A speech by British Prime Minister Theresa May on Tuesday answered the biggest outstanding question about the United Kingdom's impending departure from the European Union: It will not try to stay in the bloc's single market. Instead, May explained, her government will push for a comprehensive free trade agreement with the European Union, emphasizing that regaining control of immigration policy would take precedence over remaining a member of the market. But while her speech clarified some questions about the Brexit process and the United Kingdom's future course, it left several major issues unaddressed.
The Cost of a Free Trade Deal
In her speech, May highlighted two themes: sovereignty and national unity. She characterized the Brexit as a means by which the United Kingdom can recover its sovereignty, especially over immigration (one of the hottest topics of the referendum campaign) but also over trade and legislation. She said the Brexit will enable the country to reduce immigration, restore the full sovereignty of Parliament, and re-establish the supremacy of British courts and judges. But, she said, to achieve those ends, the United Kingdom must leave the single market, an area in which people, goods, services and capital move freely, and sign a "comprehensive, bold and ambitious free trade agreement" with the European Union.
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By leaving the single market, the United Kingdom would gain the ability to negotiate as many free trade agreements as it wants while including as many economic sectors in those deals as it desires. May indicated that, in addition to pursuing a deal with the European Union, her government would also seek to strike trade agreements with the United States, China, India, Brazil and Australia, among others. But there are downsides to that strategy: Free trade agreements usually take years to negotiate and are becoming increasingly difficult to ratify.
A free trade agreement between the United Kingdom and the European Union in particular could prove hard to achieve. The complex EU ratification process means that national — and in some cases regional — parliaments in each of the bloc's 27 member states will have the ability to veto any agreement. A recently ratified deal between the European Union and Canada is an example of the inherent difficulties of finalizing free trade agreements with the bloc. That deal, which took almost a decade to negotiate, was held up over last-minute objections by a regional parliament in Belgium. In a similar manner, free trade negotiations with the United Kingdom will give EU member states the opportunity to threaten a veto in order to exact concessions that are not necessarily connected to the Brexit process.
According to EU rules, after a member state announces its intention to depart the bloc, the two sides have two years to negotiate both the terms of the departure and the structure of their future relations. Given the complexity of the negotiations, the two-year period can be extended — a likely necessity as the many details of the Brexit are hammered out. In addition, while May said London is not interested in reaching an "unlimited transitional status," she admitted that a phased implementation will be necessary to give the United Kingdom's businesses time to adapt to the post-EU environment. But granting a deadline extension would require approval from all EU member states, which would give them another opening to make demands.
It's Political, Too
Another factor that will influence the direction of negotiations is that governments in core EU member states will seek to balance their desire to reach a comprehensive deal that would preserve trade with the United Kingdom with their need to send the message to their own citizens that leaving the bloc is not a painless process. In disclosing one negotiating aim, May said her government will try to preserve the passporting rights that allow companies operating in the United Kingdom's financial sector to sell their products to the European Union without requiring additional authorization. She even suggested that Britain could offer access to its automotive sector (an important concession to countries such as Germany) in return for an agreement on the financial sector.
But Berlin and other governments will conduct these negotiations with an eye not only on economic issues but also on Euroskeptic forces at home. Should voters in the European Union perceive the Brexit as a successful process for Britain, other countries could demand to follow it out of the bloc. Euroskeptic political parties that want to leave the bloc or the eurozone have been gaining strength in key EU members such as France, the Netherlands and Italy. Foreseeing the desire among some of those governments to take a tough line with the United Kingdom, May warned that an effort to punish her country for leaving would be an act of "calamitous self-harm." But considering that the Brexit will create a precedent for members to depart the bloc, political calculations will be as important as economic interests in the negotiation process.
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In her speech, May also stressed national unity. In Scotland and Northern Ireland, a majority voted to stay in the European Union, and the Scottish government has been particularly vocal with its demands for the United Kingdom to remain in the single market. In an attempt to address their concerns, May announced the creation of the Joint Ministerial Committee on EU Negotiations, which will give officials from each of the United Kingdom's devolved administrations a chance to contribute to the Brexit negotiations. This is unlikely, however, to appease regional governments. Though Scottish voters rejected a referendum on leaving the United Kingdom in 2014, and opinion polls suggest that the Brexit has not significantly changed popular sentiments on independence in Scotland, its government will continue to use the threat of independence as part of its strategy to seek a greater say in the Brexit negotiations.
May also said she will negotiate with the European Union to find "a practical solution" that would retain the open border between Northern Ireland and the Republic of Ireland, an EU member. She did not, however, offer any details. Dublin will support London on this issue, since the two governments are interested in allowing people to move freely about the island. But some form of customs control will be difficult to avoid. After May's speech, a member of Northern Ireland's nationalist Sinn Fein party accused the prime minister of ignoring the will of the Northern Irish citizenry on the issue. The Brexit could reignite tensions between nationalists and unionists as the country prepares to hold snap elections on March 2.
The British Parliament will hold significant power over the Brexit process. May said that the final agreement with the European Union will be put to a vote in Parliament and that lawmakers could decide which parts of EU law the United Kingdom should retain. But the more pressing question is whether parliamentary approval will be needed before formal negotiations with the European Union can even begin. In late 2016, a high court in London ruled that lawmakers must give their authorization before May can formally start Brexit negotiations. The Supreme Court of the United Kingdom is expected to rule on the question later this month. This is not a minor issue, considering that most members of Parliament supported the "remain" camp during the referendum campaign. Should lawmakers gain power over the Brexit trigger, though, they are unlikely to thwart the will of voters and veto Britain's exit. They would, however, likely use that power to press for a greater say in negotiations.
The Brexit referendum showed a country split among generations and along income and ideological lines. In her speech, May tried to strike a balance between protection of national sovereignty and the defense of Britain's tradition as a trading nation. She promised to reunite the country and make it "more outward-looking than ever before," keeping in mind the interests of voters from both camps and the priorities of the country's main economic sectors. But the first reactions to May's speech showed that the wounds left by the divisive Brexit campaign have not healed, with Europhiles accusing the prime minister of giving up on the EU single market before negotiations even begin and Euroskeptics pushing May to break all ties with the continental bloc.
At the core of May's dilemma lies a basic issue: While voters who participated in the Brexit referendum gave their government a clear mandate to leave the European Union, the referendum did not spell out the terms under which the exit should happen. Since taking office six months ago, May has faced pressure to clarify her administration's Brexit negotiation strategy. On Tuesday she went as far as she could in providing answers, but she remained decidedly ambiguous on many topics. Considering that negotiations haven't even begun, May likely does not want to make promises she won't be able to keep. The vague details she shared also preserve her negotiators' ability to make sweeping demands at the start of the bargaining process that leave room for compromise as talks develop. While May succeeded in answering some of the most important questions regarding the Brexit, it's clear that there is still a long list of issues that exceed her government's control and will be decided only once talks begin.
"May Answers the Big Brexit Question" is republished with permission of Stratfor.
