The UK public and those watching the changes and nuances of the aftermath of the Brexit vote are becoming more confused on the eventual Brexit divorce: a soft or hard exit and what does this mean in practical terms especially for free movement?
After a rather uneventful second preliminary round of Brexit talks several weeks ago, the United Kingdom and European Union negotiators broke off for the summer recess, postponing the most politically sensitive topics until after the September 24 German elections.
While there has been some bad blood with colourful comments by Boris Johnson the UK Foreign Secretary, one is of the opinion that the odds for an orderly UK exit from the EU, followed by a transition period and an eventual trade deal remain high.
Despite the poor showing in the June 8 elections, Prime Minister Theresa May and her allies have not veered away from pledges to exit the Single Market and the EU Customs Union, control EU immigration, repeal EU law supremacy, and extricate the UK from judicial control by the European Court of Justice.
It is pressure from a venerable British institution – the London financial market – that is leading the quiet charge for a soft Brexit.
It is pressure from a venerable British institution – the London financial market – that is leading the quiet charge for a soft BrexitDr. Mohamed Ramady
The City of London is pushing for the British negotiators to be open to further concessions on EU citizens rights and accepting European Securities and Markets Authority supervision as trade-offs to retain some of the euro clearing business, even if that eventually entails ceding some level of control to the European Court of Justice (ECJ).
On a purely strategic level, London has for now decided to focus on transitional arrangements, which the British government would like to last for as long as possible given the early March 2019 negotiations deadline, and insists on an “implementation phase” with Ministers debating publicly on the length of the transition.
In order to defuse delaying tactics, the European Commission has decided to put new financial regulation proposals, and especially the one on third-country “equivalence,” as a “loaded gun” on the negotiating table.
The real issue, and where the talks will become highly political, is with the free flow of financial services from the UK to the continent and vice-versa. EU officials say Britain could eventually make some limited concessions even on these so-called “red lines.”
The hot topic
The other hot topic, the issue of the border between the Republic of Ireland and Northern Ireland, is being dealt with by the Irish government’s revenue service, which is conducting studies and tests on how to allow a smooth transit without having to put in place a “physical” border.
For the time being, infrared scans and computer could do the trick, but there is also a strong possibility that companies will still need to fill customs IN/OUT filings and pay VAT somehow, and that keeping the border as open as today is all but impossible. It is widely accepted by all sides that some controls will be introduced, the idea is to try and limit disruptions, hence the on-going research.
Meanwhile Brussels officials have been unanimous in portraying the British negotiating team as showing a lot of goodwill, but also as rather clumsy and unprepared. While this is understandable as trade has been for years a “Brussels’ only” competence, May’s election debacle, and changes in Downing Street’s power structures, have made things even tougher for the UK team.
The divisions in the British cabinet are publicly displayed with Phillip Hammond, the Chancellor of the Exchequer, saying that after March 2019, the UK will hang on to “some elements” of the current EU regulations especially free movement. On the other hand, Liam Fox, Secretary of State for International Trade strongly objected, arguing that Brexit means Brexit and if these undefined “elements” continue then it will be a betrayal of the British public’s vote.
To put an end to this cabinet squabble, the Prime Ministers Office intervened to state that free movement ends when the UK leaves the EU. The result was a joint media article from the two protagonists that seemed to save some face for both in that there are no backhand solutions to have the United Kingdom remain in the EU.
However a trickier issue remains, one of these “elements” being free trade. The issue is how to make the border between Northern Ireland and the Republic of Ireland as “frictionless” as possible.
After the 1998 Good Friday agreement, and the implementation of the UK-EI Common Travel Area, border controls between Ireland and the North were removed entirely, not only boosting cross-border trade but also in the process helping maintain peace within the region – a peace of which the EU is one of the international guarantors.
Any disruption to the free flow of trade is feared to have potential disastrous effects not only on the fragile Northern Irish economy, but also more broadly on the stability of the entire region and few will want to see the repeat of the bloody era of the Irish “troubles” come back again.
From what the various technical committees have concluded, technology seems to be the only answer to keeping trade flows as smooth as possible, as customs controls – even if only a light version – will have to be reintroduced.
But despite the difficulties, there is still significant Parliamentary support to respect the outcome of the referendum. The UK is pushing for immediate concessions on ending European Court of Justice supremacy and ending or limiting free movement as part of any phased process of implementation, and certainly as quickly as during the transition period.
Failure to achieve these concessions will be difficult for May to sell to her backbenchers and the public as genuinely leaving the EU. Whatever the outcome, UK voters are no nearer on knowing what happens when the country finally exits, or whether it is soft, hard or very hard, but are just praying for the divorce to happen so they can pick up the pieces and continue with their lives.
Dr. Mohamed Ramady is an energy economist and geo-political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia.