THERESA MAY’S SPEECH was some piece of work. She seems to think the EU and the UK are negotiating on an equal basis. It’s a dangerous game of chicken. It’s like a hostage taker. She’s saying: “Give me the deal I want or the 64 million Brits get it”.
And, the more clarity that Theresa May tries to bring to the Brexit process, the more questions there are. There was hope that the New Year would bring some clarity on what we can expect from Brexit, or at least from the negotiations.
Staking out the UK’s negotiating position
Today’s landmark speech was intended to stake out the UK’s negotiating position. What we saw instead was long on soundbites and platitudes, and short on detail. It seems Prime Minister May’s objective is to have all of the benefits from EU membership without the EU membership.
There has been a hardening of positions by EU and UK leaders as we near Prime Minister May’s self-imposed deadline for triggering Article 50. While this may not be surprising as each enters unprecedented and unpredictable negotiations, it is not good news for the Irish economy.
Ireland have most to lose from Brexit
History and geography has tied the Irish and UK economy together through trade, and while the share of trade between the countries has reduced since both joined the European Union, they share approximately €1 billion in trade every week. The impact of, at best, currency fluctuations and, at worst, the imposition of tariffs will be substantial and damaging.
Brexit will be painful for the Irish economy, and the harder the Brexit the more pain we can expect. In the last week or so, EU leaders, from Maltese Prime Minister Joseph Muscat, which holds the EU Presidency for the first half of 2017, to Chancellor Angela Merkel have insisted that the UK cannot pick and choose the elements of the EU it wishes to retain, gaining access to the single market without free movement of labour.
UK is overplaying its hand
At the same time Prime Minister Theresa May seems to believe that the UK can retain access to the single market, because it will be in the interests of both parties, even if the UK does not accept free movement. There is a sense that the UK is overplaying its hand. Even as Article 50 is triggered and negotiations begin, it is unlikely that 2017 will bring about much more clarity on the likely outcome of Brexit.
The softer options are better for the UK, and for Ireland, though they may involve UK contributions to the EU to access the single market and/ or free movement of people between the UK and the EU. Both of these would not be politically palatable in the UK.
British government clearly doesn’t have a plan for Brexit and is scrambling to find one
This explains the sometimes contradictory messages coming from the British government, meaningless statements such as the “red, white, and blue Brexit”, and suggesting the UK can have it all.
The Conservative government has committed to providing a strategy for Brexit to parliament in advance of invoking Article 50. It is unlikely that strategy will be comprehensive or enlightening, and the government will claim that a more detailed plan would hamper their negotiations.
In the meantime, EU leaders sit and wait for the British to get their act together. There is little incentive for Chancellor Merkel, President Hollande, and other leaders of larger EU members to adopt anything other than their best poker faces. The Brexit process is unprecedented and triggering Article 50 will set in train a series of negotiations whose outcome is unpredictable.
European leaders won’t prioritise Brexit
In this context it makes sense to be non-committal and let the British come with their opening offer. Even after a formal application to leave is submitted, the European leaders are unlikely to prioritise Brexit negotiations. They have their own domestic concerns with elections scheduled in France, Germany, and the Netherlands in 2017.
Two critical factors that will need to be clarified early in the negotiations process are whether an Article 50 application to leave can be withdrawn and whether there can be a “transition period” beyond the two years allowed for in Article 50.
The first matter may become an issue before the Irish courts shortly. Even without these legal complications, it is difficult to overstate how substantial the Brexit process will be. For example, the UK has not negotiated a trade deal on its own in over 40 years.
It is unlikely that any civil servants have experience of doing so. EU laws, rules, and regulations are embedded in British laws over the last 40 years and it will be arduous to unpick all of them.
There is a risk that 2017 could also see a UK election
It could be prompted by Prime Minister May seeking to strengthen her hand going into negotiations and trying to take advantage of ongoing Labour party troubles. On the other hand, perceived failures in negotiations might embolden Brexiteers to seek to replace her as Conservative leader.
Signs that EU leaders are being tough on single market access and the movement of people could feed perceptions among hardliners that the unwelcome soft Brexit has to be opposed from the top of the government. Ireland has more at stake than any other EU member from Brexit. However, our worries are not likely to be eased much in 2017 as British and EU leaders begin negotiations.
The ultimate shape of Brexit will only emerge in 2018 and beyond, and in the meantime we can expect more uncertainty and posturing from British and EU leaders. The Irish need to persist in making our case, but it may be some time before the decision-makers turn their heads to listen.
Dr Declan Jordan is a Senior Lecturer in Economics in the Cork University Business School. His research interests include business economics, innovation, regional development and competitiveness, and economic growth. He also has substantial management and corporate experience gained prior to joining UCC. He tweets as @decjordan.
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