Analysis | Barreling for Brexit: London's Remaining Options

Analysis | Barreling for Brexit: London's Remaining Options

Pascal Letendre-Hanns.png

Pascal Letendre-Hanns

- European Affairs Specialist with The International Scholar
- Foreign Policy, European Affairs, EU Policy, UK Politics, and Brexit

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London — Following a tortuous and acidic debate on the merits of EU membership, the UK narrowly opted to leave in the 2016 Brexit Referendum. Yet the reality of the UK’s relationship with the European Union was never as simply as “Leave” or “Remain”. Far from a binary proposition, there is a spectrum of different outcomes for the UK, depending on what the country considers to be its highest priorities and interests. It is because of this reality that the EU debate in the UK was far from settled by the referendum, instead splintering the Leave and Remain camps into further groups, each with their own particular preferences for the future of UK-EU relations. 

All these options hold fundamental differences and which one the UK finally opts for will have consequences for decades to come. Once the path is set, it will prove immensely difficult to change course. Trade arrangements take many years to negotiate, even if the UK is completely clear on its desired future, it would be unsurprising for the whole process to take 5-10 years. Importantly, should the UK change its mind on Brexit after it has left the EU and decide to rejoin, this will be no quick deal either. As an outside country seeking to join the EU, even as a former member, the UK would have to adopt all the existing EU “acquis communautaire”. This would mean that the UK would be required to join the euro, the Schengen area and would lose the budget rebate that the UK currently enjoys as part of its EU membership. 

Whether the UK wants to set up a simple free trade deal with the EU for the future or whether the country chooses to stay in the EU under the current terms of its membership, time is of the essence. As changing course at a later date will be a long and politically costly process, making the wrong choice now, in the few months left before the UK’s default exit date (29th March 2019), could be disastrous. If the UK has the misfortune to go down a path that results in economic stagnation and a reduction in global influence, it is likely at least a decade will be lost, if not a whole generation. 

The UK has been a member of the EU for more than 40 years. In that time significant links have been built and the EU has become an intrinsic part of the UK’s constitutional order. To undo those ties is an inherently risky proposition. A careful and measure assessment of the different options that present themselves is essential.

Between the acronyms and the shorthand terms used in the Brexit debate, it’s easy to get lost. To help bring a sense of meaning back to some of this language, let’s lay out the main options for Brexit facing the UK government and their advantages and disadvantages.

Canada + Northern Ireland Backstop
This scenario seems the most likely as it is the one most closely aligned with the stated objectives of the UK government. This is referred to as the “Canada” scenario as it would seek to copy Canada’s approach in negotiating a comprehensive free trade deal with the EU. A backstop would be needed for Northern Ireland, effectively keeping the area in the EU Single Market and Customs Union until an alternative workable arrangement can be found. This would be essential for keeping the land border between the UK and the Republic of Ireland open (something both the EU and the UK officially support). Ideas of Canada+ or ++ or +++ (etc) are not considered here as they are not relevant. The trade deal would never be an exact copy of Canada’s deal with the EU anyway and it would always be as comprehensive as it can be, whilst always inevitably falling short of the relationship afforded by the Single Market.

Pros:

  • The UK could negotiate and sign independent free trade deals with whoever it likes

  • EU law will not have any direct effect in the UK meaning the UK will have, in theory, complete legislative liberty

  • The UK could impose much more significant controls on immigration

  • Free trade agreement (FTA) with the European Union would ensure some levels of free trade

Cons:

  • A simple FTA will never replicate the advantages of the Single Market, so UK very likely to take an initial economic hit and experience lower growth over the long-term

  • “Just in time” industries such as car manufacturing and food and drink have warned they would be very badly hit as a result of the increased delays in supply chains coming from the re-imposition of customs checks

  • It will take many years to negotiate new trade deals and these new arrangements may be on worse terms than those the EU could have agreed due to the weaker economic power of the UK compared to the EU

  • The UK would have to implement a massive new bureaucracy to replace EU regulatory bodies in a number of areas such as medicines and nuclear materials

  • Economic studies are generally agreed that any significant cut in EU migration to the UK will impose economic costs as these workers are net contributors to UK finances

  • It is unlikely the UK would completely escape EU regulations as the EU as significant global (and even stronger regional) influence in this area

It Depends:

  • Northern Ireland could gain from its unique privileged position in both the UK and EU markets, attracting investment

  • This would likely mean some level of divergence from the UK, a price some unionists in the region are unwilling to pay

EEA + Customs Union
A halfway-house, also known as “soft Brexit”, this scenario would involve the UK staying in the European Economic Area (EEA) and the EU Customs Union. The Customs Union in this instance would prevent the need for a border in Ireland. Though maintaining most of the economic ties, the UK would still leave EU institutions in a number of other areas.

