of the social democratic parties in most of continental Europe, Brexit is expected to further strengthen and secure the EPP’s prospects of remaining the largest group in Strasbourg. These shifts will also have an effect on the Spitzenkandidat or “lead candidate” system. In 2014, the battle for the position as the largest parliamentary group was still considered an open race. Then, Martin Schulz, S&D’s leading candidate, could see himself as having a chance of becoming President of the Commission. But after 2019, majority building in the European Parliament will probably only be possible with the EPP. The EPP’s Spitzenkandidat will have, therefore, the best chance of becoming the President of the European Commission.

A Bad Deal for EU-Skeptics

The impact on the EU-skeptic groups will be even more significant. Due to their gains in the 2014 elections, EU critical parties have, overall, picked up nearly 20 percent of the seats in the EP. Nevertheless, they are divided across three political groups, and British Members of the European Parliament (MEPs) play an important role in each of these. The (so-far) moderately EU-skeptic grouping of the European Conservatives and Reformists (ECR) is supported by two main national groups, the British Conservative Party and the Polish Law and Justice Party (PiS), which together account for 37 of the 73 ECR MEPs. Given Britain’s departure, the EP will lose the EU-skeptic MEPs who have at times been the most constructive. Even after Brexit the ECR, which is comprised of parties from 17 member-states, will have enough members to continue as a political group. However, its identity will be much more Central/Eastern-European, as 31 of the 54 remaining ECR MEPs will come from this region.

On the other hand, the “Europe of Freedom and Direct Democracy” (EFDD), a fundamentally EU-skeptical group, is on the brink of collapse. From the start, this group has been a partnership of convenience between UKIP and the Italian Five Star Movement. While Brexit will see UKIP leave the European Parliament, the Five Star Movement has (at least rhetorically) scaled back on its criticism of the EU. For example, it voted for the Article 7 sanction procedure against Viktor Orban’s Hungarian government. It is thus likely to leave the EFFD, which will find it difficult to survive Brexit. The EFDD’s smaller members will therefore have to reorient themselves, either to the ECR or the ENF. The Swedish Democrats, for example, already left the EFDD in July for the ECR. This also affects the Alternative für Deutschland (AfD), whose sole remaining MEP (of an original seven) sits with the EFDD. After the next elections, however, the AfD hopes for a significant number of MEPs, who thus may have a strong influence on the shape of the EU-skeptic groups in the EP. The EFDD’s time is certainly coming to an end.

The also fundamentally EU-skeptical group “Europe of Nations and Freedom” (ENF) is not home to any British party, though it still relies on individual British members to maintain its status as a political group. However, given expected gains for example for the Italian Lega, the ENF is likely to be able to form again after the 2019 elections.

Put simply, the EU-skeptic spectrum will have to rearrange itself after Brexit and the 2019 European elections. There are two basic scenarios for this: The first is a continued division into a national conservative ECR group with a strong central and eastern European influence on the one hand and a deeply right-wing, populist, fundamentally EU-skeptic ENF on the other. In this scenario, both groups would continue to struggle for the allegiance of national parties and thereby the dominance of the EU-skeptic camp. The second scenario is a collective EU-skeptic group that could reach from Hungary’s Fidesz (currently EPP), to the ECR parties, the EFDD and the ENF. A collective parliamentary group such as the one envisaged by Lega leader Matteo Salvini and supported by Donald Trump’s former advisor Stephen Bannon would have the potential to become the second largest parliamentary group in the EP after the 2019 elections.

A Shift Toward the Eurozone

However, shifts take place not only between political parties but also between member states. Already in the summer of 2018, the EU institutions decided how to deal with the 73 soon-to-be-vacant seats after Brexit. 27 of them will be divided up among 14 underrepresented member states in order to address imbalances in parliamentary representation.

The European Parliament will still become noticeably smaller for the first time, shrinking from 751 to 705 MEPs. France, for example, will get five additional MEPs, and Ireland two. Germany, however, will receive no additional representatives, as it is already at the upper limit of 96 set by the EU treaties.

The redistribution is based on shifts in the population sizes of the member states, but will also have a political effect. As a result of the withdrawal of the largest non-euro country, 85 percent of the EU economy will be concentrated in eurozone member states.  At the same time, 22 of the 27 redistributed seats are going to eurozone members. As a result, the share of MEPs coming from the eurozone will increase from 65 to 72 percent. The “South” in particular will benefit, i.e. the eurozone countries France, Italy, and Spain.

