LLMs Anglia Ruskin Press


The challenges and consequences of Brexit on UK-EU relationship

By Serena M. Sakr

The European Union has been grappling with several major challenges. The United Kingdom’s decision to leave the Union is the most recent and, at the same time, most difficult one of all. As a result, the regulations and laws governing the relationship between the UK and the EU will need to be altered and the UK-EU trade relationship will be one of the factors impacted by Brexit.

The UK has long been considered one of the most euroskeptic members within the Union, with many leaders traditionally cautious of ceding much power over to Brussels. This is also the reason why the UK has opted to remain outside of the Eurozone and the Schengen free movement area. In addition, amid joining the Union, the UK negotiated to participate in only few selected major home affairs concerning the Union[1].

In the middle of all the challenges facing the EU as well as the financial crisis that hit in 2007, former UK prime minister David Cameron faced a growing pressure from hard-line euroskeptics, both from his own party and outside, to reconsider the UK’s relationship with the EU[2].

An “in-or-out” public referendum took place on the 23rdof June of 2016. Results came in favour of a British exit from the EU or in other terms “Brexit”. Theresa May’s government enacted the results of the referendum by evoking Article 50 of the treaty or the so-called exit clause in March 2017, triggering a two-year withdrawal period in which the UK would negotiate with the EU an agreement on the terms of the withdrawal and on future relations[3].

In December 2017, both parties have reached an agreement in principle covering the main aspects of the three withdrawal issues: the Irish border, the rights of UK and EU citizens and the financial settlement. Wanting a ‘soft’ or ‘hard’ Brexit has been an issue for the UK government and as such, negotiating the details of the withdrawal, including on customs arrangements and trade relations, has proven to be difficult[4].

Since negotiations went underway, two agreement deals have been negotiated between the UK and the EU.

The first agreement was rejected by British MPs in a historic defeat of 202 agree votes to 432 reject votes. The House of Commons vote crushed the deal struck back in November at the first hurdle[5]. The defeat came as a huge blow to Theresa May who had spent the last two years drafting the agreement with the EU. Subsequently, May’s government faced a non-confidence vote in the House of Commons. The government won the vote and May pledged to reopen talks with the EU to find an alternative strategy[6].

More recently, with 17 days left for Brexit, on the 12th of March, Theresa May’s new EU withdrawal agreement was put to vote and been rejected for a second time by 149 votes compared to 230 votes on the first agreement in January[7].

After Brexit, the UK-EU relationship will be different, and the UK will have few options under EU rules that it can opt.

The WTO Agreement

The trade relationship between the two blocs could be governed by the World Trade Organisation (WTO) rules.

What exactly WTO and how would that work for the EU and the UK?

WTO is a global intergovernmental organisation which regulates trades between countries around the world. After the UK would leave in a no deal scenario, it would become a “third country” meaning that it will have no registered trade deal with the bloc and will revert to dealing under WTO terms[8].

The current EU WTO tariffs will automatically apply to the UK meaning that tariffs will apply to goods and products exported between the UK and any EU member. The imposition of tariffs on trade between the two blocs will mean that the EU would increase costs on both UK importers and exporters. At the same time, the UK will do the same on EU importers and exporters. At a sectorial level, the impacts would be significantly visible as usual EU tariff rate is as low as 1.5% but would increase to 10% on cars and car parts. The impact would also be huge on agriculture as EU tariffs and quotas remain high, resulting in food price inflation on British consumers[9].

The Canadian Plus Deal

A Canadian Plus Deal could be made between the blocs which allows the UK to agree international trade deals but would create border controls and restrict the UK as well as it will not solve the Irish border problem[10].

"Replicating the Canada-EU deal would represent such a restriction on our mutual market access that it would benefit neither of our economies", Theresa May's  Florence speech.

The three-basket approach

UK government might also seek a “three-basket approach” to any future regulatory trading relationship with the EU.

This agreement is based on three factors[11]:

  1. Full alignment: This factor would mean that by default, the UK would opt into EU laws. Sectors affected are believed to be the motor industry and rules on data sharing, VAT and aviation safety rules.

  2. Mutual recognition: This factor allows the UK to diverge from EU rules. Financial services are one side affected by this factor.

  3. Outer tier: This factor is same as factor number 2. Agriculture is a sector that is considered to fall under this factor.

A no-deal Brexit

A no-deal Brexit was rejected by MPs on the 12thof March in a night full of high drama in the Commons. The vote came in as 312 to 308 reject of a no-deal Brexit under any circumstance[12].