Pros:

  • Minimal economic disruption

  • UK would be subject to fewer EU rules than as a full EU member

  • EU budget contributions would be lower than as an EU member

  • UK would be in a better position to continue membership of EU programmes it likes

Cons:

  • UK contributions to the EU budget would still continue

  • The UK would still be subject to at least some EU rules, notably those relating to the Single Market

  • The UK would have only a very minimal ability to exert influence on those laws and would have no formal voting power or political representation

  • The UK would not be able to negotiate independent trade deals or, at best, would have its ability to do so severely constrained 

It Depends:

  • EU Free Movement would continue – for some this would represent a gain in individual freedom, a boost for the UK’s economy and culture and a big win for UK citizens working and living in the EU, while for others this would represent a big loss in the UK’s ability to reduce net inward migration

Remain
Most likely as a result of a second referendum, it is still a possibility that the UK will not leave the European Union after reconsidering the idea of Brexit.

Pros:

  • Continued economic benefits from membership of EU Single Market and Customs Union

  • Continued political representation within the EU, meaning the ability to directly influence EU rules

  • Continued full participation in EU programmes and regulatory institutions

  • Continued benefit from EU trade deals with other countries

  • UK political energy freed up to focus on pressing domestic issues

Cons:

  • Risk of anger from a section of the public over failure of Brexit to materialise 

  • No independent trade deals

  • Continued UK contributions to EU budget

It Depends:

  • EU Free Movement would continue (same as above)

  • Continued EU integration over the long-term; may see this as good or bad depending on pre-existing view on merits of EU integration. This point cannot be understated as the EU is not a static entity and staying in the Union won’t be merely an extension of the 2016 status quo.

No Deal
Though both sides are clear that they do not want this outcome, differences over key parts of the withdrawal negotiations, notably concerning the Irish border, could lead to a No Deal scenario where the UK crashed out of the EU.

Pros:

  • Similar to the Canada scenario but without free trade with the EU 

Cons:

  • Massive economic disruption – UK cut off from main trading partner, UK loses free trade with countries who have an FTA with the EU, transnational supply chains in many key industries will face collapse (with serious risks around food and medicine supplies)

  • Planes likely grounded due to lack of international agreement on flights 

  • Massive queues at UK borders, further disrupting trade and business

  • Defaulting to World Trade Organisation rules would result in an automatic and severe increase in tariffs for UK trade, likely resulting in less trade overall and higher consumer prices

  • Theoretical measures to combat negatives (such as unilaterally dropping tariffs for all countries) would have massively negative effects on local UK industry

  • The UK also drops out of all non-economic cooperation with the EU, such as on policing and defence

  • Re-imposition of hard border between Northern Ireland and the Republic of Ireland, widely viewed as dangerous and a threat to the Northern Ireland peace settlement

  • Status of UK citizens in the EU and EU citizens in the UK completely uncertain, high risk of people being caught up in uncaring bureaucracies 

  • Political and economic disruption would threaten integrity of UK and could fuel nationalist demands in both Scotland and Northern Ireland

What should be clear from these explanations is that there is no ideal solution that would solve all the problems faced by the UK. Ideally, such an assessment would have been carried out no later than September 2016 (allowing for the formation of a new government after David Cameron’s resignation). In practice, much decision-making from the UK government appears to have been carried out simultaneously to the Brexit negotiations themselves, adopting reactive positions and getting embroiled in a deeply unsettled domestic debate. The 2016 Leave campaign made promises that were simply contradictory and so far, no one in the UK government (and few within the official opposition) has been willing to come clean about this reality.

There is no way forward that will satisfy every demand, instead what matters is prioritisation. Are you more concerned with economic stability or the possibility of new trade deals? Do you want migration to be cut more than you want full access to the massive EU market? How much do you value political representation within the EU? Is it all EU integration that concerns you or only certain aspects?

The point, however, is not to relativize all these options as equal or all priorities as right in their own way. Dismissing economic disruption as unimportant or rejecting the evidence that new free trade deals will deliver few benefits for the UK is not a valid approach.

What is important is to recognise that there is no perfect Brexit, able to deliver large benefits for few costs, and accept that such fantasy thinking does not help the UK or any of its citizens. Instead it is time to decide whether the marginal benefits of Brexit scenarios will be worth the associated (sometimes very significant) costs or whether it would be best to stop the whole venture entirely, taking the political risks that come with that option. 


All views expressed in this article are solely those of the author, and do not represent the views of The International Scholar or any other organization.

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