The 46 remaining British seats will initially be removed,  according to the principle “a smaller EU, a smaller parliament”. They will not only serve as a reserve for future EU enlargements but could also be used to introduce transnational lists for the European Parliament. This idea, promoted in particular by French President Emmanuel Macron, foresees using those 46 seats for a Europe-wide constituency in which European parties would directly compete for votes. Its proponents were unable to implement it for the elections in 2019, mostly because of opposition by the EPP. It is possible that such lists will be introduced for the next elections in 2024, seeing as Macron and Angela Merkel among others are calling for it.

The Risk of Extension

With less than six months to go before Britain’s planned withdrawal, Brexit negotiations continue to be characterised by maximum uncertainty. As of late October 2018, departure without an agreement, a rejection of the negotiation result in the British House of Commons as well as new elections are all still in the realm of the conceivable. Notably, Article 50 allows the EU-27 and the UK to unanimously agree to extend negotiations. This is currently not the wish of either side, but cannot be ruled out in view of the political crisis in London.

Should such a scenario come to pass, it would have considerable consequences for the European elections. If the Article 50 negotiations were extended, the UK would continue to be a member of the EU until the next deadline, with all the rights and obligations. This includes the retention of the 73 seats in the EP and would therefore require the UK to partake in the elections in May 2019.  According to the relevant texts, the EU would have to temporarily suspend the redistribution of seats.

From Brussels’ perspective, holding European elections in a country as it departs would be quite uncomfortable. The consequences for Britain, however, would be even more serious. Given the tense domestic political situation, European elections would almost inevitably become a sort of second referendum on Brexit. They would breathe new life into parties such as UKIP. Brexit advocates would attack the extension itself as a betrayal of the 2016 referendum, and Brexit opponents would beat the drum  at the prospects for staying in the EU. This would be an explosive combination—though it is, at this moment in time, only a fringe scenario.

A Historic Rupture

Finally, it is important not to underestimate the psychologic effect Britain’s likely departure will have on the European elections. The current negotiations are mainly focused on the economic and technical aspects of Brexit. At the same time, the clock seems to have stopped for Britain to some extent, as the country has not yet left the Union. Shortly before the European elections, however, the reality of Brexit will become abundantly clear—British representatives will leave every EU institution, Brexiteers will celebrate the consummation of the withdrawal, and the EU will be without its second-largest member-state. All of a sudden, there will be a large western European country on the EU’s doorstep that has opted for an alternative to European integration.

Causing and winning the British referendum to leave the EU is so far the greatest political success of the EU-skeptic movements, and anti-EU parties often hold Britain up as an example. At the same time, however, the difficulties of the Brexit negotiations, the ongoing political crisis in London, and Britain’s painful struggle over its decision are acting as a deterrent to other member-states. Since the Brexit referendum, support for EU membership has grown  across all of Europe. Most EU-skeptic parties seem to have learned from Brexit and Marine Le Pen’s defeat in the French presidential election. They no longer want to question their country’s membership in the EU per se but rather seek to fundamentally transform the EU’s political orientation from liberal democracy to a union of states with authoritarian tendencies that build new and old borders.

Thus, both Brexit itself as well as the forced rearrangement of the EU-skeptic spectrum underlines the importance of the next European elections for the future direction of the EU. At stake here is nothing less than the fundamental orientation of European integration.

The post Brexit Tectonics appeared first on Berlin Policy Journal - Blog.

© REUTERS/Francois Lenoir

When Prime Minister Theresa May sent her Brexit notification to Brussels in March of last year, she was celebrated by parts of the British press as the country’s “new Iron Lady.” In her speech at Lancaster House, May set a course for a clean break with the EU. She interpreted the Brexit vote as a mandate not only to leave the EU, but also to curtail freedom of movement, to stop implementing European regulations, to cease contributing “significant” sums to the EU budget, and to remove the UK from the jurisdiction of the European Court of Justice.

According to the red lines set out by May, a close relationship similar to the one between Norway and Brussels would not be an option. Instead, she declared it the UK’s goal to create a “deep and special relationship” with the EU. Despite the desired hard Brexit, there would be no barriers to trade. At the same time, the country would seek to negotiate its own trade agreements with the rest of the world. Such was May’s Brexit utopia.

A Fragile Government

At the half-way mark of the two-year Brexit negotiations, the reality is starkly different. The political context has undergone a fundamental transformation. May has not managed to create a consensus within her Conservative party—let alone within the country as a whole—about the desired goals for Brexit. Her decision to call unnecessary snap elections at the start of negotiations caused her Conservatives to lose their parliamentary majority, meaning that May now heads a minority government. In the coming months, she will face the difficult task of getting a Brexit deal and a number of other agreements through both houses of parliament which will require full support from her own faction as well as the leading Northern Irish unionist party DUP.

