BRITAIN & THE EUROPEAN UNION

On June 23, 2016, Britons voted to leave the European Union. The two-year process for negotiating Britain’s departure will soon begin.

Intro: It has been six months since the referendum vote on Brexit. Thus far, the debate has been more about process and procedure than substance. In 2017, as negotiating talks get underway, the going will get much tougher. As we edge closer to Article 50 being triggered, where does Britain stand?

SOME THINGS have already changed since Britons decided to withdraw from the European Union following the Brexit vote on June 23rd. The country has a new government led by Theresa May. Two new government departments have been set up For Exiting The EU (under David Davis) and for International Trade (under Liam Fox). After several years of austerity cuts, the civil service is beginning to grow again. It is being geared up in tackling the numerous challenges of disentangling Britain from the bureaucracy of Brussels. In the Government’s most recent Autumn Statement, Philip Hammond, the Chancellor, softened previous plans to cut the budget deficit by 2020.

But on another level, and on Brexit itself, however, Mrs May has done little beyond repeating her mantra that ‘Brexit means Brexit’ and ‘We’re going to make a success of it’. The prime minister has promised a Great Repeal Bill to enshrine most exiting EU rules into UK law for continuity. And she has said she will invoke Article 50 of the Lisbon Treaty, the legal clause that sets a two-year time limit for Brexit, by the end of March (2017).

Indeed, most public discussion and debate on Brexit has been procedural, not substantive. Discourse in Parliament has revolved around how much information MPs will be given. The courts have become involved: this month the Supreme Court will decide whether triggering Article 50 requires prior authority through an act of Parliament, as the High Court has already ruled. There have been disputes over just how much Mrs May should reveal over her negotiating objectives. Yet, all of this has taken place even before there is an internal agreement within the government over what form of Brexit to aim for when negotiations begin.

For some MPs, such as Neil Carmichael and Mr Davis himself, there is hope that a government white paper on Brexit will be published before Article 50 is triggered. Mr Davis has recently said, though, that the government would not publish anything until February. Protagonists say that would still leave time for a white paper and a short parliamentary act before Article 50 is sanctioned.

The substance of Brexit is likely to prove far more difficult than the procedure. One reason is that it will involve trade-offs the government has so far avoided debating. The most obvious is that in which maximising barrier-free access to the EU’s single market will make it hard to take back full control of migration and laws relating to freedom of movement. That’s because it is invariably and directly linked to the free movement of capital and services. There is also the issue of ceasing contributions to the EU’s budget.  Several more difficult dilemmas await: for instance, the desire to maintain security and intelligence cooperation with the EU may be almost impossible to achieve if Mrs May continues to insist on escaping completely from the jurisdiction of the European Court of Justice.

The substance of a Brexit deal will also be more difficult than procedure because Britain’s 27 EU partners are likely to put a premium on unity. It is possible Britain will need to pay an exit fee of some $63bn, as well as negotiating separately any future trade relations which would not run in parallel with the strict terms of exit. Other EU leaders face political pressure at home: France, Germany, the Netherlands, and possibly even Italy, will all have elections in 2017.

The ominous and gloomy signs are that a harder version of Brexit will prevail, but there are some flickers of hope that also point in the other direction. Mr Davis and Mr Hammond appear to be working as one in minimising the shock of departure. Mr Davis has not completely ruled out making payments into the EU budget after Brexit. Several other government ministers have floated the possibility of continuing partial membership of the single market, the customs union or both. The Scottish government, too, has said it wants to stay in the single market regardless of what happens elsewhere in Britain. Negotiating a final deal for Brexit with so many added complexities will become more divisive and problematic as the clock starts ticking.

Of late, a growing recognition has emerged of the economic risks of Brexit. Leave campaigners have long claimed that economic forecasts and predictions by Mr Hammond’s predecessor, George Osborne, were too pessimistic and overly cautious. But the Autumn Statement made clear that Brexit has a cost. Public and private consumption has held up reasonably well but investment continues to be cut. Banks and others in financial services are talking of major job losses as institutions restructure and positions are transferred to continental Europe.

Prodding ministers towards a softer Brexit must be on the table because the economy matters. A recent poll for Open Britain, a pro-EU lobby group, found that half of Leave voters are not ready to be made worse off as a result of Brexit.

More realism over immigration should also be a factor. To date, this has only been presented in terms of the relationship between the single market and the four freedoms of movement of capital, goods, services and people. The implication has been that to keep the first may require concessions on the second. Several companies, however, in industries ranging from financial services to agriculture, have made clear that migration is crucial in its own right. Indeed, some are more concerned about migration controls than they are about barrier-free access to the EU’s single market because of the effect such controls will have on the availability of labour for their industries.

A view is also emerging among politicians who see the need for a transitional deal with the EU – to avert a hard landing in March 2019. Transition is being talked up, as a string of recent reports from the House of Lords EU committee highlight. They say this is particularly important for financial services. The fact that transition was ever controversial is, in the words of Nick Clegg, the former deputy prime minister, “symptomatic of a strategy-less approach to Brexit”. That it is now widely accepted as a sign of common sense.