For Australia, Brexit means the loss of an important trade negotiation ally, but it would be wrong to predict an end to the EU project, writes Nathalie Rubin-Delanchy* in Brussels.
Following a referendum on 23 June the UK is set to leave the European Union, effectively putting an end to over 40 years of membership. From an Australian perspective, Brexit will not fundamentally affect relations with the EU. Tourists can continue to travel to EU countries under the same conditions (the UK does not participate in the Schengen area, which allows for free movement within EU borders). The UK will also continue to operate according to EU rules until its departure comes into effect – which will take at least two years.
However, Australia, as other Anglophone third countries such as the US and Canada, loses an important ally in international trade issues. Perhaps the most important impact will be on the business community, as the mechanics of how London-based financial institutions operate are likely to change drastically.
For Brussels, Brexit definitely came as a shock.
This is the first time in the history of the EU that a member chose to leave. It will have important consequences on how the EU project moves forward. Faced with an existential crisis, the EU has to be remodelled to prevent any ripple effects in other member states and try to appeal to a people who have shown dwindling support over the last years.
Euroscepticism has been on the rise in several EU countries, fuelled by a string of challenges such as the economic and financial crisis or migration. Nationalist voices demanding greater sovereignty for member states have taken a front seat during elections in Poland, the Czech Republic and Austria. France and Germany are witnessing a similar phenomenon as they gear up for their own elections in 2017. Since the UK’s vote, France’s National Front, Italy’s Northern League, Austria’s Freedom Party, and the Dutch Freedom Party all issued calls for their own Brexit-style referendums.
But the contagion risk may be exaggerated. As the dust begins to settle on the chaotic aftermath of the vote, some are starting to believe that Brexit could be the much needed wake-up call for the EU project. Opinion polls suggest that support for staying in the EU has actually (and substantially) increased this past month in countries such as Denmark, Sweden, Germany and Finland.
The 27 leaders have already announced they are starting a deep think on the EU’s future, with action planned for 2017.
The EU, whose moto from the onset has been “ever closer union”, could move towards greater integration or more rapidly shift to a “multi-speed” Europe with varying levels of integration between countries and policy areas (as is already the case with monetary union through the Eurozone and free movement through the Schengen passport-free area). Any such predictions are, however, premature at this stage: other scenarios predict a serious roll back of EU sovereignty.
One month down the line, most stakeholders appear to have opted for a wait-and-see approach. This means a sudden and drastic change in the EU’s functioning will probably not happen. Incremental change is more likely – keeping in mind that coordinating positions of (now) 27 member states can take a very, very long time.
In the meantime, the Brexit wheels are already in motion. The UK, in practical terms, remains a member of the EU until the Government decides to trigger article 50 of the Treaty on the European Union, which lays out the conditions for withdrawal of membership. The trigger of article 50 is a formal request to leave, which is expected at the earliest at the end of 2016.
However, new appointments on both sides indicate clearly that Brussels and London are gearing up for negotiations: new British PM Theresa May has appointed several pro-Brexit politicians
to key positions within her cabinet, while Belgian diplomat Didier Seeuws and former French representative in the European Commission Michel Barnier should lead negotiations on the Brussels end. The final decision is to be voted on based on standard EU qualified majority voting rules, meaning an isolated UK will have very little weight.
The EU, therefore, holds all the cards.
Brexiteers foresee a future where UK residents and businesses would retain a
large part of their freedom of movement and operations within EU member states.
This is unlikely.
It would imply paying into the EU budget and accepting free movement of labour from the EU – the two main reasons for withdrawal in the first place. It is also unlikely the UK will have much leeway to strike a profitable deal. Since the result from Brussels has been
inflexible. All three leaders of the EU institutions – Donald Tusk, heading the Member States’ European Council; Jean-Claude Juncker, heading the executive branch the European Commission and Martin Schulz, heading the European Parliament – are calling for a “clean divorce”.
The UK is thus essentially no longer considered an EU Member State by its peers. EU leaders are already shifting their language to refer to the “EU27”; the country has relinquished its six-month seat as the Presidency of the EU in 2017 as well as the prestigious financial services portfolio in the European Commission; in the Parliament, British representatives have given up their leadership roles. The UK Permanent Representation to the EU has been moved from the FCO to the newly created “Department for Exiting the European Union”, indicating how British diplomats will no longer be focusing on playing a pro-active role in European affairs.
Policy-making will change fundamentally on both sides of the channel. For Brussels, the UK’s departure will have a significant impact on dynamics and voting patterns in many EU policy fields. The EU loses a generally vocal and powerful member, for better or worse (depending on the policy field and your opinion). The UK, for instance, was a heavyweight voice for lower taxes and better regulation. On the other hand, the remaining big EU member states – notably Germany and France – will gain more sway in the Council and Parliament.
For London, leaving the EU means renegotiating relations with countries around the world – covering everything from trade deals to international political agreements such as the COP21 climate agreement. The country has next to no trade negotiators (as the EU has for the past four decades negotiated on its behalf), and will need hundreds to replicate the market access it currently has with 50 states around the world as an EU member. US President Obama has already warned the UK that it would be “at the back of the queue”. Until the UK officially leaves the EU, it cannot even start new trade talks.
However, it is unlikely the UK’s profile as an international trade partner will change much. EU countries are among the UK’s largest trading partners and any model which the UK opts for will seek to keep maximal access to the EU’s internal market.
Options such as the Norwegian or Swiss model, or a deep and comprehensive Free Trade Agreement, will require the UK to abide by EU standards (in for instance social or environmental aspects). In any case there will not be a roll back of UK regulation and the UK will likely continue in the long term to apply EU regulation.
In the financial sector, prospects at first glance are grim: as soon as the vote result became clear in the early hours of Friday 24 June, financial markets plummeted, the pound falling by 14 per cent to its lowest level in 30 years. Capital has been fleeing the UK ever since.
The International Monetary Fund, the European Commission and the Bank of England have all issued negative forecasts for the UK economy, and more broadly for the EU. Yet Brexit does not necessarily imply a lose-lose scenario for the EU, UK and foreign companies.
A new spot is up for grabs as the EU’s financial hub since London’s ability to secure a strong deal with the EU remains uncertain. Wannabee financial centres such as Frankfurt, Paris or Dublin could attract UK-based companies wishing to relocate elsewhere.
What will definitely change is the voice UK-based businesses have in EU policy-making. UK businesses can no longer count on the UK government channels to shape EU policies to the same extent as previously – they will accordingly need to shift their lobbying activities to Brussels or other EU capitals. The same holds true for EU trade associations, which will surely not give the same weight to the interests of their UK members moving forward. Third countries inevitably need to adapt to the reality that the UK’s voice no longer carries weight in Brussels.
Yet despite the chaos that ensued from Brexit, panic is not on the table for Brussels. The EU has to adapt its modus operandi but Brexit does not presuppose a halt to European integration. What is more likely is a more tailored EU, allowing closer integration where desired and more flexibility where required.
Nathalie Rubin-Delanchy is an external relations consultant at Wells Haslem’s IPREX Brussels partner, Cambre. She is also a member of Cambre’s Brexit Taskforce.
Cambre is a multidisciplinary team focused on European advocacy and communications, based in Brussels. The company brings a collaborative approach to government relations, public affairs and public relations in order to anticipate and manage its clients’ policy and reputation needs.
Cambre has a network of partner agencies across Europe and like Wells Haslem is a member of the IPREX global communications network.
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