Extension of Article 50

As a result, Theresa May has now asked for an extension of Article 50 until June 30th. This Brexit delay sought is only “conditional” as the President of the European Council has said on the MPs voting to support the deal struck between the UK and the EU next week[13].

“In the light of the consultations that I have conducted in the past days, I believe a short extension will be possible, but it will be conditional on a positive vote on the withdrawal agreement in the House of Commons,” said the President of the European Council in a press statement.

Leaders in the EU will have to discuss this in their meeting taking place on the 21s tof March. The EU is concerned about the effects of a short-term extension on the functioning of the EU.

A leaked diplomatic note explains that any extension would be a “binary” choice between a short extension to late May or a longer one until the end of the year. The note adds that a middle length extension would cost the EU and that any extensionshould last until either the 29thof May 2019 or a longer one will need an election.

As the EU sees it, this is the only way of protecting the functioning of the Union. Asking for a middle-term extension could prompt a series of questions of political and legal nature.

If the EU does not grant the UK an extension of Article 50 or a revocation, the UK will definitely leave the EU on the 29thof March; with or without a deal.

On a final note, the fate of the United Kingdom is yet to be decided on whether a deal will be approved or not, an extension will be granted or not and the possibility of leaving with a no-deal Brexit. In any case, the highly anticipated exit day will surely be historic.

[1]Kristin Archick, The European Union: Ongoing Challenges and Future Prospects (Congressional Research Service 2018) <https://fas.org/sgp/crs/row/R44249.pdf> accessed 21 March 2019.

[2]'Eight Reasons Leave Won the Referendum' (BBC News, 2016) <https://www.bbc.co.uk/news/uk-politics-eu-referendum-36574526> accessed 21 March 2019.

[3]Alex Hunt and Brian Wheeler, 'Brexit: All You Need to Know' (BBC News, 2019) <https://www.bbc.co.uk/news/uk-politics-32810887> accessed 21 March 2019.

[4]Kristin Archick, The European Union: Ongoing Challenges and Future Prospects(Congressional Research Service 2018) <https://fas.org/sgp/crs/row/R44249.pdf> accessed 21 March 2019.

[5]'PM’S Brexit Deal Rejected by Huge Margin' (BBC News, 2019) <https://www.bbc.co.uk/news/uk-politics-46885828> accessed 21 March 2019.

[6]Charlie Cooper, 'Historic Defeat for Theresa May On Brexit Vote' (POLITICO, 2019) <https://www.politico.eu/article/brexit-deal-rejected-by-432-votes-to-202-2/> accessed 21 March 2019.

[7]'MPs Reject May’s EU Withdrawal Deal Again' (BBC News, 2019) <https://www.bbc.co.uk/news/uk-politics-47547887> accessed 21 March 2019.

[8]Tony Blair, 'Brexit: The Realities Of “Taking Back Control”' (Institute for Global Change 2018) <https://institute.global/news/brexit-realities-taking-back-control> accessed 21 March 2019.

[9]Dr. Swati Dhingra, 'Factsheet: No Deal - The WTO Option - UK In A Changing Europe' (UK in a changing Europe, 2017) <https://ukandeu.ac.uk/explainers/no-deal-the-wto-option/> accessed 21 March 2019.

[10]Tom Batchelor, 'Britain Will Be Forced to Accept a Canada-Style Trade Deal With EU, Leaked Document Reveals' (The Independent, 2017) <https://www.independent.co.uk/news/uk/politics/brexit-latest-uk-trade-deal-eu-canda-style-leaked-document-michel-barnier-a8059701.html> accessed 21 March 2019.

[11]Tony Blair, 'Brexit: The Realities Of “Taking Back Control”' (Institute for Global Change 2018) <https://institute.global/news/brexit-realities-taking-back-control> accessed 21 March 2019.

[12]'MPs Vote to Reject No-Deal Brexit' (BBC News, 2019) <https://www.bbc.co.uk/news/uk-politics-47562995> accessed 21 March 2019.

[13]Bianca Britton and Eliza MacIntosh, 'May Asks EU for Brexit Delay and Blames Lawmakers for Blocking Deal' (CNN, 2019) <https://edition.cnn.com/2019/03/20/uk/article-50-brexit-extension-theresa-may-intl-gbr/index.html> accessed 21 March 2019.

[14]Jon Stone, 'EU Says It Will Only Allow Brexit Extension If MPs Vote for Theresa May's Deal Next Week' (The Independent, 2019) <https://www.independent.co.uk/news/uk/politics/brexit-extension-delay-eu-mp-vote-deal-theresa-may-article-50-donald-tusk-a8832091.html> accessed 21 March 2019.

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