Union Jack
The hard way for Britain to leave the EU starts with the assumption that the United Kingdom will leave the EU by the end of March 2019 regardless, even if there isn’t a deal between Her Majesty’s Government and the EU. This is explicitly stated in article 50 of the Lisbon treaty, the so-called divorce article, which was triggered by the conservative Government last March.

Therefore Hard-Brexit means leaving without an agreement – or „transition deal“ as it is usually called – on future relations between the United Kingdom and the EU. There are those, mostly Soft-Brexiteers and Remainers, who think leaving the EU, the single market and the European Union Customs Union all at once will be a complete catastrophe for British business and its exports into the EU. They are not totally wrong, because there would obviously be a period of confusion about what rules British enterprises have to follow with while exporting goods and services to the continent. The City of London is especially scared about losing market share and jobs to Frankfurt or Paris. It would not be enough for British financial market regulations to be the same as in the EU, they’d have to be officially accepted as equivalent. British goods and services would have to pass a compliance test twice: first in Britain and then, because of the lack of a conformity agreement with Brussels, once more in the EU. And there’s another problem: During the two year grace period, the European treaties not allow Britain to negotiate bilateral free trade agreements with third-party countries like the US, Canada or Switzerland. British business is therefore threatened by a „gap“ between membership in the EU and a self-made global trade policy after leaving it.

For Hard-Brexiteers, and there are quite a few in the Prime Ministers own party, this is all just fear mongering to force Britain into a deal that does not suit British interests and honouring the vote of last June. They usually say that these arguments are from the same „experts“ who predicted a catastrophic downturn of the British economy after the referendum, and were wrong. They refer to the fact that a lot of countries from outside the EU are exporting their goods and services into the EU anyway – think of China or the US. On the other hand a lot of industries from the continent sell their products to Britain, for example the German car industry, which is traditionally important for German economy and has direct ties to politics. After Brexit, Britain will be the most important external destination for EU-goods. The financial market in the City is important for EU-members and its enterprises as well. As Hard-Brexiteers point out, neither the EU nor Britain are in favor of a divorce without any deal.

Besides that quite reasonable hope, no deal would not mean complete chaos. The basic rules of such relations without a transition deal would be the law of the World Trade Organization (WTO). In the EU there is an average maximum tariff of 4,8% – not enough to threaten British businesses as the Soft-Brexiteers say. WTO-rules were not established when the Customs Union was established in 1968 and the single market came into being in 1993. WTO includes all the advantages of both, but on a global scale. Different conformity tests have always been necessary to export globally. So there wouldn’t be a bottom-less „gap“ but probably a small one. And last but by no means least for the Brexiteers: leaving without a deal would mean getting rid of the European Court of Justice and its foreign judges and of free immigration for EU-Citizens, thus the true will of the British people. Recent plans of the British Government suggest that this is very important for them.

Hard-Brexiteers see the future of British business not on the continent but in the whole world. That’s an attractive approach. It’s true that the single market is not a free-trade heaven. Its rules do make British enterprises globally less competitive. Not being a part of any of the EU-related bodies would allow the Brits to make their own deals and foster the multilateral approach through WTO. Some Hard-Brexiteers even dream of a totally new tariff policy with fever to no tariffs for incoming foods and other essential goods. This would lead to falling prices from which most people, especially the ones with low income, would benefit. But there are serious doubts that a conservative government is able – or even willing – to bring something like that through parliament, especially not after the general election, that made the Prime Minister dependent on the Democratic Ulster Party and its Members of Parliament, a small conservative party widely supported by farmers of Northern Ireland.

Will Prime Minister Theresa May really risk a Hard-Brexit and the status quo of the many but stable regulated relations with the EU? The last documents published by Her Majesty’s Government indicate a certain kind of compromise on the British side, at least about issues that were not that important during the referendum campaign such as the British-Irish border. Let’s not forget: Talking about a Hard-Brexit could also be a good negotiating tactic for Prime minister Theresa May and her Brexit minister David Davies, because no transition deal would mean at the very least no further money for the EU after 2019. That would tear a huge hole in the EU-Budget. In the first negotiation rounds there were figures of 30 to 60 billion euros as a divorce bill on the table. Without that money the EU would have some serious problems, because the coffers are empty.

Even Hard-Brexiteers admit that leaving without any deal is the „second-best option“. But article 50 has a small exit door: the European council and the UK can decide to extend the grace period – if they both agree. And there are more and more Hard-Brexiteers openly admitting that there will be such a „transition-period” of further negotiations.

For its supporters a Hard-Brexit might not be a bird in the hand, to stay with this picture from part 1, but the hope of getting one later and the guarantee of getting two birds already singing in the bush. (Picture: Davide D’Amico / flickr.com, Creative Commons, unchanged)

The other parts of this article:
Part 1: Soft Brexit
Part 3: Meaning for Switzerland

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One thought on “Brexit: Two paths for Britain – and what they mean for Switzerland (Part 2)

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