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“Deal or No Deal”? Why the UK and EU Must Not Ignore the Risk of No Deal on Brexit.

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The EU is prepared for a ‘no deal’ scenario in a way that the UK government and the wider public perhaps fail to appreciate. This is because the EU and the UK approach the withdrawal negotiations with radically different understandings of the purpose of the process of exiting the current EU treaty-based system. Consequently, the EU is fundamentally prepared to withstand one or both of two “no deal” scenarios: no formal withdrawal agreement or no new trade deal to regulate access to each side’s market.

The British debate – within government and amongst key stakeholders – over leaving the EU, following the triggering of Article 50 of the Lisbon Treaty, has been dominated by the question of whether this exit will be “hard” or “soft”. The latter option relates to retaining membership of the single market and/or the Customs Union, reliance on WTO trading rules and no actual FTA with the EU is the hardest of exits, while a formal transition period that gradually uncouples rules and relations is a temporary middle ground softening the move towards a hard break. The principal concern of the UK negotiating team is thus the nature of the final destination.

By contrast, for the EU, Brexit is first and foremost matter of principle, not a wrangle over what form it takes; from an EU perspective, the hard/soft distinction is not a meaningful component of the objectives of the Article 50 talks. What the EU privileges is a phased approach to negotiations that first creates an orderly withdrawal; it is officially agnostic regarding the final terms of future UK-EU relations.

The British Prime Minister’s Florence speech last September helped smooth the way towards agreement in December over Phase I of the Brexit negotiations. This was in large part because she took the opportunity to clarify the UK position on its financial liabilities. Yet the speech largely functioned as a placeholder for the more long-lasting issues by reiterating the desire to embark on trade talks as soon as possible and invoking creativity to craft a bespoke arrangement on the back of a transitional status. The intention was clear: to highlight that the EU is just as implicated in the task of settling the kind of Brexit that will occur.

Hence the Prime Minister’s position still overlooks the fact that the EU privileges process over content in approaching the free trade component of the Brexit talks. The content the EU wished to find an agreement on in the first phase concerned citizens’ rights, financial liabilities, and the Irish border. Now the second phase of the Article 50 talks is dominated by the question of what a transition period will look like. However, the two negotiating teams are divided on the terms of transition and how the phase I agreement will become law for the UK. In reality, therefore, they are focused on different outcomes as the EU insists on clarifying the process of leaving while the UK seeks to move the conversation on to a “deep and special partnership” in the future.

The problem of bridging this gap between the two sides is what creates a genuine risk of a no deal scenario arising, with neither side necessarily at fault because the timeline is so short. Wrangling over the terms by which the UK will leave inevitably comes at the expense of taking time to address future relations. On that basis, it would be extremely prudent for the UK government to accelerate planning for leaving the EU at 2300 on 29 March 2019 with no new trade agreement.

There is a further risk that the mooted “implementation period” creates false expectations amongst the public that negotiations cannot fail. Temporizing measures to allow new institutional structures to be put in place are potentially an attractive proposition for both parties. Yet any transitional status still needs to be agreed within the existing timeframe of Article 50 talks – unless all UE countries agree to a request or put forward a proposal to extend them – and would have to determine a precise future relationship that currently is not on the official agenda. Moreover, transition arrangements are conditional on successfully concluding terms of withdrawal.

The above analysis suggests the UK government needs to be fully prepared for a no deal scenario because the EU is, understandably given its preferences, inflexible in seeking orderly withdrawal above anything else. It is also of equal importance to manage public expectations to that effect, especially when discussing a putative implementation period that can too easily be misinterpreted as a way of automatically “buying time” for talks to continue. There is nothing automatic about transitioning to a new EU-UK relationship and it would be best to ensure the British public is fully aware of this.

Dr. Andrew Glencross, Senior Lecturer Dept. of Politics and International Relations School of Languages and Social Sciences
Birmingham, B4 7ET, United Kingdom

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