Opinions - 26.03.2019 - 00:00
26 March 2019. It has now been a thousand days since the British people voted to leave the European Union. With the drama coming closer to its closing scene, it remains entirely unclear how the relationship between the United Kingdom and the EU will look like in the future. It is remarkable, to say the least, that every option is still on the table: a no-deal hard Brexit, a last-minute deal of any kind, a postponement, and even a cancellation of the whole Brexit.
Many ask why the EU and the UK cannot reach a deal. The answer is simple: the demands from London and those from Brussels create an empty set of solutions. This is illustrated best by considering the border question. If Brexit ought to have any meaning, the UK must drop out of the EU Single Market and the Customs Union. Among other things, this would allow the UK to design its own trade and immigration policy. However, the well-known phrase 'taking back control' implies that there must be a border between the United Kingdom and the EU. Placing this border between Northern Ireland and the Republic of Ireland would risk igniting a violent conflict. Hence, the EU demands a permanent solution for this (so-called Irish backstop). But if there cannot be a border within Ireland one has only two options left: either split the United Kingdom by placing the border in the Irish Sea or leaving the entire UK in the Single Market. Both are nearly impossible to sell at Westminster.
Lessons from the Brexit Mess
No one can predict how the current impasse will be resolved. Neither option is appealing. If anything good comes out of this debacle it is that Switzerland – and other countries, including the UK – can learn some lessons.
First of all, a thousand days since Brexit have seen British politicians delaying the process time and again. However, all this postponement has yielded nothing. Domestically it has absorbed valuable resources and attention from other fields of politics. Internationally, the idea that the EU would become nervous and make last minute concessions must be all but rejected. British leaders including Prime Minister Theresa May have maneuvered the country into a dreadful position. This should be a warning to those in Switzerland who believe that the framework agreement can be put into the cold storage for years. The default outcome of Brexit is a no-deal, the default outcome of the framework negotiations is that Switzerland’s agreements with the EU become outdated. The Swiss position is markable better than the British in that regard, but inactivity is not advised in either case.
Second, the EU is no longer the self-absorbed cacophony it used to be. For a long time, the European Union appeared to be a weak and inward-looking political body, consumed by its own crises. One can argue that this has changed. The EU economy is almost equal in size compared to the American one and about 40 percent larger than the Chinese at current prices. Treated as a single country, only China and India have a larger population. It is the single largest trading bloc in the world. Half the world’s rich countries are a member of the EU. Realizing the influence that can be derived from these numbers, the EU has hardened its tone towards both the US and China.
The United Kingdom and Switzerland feel the impact of a reinvigorated European Union. Asking for another delay of Brexit and additional concessions, British politicians had to learn that few concessions will be made and many in the EU will be happy to see the UK leave. Note that a loss for the EU as a whole can be a blessing for some interests within the Union. Brexit reduces the EU gross domestic product by as must as if the 19 smallest countries left the EU. Yet, it would open up new possibilities within the Union. French president Emmanuel Macron will not admit but his ambitious plans would fall on a more fruitful ground in a post-Brexit EU. Sooner or later Germany will realize that it will no longer be in a position to veto plans by 'Southern member states' and renegotiating the Lisbon treaty’s double majority rules will be tough. For many forces within the EU the time is ripe to 'get rid of some old problems'. That includes British privileges but also the gaping hole in the EU map marked out by Switzerland.
The consequences for Switzerland are visible already. Several Eastern European countries demand larger Swiss contributions along the cohesion billion. French judges fined the largest Swiss bank about $5 billion in a criminal trial over tax evasion and not too long ago German authorities felt empowered to encourage breaking Swiss law and buying CDs with tax information. Almost to the day ten years ago, the sacred Swiss bank secrecy laws were abandoned quickly as pressure from the EU and the US built up. When push comes to shove, Switzerland will again find itself as David in front of Goliath. Trade statistics illuminate the imbalance: Swiss exports to the EU per person are about 16,000 CHF while EU exports to Switzerland per EU citizen are just 350 CHF. It does not come as a surprise that the EU presents Switzerland with two options for the framework agreement: take it or leave it.
A third lesson many observers have already drawn from the current British situation is that if you want to fight the European Union you might better do it from within. Whether it is Viktor Orbán’s stance against immigration or Sebastian Kurz’s cuts to child benefits for immigrants – European law is frequently challenged, ignored, or outright violated. The consequences are often not material. As Simon Kuper noted recently, the European Commission refers ever fewer cases against disobedient member states to the ECJ. Clearly, this has an impact on behavior by EU members. What remains to be debated is which implications Switzerland should derive from this observation.
The final economic lesson from the Brexit adventure concerns the surprisingly small impact we have seen thus far on the UK economy. Many predictions of an immediate economic downturn after the Brexit vote have turned out wrong. At 3.9 percent, the British unemployment rate is lower today than at any time since 1975. Nevertheless, the UK economy is growing slower than all other G7 countries and current research by Benjamin Born and co-authors suggests a sizeable loss in economic output. One major reason why things have not turned out worse is the fact that the British pound was allowed to depreciate by more than ten percent against the Euro. If only Greece had possessed that option.
The Brexit saga will not have a happy ending. Either way, the United Kingdom will face the consequences of challenging its closest ally and trading partner – at a time when this partner feels and behaves increasingly emboldened. Chinese general and strategist Sun Tzu wrote "He will win who knows when to fight and when not to fight". The UK picked the wrong time and never fully developed a strategy to manage Brexit. The result will not be catastrophic but a significant loss in the British standard of living. The Swiss position regarding the EU is notably different. The country never was a member state and has decades of experience negotiating with the EU. Right now, that experience is duly needed and better include the lessons from Brexit.
Stefan Legge is researcher and lecturer at the University of St.Gallen.
This article was published on 26 March 2019 on swissinfo.ch.
Photo: Adobe Stock / Andrey Kuzmin
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