28 April 2016

CER: The seven blunders: Why Brexit would be harder than Brexiteers think

If Britain decides to leave the EU it will have to invoke article 50 of the Treaty on European Union. That will set in motion a complicated procedure that puts the departing member-state at a disadvantage.

The British government fears that the divorce would be turbulent. It says that it could take Britain up to a decade to negotiate withdrawal terms and agree on a new relationship with the EU. Article 50 only guarantees a two-year negotiating period, which would not be long enough to complete the process. [...]

Brexiters claim that this is all scare-mongering. Lord Lawson, the former Chancellor of the Exchequer, thinks that article 50 is another example of a Brussels diktat constraining sovereign member-states, and suggests that the UK could simply ignore it. Others still cling to Boris Johnson’s idea, now recanted, that a vote to leave does not have to mean exit, and that Britain could negotiate better terms for its membership than Cameron obtained. Brexiters are confident that the rest of the EU will have no choice but to offer good terms to the world’s fifth largest economy. And if that does not work, Michael Gove, the pro-Brexit justice minister, has said that Britain could threaten to block other European projects if the EU did not give the UK what it wanted. 

Article 50, however, gives seven reasons why Brexiters should not assume that Britain would be in control of its own fate in the post-referendum negotiations.

First, article 50 is the only way to leave the EU that is accepted by the member-states. [...] One example with a potentially significant impact on the UK would be the European Market Infrastructure Regulation (EMIR). If this regulation were no longer in effect in the UK, financiers trading derivatives in London for banks headquartered elsewhere in the EU would be doing so illegally. This would have far-reaching implications for the City of London, and because of its status as Europe’s financial capital, for the European financial system as a whole. Such a “unilateral declaration of independence” would also make the EU more likely to play hardball over Britain’s access to the single market, and would make normal trade relations more difficult in the interim.

Second, a post-referendum prime minister could unilaterally delay pulling the article 50 trigger in the hope of squeezing more concessions from other member-states, but only at the cost of antagonising the rest of the EU. [...]

Third, once the article 50 process starts, the tight timetable reduces the UK’s leverage. Any decision to extend article 50’s two-year deadline must be taken unanimously; any member-state can block it. The UK would have only two years to agree with partners [...] In the absence of agreement on exit terms or an extension to the negotiating deadline, Brexit would be automatic. The UK would then have no choice but to trade with the rest of Europe under World Trade Organisation rules. This could seriously damage the British economy. [...]

Fourth, article 50 puts a departing member-state at a disadvantage in the negotiations with the rest of the EU. [...] Britain would not be in the room when member-states agreed on the EU’s negotiating position; once the 27 had agreed, the Commission would then negotiate with the UK on the basis of that position [...]

Fifth, Britain would not be able to filibuster or veto EU policy if it did not get what it wanted in withdrawal negotiations (as Michael Gove has suggested). [...]

Sixth, even if member-states and the European Parliament agreed to give Britain a favourable withdrawal deal with extensive market access, there would still be a risk that the deal could be rejected in a referendum in a member-state. [...] If so, the future relationship between Britain and the EU could depend on French or Dutch voters, who might resent any preferential treatment for the UK and seek to punish either Britain or their own governments for the situation. 

Seventh, the UK could not easily decide that it had made a mistake and rejoin the EU on the same terms that it now enjoys. [...] If a post-Brexit Britain changed its mind, it would have to follow a painful accession process. Britain would struggle to secure the opt-outs from the euro and Schengen that it enjoys today. Most of its political capital in Europe would already have been spent. 

Full article on CER

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