A case for pragmatism in the light of Brexit
On Friday, we will be precisely one week away from the UK leaving the EU. The withdrawal agreement bill has now passed Parliament and Brexit — the subject of much soul-destroying, divisive and seemingly never-ending debate — will become reality on Jan. 31. This D-Day will, however, not be the end of the story. The UK and EU will instead enter a transition period that will last until Dec. 31, by which date they must have hammered out the details of their future relationship. UK Prime Minister Boris Johnson has made it abundantly clear that he will not extend that period: The UK will be out for good by Jan. 1, 2021 — no ifs or buts.
However, new EU Commission President Ursula von der Leyen has made it equally clear that negotiating a free trade agreement alongside the other aspects of the divorce pertaining to security issues and the status of citizens in just 11 months will be nearly impossible. She insisted that negotiations would evolve more easily the closer the UK intended to stay to EU regulations.
As part of what can be considered a ping-pong match of statements carving out the negotiating positions of the two parties, Chancellor Sajid Javid claimed that the UK would not be a rule-taker in an interview with the Financial Times last weekend. This once again opens up the prospect of a no-deal Brexit at the end of this year. Industry is up in arms — particularly the automotive, pharma and other sectors, which rely heavily on intricate supply chain arrangements with the continent.
Wherever one stands on the Brexit debate, Johnson’s decisive victory in December’s election has at least put a stop to the never-ending debate and provided some clarity: The UK is leaving and the exact modalities of Brexit will be clear by Dec. 31, at the latest. A no-deal exit would be unfortunate for both parties. It would, however, be preferable to a continued state of uncertainty prolonging divisions in the country. Businesses will deal with new challenges. Even if they are suboptimal, at least business leaders will know what they have to deal with and adjust. It will admittedly be much harder for smaller businesses that, unlike their bigger counterparts, do not have the wherewithal to employ armies of consultants, accountants and lawyers. They also have much less clout when it comes to representing their interests with government. There will be losers for sure, but epoch-defining decisions like Brexit always produce winners and losers. It will then be up to society and the government to deal with the fallout.
For the EU, it will be good to have clarity too. Brexit was all-consuming and prevented the organization from dealing with other pressing issues, such as migration, the economy or climate change. Both the UK and EU have a new leadership team. A new “European Green Deal” is the top priority for Von der Leyen, which she set out clearly in her inaugural speech in the European Parliament and at the World Economic Forum in Davos this week. Even German Chancellor Angela Merkel, who up to now had always hoped against hope that the UK would reverse its decision to leave, welcomed the new-found clarity.
Johnson’s decisive victory in December’s election has at least put a stop to the never-ending debate and provided some clarity.
Things will change in the UK, but they will also change in the EU. The advocates of liberal economies and free trade, such as Holland, Germany and Ireland, could until now always hide behind the UK when it advocated its strong pro-business and free trade agenda. They will now have to do more heavy lifting when it comes to those themes. The northern countries will collaborate more in the so-called Hanseatic League, while the right-wing Visegrad Group of countries, including Hungary, the Czech Republic and Poland, will probably gain in relative strength once the EU is “sans” the UK. And don’t forget the economic laggards, like Italy, which will face an EU with less money in the till once the economic powerhouse that is the UK has left.
These groups will have to jostle for their relative positions within the EU. Expect this to be a lengthy and, in part, painful process. The outcome will not just inform the relationships among EU countries, it will also have ramifications for the organization’s relationship with outside powers like the US, Russia and China. Gone is the influence of the strong “special relationship” between the US and the UK. Near neighbor Russia and emerging superpower China will try to capitalize on the new balance of power within the bloc.
While many would have liked the UK to remain in the EU, they have to admit that both parties were in dire need of a way to cut through the endless procrastination of the Brexit debate. Whether we like it or not, we now need to move forward.
- Cornelia Meyer is a business consultant, macroeconomist and energy expert. Twitter: @MeyerResources