Bloomberg.- Last week’s Brexit talks between the U.K. and the European Union didn’t go well. The March 2019 deadline for concluding an agreement is approaching, and progress has been much too slow. Prime Minister Theresa May needs to get a grip on this process.
Britain’s government faces two crucial obstacles. It’s in May’s power to break through both.
The first is the EU’s insistence that Britain’s exit payment in settlement of liabilities should be substantially agreed — the formula is that “sufficient progress” should have been made — before talks move on to post-Brexit arrangements. The second is uncertainty over the form of a transitional post-Brexit deal to govern relations until the two sides can fashion a permanent new agreement — a task bound to take at least several more years.
The U.K. is dithering on both points, and it’s clear why: Each of these questions is politically toxic — and May’s political capital, after this year’s general-election debacle, stands at roughly zero.
Public opinion in Britain solidly opposes an exit payment in the mid- to high tens of billions of euros, which the EU has said it expects. And many of those who voted for Brexit are skeptical about a transitional deal that leaves the U.K.’s obligations to the EU substantially in place, seeing this as a continuation of EU membership by other means.
So far, May has done nothing to prepare public opinion for the substantial exit payment that the U.K. will probably have to endure. And she’s done nothing to make the case for a so-called off-the-shelf transition, which mostly just freezes existing arrangements.
To be fair to May, the EU is wrong to insist on “sufficient progress” on the exit talks before moving to other matters. There’s no reason why these talks shouldn’t be on parallel tracks, or for that matter bundled together, so that concessions in one area could be balanced by concessions in another. Putting questions into a series of silos, with permission needed at each stage to move on, is a good way to make talks fail. But then the Brits had no reason to expect the EU to be obliging about this: Britain has spurned the EU, not the other way round, and now the EU has the upper hand.
What then should May do?
On the exit payment, she should propose to settle the matter through independent international arbitration. This was suggested earlier this year by Andre Sapir of the Bruegel Institute — before it was certain that the issue would in fact cripple the talks. Now that it has, May should take up Sapir’s idea.
Arbitration has great substantive advantages. It recognizes, for instance, that the question of what is actually owed is enormously complicated, that the parties start from positions that are very far apart, and that a lot of face is at stake on both sides. It gives Britain, especially, cover for backing down. The resulting terms would not be a surrender to EU bullying, but a principled compliance with a legitimate process both sides agreed to invoke. The International Court of Justice, a United Nations body, or the Permanent Court of Arbitration, as Sapir suggests, would be the appropriate body.
On the form of the transition, May should come down squarely in support of her chancellor of the exchequer, Philip Hammond — and against other ministers, notably Liam Fox — and say that the transitional deal should be, in effect, an extension of the existing arrangements. After Brexit, for a period of several years, Britain would remain in the EU’s single market and customs union, would keep paying its membership dues, accept free movement, recognize the existing rights of EU citizens in the U.K. — and have no say in EU decision-making.
Brexit hardliners, inside and outside May’s Conservative Party, would denounce that as overthrowing the referendum result. May would say: It does no such thing. Of course, she would say, this outcome is completely unacceptable as a long-term arrangement — and that’s precisely why it’s guaranteed to be temporary. It’s merely the price of executing Brexit with the least possible short-term disruption.
And she could patiently explain why Brexit hardliners should be open to this approach. Their resistance to EU demands for liabilities to be settled, and their preference for a complex bespoke transition that dissolves the U.K.’s existing rights and commitments at the outset, are leading in one direction only — to the so-called cliff-edge Brexit that will, at a minimum, impose enormous short-term disruption on the U.K. economy. And that, as John Springford of the Centre for European Reform has argued, might be the worst possible outcome for hardliners. It would lead voters to conclude that Brexit was a terrible mistake after all — an error that they might then decide to put right.
It ought to be obvious: The hardliners have a bigger stake in a smooth Brexit than anybody else. The price for securing it is modest — a little patience. Is it really beyond the prime minister to see this, take charge, and make the case?
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