BREXIT: Where does it stand and what are the options?
If I were a business person in the United Kingdom (UK) or a concerned voter, I would be somewhat unhappy about the persistent uncertainty regarding the outcome of the Brexit process. There are two main reasons: The stakes are high, and it is late in the day.
The signals from the two centres which must generate the answers (the UK government and Brussels) are often contradictory. On Monday 3 September 2018 (that is 6 months before the end of the two-year period stipulated in Art. 50 of the Lisbon Treaty for exiting from the EU), British media carried the following headlines: “Johnson savages May’s Brexit plans” and “EU chief negotiator Michel Barnier said he’s ‘strongly’ against elements of the Chequers agreement too”.
The efforts to reach a Brexit deal are not helped by the fact that the UK’s governing party remains split. Two former cabinet ministers (David Davis and Boris Johnson) continue to criticise the PM’s Chequers proposal. This is the formal UK proposal for leaving the EU. The result is more conflicting signals.
Brexit may be a tough journey. A week ago the new Brexit secretary unveiled 24 technical notices on the often alarming consequences of no deal. The chancellor warned it could cost £80bn. One commentator describes the UK’s efforts to leave the EU as “a lot of noise, no real action, and complete uncertainty as to the outcome.”
Politics and Background Facts
On June 23, 2016 the UK voted to leave the EU, after almost 44 years of membership. It should also be noted that the UK had joined the EU in 1973, long before the WTO was established in January 1995. It is a member of the WTO but does not have its own WTO schedules. At some point this matter will have to be addressed. The nature of Brexit will have an impact on the detail of her future WTO membership and trade with third parties. The latter include African nations.
Nine months later the Prime Minister activated the official mechanism to leave the EU, Article 50 of the Lisbon Treaty. At 11pm local time on March 29, 2019 the UK is scheduled to leave the bloc. The time-frame allowed in Article 50 is two years – and this can only be extended by unanimous agreement from all EU countries.
When Article 50 was triggered it was said that no deal is better than a bad deal. If no agreement is reached in two years, and no extension is agreed, the UK would automatically leave the EU and all existing agreements, including access to the single market. It would, however, gain full control over migration!
Calculating the costs of a hard Brexit then generated an appetite for a soft Brexit and a “deep and special relationship” with the EU, which must be negotiated. This requires more time; beyond 29 March 2019. White Papers, a Withdrawal Bill and Negotiating Guidelines were also published over time.
The present state of affairs is indicative of the difficulties in hammering out this special relationship, which most commentators argue would serve both London and Brussels. The EU is the UK’s biggest trading partner. However, Brexit cannot allow cherry picking and cannot be seen to be an attractive option for other EU members. The integrity of the EU must be protected.
When will the real negotiations start? The last European Council meeting in 2018 is scheduled for December 13 to 14. This is believed to be the last practical date for an Article 50 divorce deal to be signed off by Britain and the EU. It must contain the general principles for guiding the transitional phase, which starts in April 2019.
In January 2019, the UK Parliament must approve whatever Brexit deal Mrs May has agreed to in Brussels. Parliament must also pass an Implementation and Withdrawal Bill, setting out the terms of Brexit. Legal issues about the withdrawal treaty could be referred to the European Court of Justice.
The extent of the changes to life at the moment of the UK’s departure from the EU depends on the negotiations in the preceding months. They could produce a largely seamless transition or, if they fail to yield any deal, a much more chaotic “cliff edge” Brexit.
Full-fledged trade talks about the future relationship between the UK and the EU should kick off after April 2019, if all goes well. (While Britain remained a member state, such talks were not permitted under EU law.) Under the deal reached in principle in 2018, this is when the 21-month transition period begins. During this time most aspects of UK membership of the EU will remain in place, including free movement across borders and membership of the customs union and single market. But Britain will no longer have a vote. The UK expects any transition deal on customs to end in December 2020.
What happens if there is no final UK-EU trade deal by December 2020? That is one reason why the EU insists on “backstop” provisions to avoid a hard border in Ireland that will last unless and until a new arrangement is implemented.
Where does the Process stand?
The good news is that the EU and the UK have agreed on more time. They now say that the original deadline for the final withdrawal agreement – the EU’s 18 October summit – may no longer be set in stone. Early November is now more likely.
One important point of departure is that a blind Brexit would benefit no one. The French president, Emmanuel Macron, has stressed his opposition to a “blind Brexit” in which the UK leaves the EU without clarity on the terms of a future trade deal, fearing that pushing the issue down the line could lead to an extension of the 21-month transition period. A number of EU member states, including Germany, believe an aspirational political declaration on the future that ducks the most contentious trade issues now would be the best way to avoid a no-deal Brexit.
The priority for the remaining 27 EU member states seems to have the withdrawal agreement, on citizens’ rights, the Irish border and the £39bn “divorce bill”. EU and British negotiators will then have until 31 December 2020 to sign off on a future trade deal, during which time the UK will effectively remain a member of the EU, but without voting rights.
A number of members, including Hungary, Poland, Belgium, the Netherlands and Portugal, are said to have made the case in the past few months that the EU could be more generous in response to the UK’s proposals to ensure the free flow of goods after Brexit. Time will tell how much this view will count.
The different future options are well-known by now, including their political and practical challenges. Several think tanks and university departments have undertaken studies and developed scenarios for future UK-EU trade. The range covers options from the EEA, a new customs union agreement, a special FTA, to the WTO option. Another starts with the Lancaster House Statement (hard Brexit), to stay in the single market but leave the CU (Norway option), leave the single market but negotiate a CU (Turkey option), leave the single market and the CU and negotiate a new bilateral deal (Canada option), to leaving the single market and CU with no deal (the WTO option).