There are five influential groups pulling her in different directions. The euroskeptics within her parliamentary faction are pushing for the hardest-possible version of Brexit. Loosely organized under the leadership of Jacob Rees-Mogg, the backbench European Research Group comprises 60 or so lawmakers that have included members of May’s own cabinet. Given its numbers, the group has the ability not only to deprive the prime minister of her parliamentary majority, but also to force a vote of confidence, which requires a minimum of 48 lawmakers. On the other side of the spectrum, there are between 15 and 20 Conservative lawmakers pushing for a close relationship with the EU that would include remaining in the customs union and the single market. Their number also qualifies them to rob May of her majority. The pressure has meant that May has repeatedly postponed tough Brexit decisions, such as questions over the customs union; however, she will have no choice but to face these in the coming year.

Meanwhile, the ten lawmakers for DUP—also part of May’s hoped-for majority—are rejecting any “special status” for their region in the EU. The DUP, a proponent of a hard Brexit, is threatening to topple May’s government if she cedes to EU demands for the regulatory alignment of Northern Ireland with the EU. The regional governments of Wales and Scotland, meanwhile, are pushing for close alignment with the single market and the customs union. Though Scottish independence seems to be off the table in the medium-term, May still requires the approval of Edinburgh and Cardiff in order to get a Brexit deal through.

The fifth and final group that wields influence over May is British industry, which is pushing for a lengthy transition period after Brexit that would include remaining in the single market and the customs union. However, so far neither Britain’s business sector nor its public administration have readied themselves to deal with new trade barriers between the closely integrated British and EU economies even in the medium term.

More United Than the UK Cabinet

Paradoxically, the Brexit negotiations are actually keeping the weakened prime minister in office against this complicated backdrop. For one, there is no other Conservative leader who would be able to unite these disparate groups. All involved are aware that Britain cannot afford another election with an uncertain outcome in the short time that remains to negotiate Brexit. And pro-European Conservatives have no interest in paving the way for a Jeremy Corbyn-led Labour party to enter 10 Downing Street.

In short, the British government finds itself in a state of perpetual fragility while it is mired in the most complex and difficult negotiations in decades. There is no majority against leaving the EU, but there also is no majority in favor for any particular form of Brexit.

On the other side of the divide, the EU’s 27 remaining members are displaying an unusual state of unity. The European Council has come up with a set of principles based on a common goal: to make sure that Britain will not benefit from unfettered access to the single market if it does not deliver on the corresponding obligations. The member states have unanimously placed the integrity of the single market—which seeks to guarantee the free movement of goods, capital, services and labor—at the center of negotiations. Remarkably, the 27 member states have seemed more united than May’s 22-member British cabinet.

A central part of the EU-27’s strategy is based on the sequencing of Brexit negotiations. The British government initially pushed to negotiate the divorce agreement and the agreement on the future relationship at the same time. Due to the complexity of the issue, but also due to Britain’s lack of leverage, the remaining member states successfully insisted on concluding negotiations on the former before engaging in the latter. Considering Britain’s difficult state of domestic politics, it is remarkable how much progress has been made on the transition period.

As such, the British government agreed to meet all of its financial and other membership obligations until 2020—the end of the current EU budget. This means London will continue to contribute to the budget far beyond its official exit date. According to estimates, the total amount could reach about 40 billion euros. The UK and the EU-27 have also fundamentally agreed to secure the rights of the roughly 3 million EU citizens living in Britain and their 1.2 million British counterparts on the continent. This is intended to create certainty both for individuals and businesses.

The Northern Ireland Question

Progress on one of the most difficult Brexit-related questions, the border between Northern Ireland and the Republic of Ireland, has been less certain. Not only is it the only land boundary between UK and the EU, it also holds a strong political significance for the peace process in Northern Ireland. If Britain leaves the single market and the customs union—as May has stated as her aim—border controls will become necessary. Yet in an act of solidarity with fellow member state Ireland, the EU-27 have agreed in principle with Britain to prevent the necessity of border controls. The way this agreement will be implemented is still subject to fierce debate, however. Britain wants Northern Ireland to be part of the larger Brexit deal, but the EU is pushing for a fallback proposal for Northern Ireland that would ensure its remainder in the customs union and regulatory alignment with the EU. This is considered completely unacceptable by both the DUP and May. The EU’s chief negotiator Michel Barnier has in turn rejected May’s proposals on implementing technical solutions at the border as unrealistic. Difficult negotiations to resolve the issue are inevitable.

