British Prime Minister Theresa May has initiated the process for the eventual exit of Britain from the folds of the European Union. On March 29, Donald Tusk, President of the European Council, was handed over a letter in this regard.
Earlier, on January 17, 2017 May had observed that Britain was seeking "Not partial membership of the EU, associate membership of the EU, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. … No deal for Britain is better than a bad deal for Britain."
The triggering of Article 50 has raised, as expected, many questions among the stake-holders. As pointed out by Andrew Duff, a former Member of European Parliament, the Brexit process is complex and would require at least a two-year negotiation and agreement on certain issues might reached quickly and easily than others in the context of the framework of Britain's future relationship with the EU. The European Council is scheduled to issue the guidelines of discussion on April 29. That will be the basis of the twin excercises of finding the basis of UK's exit from and also its new relationship with the EU. This will induce a lot of debate, scrutiny and internal consideration.
Consequently, it is being anticipated by some analysts that the 'comprehensive free trade agreement' that will be aimed at might take much longer than two years. It is nevertheless being expected that the Article 50 secession treaty will be enacted in 2019 as a Council decision (through voting with the consent of the European Parliament, without national ratification). The legal base of any 'new partnership' treaty will also be attempted through Article 217 TFEU, negotiated under the procedures of Article 218 (requiring the consent of the European Parliament, unanimity among all 27 states, plus national ratification). It may be pointed out here that while the European Union Members have had no experience in using Article 50, the EU has concluded numerous treaties on the basis of Articles 217 and 218. An obvious, but overlooked precedent is the EU's recent association agreement with Ukraine, which offers a neat template for Britain.
What is clear is that the long-term deal is not likely to be a soft Brexit, i.e., the UK remaining within the single market and/or the customs union. The red lines of the UK government, in particular, concerning the freedom of movement of people and the role of European law and the European Court of Justice, will make it impossible to strike a deal modelled after EFTA/EEA membership.
There are, however, some clues about the UK's position on the single market and the customs union. There is an indication of what kind of long-term outcome will be desirable from the UK perspective. It will have to be: a comprehensive deal that minimizes the impact on the trade and investment flows between the UK and the EU and at the same time permits Great Britain to be selective regarding in-migration and strike trade deals with the rest of the world.
It remains to be seen how likely such a trade deal will be. Any such deal would have to meet the interests of the EU27, as well as satisfy the European Parliament. They might react unfavourably to any mercantilist behaviour, for example, with regard to corporate tax. However, before both sides can even enter these negotiations there will have to be a successful conclusion of the withdrawal agreement.
TRICKY ISSUES IN THE ARTICLE 50 NEGOTIATIONS: In this context, analyst Ewa Chomicz has pointed out that there is likely to be a number of tricky issues in the Article 50 negotiations, including, for example, the question of UK benefits for EU citizens. A big hurdle will be the legacy payments the EU is going to demand from the UK. While estimates vary, it will certainly be a significant amount. This is an anathema to the Brexiteers in the British government and might also prompt a reaction in the Eurosceptic tabloid press. So far, such a payment has been portrayed in the British debate as the price the UK will have to pay for continued market access. However, given the sequencing of the negotiations, this is unlikely to remain a convincing argument. In addition, the conclusion of the House of Lords Committee that there is no obligation for the UK to pay might result in a hardening line on any divorce payments.
From a negotiation perspective, reaching a withdrawal deal without any payment is highly unlikely. The EU will not simply scrap its demands in the face of UK opposition. At the same time without a withdrawal deal, there is little chance of transition arrangements or a long-term trade deal. This will add fuel to the arguments of those in the UK who believe that a quick exit will be better in any case and that this situation can eventually be helpful in concluding trade deals with other countries.
Economists are also pointing out that there is likely to be a significant cost to the EU because of BREXIT. Uncertainty, including legal uncertainty, would affect the workings of the EU. In addition, an immediate cessation of UK budgetary payments would create financial difficulties, which would also necessitate budget negotiations.
According to estimates, the UK's eventual withdrawal from the Union could leave a financial gap of 14-19%, or between EURO 20 to 27 billion, which the EU would need to deal with in 2019/2020, in the next Multiannual Financial Framework (MFF), or earlier. This would depend inter alia on whether any transition agreement or "phased process of implementation" with the UK is concluded, how the issue of the 'exit bill' is settled, and whether the negotiations last for two years, are extended, or collapse prematurely.
