The U.K. Sketches the Outlines of Its Brexit Strategy
OCTOBER 7, 2016 | 02:17 GMT
The British government has started to outline the positions it will take in negotiations over its departure from the European Union. Recent statements by Prime Minister Theresa May and several members of her Cabinet have sought to clarify London's views on a number of issues surrounding the Brexit. Any haggling over the country's future outside the bloc must wait until the United Kingdom formally triggers the Brexit process, and May's ministers remain divided on multiple counts. But more than three months after the British referendum passed, London feels that it is time to send a message to voters, local and foreign companies, and EU governments.
The campaign began over the weekend with May's speech at the Conservative Party convention, where she announced that London will formally notify the European Union of its intention to leave the bloc by March. This will start the official negotiation process between the United Kingdom and its EU peers on the terms of the Brexit and, perhaps, the shape of their future relationship. Afterward, critics in the media accused May of reducing the United Kingdom's leverage by prematurely setting a date for the formal notification. But the prime minister likely deemed that prolonged uncertainty about the Brexit's timetable would unnecessarily hurt the British economy.
On Wednesday, a member of the team in charge of the Brexit talks said the British government has four "red lines," or demands on which it will not compromise: the United Kingdom wants to stop making contributions to the EU budget, regain full legislative sovereignty for its Parliament, break free from the jurisdiction of the European Court of Justice and have an independent immigration policy.
It's too soon to know whether these goals are truly inflexible or simply an attempt to set a starting position before concessions are made. But with the announcement, London is signaling that its continued membership in the internal EU market may not be a priority. During her speech, May said her government would not try to emulate Norway, which while not a member of the European Union, accepts EU workers, contributes to the bloc's budget and follows some EU norms in exchange for its participation in the common market.
This strategy, which addresses most of the issues that resonated with voters who favored a Brexit, makes political sense. It is also in line with May's attempt to appeal to the country's working class, which she said would be the focus of her government rather than corporate or financial-sector interests. The Brexit vote had visible anti-system and anti-establishment elements, and the new British government is interested in winning support from those voters. As the prime minister said, "in June people voted for change. And a change is going to come."
But May's strategy also faces significant challenges. Should London decide not to remain in the common market, it would probably seek to enter a free trade agreement with the European Union. But that path has its own obstacles. In general, free trade agreements are easier to negotiate for goods than they are for services. The United Kingdom's is primarily a services economy, and the British government will be interested in negotiating as much access for services as possible.
Another crucial issue in the Brexit talks will be the status of the United Kingdom's passporting rights, a system that allows financial companies operating in the United Kingdom to sell their services to EU members without having to apply for permission in each country. Despite her appeal to the working class, May cannot afford to completely ignore the needs of a sector that represents a sizable portion of the country's gross domestic product. The interests of some big EU economies will also play a role in this process: Germany or France, for instance, could deny Britain's passporting rights to force companies currently in London to relocate to Frankfurt or Paris.
May's speech reignited fears in Scotland and Northern Ireland, where a majority of the population voted to remain in the European Union. Legal experts in both countries have said the Scottish and Northern Irish governments may have the power to veto the United Kingdom's exit from the European Union, a claim rejected by the British government and other legal experts. Some Northern Irish politicians are also worried that a Brexit could jeopardize the 1998 peace agreement with Northern Ireland. Because Ireland and the United Kingdom are currently members of the European Union, people, goods and services can move freely between them. Should the United Kingdom lose access to the EU common market, however, Northern Ireland might be forced to reintroduce border controls. The government in Dublin recently called for Northern Ireland to be given special status to keep the border open. This will be one of the many topics up for discussion when the Brexit negotiations formally begin.
With this week's announcements, the British government offered glimpses of clarity after months of uncertainty. But the preview of London's negotiation strategy confirms that May's team will have to make tough political and economic choices. What might make sense from an economic point of view could prove unacceptable politically. Moreover, the red lines drawn before the start of negotiations might have to be altered as the conversation progresses. What is most clear, though, is that domestic political calculations will be as important as economic strategies in shaping the future of the United Kingdom's relationship with the European Union.