Reaching agreement on a transition deal for the period after Britain’s formal departure was straight-forward by comparison. Even London concluded that the future relationship will not have been fully negotiated by March 29, 2019, nor will Britain be equipped to take on all the tasks currently handled by the EU. Therefore, London and Brussels agreed in principle that Britain will remain a full member of the single market and the customs union until the end of 2020. The EU was almost completely successful in its negotiation of the transition deal, with the UK now obligated to enforce all EU rules including freedom of movement and implement new EU legislation. As a third-party state, however, it will no longer be entitled to voting rights, nor will it be represented in EU institutions. This means that Britain will – albeit for a limited time – hand over sovereignty to Brussels in order to protect its economy.

Despite the progress, the guiding principle “nothing is agreed until everything is agreed” remains. The Brexit deal, including the transitional period, citizens’ rights, financial obligations, and the border issue, have yet to become legally binding. While implementation would not require the border issue to be completely ironed out, it would need ratification by the EU-27 and Britain, as well the British parliament.

Three extreme scenarios that once seemed to be a possibility have become unrealistic. The so-called “exit from Brexit” demanded by former prime ministers Tony Blair and John Major is no longer viable given the strength of the Brexit mandate. There hasn’t been a major shift in public opinion in the country, nor is the opposition Labour party willing to fundamentally question the Brexit decision.

A so-called “no deal Brexit,” which would see the UK leave the EU without a divorce agreement, has become similarly unrealistic. Under this scenario, the rights of EU citizens would be in limbo, British contributions to the EU budget would cease, trade between Britain and the bloc would default to WTO agreements, and customs obligations and other trade barriers would resurface with disastrous results, particularly for the British economy. This prospect is what led the British government to make significant concessions in recent months. These concessions have become acceptable even to Brexit hardliners, who have shifted gears to focus on the core goal of implementing Brexit. The “no deal” option would only have been viable if the UK had had a long period of preparation.

The third scenario, a continuation of the recently-agreed transition deal after 2020, has been ruled out by both sides. Though it is highly doubtful that the UK and the EU will have ironed out all the details of their future economic and political relationship by that time (or that the deal will have received ratification from all 28 national parliaments), the transition agreement currently on the table does not include a clause that would allow it to remain in place beyond 2020. In order to protect its economy, Britain has agreed to almost all conditions imposed by the EU—a bitter pill to swallow for proud Brexiteers. According to the EU, the transition agreement must be strictly time-limited to conform with withdrawal under Article 50. Its continuation beyond 2020 is therefore a political and legal non-starter.

Strategic Decisions

What lies ahead are bitter negotiations between the UK and the EU-27 that look set to continue way beyond the end of the transitional period. This summer, however, must bring a solution regarding Northern Ireland so that Ireland and the EU-27 as a whole can ratify the Brexit agreement and the transition deal. Navigating the legal ins and outs of the deal and getting it ratified will require considerable efforts on both sides.

Parallel to this, the parties will have to negotiate three main aspects of the future relationship between Britain and the EU: Britain’s access to the single market and the customs union, future cooperation on internal and external security, and the future interaction between Britain and EU institutions.

The current political path continues to point to a hard Brexit. May is insisting on departure from the single market and the customs union. The EU-27 say that in that case, Britain’s only option will be to negotiate a free trade deal similar to the one Canada and South Korea have with the EU. In this case, Britain would not need to reintroduce customs duties, but would be faced with significant non-tariff barriers in particular for closely-integrated supply chains and the financial services industry that is so important to the country. London could remain an EU partner on foreign policy and security, but would have to align itself with the bloc’s rules for instance on data sharing.

This path is not yet set in stone, however. Considering the political instability in London, closer alignment between Britain and the EU may still be negotiable—particularly in relation to the customs union, which would not only help solve the Northern Ireland dilemma but also simplify the conditions for trade with both the EU and the rest of the world. The House of Lords is pushing May on this issue, yet the price of such an arrangement would be similar to the one paid for the transitional agreement: Britain, the world’s fifth-largest economy, would be subject to EU trade rules without formal voting rights. Even with regards to the single market, the consensus in London is increasingly shifting towards keeping the country aligned with EU standards in almost all major sectors of the economy for the forseeable future. Here, too, the EU-27 will insist that, in line with its “no cherry-picking” and “autonomy of EU decision making” principles, Britain can only have unfettered access to the single market if it sticks to EU rules, even without voting rights and beyond the 2020 deadline.

The great paradox of the negotiations is the fact that Brussels is increasingly determining the shape that Britain’s departure will take in the end. Given its own internal divisions, London is currently incapable of agreeing on a clear agenda for Brexit. As a result, the strategic burden is on the EU and its more powerful capitals, such as Berlin and Paris, to forge the path forward. To what degree can a third country have access to the EU single market, its foreign policy and security platform, and EU programs without blurring the line to membership? How high is the price that must be paid, both economically and politically? Brussels will now be tasked with finding solutions to the remaining Brexit questions.

