Brexit day is finally here. But now comes the hardest part.
Today the UK is finally leaving the EU. While in practical terms not much will change due to the transition period running until the end of the year, the UK becomes a third country, no longer involved in EU decision-making and without the possibility to revoke the Article 50 notification. Today will, indeed, get Brexit done, at least in legal terms.
For many, including on the EU side, having achieved such an orderly Brexit is a relief, creating certainty after the repeated cliffhangers under Theresa May. The Withdrawal Agreement deals satisfactorily with the core issues of the Phase 1 negotiations – the UK’s financial obligations, the future of the EU citizens in the UK and, most crucially, the Northern Ireland border.
But Phase 2 of the negotiations is about to start, and it will not become any easier. German Chancellor Angela Merkel had already warned back in 2017 that the next phase of Brexit negotiations will “undeniably” be more complicated than the divorce talks. These negotiations will be complex and touch on many contentious issues that could throw a spanner in the works, including fisheries and the limitations the EU will impose on the UK to prevent future unfair competition. At the core of the negotiations is the agreement on the future economic relationship. But here lies an insurmountable hurdle: this will be the worst trade deal in history [1], aiming to disintegrate a fully integrated single market.
So, even if there was sufficient time, it would be difficult to agree on the future relationship. But time we do not have. While still creating a challenging timetable, the transition period could be extended by up to two years, which would provide a negotiation period of almost three years. But Boris Johnson has rejected the idea of extending the transition period, even setting down its end by end 2020 in law, leaving only 11 months to negotiate and ratify the deal. While he might make a U-turn, there are strong domestic and party-political reasons why (for once) he is unlikely to do so. In any case, if he misses the summer deadline to ask for the extension to transition, it becomes legally almost impossible to do so.
So can Phase 2 be concluded within 11 months? In the best-case scenario, it might be possible to conclude a basic deal, but it would be a relationship that would fall far short of the deep and comprehensive partnership that is needed, for both sides. It would not fulfil the need of businesses, being in many ways economically close to having no deal at all. While it might be a stepping stone to build a long- term relationship in the following years, this would be a long and arduous road, with significant economic, social and political harm inflicted on the UK.
But this is still preferable to no deal at all. There is a significant probability that the EU and the UK will not be able to agree on the future relationship, simply running out of time at the end of the year. In this case, the protection afforded by transition would simply expire, with the UK treated like any other third country with which the EU does not have a trading arrangement. While there are some mitigating (unilateral) actions the EU could take to reduce harm, the effect would be a downgrading of the EU-UK relationship, with a range of trade barriers being erected.
But this is not the worst-case scenario. What is outlined above relies on both sides negotiating cooperatively. But the relationship might well break down in the coming months, leading to the negotiations to crash. This rupture might take place at the negotiation table but it could also be triggered by events elsewhere, for example in the implementation of the agreement on Northern Ireland, between fishing trawlers in the Channel or on the border of Gibraltar.
But even if it doesn’t come to this, and there is a ‘thin’ deal, it will not address the crucial strategic questions [2]. Brexit remains a negative-sum game, with the outcomes from Phase 2 ranging from bad (a basic deal) to worse (no deal) to terrible (conflict). From the beginning, Brexit was a losing proposition. In the coming months, this will be demonstrated, whatever the outcome of the negotiations.
You can find a quick overview of the different scenarios in this infographic.
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