The seven blunders: Why Brexit would be harder than Brexiters think

Insight
28 April 2016

Brexiters argue that the negotiations after a vote to leave the EU would be a piece of cake. But 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.

David Cameron, the British prime minister, has announced that if the British vote to leave the EU he will have no choice but to trigger article 50 of the Treaty on European Union (TEU). Article 50 is one of most consequential provisions in the EU treaties: it sets out the legal procedure for a member-state to withdraw from the Union. 

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. The House of Commons foreign affairs committee has warned that “The political climate after notice of UK withdrawal from the EU would probably not favour quick agreement of mutually beneficial trading arrangements” – a polite way of saying that Britain could expect no favours from its jilted partners. 

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. It was included in the Lisbon treaty to establish a legal pathway out of the EU. That also means that the ad hoc process by which Greenland left the EEC in 1985 is no longer available. Lord Lawson is wrong to suggest that Britain could withdraw by simply repealing the 1972 European Communities Act, which established the supremacy of EU law. It would be possible for Parliament to repeal the act, thereby making UK law supreme again, but that would lead to a host of other problems. 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. Article 50.2 says that a withdrawing member-state should tell the European Council it intends to withdraw, but does not set a deadline for submitting the notification. In theory, the British prime minister could try therefore to negotiate better membership terms and put the results to a second referendum, promising that this time out would really mean out. But EU member-states would be unlikely to agree to yet another list of British demands. They think that they have already conceded alot to Britain in February’s deal, and have warned that the deal would no longer be on offer if Britain voted to leave the EU. Backtracking on this would make them look silly at home. With eurosceptic parties on the rise on the continent, EU leaders would want to send a strong message to their home-grown populists that an EU à la carte was not on offer, and that threatening to leave the EU would backfire.

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 both on what would end (for example Britain’s participation in the Common Fisheries Policy), what would change (perhaps Britain’s budgetary contributions), and what could remain broadly the same (participation in some programmes already open to non-members of the EU). 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. John Springford and Simon Tilford have argued that this is why the EU would likely force Britain to choose between two options: the European Economic Area or nothing. The House of Commons foreign affairs committee reached the same conclusion: “The Government should recognise the probability of no mutual interest deal being concluded within the two-year notice period. If no deal could be concluded within the two-year notice period, the UK would move to standard WTO relationship terms and would then need to decide which of the 6,987 directly-applicable EU Regulations would need to be replaced by UK law.” 

Fourth, article 50 puts a departing member-state at a disadvantage in the negotiations with the rest of the EU. That is not to say that the UK would have no say over the withdrawal terms. But according to article 50.4, 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, with any compromises included in the final text subject to member-states’ agreement by qualified majority. The agreement would also need the consent of the European Parliament. 

British MEPs would probably be able to participate in the Parliament’s deliberation and voting: article 50 is silent on their role, but according to the EU treaties, MEPs represent all EU citizens, rather than their own member-states. But there are only 73 UK MEPs; if more federalist MEPs from other member-states decided that the Commission had conceded too much ground in the negotiations, they could block the conclusion of the treaty with the UK.

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). Article 50 does not prevent a member-state that is in the process of negotiating its exit from participating in deliberations on, say, the energy or capital markets unions before it formally leaves the EU. But most EU policies are decided by qualified majority, not unanimity, so the UK would not have a veto. And other member-states would have little reason to take account of the interests of a departing member-state. Assuming that Britain also decided not to hold its presidency in the Council of Ministers (July to December 2017), the UK would be isolated in Europe even before it formally departed. A country with one foot outside the door and embroiled in its own difficult negotiations would struggle to perform the presidency’s role as honest broker between the member-states.

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. Lawyers are divided on whether the withdrawal terms and the future relationship should be encapsulated in a single agreement. Article 50.2 says that the agreement with the withdrawing member-state should “[set] out the arrangements for its withdrawal, taking into account of the framework for its future relationship with the Union”. A comprehensive approach would reduce economic and legal uncertainty during the process of withdrawal, and would be welcome to businesses. But such an agreement would be probably a ‘mixed’ one, in EU jargon: it would cover policy areas where both the EU and the member-states have competence. It would therefore require ratification in all member-states. Because of the importance of the issues at stake, some EU countries might decide or be forced to hold a referendum on the agreement. 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. Anyone who thinks that the UK could always reverse course is misled or misleading others. Article 50.5 indeed says that a member-state that has withdrawn from the European Union can apply for membership again – but only on the same basis as any other applicant. 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. 

Boris Johnson says his “policy on cake is pro-having it and pro-eating it”, and his fellow Brexiters have the same view of the withdrawal negotiations. But the provisions of article 50 make it clear that the divorce would be a time-consuming and cumbersome process in which other member-states, not Britain, would have the upper hand. Brexiters should be careful what they wish for: if the British vote to leave the EU there will be no coming back.

Agata Gostyńska-Jakubowska is a research fellow at the Centre for European Reform.

Comments

This is an excellent article that goes much further in depth about the difficulties that lie ahead, should the UK opt to "leave" the EU. Well done!
If only I could understand how it could become really possible for the pragmatic Brits to harm themselves to such a degree....
The UK has a huge trade deficit with most of the major members of the EU. Germany especially. The UK will decide it's own Brexit strategy as demanded by the population of the UK or the EU will run the risk of trade to the UK stopping.
As the UK are leaving the EU, the rest of us must focus on the possible benefits for the EU citizens. It is a great gift to have some of the worlds largest moneylaundries and financial gamblinghouses excluded from influence on the European real economy.

The Brexit is a great opportunity to refocus european finances on the real investments, real jobs, real people, so long being blocked by the UK vetos in the EU. We might even get rid of the Juncker-Luxemburg Taxfraudster Commision, now their main supporter is gone. When the Scots and the people of Northern Ireland decides to rescue the last remains of their real economy, they will certainly be welcome in the EU.

Without the City of London it will be possible to make the EU a real union for the European populations.
I fear even the EEA option is not really realistic: all EEA/EFTA members would need to ratify the UK joining them.

And if you google what happens if one EEA member refuses to implement EEA rules (rebranded EU rules), namely the suspension IDF the whole EEA common market access, there is probably not much enthusiasm for allowing the UK to kill their solution, because some hardcore Eurosceptics Tories prevent necessary laws to pass.

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