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© REUTERS/Yves Herman

The British government took seven months to present its strategy for Brexit after the United Kingdom’s historic decision on June 23, 2016, to leave the European Union. The strategy goes much further than many on the continent had expected. Prime Minister Theresa May announced her country’s intentions to pursue complete separation from the EU’s single market and customs union in a landmark speech she gave at Lancaster House to Europe’s assembled ambassadors on January 17, 2017.

A complete withdrawal did not necessarily have to follow the Brexit vote. Departure from the EU could have taken may forms. A soft Brexit, for example, was the preferred option even of some outspoken “Brexiteers” – an EU-UK relationship that would allow the retention of market access like Norway’s ties via the European Economic Area or Switzerland’s bilateral agreements that grant restricted market access. Such partial integration, however, requires the implementation and application of EU law, acceptance of binding judicial oversight, contributions to the EU budget, and free movement of persons – none of which May seemed ready to accept, though she indicated that some, limited financial contributions may be thinkable.

But even within this hard Brexit strategy, there are different ways to organize EU-UK cooperation. This spans from the complete absence of a formalized trade relationship – thus reverting to the WTO framework including tariffs – to a regular free trade agreement without tariffs, all the way to an expansive free trade regime (like the EU recently signed with Canada, known as CETA) or an association agreement (Ukraine).

The question now is for the EU-27 to define the bloc’s ties with the UK in the case of a hard Brexit. In a rare show of unanimity, they made clear in the wake of the referendum that partial participation in the single market without freedom of movement or the acceptance of EU regulations would not be tolerated. This still stands. But there are different options within the hard Brexit scenario, and that leaves many questions still to be decided in EU-UK negotiations. It is set to be a strong test of this unity among the 27.

Single Market through the Back Door?

Access to the single market remains the most important issue for EU-UK negotiations. Even in a hard Brexit, the UK continues to have great interest in minimally restricted access to the EU’s single market – it has been the project of all British EU policy heretofore. The UK exports 47 percent of its goods to the EU-27, making these partners far more important to the British economy than the United States. EU member Ireland alone receives nearly twice as many British exports as China.

The British government has two strategies for economically cushioning its hard Brexit strategy. First, it will attempt to reach an extensive free trade agreement with the EU before the two-year deadline for exit negotiations has expired. London wants this agreement to mirror the regulations of the single market – with regard to mutual recognition, the free movement of services, and access to EU financial markets – one-to-one, to the degree possible.

Such a single market membership through the back door would put the EU in a situation it has until now successfully thwarted: The UK would enjoy continued, unrestricted access to the world’s largest market without having to abide by its rules or perform its duties. This strategy has been fed by the belief in the UK that the EU – given the continuing crisis in certain eurozone countries and considering the importance of the city of London – would suffer more under a hard Brexit than vice versa. It also highlights just how starkly different the power balance and the relationship is perceived on the continent.

Second, London plans to replace the loss of its access to the EU’s other free trade agreements with the largest possible number of bilateral agreements with third countries. The UK received support from US President Donald Trump; the avowed Brexit supporter threw himself behind the speedy construction of a US-UK free trade agreement, as this also fits into his preference for bilateral rather than multilateral trade agreements. With such a transatlantic deal as an example, the British government wants to negotiate further free trade agreements before its exit, above all with long-time partners like Australia, New Zealand, and Canada, and perhaps with India and China as well.

Such a Global Britain strategy is constructed to link an EU exit with new possibilities rather than high costs. In the short term, this strategy appears to be working among the British public: According to a January survey from the polling institute YouGov, 57 percent support May’s plans, including full exit from the EU single market and customs union. Further, a majority are convinced that the EU will suffer more than the UK from a breakdown in negotiations. May has yet to prepare her population in any way for the real costs of the hard Brexit strategy.

Disconnect across the Channel

For the EU-27, such a strategy appears to be based in fantasy, given that it contains contradictory goals. Limiting access to one’s most important trade partner is a bad way to begin a global free trade initiative. The economic dependency is asymmetrical, after all: UK exports to the EU stand at 47 percent, while exports from other EU member states to the UK average well below 10 percent. Furthermore, it is hardly realistic to believe that the EU and the UK will manage to negotiate an extensive free trade agreement parallel to all exit formalities in the two-year timeframe, especially when a similar free trade agreement with Canada (CETA) has taken more than ten years and is still not completely ratified. Nor would the EU accept a free trade agreement that corresponded to single market access without its usual requirements. Basic principles for any deep free trade agreement would at minimum include implementation of EU regulations in areas with full market access and a dispute resolution mechanism tied to the European Court of Justice.

