Brexit – 1 month to leave – or 3, or 7, or 25, or … never

On March 12 the House of Commons may have a number of Brexit-options on the table. The Prime Minister may bring some paper from Brussels repeating that the Northern Ireland backstop is not thought to be there short of eternity – while it will be in place until an alternative solution for the border in Nothern Ireland is available, acceptable for both sides, and working properly. I would not exclude that Theresa May gets a majority for the withdrawal agreement this time, but the odds are against her. So what happens if there is still no majority?

The Prime Minister has announced that Parliament should then vote on a no-deal Brexit. If this option is voted down and Parliament makes no-deal a non-option, the Commons may vote to ask the EU-27 to prorogate the negotiations on Brexit. The British government does not want a prorogation for more than 3 months. However, the EU-27 expect a clear perspective that these 3 months would mean something different from the actual mess about the withdrawal agreement.

If the vote on prorogation does not come through in the House of Commons or the EU-27 reject that application, the no-deal scenario remains the default option. Then the only option left for the government to comply with a vote against a no-deal Brexit would be to revoke the invocation of Article 50. In that case Britain would just remain a member of the EU.

The no-deal-option

A no-deal scenario would immediately transform the UK into a „third country“ for the EU. However this does not mean that the United Kingdom is free from all obligations towards the European Union. Even without a formal agreement Britain will have to pay for committments incurred when being a member. This has been acknowledged in the withdrawal agreement, but it does not depend on concluding that agreement. If Britain is in breach of its obligations this would mean a technical default with severe consequences for the international rating of the UK. For the EU this would entail a rather conflictive relationship with Britain. Negotiations on a new kind of relationship, e.g. a free trade agreement, may not even start before all contentious questions are settled.

For the EU all necessary legislation for customs procedures is already in place because it is the same set of rules applied to other third countries like the US, Brazil or China. The rules are mainly based on WTO rules. However many third countries have a free trade agreement or even a customs union with the EU enjoying trade privileges, that Britain cannot invoke until it also agrees to some free trade agreement. Both the EU and the UK want an agreement, but it may take considerable time to hammer out that deal. In a no-deal scenario there is no transition period. A minimum of provisional rulings on a case by case basis should help over some time – but to be conform with WTO rules that does not allow any privileges for one partner which are not given to all others under the most favoured nation clause.

Such a scenario will be damaging for many partners of the UK in the EU, it will be disastrous for the UK, because it will break up delivery lines and make trade between both sides more costly and more complicated. Certainly other third countries can be perfectly well trading on WTO terms, but Britain is utterly unprepared for that scenario. It may take several years to adapt to the new situation. The additional cost for business will remain a barrier for including the UK in modern integrated production lines. These production lines may shift to other EU countries and may benefit especially Ireland or Eastern Europe.

The other option: a second referendum

In case Parliament votes to ask for 3 more months of negotiations without a perspective that any new elements enter the scene, the EU-27 may not agree to that prorogation. President Macron of France and the Spanish Prime Minister already made clear that there will be strings put on any such decision. In that case the default option will still be no-deal. The EU may in the end still agree to such a prolongation, but there is a good chance that a no-deal scenario will then only be postponed. Expectations that the UK may be better prepared at the end of July than at the end of March 2019 seem to be rather optimistic.

The prorogation makes sense if it will give more time to hold a second referendum. The Labour Party did loose the vote for its own kind of Brexit with a customs union and much closer relations to the EU on February 27. It could now concentrate on campaining for a second referendum with a form of Brexit – possible the last text of the withdrawal agreement negotiated by the government – and Remain on the ballot paper. Time is running out, the decision on a second referendum must be voted before March 29.

I have always been a referendum-sceptic (being democracy without safeguards – without a fundamental debate in the two chambers, three readings of each law and regular elections to revise errors). However, the psychological impact of not implementing the first referendum can only be mitigated if the people have another vote themselves which overrules the first vote the same way any election overrules earlier elections.

A vote for a second referendum would change the whole setting for the negotiations because it would open up a chance for either accepting the existing withdrawal agreement by popular vote or getting a vote for remaining in the EU based on the existing conditions.

A second referendum would bring the UK out of the limbo of not having any majority for any option in Parliament. Since preparing another referendum may take several months, the EU-27 must be asked to prolong the period of negotiations under Article 50 for six to nine months. This should be possible.

A special agreement must then be concluded how to handle the European elections of May 2019. In case of a Remain vote it would be appropriate that British MEPs are elected for Brussels, in case of a Leave vote these MEPs may have their seats canceled when the withdrawal agreement and the provisions for the transitional period enter into force immediately after Parliament votes along with the result of the second referendum.

If the vote is Remain, the whole nightmare may be over soon, although reconciliation of the divided Britons may take some time. If the vote is in favour of Leave negotiations on the future relationship could start quickly. The government will then have to decide what kind of relationship is in the best interest of the British people. This could be a free trade agreement, it could be a customs union or it could be full participation in most of the single market (the so-called Norway model). I think it would be a good idea to have new elections before starting these negotiations. The parties should explain in their manifestos what their view on these options are. The newly elected government could start with fresh legitimacy to pursue the path it deems best for Britain. And the EU would be happy to negotiate with a government that knows what it wants.

 

 

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