In this post, Iain Begg discusses the result of the recent UK election and examines the future negotiations of a UK-EU trade deal, emphasizing that concluding a deal by the end of 2020 is likely to prove difficult.
The outcome of the UK election is both a surprise and a personal triumph for Boris Johnson. From the outset of the campaign, it seemed likely the Conservatives would win and have enough of a majority to ensure that Parliament would pass the legislation required to ensure the United Kingdom leaves the European Union at the end of January 2020. But the scale of the majority will alter the dynamic of UK politics.
The only plausible alternative was a hung parliament, which would have meant a reversion to the parliamentary guerrilla warfare of much of 2019. In the end, a further EU referendum would probably have been the only way out, although ‘Remainers’ might not have secured the result they wanted from a public fed-up with the political class.
With a substantial majority secured, Johnson is no longer beholden to any particular faction inside his own party, let alone the sort of grudging support Theresa May had to rely on from Northern Ireland’s Democratic Unionist Party. He has a clear mandate to deliver the policies he wants and to put together a government with which he is comfortable. It is an enviable position for an incoming Prime Minister, although he will be under pressure to live up to the promises made to voters in traditional Labour supporting areas.
Getting Brexit done
Completion of the withdrawal process can now be taken for granted and, in the sense of formally ending the UK’s membership of the EU, will ‘Get Brexit Done’. The immediate priority for the Johnson government will be to ensure this happens before the 31 January 2020 deadline. This will entail pushing the required legislation through Parliament, but this process should face few, if any, substantive challenges.
The constitutional and political significance of this step should not be under-estimated. The option of staying in the EU will no longer be available and, even if the country subsequently comes to regret its decision, it cannot reverse it. While the Article 50 process was still in progress, the finality of leaving could still be queried, but now it cannot: the Brexiteers have won.
Clearly, though, exiting the EU is far from the end of the story. The withdrawal deal provides for a transition during which EU rules continue to apply, intended to allow time for the negotiation of a future relationship between the two sides. The intriguing questions now are what will Johnson want and which of the red lines he had to draw to keep the party factions together will he be prepared to jettison?
Throughout the election campaign, Johnson emphasised that he would not accept a transition period longer than until the end of 2020, despite the provisions in the withdrawal deal for taking longer, creating an expectation that a free trade deal with the EU would be concluded in under a year. Most commentators regard this as implausibly short and it is worth recalling that the withdrawal deal negotiated by Theresa May also had 2020 as a target, but starting twelve months sooner.
The future trading relationship
Although the options, ranging from WTO terms to continued membership of the EU single market, have been much discussed since the 2016 referendum was called, the shape of a future relationship will not be resolved by the completion of stage one of Brexit at the end of January. Nor is ‘no-deal’ inconceivable, despite the warm words in the revised political declaration about establishing ‘an ambitious, broad, deep and flexible partnership’.
EU lead Brexit negotiator, Michel Barnier, has warned repeatedly that the time is too short, saying only a ‘bare-bones’ agreement is feasible in eleven months. A strong dose of realism is now needed. Certainly, the UK has the advantage, compared to other parts of the world seeking such an arrangement with the EU, of starting from close alignment, precisely because it has been a member state for so long.
However, the recent history of EU deal-making suggests much more than a year will be needed, and it is too easily over-looked that, while the European Commission negotiates on behalf of the EU as a whole, it does so on the basis of a mandate agreed by its members. They all have their own red lines and it is also often forgotten how little is covered by the withdrawal deal. Sectoral interests, ranging from the French and Spanish fishing industry, to German car-makers and Irish farmers, will lobby intensively to protect their positions.
Even if an agreement on trade proves to be straightforward, other dimensions of the future economic relationship could be sticky. Several EU member states have substantial numbers of their citizens in the UK and will be concerned about their prospects, beyond the safeguards in the withdrawal deal. The EU can be expected to insist the negotiations cover a range of regulatory provisions including on labour standards, financial markets, the environment, and so on.
Any deal then has to be ratified by the member states and, in some countries, by sub-national parliaments, as was demonstrated when Wallonia initially blocked the EU-Canada deal. Objections can arise for all sorts of reasons and should not be airily dismissed as idle threats. France, for instance, has led opposition to concluding a trade deal – decades in the making – with the Mercosur countries, partly because of concerns about Brazil’s environmental policies (highlighted in a diplomatic row between French President Emmanuel Macron and Brazilian President Jair Bolsonaro), but also because of objections from French farmers.
Perhaps buoyed by their successes in re-opening the withdrawal deal and, now, winning a majority, Johnson and other ministers continue to insist a deal can be achieved quickly, and now plan to amend the UK withdrawal bill to preclude a longer transition. This will arguably play well with the UK domestic audience and might help to focus minds on both sides, but could prove to be an own goal. Nevertheless, we should recall that Johnson came to power saying he would not extend Brexit beyond the end of October 2019, and then did. There is, therefore, every reason to speculate on a reassessment of that commitment to reflect the hard realities of negotiating a new relationship.
There is also a certain irony in Boris Johnson’s approach in two respects. First, his withdrawal deal has much in common with the one Theresa May concluded, yet so conspicuously failed to pass in Parliament. Second, his promises to supposedly neglected voters have loud echoes of May’s commitment to improve the outlook for those ‘just about managing’. These promises will be costly and rely on a strong economy.
Brexit and the UK economy
The immediate effects of ending the uncertainty around Brexit could be to give a fillip to the economy, at least in the short-term. This should mean higher tax revenue, allowing the Johnson government to fulfil at least some of its campaign promises to spend more, especially to the benefit of voters in traditionally Labour areas in the Midlands and Northern England.
Longer-term, the outlook for the economy will depend in part on the nature of the future deal with the EU, and especially on whether it places significant obstacles in the way of trade and investment flows, including complex supply chains. Here too, some backtracking is likely and both domestic business and foreign investors can be expected to push for a closer relationship than some of the ‘ultras’ in the Conservative Party might want.
That said, a ‘Singapore-on-Thames’ model for the British economy is highly unlikely for the simple reason that the UK electorate neither voted for it nor likes the idea. Limited changes in some areas of regulation can be expected where EU rules are deemed to be unreasonable, but the UK is, and will remain, very much a ‘European social model’ economy.
Brexit was always a question of how to reconcile different demands and manage the implicit trade-offs, not a simple binary choice. It is far from done and will remain in the headlines for quite some time. As the former Prime Minster who Boris most aspires to emulate once said:
‘It is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning’.
Iain Begg is a Professorial Fellow at the London School of Economics and Political Science and Academic co-Director of the Dahrendorf Forum.