Similarly, the US requires on average more than four years to negotiate and ratify a free trade agreement. The only exceptions have been agreements in which Washington could dictate the terms entirely. The UK, under extreme time pressure and more dependent upon the resolution of a US-UK agreement than the US, would likely pay a high price for speed.

Negotiations between the EU and UK therefore start out heavily mortgaged. Even the hardest type of Brexit with a reintroduction of tariffs has entered the realm of possibility – whether through failed negotiations or British unwillingness to accept any basic mechanisms to retain privileged access to the single market. The danger is that the British government will blame any and all costs of their hard Brexit strategy on EU unwillingness to grant them a “fair deal.”

The UK as a Third Country

How does this all shape the EU’s position? First, the British tendency toward a hard Brexit also has benefits for the remaining 27 EU countries. The division between members and non-members remains untouched. It will be clear from the very start of negotiations: Brexit makes the UK a third country; partial integration like Norway or Switzerland is practically excluded. Conversely, this also means that the central aspects of the single market like mutual recognition or the free rendering of services cannot become part of the future EU-UK free trade agreement. Trade agreements similar to those with other third countries – regulating everything from tariff-free trade all the way to far deeper cooperation – are possible as long as the UK accepts the typical conditions, including conflict mediation.

Second, the EU-27 need to resolve their communication deficits. The EU stance of “no negotiation before notification,” whereby the EU has refused to start the process before the UK has invoked Article 50, has until now left all public communication on Brexit to the British. Given both the Europe-wide reach of the British media and the EU’s traditionally weak communication skills, the British government has a significant advantage in shaping public opinion on the matter. These negotiations will also influence the European conversation within individual EU states. Therefore, the EU-27 should create their own carefully constructed communications strategy.

Third, patience is an important element. As soon as the UK announces its intention to leave the EU (expected by the end of March, if the House of Lords plays ball), the clock starts ticking on the two-year deadline. This can only be extended by unanimous decision. If there is no resolution, the UK reverts to the status of any other WTO signatory. Therefore, it is above all the UK who is dependent upon an extensive free trade agreement, or at the very least an intermediary solution. The closer the deadline nears, the more the EU can pressure the UK into accepting European rules to retain a limited form of access to the single market.

Fourth, the EU remains interested in close cooperation with its British partner on issues unrelated to the single market, especially domestic and foreign security policy. This is another area where the Trump factor has altered the calculus of European interests. The more the new US administration seeks to distance itself from the EU (and NATO) and the more it breaks with traditional positions on foreign and security policy, the more important it will be to keep a united European position, including the UK. This affects, for example, sanctions against Russia and policy toward Ukraine, the Israeli-Palestinian conflict, Syria, and Iran. Cooperation on foreign and security policy must be kept separate from tough negotiations on economic affairs, in the interest of both parties.

Last but not least, it is the EU’s responsibility to protect the various special interests of individual states in Brexit negotiations. This includes the treatment of EU citizens in the UK or the status of Gibraltar. The border between the Republic of Ireland and Northern Ireland in particular will take on a special importance as it becomes an EU external border via Brexit. The openness of this border as it currently stands is decisive not only to Irish economic health overall, but also to the Northern Irish peace process. Twenty percent of Northern Ireland’s residents also have Irish and therefore EU citizenship. Notwithstanding May’s statements for maintaining an open Irish-British border, as soon as the UK exits the customs union and single market, it will be necessary to reinstitute some sort of border controls. Here the EU needs to insist on a solution that will allow the border to remain open in the future – thus demonstrating to individual member states the value that EU membership can have in representing their individual interests.

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There are no quick fixes to the challenges Brexit poses. Berlin 
and Brussels would do well to take their time and think through the implications, as the task ahead is nothing less than Herculean.

© dpa/Maurizio Gambarini

The British 52-48 vote to leave the European Union has come as a huge psychological shock for Germany’s political elite. Despite tight polls and extensive debates about possible outcomes, Berlin’s foreign policy circles were convinced before the vote that British pragmatism and economic interests would prevail, if narrowly.

Now, even though Germany and the EU are far from having fully digested this news, both will now have to face at least six significant challenges:

First, the EU is faced with a long period of political and economic uncertainty despite Brussels’ desire for a “quick divorce.” The immediate reaction of several EU leaders, including Commission President Jean-Claude Juncker and European Parliament President Martin Schulz, was to call for quick activation of Article 50 of the Lisbon Treaty, setting in motion a two-year exit procedure.

Political and legal constraints, however, first and foremost in the UK, point in a different direction. Legally, Article 50 allows any EU member state to leave the union by formally notifying the European Council of its wish. But not right away – the state does not formally leave until either an exit agreement comes into force (with consent from the European Parliament and qualified majority of the remaining member states in the Council) or two years have passed with no such agreement being reached. The time limit can only be extended by unanimous agreement.

