Tuesday, 6 March 2018

Europe’s strategic choices on Brexit

Gideon Rachman in The FT

Talk to EU policymakers and you will be told that Britain has yet to make the hard choices on Brexit. The standard line is that Theresa May’s government is still trying to “have its cake and eat it” — leaving the EU, but retaining many of the benefits of membership. Britain must drop this “magical thinking” and make some crucial decisions. Once that is done, the structure of the future EU-UK relationship will be dictated by law and precedent. 

That argument has some truth to it. But what it misses is that the EU also has important choices to make. By treating Brexit as, above all, a legal process, the EU is largely ignoring the political and strategic implications of Britain leaving the EU. That is an intellectual failure that could have dangerous consequences for all sides. 

It is clearly true that the EU is a legal order. But it is also a political organisation. The EU is perfectly capable of creating new laws — or interpreting current ones with extreme flexibility — when it is politically necessary. 

There are many examples of this flexibility in action. France and Germany broke the EU’s Stability and Growth pact — rather than accept legally mandated fines for breaking its budget-deficit rules. There was a “no bailout” clause for the euro, but Greece was bailed out. Now the European Commission is pursuing Poland for breaching the rule of law, but ignoring equally egregious breaches in Hungary. 

So the EU can cherry-pick the law, when it is politically convenient. It can therefore make strategic and political choices on Brexit. And, broadly speaking, it has three options. 

Staying tough means sticking with the current line. Britain has chosen to be a third country. There can be no special deals — no “cherry-picking” in the EU’s favoured jargon. There are only two viable models for a “third country”: Norway (which involves membership of the single market) or Canada (which is a pure free trade agreement). Britain must pick one and then accept the consequences. 

The arguments for this purist stance are that it protects the integrity of the EU’s single market. If Britain keeps some benefits of EU membership, while ditching many of its obligations, then all 27 members of the EU might seek special deals, and the single market could unravel. 

By contrast, if Britain suffers economically from Brexit, that could actually benefit the EU. It would underline the negative consequences of leaving the organisation and undermine Eurosceptic parties across the continent. And jobs and tax revenues could migrate from Britain to the EU. 

Compromise on Brexit, the second option, would mean embracing the idea that there should be special arrangements between Britain and the EU. Britain is not any old third country. It has been crucial to the European balance of power for centuries. It has been a member of the EU for decades. And it is currently a major trading partner and military ally for most EU countries. So it sounds unrealistic to say that the UK must be treated exactly like Norway or Canada. 

As the EU attempts to navigate an emerging world order — with a rising China and an unpredictable and protectionist US — the strategic alignment of Brexit Britain is uncertain. So it makes sense for the EU to try to pull the UK into a new sort of “special relationship”. By contrast, a Britain that feels humiliated or impoverished by the EU could be an uncomfortable neighbour — with Russia as an extreme example of what can happen when a major European power is at odds with the EU. 

Some Europeans, particularly the French, agree that Britain should continue to play a major strategic role in European affairs. But they do not accept that this has any implications for Britain’s economic relationship with the EU. This sounds like a European version of the dreaded “cherry-picking”. 

There are plenty of areas where the EU could adopt a more flexible approach on its economic partnership with Britain — if it made the political choice to do so. These could involve the free movement of people, the role of the European Court of Justice, and the mutual recognition of product standards and financial regulations. 

The EU’s final option is to force a crisis. If it concludes that Brexit can be reversed and that this is in the EU’s interest (and those are both big “ifs”), then Europe might try to force a political crisis in Britain. This would involve hanging tough for now, hoping that the political fissures in Britain widen and that the May government collapses. 

A new administration in the UK might reconsider Brexit — particularly if there was a fresh offer from the EU, perhaps on free movement of people. That might create the impetus for a second referendum in the UK, and a vote to reverse Brexit. 

But this approach is also fraught with danger. Crises are obviously unpredictable. If the crisis happened too late in the process, Britain might simply crash out of the EU without a deal. And it is also entirely possible that a second referendum would result in a second vote to leave the EU. 

There are powerful arguments to be made for and against each of these three courses of action. But pretending that there are no strategic choices facing the EU should not be an option. That is simply an evasion of responsibility.

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