This week in Birmingham, Theresa May’s speech to the Tory party faithful brought to an end a rather dull summer of political posturing and procrastination about Brexit. 3 months on from Britain’s independence day referendum, voters might still not know the finer detail, but they do now know the direction of travel the Prime Minister wants to take the country as well as when the journey will begin. This blog post takes a closer look at the Prime Minister’s Birmgham speech.
The Prime Minister has pledged to trigger Article 50 by the end of March 2017. Delaying the formal start of the negotiations gives the Government time to settle on its negotiating strategy and to assemble a team of negotiators competent to deliver the strategy. No 10 has judged that further delay risks unnecessarily antagonising the cohort of Brexiters within her own party and opening the door to a UKIP revival. That she felt moved to make this speech at the start of the Tory Party Conference shows just how aware she is of the need to be seen to be making the running on Brexit.
The timing is not without its risks.
A decision to trigger Article 50 in March could see Britain’s efforts to exit the EU buffeted by elections in Germany and France. In both cases the incumbent party is facing pressure from right-wing protest parties that are seeking to capitalise on anti-EU and anti-migrant sentiment. Even if Brexit does not become an electoral football in France or Germany, the attention of political elites in both countries will be firmly fixed on domestic concerns from the spring of next year onwards. In the case of Germany, this could last well after the election as the politics of forming a new government amongst an assortment of possible coalition partners is often a painfully drawn out affair and can take several weeks.
The implication of a March 2017 notification is that Britain should in theory at least formally leave the EU by March 2019. Article 50 makes clear the EU Treaties will cease to apply from the date of entry into force of the withdrawal agreement or failing that two years after the notification. The only exception to this rule is, if in the absence of a withdrawal agreement, the European Council, in agreement with all other member states concerned, unanimously decides to extend this time frame. Securing unanimity across the other 27 member states to extend the Article 50 negotiations could be as tortuous a process as negotiating Brexit itself.
The Prime Minister used her speech in Birimgham to reject the portrayal of Brexit in hard or soft terms involving either a Norwegian or Swiss model. Instead, she argued for a uniquely British model of Brexit that allows Britain to become once again a fully independent sovereign country free to make its own laws and free to decide for itself how it controls immigration. In words that might yet come back to haunt her, she said “…. let me be clear. We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.”
What she wants instead is a mature and cooperative relationship on a range of issues like counter-terrorism, but which also gives British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same here. Make no mistake, however, this option, which is very much at the hard ened of Brexit, places Britain firmly outside the single market and the customs union. Unless Britain adopts a unilateral free trade policy, which is unlikely, Britain will need to secure a free trade agreement with the EU. If the announcements coming out of Birmingham are to be believed securing this free trade agreement is going to be a straight forward process.
Is this self-confidence misplaced?
The EU has a political incentive to ensure that Britain’s decision to leave the EU is punished in a way that it deters other countries from contemplating a similar strategy. As Francois Hollande made clear only yesterday, Britain must pay a heavy price for deciding to leave the EU. Why would the EU allow its own founding principles to be eroded in such a way that it threatens the political survival of a political project 60-years in the making? Ever since Britain voted to leave the EU, the other member states have made it consistently clear that they are not willing to sacrifice their political goals even if that means they incur some economic damage.
The economic damage the EU will sustain as a result of this polutical clear is likely to be smaller and more manageable than that borne by the British. The EU exports about 3% of its GDP to Britain, while Britain exports to the EU amounts to 12.5% of GDP. Many EU countries understandably see the prospects of Britain’s exit as an opportunity to grab Britain’s lost market share. Both Paris and Frankfurt are already jockeying for postion to attract business from the City.
The other fly in the ointment is that any free trade deal that Britain might negotiate will require unanimity across all EU member states, including in some cases approval by referendum, as well as the approval of the European Parliament. Liam Fox’s ambitions to see Britain becoming the champion of free trade globally plays well with the party faithful in Birmingham, but an EU without Britain is going to be more protectionist than it was when Britain was a member. It is highly unlikley that Britain will be able to negotiate its diovorce settlement while also negotaing its fture relationship with the EU.
The Prime Minister helpfully clarified that the Government will introduce a Great Repeal Bill in the next Queen’s Speech to ensure that the day after Brexit current EU directives are incorporated into UK law while they assess which ones to keep and which ones to ditch.This is a sensible bridging tactic, but what was missing from her speech, however, was any acknowledgement of the need for a transitional or bridging arrangements between Britain’s formal exit and it agreeing a new trade deal with the EU to ensure the UK does not lose all preferential access to EU markets upon leaving. From Marh 2019 when Britian formally leaves the EU until such time as Britain concludes a trade deal British companies will face tariffs on manufactured goods and the loss of “passporting” rights that allow financial services firms based in the City to do business across the bloc. This could prove costly.
Given the inevitable uncertainties that Britain is likely to face in the months and years ahead, it is striking that Theresa May decided to give away what little political leverage she has in the Brexit negotiations – announcing when she will start the formal negotiations – without securing some assurances from the EU on transitional arrangements following Britain’s formal divorce from the EU.
There is little doubt that Theresa May is a serious politician, but the timing of this speech at the beginning of the Conservative Party Conference and her freebie on Article 50 suggests that, as with her reckless predecessor, her primary focus when it comes to Europe is appeasing those in her own party rather than necessarily negotiating a sensible deal for the country as a whole. If Britain is to thrive and flourish outside of the EU then the PM needs to arrive at a negotiating strategy that seeks to secure the national interest rather than merely cement her own standing within the Conservative Party.