Translated into political calculations, the EU has to be prepared for a long standoff with the UK. In the short to medium term, this will determine when, or even if, the UK will actually trigger the exit clause. Legally, starting the process is absolutely a sovereign decision of the UK; contrary to the hard line from Brussels immediately after the vote, the EU has no legal power – and few political means – to force the UK to take this step. With the political chaos in Westminster following the Brexit vote, the current UK caretaker government would be highly irresponsible to trigger the two-year limit, especially now that it has become obvious that no one in the leave campaign had concrete plans for exit.

But even after a new prime minister is in place in Downing Street, triggering Article 50 could be a long way off. On the one hand, new general elections have not been ruled out, while prominent UK legal scholars argue that triggering Article 50 would require an act of parliament – meaning both the House of Commons, where pro-Remain MPs enjoy a majority, and the even more pro-EU House of Lords – which would take at least another six months, if not more. On the other hand, the activation of Article 50 would signal that the UK will almost definitely leave the EU and worsen the economic outlook. Even with the support of parliament, a new prime minister will therefore think very carefully about when to trigger Article 50, and try to press the EU – especially the German government – for informal negotiations beforehand.

To prevent this, the EU and the German government have now stressed that while they accept that triggering Article 50 is a sovereign decision of the UK, they demand it do so at the latest by this autumn, and have declined to engage in any kind of informal negotiations beforehand. Expect both declarations to be tested severely, as a new UK government will try to press as hard as possible to engage in informal negotiations and postpone the activation of the exit clause until the best strategic moment.

Second, even after the exit clause is eventually triggered, a delicate balancing act looms for Germany. Politically, the UK-EU negotiations need to solve two problems. For one, both sides need to agree on the transition phase, resolving questions like the status of EU citizens in the UK and vice versa, payments into the EU budget, etc. More importantly strategically is the future relationship between the UK and the rest of the EU, including access to the single market and cooperation in foreign and security policy. Legally, however, the exit, in accordance with Article 50, covers only the first part; a separate agreement is needed defining the more general future relationship.

Berlin and Brussels have to make two further strategic choices here. The first is whether to negotiate the two agreements together – so that the UK and the EU enter the new arrangements on the day the UK formally exits the EU – or whether to separate them so that the exit agreement can be negotiated and put into place more quickly. This would mean that the UK would spend at least some time with the same status as any other WTO country, implying very severe economic consequences for it, and to a lesser extent for the rest of the EU. London will therefore press for a joint approach, while EU politicians, including current Trade Commissioner Margot Wallström, have already ruled out detailed negotiations on the future trade relationship with the UK before its exit is completed. Germany’s interest will be in the middle – the UK is its third largest export market, and thus the absence of a trade agreement would hit Germanyʼs export-oriented industries severely. However, separating the two agreements and taking a tough negotiating stance would emphasize the real costs of EU exit to others and help complete the exit negotiations within the two-year window in order to keep the EU together.

This balance of interests also concerns the second question: on what terms and conditions to cooperate with the UK in the future. With just short of fifty percent of UK exports still going to the EU, any future UK government will have a strong interest in keeping access to the single market. The heads of state and government of the EU-27, however, have already reiterated that full access to the single market is only possible with all four freedoms, including freedom of movement, upheld. Norway, for instance, accepts and implements all EU single market regulations and pays into the EU budget. The leading candidates to succeed David Cameron as prime minister, such as Theresa May, Michael Gove, and Andrea Leadsom, have all already promised to reject free movement as a condition for the single market. Here, the EU-27 need to agree and more importantly stick to a joint negotiation position despite their differing interests vis-à-vis Britain.

Third, the UK will remain an awkward partner in the EU for the foreseeable future. In the week immediately following the Brexit vote, the EU-27 heads of state and government met for the first time at the European Council. This will remain an informal format; until the exit is formally concluded, the UK will legally remain a part of the EU, with all its rights and duties, including its votes and vetoes in the Council of Ministers, the right to participate in formal Council meetings, and the right to appoint a commissioner as well as vote on members of the European Parliament.

Germany and the other member states will therefore need to compel the UK into a gentlemen’s agreement to avoid two risks. On the one hand, the UK could be tempted to use its veto powers in order to press its interests in the exit negotiations. While many policy areas for the EU now allow for qualified majority voting, a general policy of blockade could even further hamper the EU’s ability to act, especially in areas requiring unanimity such as decisions on sanctions against Russia or the long-term financial framework of the EU. On the other hand, the risk exists that due to the very long exit negotiations and the promises made by the Leave campaign to the British people, the UK government may willingly hold back on implementing – or even actively undermine – EU rules and regulations, most notably concerning the free movement of EU citizens.

