Arguing with the EU

Breaking up is hard to do. The British people voted to leave the European Union, yet how that departure might happen is unclear. Once we’ve sorted out who will negotiate for us, and a new Prime Minister is in place, a further dilemma, seemingly overlooked, awaits: will the remaining member states give us what we want? Even spelling out what we want is not straightforward. The “best of all worlds” scenario is clear enough: freedom of movement, full access to the single market, lighter regulation and more border controls. But it will not be down just to us.

One thing that has been made clear is that the other EU member states intend to deal with Brexit using Article 50 of the Lisbon Treaty. Any hopes the “Leave” camp had of chatting amicably and informally with our partners on key issues before opening formal negotiations have vanished. While differing over the pace of negotiations, both Angela Merkel, the German Chancellor, and Jean-Claude Juncker, the President of the European Commission, have said that there will be no informal talks. This position was formally adopted at a meeting of the 27 heads of state and government once David Cameron had left the EU summit which took place immediately after the referendum. Article 50 will be the basis of any deal. No negotiations can take place until the UK has formally notified its partners of its intention to trigger it.

Article 50, and the special procedure it entails, applies to talks on how to extricate the UK from the EU. It does not apply to negotiations over a deal to regulate relations in the future. The treaty text says that negotiations would lead to an agreement with the leaving state “setting out its arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”

It is conceivable, even likely, that the two sets of negotiations will be carried out in parallel. Cecilia Malmström, the European Commissioner for Trade, was on legally solid ground when she argued in a Newsnight interview that there would have to be two separate sets of negotiations, one on the UK leaving and the other on terms for trading in the future. Yet, the treaty article contains enough wiggle room to suggest that talks will focus on the future as much as resolving relations from the past.

What is crucial, however, is that negotiating exit on the one hand, and planning for the future on the other will be determined according to two very different processes. Under Article 50, any agreement with the leaving state must be approved by the European Parliament and a qualified majority of member states. A new trade agreement, in contrast, will probably require approval by the governments and parliaments of all member states, and could quite possibly lead to referendums in some countries. The bar, in other words, is much higher.

Enter our EU partners, who will play such a crucial role in determining our future. Immediately after the vote, there were expressions of impatience from Juncker, and some Foreign Ministers including Jean-Marc Ayrault of France, who stated on the weekend following the referendum that Article 50 should be invoked within a “few days.” French markets had been particularly badly hit by the vote, as was the Italian stock market, which was among the worst affected.

Merkel has been influential in inspiring a sense of calm in her partners. On the Saturday after the vote, Merkel addressed a meeting of senior German politicians at which she cautioned against haste. Two days later, when she met François Hollande, the French President, and Matteo Renzi, the Italian Prime Minister, both Italy and France had fallen into step with her.

Berlin’s calls for patience were partly motivated by a hope that the UK might reconsider its decision. By the time heads of state and government convened in Brussels on the Tuesday, however, Merkel had rowed back from this, saying “I don’t see a way of turning this round. It’s not the time for wishful thinking but for looking at reality.”

So how, then, will other member states handle the negotiations? During the referendum campaign, the “Leave” camp said that Britain would enjoy an advantage in negotiations with the EU due to its large trade deficit with the rest of Europe. The argument said that, as we imported about £60bn more from the EU than we exported in 2014, the EU needs us more than we need them. This argument is far from compelling. Trade benefits both the exporter and the importer.

And economics alone will not shape the attitudes of other member states. Across the continent, business leaders will be lobbying their governments to ensure that any post-Brexit deal serves their interests. This is already apparent in the area of financial services. Member states have been quick to woo the British financial services industry in the wake of the referendum. The deputy Mayor of Paris has spoken of “rolling out the red carpet” to British bankers, while a representative of Frankfurt has suggested that there is potential for over 10,000 jobs to move there from London over a five-year period. The question of passporting—the agreement which allows banks to provide services in countries elsewhere in the single market—is of crucial importance. Whatever the eventual deal between the UK and the EU, banks and other large institutions are already carrying out contingency planning.

Instead of worrying about the economic impact of Brexit on their own economies, some member states have moved to thinking of it more as an opportunity. And this applies equally to the politics of the negotiations.

There has been much talk of “contagion,” of the risk that the British referendum will undermine European integration. Britain is not alone in facing domestic discontent with the EU. In 10 European countries surveyed by the Pew Research Center, just 51 per cent of voters had a favourable view of the EU, with only 19 per cent wanting more power to be handed to Brussels and 42 per cent saying they wanted power returned to national capitals.

And in the hours after the British vote, Eurosceptics across the continent including the Front National in France, the Swedish Democrats, Italy’s Northern League, Austria’s Freedom Party, the Danish People’s Party and the Dutch Freedom Party, demanded their own referendums on membership.

However, the chaos that hit the UK served a useful political purpose. As Juncker put it in an interview with the German newspaper Bild on 24th June, the “repercussions of the British referendum could quickly put a stop to crass rabble-rousing, as it should soon become clear that the UK was better offinside the EU—economically, socially and in foreign policy terms.” Mark Rutte, the Dutch Prime Minister, explained to assembled heads of state and government over dinner on 28th June that it was sobering for Eurosceptics to see how the UK was suffering. “England,” he declared, “has collapsed politically, monetarily, constitutionally and economically.”

Domestic political considerations will also influence negotiations with the UK. States such as France and the Netherlands which previously supported British demands for curbs on the free movement of workers are now less vocal on the subject, not least because of challenges from Eurosceptic parties in elections next year. There is wariness among EU governments about providing concessions to the UK that might inspire their own anti-EU opponents.

Such concerns will shape their reaction to British demands for single market access without free movement. EU leaders have already ruled out such a possibility—when the 27 met in Brussels in late June, their joint statement underlined that any “agreement which will be concluded with the UK as a third country, will have to be based on a balance of rights and obligations. Access to the single market requires acceptance of all four freedoms.” Those four freedoms cover the movement of services, capital, goods and most crucially, people.

It is worth recalling that the rules for any post-Brexit deal probably require unanimous approval from all member states and their parliaments. Thus, it only takes one government to block any agreement; the states of central and eastern Europe will all wield vetoes and they have indicated that a primary concern will be the rights of their citizens currently residing in the UK. They will be watching Theresa May with interest given her failure to guarantee these rights. The Visegrad Group—consisting of Poland, Slovakia, the Czech Republic and Hungary—have also stated their opposition to any attempt by London to pick and choose aspects of the four freedoms. Domestic opposition to concessions will be fierce.

Not all member states are as inflexible. Despite its concerns being ignored throughout the referendum campaign, the Irish government has a strong vested interest in ensuring that Britain retains close ties with the EU. The future of the internal border within Ireland and the fragile peace process have been thrown into doubt by events across the Irish Sea.

Yet, to date, Brexit seems to have provoked an unlikely bout of unity among EU member states that previously struggled to agree on much at all. The recognition of a need to negotiate together with London on the basis of treaty-based procedures has trumped any desire to hold backroom chats. And the emphasis on the four freedoms as non-divisible has emerged rapidly and easily. Our next Prime Minister must confront the reality of this determined consensus.