Ten days to Brexit: hard exit or soft?

Omar Shaban

Pal-Think for Strategic Studies

European and British negotiators continue their charged negotiations day and night in an attempt to reach an agreement for Britain's exit from the European Union before 31 December 2020 — the final, non-extendable deadline. Will Britain leave with a deal or without one? So far there are no indications of reaching an agreement.

A historical sketch:-

Britain became a member of the European Union in January 1973 after several failed attempts to join — it applied for membership twice, in 1963 and 1967, applications that met rejection above all from the late French president Charles de Gaulle, who justified it by saying that a great many features of the British economy were incompatible with Europe, and that Britain harboured great hostility to any European project. Britain's membership was never complete as it was for most of the EU's 27 states: Britain kept its own currency (the pound sterling) and was not covered by the unified European visa (Schengen) applied in the EU member states. Some studies suggest Britain benefited greatly from its membership while keeping its own currency and its own entry visa. Even so, Britain's accession to the European Union was never a matter of consensus among the British people: the British people were polled several times (1975, 1977, and 1980) on remaining or leaving, with a slim majority voting to remain. Indeed several British governments fell over the question of how far to integrate with, or stand apart from, the European Union — until the last referendum came in June 2016, in which 52% of the British people voted to leave the European Union, in what was called Brexit.

A hard exit or a soft one?

Since the British people's vote to leave, and the fall of former prime minister David Cameron's government in its wake, negotiations began between the two sides for a safe (soft) exit, to avoid shocks in the event of leaving without a deal. The negotiation period was extended several times owing to the failure to reach an exit with agreement. In September 2018 the two sides agreed to set the end of December of this year, 2020, as the outside limit for reaching and signing an exit agreement — otherwise it would be a hard exit (without a deal). In the meantime the United Kingdom remains effectively a member of the European Union but without voting rights. Exit without a deal (hard) or with a deal (soft) are informal terms coined by the media to describe the future relationship between the United Kingdom and the European Union after withdrawal. A hard exit (no deal) means leaving without any agreement between the two sides, with the movement of trade and persons subjected to the rules of the World Trade Organization as with other countries — and Britain deprived of the varied services provided by the European Union's many bodies, such as the European Aviation Safety Agency and others. A soft exit (deal) means Britain leaving while certain special agreements remain that allow the movement of goods and persons with the European Union, as is the case with Switzerland and Norway.

The costs and repercussions of withdrawal without a deal:-

According to many studies, the repercussions of leaving the European Union will be bad for the British economy in particular and for society in general. A publication of the British Treasury (November 2018) estimated the British economy would be 3.9% worse off over the coming 15 years compared with remaining in the European Union. Other official reports estimated that Brexit would curb the migration of talent from the states of the European Economic Area to the United Kingdom — posing challenges to British higher education and academic research. Britain must also pay the exit bill — the “divorce” — the value of Britain's accumulated unpaid contribution to the EU budget, estimated at 39 billion pounds sterling. The British minister charged with the exit file declared that the British government would not pay this bill in the event of leaving without a deal. The repercussions of a no-deal British exit are many — some immediate, some taking time to appear. Some of the principal repercussions can be summarised as follows:

• Rising costs of trade between Britain and the European Union, since Britain and the EU would trade on World Trade Organization terms. For example, the EU would impose customs duties on goods coming from Britain at a rate of 2.8% for non-agricultural products, 10% on cars, and 35% on dairy products — reducing these sectors' competitive advantage in the European market. The fisheries question is among the most prominent points in the trade talks: without a deal, British fish exports to the EU could be badly harmed by tariffs.
• Because of the mismatch in food and medicine standards between the EU and Britain, these goods could face problems obstructing their entry and sale in European markets. There would likewise be long queues of lorries at the borders, with additional restrictions limiting the freedom and ease of movement of persons and goods.
• It would be difficult for British companies to continue operating in the EU area, where they would be considered foreign. Thousands of British employees have therefore begun arranging to leave their jobs in EU states and return to Britain. Dozens of huge companies, factories, and banks have likewise begun leaving Britain for EU states — especially France and Germany — to secure their presence in a wider market and enjoy the advantages the EU provides. For example, Citigroup began moving European assets from London for fear British banks would be unable to sell their services in Europe; the group plans to move assets worth a trillion pounds sterling and seven thousand jobs. The German carmaker BMW likewise expressed its fear that a chaotic exit from the EU (a no-deal exit) would halt work at its plant in Oxford.
• Tens of thousands of Britons living and working in EU states must decide either to stay and apply for citizenship or residency, or to return to Britain. About a million French citizens live in Britain, and about half a million Britons live in France. Some of them may have to queue at the doors of the citizenship offices in Paris and London to submit citizenship applications. Thousands of mixed families must decide either to continue living in the husband's or wife's country or to depart for the other.

True, it is a very complex and interlocking process; it will require allocating enormous budgets to carry out and will take many years to complete — but it is being conducted in a civilised atmosphere and with a high level of responsibility.