Fourth, the Scottish question will further complicate negotiations for the British – but also for the Europeans. Although the Scottish voted in their independence referendum in 2014 in favor of staying within the United Kingdom, the EU referendum has significantly changed the debate – in contrast to the UK as a whole, the Scottish people voted by 62 percent in favor of remaining in the EU, and now fear being taken out of the European Union against their will. Equally significant, this outcome has underlined the main argument of the Scottish National Party (SNP), namely that in the UK the democratic choices of Scotland are regularly ignored and overruled by the English majority.

Scotland’s First Minister Nicola Sturgeon (SNP) has therefore already declared that she will do everything in her power to ensure Scotland’s continued place in the European Union. In the short term, this will include direct talks with the EU and other member states to gauge sentiment on a solution wherein Scotland remains fully integrated in the EU while still a part of the UK. If that fails, the SNP has already announced that it will push for a second independence referendum.

For the UK, this means that, in addition to the negotiations with the EU, the new government will have to carefully negotiate to ensure the survival of the United Kingdom. A second independence referendum would require the consent of the UK parliament; but as tensions grow, the United Kingdom may be hard to sustain if Scotland does not at least get more autonomy to negotiate a special deal with the EU.

For the EU and its member states, though, this is also difficult for other reasons. On the one hand, Brussels will now be tempted to support Scottish interests to remain in the EU to underline the continued interest in the European project. On the other, the independence referendum is not only a matter for the internal politics of the UK – it touches upon regional secessionist movements in other EU countries, in particular Spain’s Catalonia.

Fifth, the overriding challenge will be to address the question of democratic legitimacy and EU reform. The British vote to leave the EU was not an isolated vote of no confidence. Quite the contrary: euroskeptic parties have been on the rise in almost all EU member states in recent years. Although not all of them necessary call for an end to the EU – some, like the True Finns in Finland and the Danish People’s Party, are merely against further integration – the arguments employed by the Leave campaign on migration, mistrust in political and economic elites, and national identity and sovereignty resonate in all of these parties. Unsurprisingly, in the hours and days after the Brexit vote, Marine Le Pen in France, Geert Wilders in the Netherlands, and Norbert Hofer in Austria, among others, called for their own EU exit referendums in their respective countries. In the former two countries there are also national elections next year, while the Austrian presidential elections in which Hofer very narrowly lost have to be repeated, presumably later in 2016. In short, in core EU member states, political elites will have to explain why their countries should remain in the EU.

At the same time, deficits in the eurozone and the Schengen system remain problematic. In the more than seven years since the start of the eurozone debt crisis, the EU has not yet been able to repair the fundamental structural flaws within the economic and monetary union. Unsurprisingly, the Brexit vote has therefore been used by politicians across Europe to claim that their unique vision of EU reform has been made paramount – the German finance ministry calls for stricter budgetary control, the Greek prime minister for the end of austerity, the French and German foreign ministers for closer cooperation in security and defense, and the Polish and Hungarian prime ministers for a return to a more intergovernmental EU. In short, while almost all EU leaders agree on the need to reform the EU, interests and visions on the future direction are more divided than before the Brexit vote.

Sixth and last but not least, a UK exit puts the German question back on the table with renewed force. As the third largest member state with the second largest economy and distinct political interests, the UK was and is a major balancing factor in the power relations between EU member states. Just like in the eurozone, an EU without Britain foists greater responsibility on France and Germany.

However, as long as France remains in a politically and economically weakened position, Berlin will be called upon to provide leadership for the EU. Structurally, Germany is closer than France in economic and foreign policy to the UK, so most of London’s close partners in the EU will likely shift toward Berlin rather than Paris. The one exception to this is the area of foreign, security, and defense policy, where France is already carrying the greatest burden in the EU and has repeatedly called for greater German involvement. Here as well the German government will be called upon to do more to strengthen the EU after – and even during – a British exit. In both cases, the other member states will call for more German leadership and be wary of it at the same time.

With the UK vote to leave, it is clear that the debate on the future of the EU – including Britain’s place in it – has just started. Looking at the political and legal tasks ahead, the German government should indeed prepare for a process that takes years rather than months. Instead of pushing for a quick Brexit or calling for integration for the sake of showing that the EU still works, the imperative should now be to provide leadership with strategic patience. This patience will be crucial in bringing together all these different negotiations, political as well as legal, and keeping unity among the now-27 member states – a necessary, if Herculean task.

Read more in the Berlin Policy Journal App – July/August 2016 issue.

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