A no-deal arising from a failure to reach a withdrawal agreement, or Parliament’s failure to pass it, would undoubtedly be the most acrimonious of “no deals”. The UK would, from an EU perspective, be failing to both honour its financial obligations and respect its commitments under the 1998 Belfast/Good Friday Agreement. The UK will have no trade agreement with the EU (its most important trading partner). This will force them to trade with each other on MFN basis. There will be no special legal basis for trade in services. The EU may be reluctant to conclude the narrower deals that it has with other important trading partners on, for example, data, customs facilitation and aviation.
The UK would also need to rush to roll over as many third-country agreements as it could. This includes the promise that the preferences under the SADC-EU Economic Partnership Agreement which the SACU members and Mozambique agreed with the EU after many years of negotiations. It provisionally entered into force in October 2016.
Why Brexit? Can it be reversed?
In a speech delivered in January 2013, the then Prime Minister, David Cameron, announced he would seek a “new settlement” for Britain in Europe, promising to win a host of concessions from Brussels that would convince Britons to remain in a newly-invigorated Europe. He subsequently claimed to have reached that goal, but promised a referendum on EU membership during the early part of the next parliament – by the end of 2017 at the latest – if the Conservatives win the next general election.
Why did the UK vote to leave the EU? Subsequent studies claim that identity politics played a role (but deny the vote was anti-EU citizens); that voters were not persuaded by arguments about economic risks; that ‘new voters’ leant towards Leave; that the vote split across traditional party lines; that turnout favoured Leave; and that the Leave campaign brought together a broad coalition of voters.
No country has ever left the EU and Article 50 of the Lisbon Treaty does not explicitly say whether the process can be halted. The present Prime Minister, Theresa May, has said “there can be no turning back”. After her recent African tour, she said that would make a travesty of democracy.
But the European Council President Donald Tusk believes Article 50 can be reversed. On his side is veteran British diplomat Lord Kerr, who drafted Article 50. He told the BBC in November 2016 “you can change your mind while the process is going on”.
Present indications are that the UK government wants to see Brexit through. This could change if this government loses it majority or any of the important Parliamentary votes.
Perhaps this commentator correctly sums up the mood in the UK at present:
There were good reasons for Britain to leave the European Union. They were largely to do with the future politics of an outer ring of non-eurozone nations. They were nothing to do with the single market, championed as a majestic edifice of free trade by the Brexiter’s darling, Margaret Thatcher, some 30 years ago.
Some of us may be tempted to argue differently. Those future market arrangements do count.
 BBC News Daily, 3 September 2018. https://www.bbc.com/news/uk-45357406
 ‘Brexit weekly briefing: no real progress during summer of squabbles.’ The Guardian, 4 September 2018. https://www.theguardian.com/politics/2018/sep/04/brexit-weekly-briefing-no-real-progress-during-summer-of-squabbles
 ‘Brexit: Article 50 has been triggered – what now?’ BBC, 29 March 2017. https://www.bbc.com/news/uk-politics-39143978
 Explained in the PM’s Florence speech of 22 September 2017. It was billed ‘A new era of cooperation and partnership between the UK and the EU’. See https://www.tralac.org/publications/article/12192-has-the-brexit-process-entered-a-new-phase.html
 To take effect, the withdrawal agreement needs to be backed at an EU summit by a supermajority of leaders of member states (representing at least 20 of the other 27 EU countries and 65 per cent of their population). That decision must also be approved by the European Parliament in a plenary vote.
 ‘Brexit timeline: key dates in UK’s divorce with EU.’ Financial Times, 9 July 2018. https://www.ft.com/content/64e7f218-4ad4-11e7-919a-1e14ce4af89b
 Emmanuel Macron stresses opposition to ‘blind Brexit’. The Guardian, 3 September 2018. https://www.theguardian.com/politics/2018/sep/03/emmanuel-macron-stresses-opposition-to-blind-brexit
 The European Economic Area (EEA) is the area in which the Agreement on the EEA provides for the free movement of persons, goods, services and capital within the European Single Market, including the freedom to choose residence in any country within this area. The EEA was established on 1 January 1994 upon entry into force of the EEA Agreement. The contracting parties are the European Union, its members states, and the member states of the European Free Trade Association. The EFTA Member States are Iceland, Liechtenstein, Norway and Switzerland.
 Which took 7 years to negotiate.
 Institute for Government. 2018. The options for the UK’s trading relationship with the EU. https://www.instituteforgovernment.org.uk/explainers/options-uk-trading-relationship-eu.
 Rutter, J. and Owen, J. 2018. Autumn surprises: possible scenarios for the next phase of Brexit. Institute for Government. https://www.instituteforgovernment.org.uk/publications/possible-scenarios-next-phase-brexit
 ‘EU deal: What David Cameron asked for... and what he actually got.’ The Telegraph, 14 June 2016. https://www.telegraph.co.uk/news/2016/05/19/eu-deal-what-david-cameron-asked-for-and-what-he-actually-got/
 ‘David Cameron promises in/out referendum on EU.’ BBC, 23 January 2013. https://www.bbc.co.uk/news/uk-politics-21148282
 Swales, K. 2016. Understanding the Leave vote. NatCen Social Research. http://natcen.ac.uk/our-research/research/understanding-the-leave-vote/
 ‘Boris Johnson’s latest Brexit outburst combines madness and mendacity’: Simon Jenkins. The Guardian, 3 September 2018. https://www.theguardian.com/commentisfree/2018/sep/03/boris-johnson-brexit-outburst-tory-leadership-challenge
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