After Prime Minister May’s catastrophic defeat in this week’s meaningful vote, the worst-case Brexit scenario, no deal, remains a real possibility writes Fabian Zeelug. While most UK MPs have repeatedly expressed their determination to avoid a no-deal scenario, so far no alternative appears to command a majority in the House of Commons, risking a no deal by default on 29 March. While this is not the only possible outcome, prudent risk management demands increased contingency planning for such a scenario, on both sides of the Channel.
While the economic costs are clearly asymmetric, the impact on the EU and its member states is far from negligible, with significant losses especially for countries with close economic ties to the UK, such as Belgium and the Netherlands. Both sides want to mitigate the worst effects, hoping to ensure that, at the very least, planes will fly and critical supplies will continue to cross the Channel, although logistical chaos and legal uncertainties will become significant barriers. But contingency planning also needs to happen at the highest political level: it is high time the EU and its members coordinated and determined their strategic positions in case of a no-deal Brexit.
From unity to discord?
One of the most remarkable aspects of the Brexit process has been the unity displayed by the EU27, which has been essential to deliver the Union’s desired outcomes. But unity is likely to fray in a no-deal scenario, to the detriment of the EU27. In the countries hit hardest by a disorderly Brexit, there will be strong domestic pressure to find quick-fix solutions, even if these go against common EU positions. Already in the run-up to a chaotic exit, diverging risks make some member states far more inclined to extend Article 50 than others.
If the UK reneges on its commitments made in the first phase of the negotiations (on EU citizens’ rights, financial obligations and the Northern Ireland border), the potential of conflict between member states increases further. The appearance of the ‘Brexit gap’ already in the current EU multiannual financial framework would make discord between the EU27 a certainty.
A changing political geography
At the same time, the EU would be faced with some tricky questions created by a changing political geography, from Gibraltar to the Channel Islands, to Crown dependencies in the rest of the world, as well as for the EU’s relationship with countries such as Switzerland, Norway and Turkey.
No deal and the potential of border controls would be unacceptable to large parts of the population in Northern Ireland, putting into question the constitutional status quo. The potential unification of the island would be back on the agenda. This could also draw the EU27 into conflict if the pressures result in a re-eruption of violence.
No deal would also make a second independence referendum in Scotland almost certain. Current opinion polls indicate that a chaotic exit might well be enough to lead to a separation of Scotland from the rest of the UK, which would almost certainly be followed by an EU membership application; there is little thinking in the EU on how to react to such a scenario.
The UK as a third country
After no deal, the EU27 would be faced with a competitor posing far more fundamental challenges than a UK still closely tied to EU rules, especially in case of an acrimonious divorce. There might well be competition and conflict, including for contested resources and markets in areas such as fishing and energy. The level playing field provisions included in the Withdrawal Agreement would not come into force, opening the possibility of the UK to adopt far more mercantilist economic policies, potentially based on lower standards. In global trade relations, the UK could pursue trade deals by undercutting the EU, driven by a necessity to quickly establish new economic relationships.
Europe in the world
The EU’s global role would also change. Current cooperation on issues such as climate change, development or combatting tax havens could not be taken for granted. This would be a particular challenge in the field of internal and external security where UK capacities remain substantial for the EU27, including within the NATO context.
The EU would also have to deal with a situation where a major power within Europe would seek separate strategic relationships with key countries around the world, including the US, Russia and China. This opens the door to divide-and-conquer tactics and might lead to divergent positions on crucial issues such as the global multilateral trade system, sanctions or openness to investment in strategic sectors.
Together we are strong
The tribulations resulting from a no-deal scenario must not result in the EU sacrificing its principles to ensure an orderly Brexit. It is in the economic and political interest of the Union to remain united on its red lines, which also limits what can be offered to the UK at this point; caving into cherry-picking demands of the UK would, in the end, pose an existential threat to the EU itself.
This implies that the EU27 need to discuss and provide answers to the hard strategic questions a no-deal Brexit poses, redefining not only the EU’s relationship with the UK but also with other neighbours and the rest of the world. Most crucially, the EU member states need to agree a common strategic ‘negotiation position’ for the event of no deal. If the worst-case scenario cannot be averted, it is best for the EU27 to be fully prepared for all eventualities: unity has proven to be the best recipe.
Fabian Zuleeg is Chief Executive and Chief Economist at the European Policy Centre (EPC). This article was first published by the EPC. More information can be found at www.epc.eu