Theresa May's negotiating aims and red lines have been clearly stated more than once but differing views still remain as to whether any future deal after conclusion will be fully consistent with these objectives, considering that political goals do not always meet economic reality. There will also be the traditional trade-off between sovereignty and access to the single market (linked also to financial contributions). Such an equation has led some analysts to suggest that three models might eventually be considered in detail as regards potential future UK payments to the EU budget: the Norwegian, Swiss and default model (assuming zero direct contributions). These models, it is being felt, could serve to present different budgetary implications of different levels of access to the single market. If direct budget contributions under a Norwegian or Swiss-style deal were the case, the EU budget gap could decrease to 12-18 per cent. However, at the same time it is being stressed that the UK would likely contribute to the EU budget more in an indirect way, given the potential revenue from customs duties on goods exported from the UK to the EU. Funding for the Cohesion Fund could also be decreased proportionally to the UK's direct contributions to selected member states for disparities reduction, and additional income from customs duties could be taken into account.
It is also generally agreed that as the EU-UK negotiations are expected to develop in parallel with the next multiannual financial framework (MFF) negotiation process, they should add momentum to the overall pressure to reform the EU budget which has been mounting across the EU independently of the Brexit vote. This could serve not only to achieve a better financing system, but also to contribute to restoring citizens' trust, and to (re)open or further the discussion on other fundamental financial reforms in the longer term, such as the creation of a Eurozone budget. However, given how hard the upcoming negotiations on the future MFF promise to be, it remains to be seen whether such effects could prove to be more than wishful thinking.
It needs to be added here that while the secession treaty will be negotiated mainly by the European Commission, the political agreement on the future partnership will be achieved mainly by the European Council. This requirement should prevent the Article 50 from being treated as a 'mixed agreement' that would then require national ratification by all 27 states.
A DIFFICULT EXERCISE FOR BRITAIN: The UK after invoking Article 50 will be transforming itself from being a member state into a third country. Its participation consequently in ongoing EU legislative and judicial matters during the coming two-year period will therefore be highly sensitive. This change in the ball-game has to be treated with great caution by the UK. They will have to take care not to overplay their hand in the matter of security intelligence, foreign affairs and defence. This might be a difficult exercise for Britain which is normally used to being very pro-active in this regard on the world stage. Similarly, political scientists are observing that the EU 27 should also be careful about respecting the spirit of Article 8 TEU which will enjoin them to 'develop a special relationship' with post-Brexit Britain 'aiming to establish an area of prosperity and good neighbourliness'. The European Council guidelines should ensure this.
The transition will be complicated and will need careful oversight. Consequently, observers are suggesting that serious consideration needs to be given to set up a special body, answerable to both parties, to oversee the completion of the Brexit process. Such a Joint Transition Authority (JTA) could then be charged with the task of managing the phasing-out of the UK's rights and obligations to the EU, and vice versa. The JTA could also be charged with settling the disputes that will inevitably arise during the period in which the Brexit deal is being implemented. This would avert unexpected difficulties and avoid a rush to costly and lengthy litigation in both the British and European courts. With a joint governing board and a secretariat, the Authority could also advise, warn and report. The existence of the JTA would also ensure that relations with Britain would not fall off the agenda of the EU 27 once the UK has left.
SCOTRTISH FACRTOR: The Scottish government, adamantly opposed to a hard Brexit, is pushing for an independence referendum between autumn 2018 and spring 2019. The UK government has stated that there will be no referendum before the outcome of the Brexit process is clear. But if the signs point towards a bad deal, leaving the EU quickly with no deal in advance of such a referendum might make it harder for the Scots to vote to leave the UK.
Before concluding it would be pertinent to also refer to Fabian Zuleeg, the Chief Economist at the European Policy Centre (EPC), Brusels and his observation about the possibility of Scotland seeking an independence vote sooner rather than later as a fallout from BREXIT. It could still result in Scotland voting yes to independence after Brexit, in a process compliant with the constitutional provisions of the UK. The EU will then have to decide how to manage the accession process if an independent Scotland applies for membership, accepting all associated conditions. This would be a difficult scenario but in the end, more likely than not, the EU would accept a country that fulfills the accession conditions and has expressed such a strong desire to remain part of the European family.
The writer, a former Ambassador and Chief Information Commissioner of the Information Commission, is an analyst specialised in foreign affairs, right to information and good governance.
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