Brexit: the EU’s perspective

Most of our recent essays on the UK’s departure from the EU have observed the process firstly from a British viewpoint, and secondly through a political lens.  We make no excuses for this – we write from a British base and for a mostly British audience, and up until now (and especially during and in the immediate aftermath of the recent election), politics has tended to dominate the discussion.

Now that the actual negotiations between the EU and the UK have started, though, it is worth examining the issues from the EU’s perspective, and doing so within a more administrative and legal framework.  Indeed, the first leads automatically to the second, for while Brexit is for the British at heart an emotional matter – to the point, some might say, where reason and logic at times seem to play only a minor role – for the EU it has from the very start been almost entirely an administrative and legal challenge to be executed with as little ongoing cost and disruption to the remaining members as possible.

The EU started preparing for the possibility of Brexit almost as soon as David Cameron called the referendum.  At that point, the view in Brussels was that a vote to leave, while not what they expected, could not be ruled out completely, and in time-honoured style the Commission therefore started “hoping for the best but preparing for the worst”.

As a result, when the result of the referendum was announced, the EU was in a position to act very quickly.  The formation of the “EU-27” – a gathering of the heads of state of the member states other than the UK – was almost immediate, and the first statement of the new grouping was made on 29 June 2016, less than a week after the poll.    In that statement the EU-27 pledged

>  To stay together;

>  To ensure as a fundamental principle that the appropriate balance between rights and obligations inherent in the EU was maintained, and in particular would be integral to any arrangement with the UK;

>  As part of this, to maintain the indivisibility of the “Four Freedoms”, of movement of goods, services, capital and people;

>  Finally to ensure that no deal with the UK left the UK better placed than any member state – not least to dissuade other states from seeking to leave.

To this admirably clear statement, which the EU-27 have not deviated from at all in the subsequent twelve months, were quickly added two further very important principles, the EU-27’s negotiating protocol and the procedure for the actual order of negotiations.

On the first, the EU-27 distinguished completely between the political direction, to be set by the heads of state of the 27 members, and the negotiations themselves, to be conducted by a Commission team under Michel Barnier.   This division established that the negotiations are only to be with Barnier and his team, and the EU-27 council has made it clear that they will not entertain direct contact between the UK and the 27 heads of state themselves (thus denying the UK the ability to “divide and conquer” the EU side, or to play one member state off against another).  In addition, by being with the Commission, the intention is to keep the discussions on a technical level wherever possible and to remove as much as possible any emotional content.

(We actually think this could be helpful for the UK, as it removes the risk of individual member states “holding out” for special terms in the negotiations, and holding the whole agreement to ransom.  Instead, all 27 member states have pledged to accept the result of Barnier’s negotiations, whatever he manages to agree).

Secondly, the procedure for the negotiations has specified that the terms of the UK’s departure for the EU must be settled (or at least be well on the way to settlement) before the shape of any future arrangement is discussed.  This is more contentious, because there is an understandable wish on the UK side to establish some linkage between the terms of the divorce and the terms of the future relationship – in the first of these, the UK is mostly on the receiving end of demands (for money, for EU citizens’ rights, etc), and it is natural to seek some sort of assurance that a co-operative stance at this stage will be rewarded by a fair hearing at later stages.

But again the EU has stuck to its position, and is resolute that the departure and the future association should be agreed separately.  Privately, we understand that one reason for this is that the EU-27 have less than complete confidence in the UK as a reliable negotiating partner – as one person put it “even if Davis [ie David Davis, the UK’s chief negotiator] concludes a deal, can we be sure that both the UK government and the UK parliament will agree and honour it?”  Given this, the desire to tie up the departure terms first, before moving onto the more difficult discussions on the future association, is understandable.

And without doubt, shaping the future association between the UK and the EU will be problematical.  The EU’s stance is that the UK does not move seamlessly from EU membership to another form of membership (whether of the single market, or the EEA, or EFTA, or a bespoke customs union), by as it were shedding some rights (those relating to EU membership) but retaining others, as if the EU was nested within the EEA, which in turn was nested within a wider customs union.  Instead, the EU maintains that the UK will cease its EU membership (completely) and only then be free to establish the new association.

This raises the very real possibility – indeed in our view the inevitability – of a gap between the ending of the UK’s membership of the EU (and so trading rights) and the start of the new association, not least because, as a new trade deal, this will need to be agreed unanimously by all 27 member states, and this will take longer than the 20 months left before the UK leaves.  And as Philip Hammond has observed, this creates a need for a transitional arrangement if trade is not just to stop completely.

This is a highly contentious issue in the UK, or more specifically in the Conservative party, because any transition arrangement will inevitably imply the continuance of EU rules (on, for example, competition policy, taxation policy, state aid), and will need to be policed, which inevitably means an ongoing role for the European Court of Justice.  This is known to be one of Mrs May’s most adamantine red lines, and it is far from clear whether the realities of trade without any agreement at all can persuade her to bend.

Even if she does, the challenges in setting up the transition agreement in the time available are not small.  For on the one hand, unlike any other transition arrangement the EU has concluded, such as those agreed with applicant states, this one would not be from a known start point A towards a known destination B, but from a known start point A to an unknown destination.  And on the other, unlike any other free trade deal the EU has negotiated in the past, the new association with the UK would be seeking to de‑liberalise existing trade arrangements, from totally free to free-with-conditions.  This will be a novel experience not just for the UK trade negotiators, but also for the EU’s.

Which leads the EU to ask itself, in its private moments, whether the UK will not finally come to realise quite how damaging leaving the EU will be and will not seek in some way to cancel its Article 50 letter and therefore stay a member.  Various EU politicians, including both Donald Tusk and Emmanuel Macron to name but two, have said that the door remains open, and if the UK were to ask to be taken back, the EU-27 would almost certainly agree – any misgivings about readmitting the EU’s most troublesome member state would surely be trumped by the sheer psychological victory and morale booster of having the British crawling back with their tails between their legs.

But such matters are for the dreamers.  The EU does not expect Britain to change its mind – the full costs of leaving will not be apparent soon enough and the blow to the Conservative party would be far too damaging.  And so the EU-27 are preparing to leave Britain, withdrawing their agencies and establishing their defensive positions.  As one person said to me “We have after all done this before, and we made it work last time”.

When I queried when the Europeans last left Britain, he replied “In 407 AD, when we withdrew our legions”.  And the coda to that event is not encouraging for the British.  For when three years later in 410 AD their ancestors appealed to Rome for help and to be readmitted to the Empire, the emperor of the time, Honorius, declined their request and is reputed to have rather chillingly told them to “look to their own defences”.

Sixteen hundred years later, the EU-27 may not be quite that blunt.  But the stance is identical.  From the perspective of Brussels, the Brexit negotiations are all about defending the interests of the 27.  The fate of the UK is not their concern.