Brexit: A Story of Old Friends and New Beginnings

Image courtesy of the LSE Events.

In this blog, Inga Runarsdottir examines Ursula von der Leyen’s recent speech on the future of the EU-UK relationship, delivered at LSE earlier this month.

 Shared values, joint challenges

The results of the United Kingdom’s December general election made it clear that Brexit would become official on January 31st of 2020. To prepare for Britain’s departure, European Commission President Ursula von der Leyen scheduled a visit to London in early January to discuss Britain’s exit strategy and the future EU-UK trade relationship with UK Prime Minister Boris Johnson. During her visit, von der Leyen also delivered a speech at her alma mater, the London School of Economics and Political Science, on the future of relations between the European Union and United Kingdom, titled ‘Old Friends, New Beginnings: building another future for the EU-UK partnership’. Among the attendees was European chief Brexit negotiator Michel Barnier, who at one point joined von der Leyen on stage to answer a question from the audience.

Von der Leyen gave a wide-ranging account of her vision for the post-Brexit relationship. Much of the speech emphasised the shared values and principles that unite Britain and the EU, such as democracy, freedom and the rule of law. Her speech also pointed out the joint challenges facing the EU and the UK, with von der Leyen naming terrorism, climate change and cyber-security as core concerns.

Past and future divides

It is understandable that the Commission President should want to emphasise the common principles between the soon-to-be divorced partners. However, it is worth noting that certain ideological differences between the two have existed throughout the entire partnership. Euroscepticism has been within the UK since it voted to join the European Community in 1975. The British populace has generally been less supportive of European integration than their German or French counterparts. By not taking part in the Schengen free movement area or the common euro currency, the United Kingdom has kept its distance from ´Federal Europe’. This has been explained as island mentality, an emotional attachment to the fallen empire, or as a result of the close relationship with the United States. There is considerable literature on the way these ideological differences may have played a significant role in bringing about Brexit.

NATO is another shared challenge for the UK and the EU and one which has been a subject of heated debate of late. The Commission President is a strong advocate for the alliance, and praised it as the strongest military group in the world. While acknowledging discord with the Trump administration, von der Leyen spoke of the seven decades of history and friendship behind the transatlantic relationship. She is confident that this foundation will suffice to tackle the issues the alliance currently faces. Perhaps more telling, were the comments about China: “In the trade war between US and China, we will never ever forget where we come from and on what side of the table we are sitting.” More to this point, the Commission President emphasised the importance of an assertive and clear stance with China. Matters related to human rights and cyber security are particularly troubling, whereas climate change presents a common ground. This might be at odds with the UK´s foreign policy – China is now a more important trading partner than ever before, so it is in the UK´s interest to avoid conflict.

“Our partnership cannot and will not be as close as before”

While von der Leyen said the EU was ready to negotiate a “partnership that goes well beyond trade and is unprecedented in scope”, she was clear that the relationship between Britain and Europe would inevitably become more distant, and that the coming months would be difficult.

The four freedoms are particularly important to the EU and the UK will no longer be party to those. Von der Leyen made this clear when she explained that “without the free movement of people, you cannot have the free movement of capital, goods and services. Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest quality access to the world’s largest single market.”

There appears to be little flexibility on the four freedoms: the UK will not be allowed to pick and choose which it chooses to apply. Historically, the Swiss-EU agreement is the only one that has done so, and only to an extent. The Swiss-EU agreement does not include free movement of capital but, for the most part, freedom of movement of goods, services and people is possible. In terms of trade, the EU is aiming for zero tariffs, zero quotas and zero dumping.

Bumps in the road ahead

The main challenge facing the trade negotiation process is the tight time frame. Negotiations can begin on February 1 and PM Boris Johnson has indicated that an extended negotiation . By committing to finalising the deal by the end of this year, and given the time needed for ratification, the PM is allowing approximately nine months for the negotiations. The goal is to achieve an agreement similar to the EU’s trade deal with Canada, CETA; “a broad free-trade agreement covering goods and services, and cooperation in other areas”. For context, CETA negotiations began in 2011 (with informal discussion beginning in 2007), and the agreement entered into force in 2017. While it has been ratified by Canada and 14 EU member states, the ratification process for the remaining countries is expected to take years.

It should thus come as no surprise that von der Leyen stated that, given the timeframe, it would be impossible for the agreement to cover all areas, and that prioritisation would be key. It is likely that the EU and UK will have differing opinions of how that prioritisation should take place. For instance, there is great interest on the EU side in maintaining good relations between scholars and educational institutions and encouraging cooperation in research and development. Meanwhile, in the UK, the future of the Erasmus program is uncertain after the recent election.

As another example, the financial services sector is likely to undergo significant changes. Up until now, corporations residing in the UK have had access to all EEA markets through so called ‘passporting rights.’ This allows them to operate throughout Europe without consulting with regulators. The EU is losing its main financial hub in London, and the UK in turn will find that many of its financial service operators will be driven out of London to other European capitals, such as Frankfurt, Paris, and Dublin.

Finally, the Irish border debate remains to be fully resolved. For the duration of the transition period, there will be no tariffs or restrictions on goods moving between Ireland and Northern Ireland. However, the rest of the UK will have tariffs on Irish goods, and vice-versa. This can only work temporarily, putting additional strain on the coming negotiations.

There is a lot of ground to cover, and little time. Although she did not say it explicitly, von der Leyen hinted at another extension, remarking that “we will have to prioritise, as long as we face the deadline at the end of 2020… I would prefer to look at the whole scenery during the summer and reconsider the timeframe before the 1st of July.” Given the range of the future partnership and broad negotiations, an extension would be prudent for both parties. However, the UK public is experiencing ‘extension exhaustion’, and the recent Conservative victory was largely due to Prime Minister Johnson’s straightforward pledge to “Get Brexit Done”. It is thus unlikely that another extension would be acceptable to the UK voters.

Apart from the urgency, little is known about the UK priorities for the agreement. The more nuanced parts of the negotiations, and how the UK will meet demands on a level playing field, remain to be seen. Von der Leyen may have provided a hint about the future relationship, when she explained that the UK would always have a trusted friend and partner in the EU. However, the friendship will be more distant than before, as indicated by her remarks on the EU’s need to forge its own path in the world, and the strengthened unity and faith in the European project that has resulted from Brexit.

Inga Runarsdottir is a Research Associate with the Dahrendorf Forum at the London School of Economics and Political Science. 

The opinions expressed in this blog contribution are entirely those of the author and do not represent the positions of the Dahrendorf Forum or its hosts Hertie School and London School of Economics or its funder Stiftung Mercator.