A bimonthly magazine on international affairs, edited in Germany's capital

Brexit by Brussels


At half-time in the negotiations, a curious pattern is emerging: As London proves unable to adopt a unanimous approach, it is the remaining EU-27 that determine the make-up of Brexit.

© 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.