Bypass the European Commission altogether.
Last week, British prime minister Theresa May failed for a third time to secure a majority in Parliament for her Brexit deal. Now she faces an ever-narrowing set of options. With the European Commission unwilling to make concessions that would satisfy her Democratic Unionist party (DUP) coalition partners and Brexiteers in her own party, and with those same parliamentarians equally dug in, she has now been forced to entreat the European Union for an indefinite and humiliating delay. Yet, as she must realize, delay by itself offers no hope of a fundamental change in the dynamics of the negotiation and, therefore, no realistic hope of resolving the political crisis now engulfing Britain.
To date, debate about how to leave the EU among those in the British Conservative party has focused on whether to accept Prime Minister May’s current deal with the European Commission or to pursue a “hard” or “no deal” exit subject to fewer continuing EU regulations. In fact, there is a better option available than either the current deal or no deal. Paradoxically, however, Mrs. May will have to signal her willingness to leave without a deal to get a better deal — indeed, one that can win the assent of Parliament, including Brexiteers and her DUP coalition partners.
Specifically, here’s what she can do: Rather than returning to negotiate with the European Commission, Prime Minister May should now bypass the commission altogether. Instead, she should make an eleventh-hour offer to the people of Europe through the EU Council of Ministers. She should propose, for a period of, say, three years, continued reciprocal residency for European Union citizens living in Britain and for British citizens living in the European Union. Most important, she should also offer the council continued free trade under the auspices of the World Trade Organization rather than the European Union’s Luxembourg court. She can inform the council that if it refuses her offer, Britain will leave the EU without a deal and will immediately seek free-trade agreements with friendly non-EU countries, including the United States.
Making such a proposal would begin to resolve the Brexit crisis for several reasons.
First, by dealing directly with the EU Council of Ministers, the British government can negotiate with a less intransigent and more politically accountable arm of the European Union. The Council of Ministers is made up of representatives of the elected governments of the 28 EU member states, and consequently it tends to be more responsive to the concerns of the people from sending member states than the European Commission is. Legally, the Council of Ministers also has executive decision-making power. But because the unelected European Commission has the sole authority to propose legislation, in practice the council often merely rubber-stamps the recommendations of the unelected commission.
The British government need not allow the commission to dictate terms in this situation, however. The sole interest of the European Commission is to advance the project of European political unification. The difficulties that May has encountered in negotiation reflect this overriding interest. Yet she has been forced to deal with the commission only because the council exercised its prerogative (under a clause in Article 50 of the Treaty on European Union) to turn that negotiation over to the commission. Having found the commission unreasonable, May has every reason go back to the council and make the people of Europe an offer through this more accountable body.
Second, making the council an offer of mutual residency and WTO-administered free trade would allow the British government to negotiate from a position of strength. Currently, nearly 3.5 million EU citizens live in the United Kingdom, while only about 1.2 million Britons live in EU countries. So securing mutual residency is significantly more important to EU countries than it is to the U.K. Similarly, EU exporters sell far more goods and services to Britain than the reverse. If the U.K. leaves the EU with no deal, EU exporters would have to pay an estimated £14 billion in tariffs to the U.K., while U.K. exporters would have to pay only £6 billion in tariffs to the EU. What’s more, if Britain leaves without a deal, under WTO rules the British government could subsidize U.K. exporters for their tariff expenditures from the revenue the government would receive from EU exporters. Clearly, again, the EU countries have far more to lose than the U.K. does in the event of a no-deal exit.
Third, by offering a free-trade deal, the U.K. can at last begin to negotiate the correct issue. Up until now, May’s negotiation with the commission has focused entirely on the terms of the British “divorce” rather than on the future EU–U.K. trading relationship. That has meant that the negotiation, and the current May deal, have mainly addressed the question of how much the U.K. would pay for the “privilege” of leaving (currently agreed at £39 billion) and the Irish-border question. Astonishingly, in more than two years of negotiating, the two sides have yet to establish even the basic contours of a future trade deal.
Fourth, a free-trade agreement administered under WTO auspices would dissolve the thorny Irish-border problem. In order to prevent the reestablishment of a hard border, with customs checks, between the Republic of Ireland and Northern Ireland, May has had to accept continued U.K. compliance with a swath of EU trade, social-policy, and customs regulations. Yet a hard border is necessary only in the absence of a free-trade deal between the EU and the U.K. By making a free-trade proposal directly to the council, backed by a credible threat of leaving with no deal, May can solve the Irish-border issue in one bold stroke.
Fifth, since such a deal would extricate the U.K. from the EU customs union, it also would allow the U.K. to make free-trade agreements with non-EU countries. May’s current deal, on the other hand, leaves the U.K. in the customs union for nearly two years and requires EU approval for the U.K. to withdraw permanently. Trading freely under the WTO would allow the U.K. to take advantage of, for example, the standing U.S. offer to fast-track a U.S.–U.K. free-trade agreement as soon as the U.K. leaves the EU. Should the Council of Ministers accept a British free-trade offer, the U.K. could soon have free-trade deals with both the EU and the U.S. If the council rejects the British offer, the U.K. could still secure a free-trade deal with the United States, its largest trading partner.
Further, as noted, the U.K. will have plenty of extra cash on hand to compensate its exporters for any increased tariff costs should the council reject its free-trade offer. In addition to the estimated £8 billion profit from new tariff revenues in the case of a no-deal exit, the U.K. would also save an estimated £10–12 billion per year by not having to subsidize the EU (in addition to saving its £39 billion exit payment as pledged under May’s current divorce deal). In addition, the unencumbered access to the huge North American market would over time more than compensate U.K. businesses for any restricted access to the EU market.
Leading British businessmen and a few pro-Brexit politicians have urged the British government to adopt just this kind of approach. Until now, the government has rejected these pleas on the grounds that the U.K. “is a law-abiding nation.” But the Luxembourg court itself recently ruled that Britain may leave the EU unilaterally in accord with its own constitutional requirements (under the first clause of Article 50 of the Treaty of the European Union). Though some have quibbled about this citing various legal technicalities, the U.K. certainly does not need to negotiate the terms of its divorce through the European Commission as a precondition of establishing a trading arrangement with EU. Instead, the U.K. can simply inform the European Commission of its intent to leave and offer the Council of Ministers a free-trade and reciprocal-residency deal, which the council in turn may refuse but only to the detriment of its own people and businesses.
The best time for the British government to make such an offer likely will be just after April 10, when the EU decides on whether to accept Mrs. May’s most recent request for an extension beyond the current April 12 deadline for Britain to accept the current deal or leave without one. If such an extension is granted by the EU, May will desperately need a new approach that changes the dynamics of the negotiation and promises a different outcome.
Conversely, in the unlikely event that the U.K. does leave on April 12 without a deal, May will still need to make a free-trade and mutual-residency offer in order to protect exporters from tariffs and minimize dislocation for both U.K. and EU external residents. (Even so, the U.K. and EU have already concluded many “micro-deals,” covering licenses for lorries, financial derivatives, expedited border checks, visas, Irish electrical-power generation, air travel, and more.)
This revised approach to the negotiation with the EU has one final advantage. Since it would not require the U.K. to negotiate a separate divorce deal, it would allow Britain to leave the EU immediately, thus ending the uncertainty surrounding the Brexit process. Indeed, the beauty of this strategy is that it eliminates the need for the U.K. to wait for an EU response. The U.K. can simply declare its intent to leave, make its offer to the Council of Ministers, and prepare to trade freely under WTO auspices. If the council decides to act in the interest of its own people, then no new tariffs will kick in. If the council fails…