Last night, in a stunning gesture, the United Kingdom voted to leave the European Union, of which it has been a member for 43 years. In a closely contested referendum of passion and rigourous debate, ‘Brexiteers’ carried the day, beginning a process of withdrawal that has never been experienced before in the bloc’s history. Henceforth, the United Kingdom will enter into a series of difficult and prolonged negotiations with EU leaders, both from EU institutions and Member States.
These are uncharted waters for all parties involved, so we should expect some fumbling along the way. What is a guarantee, however, is that EU leaders and EU heads of state and government will not be overly generous to the UK during these negotiations. Already, President Hollande and Chancellor Merkel have said that the EU should not offer ‘too many concessions’ to the UK in the upcoming negotiations and that the Eurozone must integrate further to keep itself stabilised and the European Project alive. They are expected to release a statement later today following last night’s results which will outline their proposals for the next step forward.
We know what the UK wants out of these negotiations: no political union, free trade agreements, and freedom of movement for its students and workers (maybe). This is roughly the same agreement that both Norway and Switzerland have with the EU, except both of those countries are made to pay billions of euros into the EU in order to be granted access to the Single Market. The strongest argument for Remain, was in fact that these countries actually have less sovereignty outside the EU because they must abide by EU regulations and pay into the system without having a seat at the decision-making table, but that remains to be tested in the UK’s case. However, that seat has been vacated by the one occupying it. So now we must know, what will the EU’s negotiating position be?
It’s not that simple to pinpoint. Presidents Tusk, Schulz and Juncker do not want to take punitive action against the UK. In their joint statement, along with Prime Minister of the Netherlands Mark Rutte, President of the rotating Council of the EU, they said, “As regards the United Kingdom, we hope to have it as a close partner of the European Union in the future. We expect the United Kingdom to formulate its proposals in this respect.” One should therefore anticipate the EU demanding the following of the UK in any post-Brexit agreement:
- For access into the Single Market, the UK must pay into the EU system so less-prosperous Eastern Member States-such as Poland or Hungary- do not lose out on their budget allocations and to keep the playing-field as level as possible for the 27 remaining Members.
- Free trade agreements will likely include language specifically protecting Frankfurt, Paris and other European financial capitals and be less concerned about protecting the City of London. The City has gotten many concessions from the EU in financial deals past but is likely to see that progress washed away, specifically on free transfer of trades and currencies.
- EU farmers will lobby hard for more protectionist measures of their own products. Expect to see CAP and farm subsidies a major sticking point. British farmers are set to lose billions in EU subsidies. Do not plan to see those subsidies continue.
- EU leaders will still want the UK to accept more refugees coming from the Middle East and North Africa, considering for many, their final destination is the UK, where many of their families are located. So far, Cameron has only pledged to take in 20.000. Even though its borders will be its own to non-EU nationals (like it is now), expect Merkel, Hollande, Renzi and Junker to seek greater numbers on this issue.
- Speaking of UK borders, Britain will be asked to accept free movement of EU nationals for access to the Single Market as well as money, like Norway and Switzerland. This is why Leave’s promise to cut EU immigration was inherently impossible to keep. To have business with Europe, Britain must accept Europeans.
- NATO will want the UK to remain part of EU’s foreign affairs apparatus to keep the sanctions on Russia in place and maintain unity against Russian moves in Europe.
In essence, EU leaders will come from a negotiating position that asks the UK to accept a Norway or Switzerland style deal, which changes little by way of contributing to the EU budget and free movement, but changes a lot in terms of Britain having any further say in its application. A document from the German Ministry of Finance has suggested that the UK be given the possibility of an “Association Status” with the EU, similar to what states are given before they attain full Membership. This would be attained gradually but could see many of the pillars and benefits of EU Membership retained, if Britain wants it.
In all, EU leaders, financial investors, economists and many other people have been both shocked and proven wrong in their calculation that Britain would vote to Remain in the EU. Whether you supported Brexit or not, it is now time to turn our attention to what’s next. Article 50 provides a way out for any Member State that wishes to leave the EU, and EU leaders want it invoked quickly so the process can be completed in two years. Brexit will now dominate the British political landscape for several years which hopefully does not sideline other responsibilities of Government. European leaders did not want this to happen, but are prepared to offer their terms to whoever inherits Downing Street next. It will surely be a complicated and tedious negotiation.
