LONDON — Sometime in the next few days, Theresa May will finally pull the trigger.
Roughly nine months after Britons narrowly voted in a referendum last June for Brexit — Britain’s exit from its membership in the European Union — the United Kingdom’s Conservative prime minister will activate Article 50 of the Treaty of Lisbon, essentially the EU’s constitution. Doing so will formally start at least two years of negotiations on how to bring the country’s 44-year-old relationship with the union and its $19 trillion, 500 million person-strong single market to a close.
May could soon discover, however, that triggering the Brexit negotiations is the easy part. Accomplishing her goals will likely prove much harder.
May and her government are expressing confidence they can wrangle an “ambitious and comprehensive free-trade agreement” with the EU, while remaining outside the single market, according to a government report published earlier this year. A deal that’s not favorable to the United Kingdom, she’s said, would “be an act of calamitous self-harm” by the EU. Foreign Minister Boris Johnson, echoing a view repeated ad infinitum by Britain’s rabidly pro-Brexit tabloid press, has argued that European industries, from German automakers to French cheesemakers, will push their governments to endorse a U.K.-friendly agreement, because they don’t want to lose lucrative British markets. Taking a hard line that implies a willingness to walk away from negotiations that don’t go her way, May has said that “no deal for Britain is better than a bad deal.”
But many trade experts call May’s bravado divorced from reality. Instead, they predict, Britain faces lengthy, hard negotiations that will offer it few good options and ultimately leave the U.K. poorer.
“The idea that we can do what we want because German carmakers need us is just fantasy,” says Jonathan Portes, an economics professor at King’s College, London. Adds Michael Gasiorek, an expert in international trade at the University of Sussex: “No deal would be like falling off a cliff.”
Europe, not Britain, is seen as having the most leverage going into the talks. “The party with the most to lose has the weakest position,” says Dennis Novy, a University of Warwick economist, “and that’s the U.K.” The EU is Britain’s closest and largest trading partner. Forty-four percent of U.K. exports go to the EU, while only 8 to 17 percent of EU exports go to Britain. Novy says failing to reach a trade deal wouldn’t completely quash U.K. markets for European goods and services anyway, just shrink them as rising prices dilute demand.
Britain wants a trade deal with Europe that’s unique to the U.K. and perhaps carves out special sweet spots for sectors where it’s strong, like automobiles and financial services. “That’s unrealistic, ” Novy says. “The EU will not agree to a deal tailored to specific industries that the U.K. is interested in. What’s in it for them?”
EU politicians want to reach an accord, too, but are unlikely to accept a deal that could be seen as rewarding Britain’s exit from the union. They fear that might encourage other countries to make a break, too, eventually weakening the union. “The EU will not want to make it seem as if you can leave the EU easily and without cost,” Gasiorek says.
Britain is opting to leave the single market to avoid having to accept the free movement of people, a bedrock EU principle. May believes voters opted for Brexit largely because they want to curtail immigration. It could be a costly decision. The British Treasury says leaving the single market could, by 2030, reduce British gross domestic product between 4.6 and 7.8 percent, a cost of £4,300 ($5,246) to the average household. Richard Baldwin, professor of economics at the Graduate Institute, Geneva, says the cost to British exporters selling into the single market could rise by around 6 percent, while higher prices for imported goods will hit the pocketbooks of British consumers.
Article 50 calls for two years of negotiations to finalize a divorce from the EU. Negotiations to arrange a new framework for relations, including trade, could take many more years. But the government wants to wrap up both negotiations by 2019. “They will never be able to do the divorce and the new settlement in two years,” Baldwin says, because the EU isn’t built to do fast-track negotiations, and a final deal has to be approved by the governments of all 27 members. “My judgment is that this herd of cats won’t be able to agree to anything bespoke in the time they have for Brexit talks.”
Indeed, a cross-party parliamentary committee this past weekend released a report warning that the government hasn’t prepared for the “real prospect” of failing to reach an agreement in two years.
That raises the prospect of putting a transitional agreement in place while the final talks continue. But such an agreement could be problematic, too. Would it, for instance, continue the status quo in the interim, with Britain temporarily remaining in the single market? “That would be the best deal,” Portes says, “but the government would probably find that politically unacceptable,” because immigration from Europe could continue beyond two years. Another hurdle: A transitional pact would also need approval of all 27 members.
The U.K. leaving the EU without an agreement raises the likelihood of U.K.-EU trade reverting to World Trade Organization rules, which means tariffs. Britain’s trade arrangements with WTO members were negotiated by the EU, however, so it would need the approval of other members to leave them intact. But any one of the WTO’s 164 members could raise an objection, which would create an impasse.
May also wants the U.K. to compensate any loss of EU markets by inking new deals with non-European countries, from the U.S. to China. She and President Trump have already informally discussed a U.S-U.K. deal. But negotiating those accords would also take many years, and the efforts couldn’t begin until after Brexit occurs. “And they’re not going to make up our likely losses in Europe,” Portes says. A deal with the U.S., for instance, would boost UK trade by just 2 percent.
Beyond trade, the Brexit negotiations will cover many other tough issues, including future U.K. payments to EU budgets, and security and defense arrangements. One particularly thorny topic is Northern Ireland, which is part of the U.K., but physically located on the island of Ireland, also an EU member. Britain outside of the EU raises the potential of border checkpoints between the province and the republic. That would be highly unpopular and could increase pressure in Northern Ireland for a referendum on leaving the U.K.
“Brexit upsets the apple cart,” says Adrian Guelke, professor emeritus of comparative politics at Queen’s University in Belfast. “It reopens the question of reunification of Ireland.”
Meanwhile, Scottish leader Nicola Sturgeon, unhappy over the prospect of forcing Scotland out of the single market, pledged on Monday to seek another independence referendum by 2018 or 2019. In a 2014 referendum, 55.3 percent of Scottish voters opted to remain in the U.K.
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U.K.’s Theresa May Expected to Trigger Brexit Talks originally appeared on usnews.com
