Brexit negotiators should consider global impact

Fu Jing is the Deputy Chief of China Daily European Bureau

At midnight on New Year’s Eve 1973, a British flag was raised in front of the headquarters of the Commission of the European Communities in Brussels, marking the start of the United Kingdom’s full membership of the project. That day, British prime minister Edward Heath said membership would bring prosperity to his country.

A year after British voters decided to leave this 28-member and 500 million-citizen bloc, British negotiators walked into the European Union headquarters to begin talks with their Brussels counterparts on the terms of their divorce. This is just the beginning of a technically, judicially and financially complex series of negotiations that aim to end the interdependence formed by many treaties, laws and projects.

With Prime Minister Theresa May setting a Global Britain blueprint, the negotiation teams are scheduled to complete the talks in early 2019. However, it is obvious that London is still unclear on how to pull itself out of this union.

The EU, represented by Michel Barnier as chief negotiator for the 27 member states, has published several position papers, including one on the financial settlement, which is estimated to range from €60bn to €100bn. In its 11-page financial settlement paper the EU has clearly stated that the UK should clear its ties with all the EU institutions and the projects it has committed to as a full member in previous years, including the European Central Bank and European Investment Bank.

The EU has created a complex and sophisticated set of laws, rights and regulations to allow free flow of people, capital, technologies and goods. The dismantling of this system means the talks will be extremely tough, especially given the limited time allowed. Fortunately, both sides have already emphasised that the rights of EU citizens in the UK and Britons in the EU, as well as their families, should be protected. This should mean that the lives of 4.5 million people will face minimal disruption as a result of Brexit.

The EU is determined to ensure the delivery of European projects agreed by the EU’s 28 member states, including the UK, but now to be implemented by the remaining 27 members. Michel Barnier recently hinted that the UK should honour its commitments to the €90bn European Social Fund (to help Europeans develop skills to find work) and the €200bn European Regional Development Fund (to support isolated regions).

The two parties must also reach an agreement on the €315bn Juncker Investment Plan, the almost €80bn Horizon 2020 research programme, and the relocation of the two London-based EU organisations, the European Banking Authority and European Medicines Agency. Brussels has agreed on a ‘phased’ strategy, which means the UK and the EU must sort out their past commitments before discussing their new relationship. London wanted to negotiate a new partnership and divorce at the same time, but this has been firmly rejected by its EU partners.

Brussels now looks determined to ‘punish’ the first-ever member to leave, even as the bloc is in the process of accepting more countries as members. Such hostility is perhaps understandable as the UK has shown the EU the cold shoulder, but an unexpectedly disruptive division is emerging and producing growing uncertainties.

Such adversarial mentalities in the tough negotiations of the scheduled two-year divorce process will easily play into the hands of speculators. Clearly more fluctuations and shocks are on the way if the EU and the UK maintain this kind of hostility toward one another. And such a scenario will surely damage the global economy, which still lacks the proper impetus to grow.

The EU also insists that the talks on ending the UK’s EU membership must be finished before embarking on any negotiations for a new relationship. Amid rising political difficulties, some in UK have started to question whether Brexit should go ahead, although May and her negotiators insist that it will.

Some even envision the EU’s strategy of being super-tough in the negotiations may lead to a ‘no deal’ scenario within the two-year negotiation time allowed by EU treaties. Then the UK would fail to leave and the damage to European integration brought about by the UK referendum could be avoided. Either way, Brexit has already been a hugely damaging consequence of UK democratic politics.

Now the only rational thing to do is to agree on compromises and separate in a friendly way. But quicker re-engagement is of global significance and will bring stability to the changing geopolitical surroundings. The EU has pledged to keep the negotiations extremely transparent, which is politically correct but surely would create long chain of debates. And as shown in the EU’s debt crisis years, too much debate can be misleading at some junctures and even the markets respond irrationally. In a world filled with so many challenges and uncertainties, such risks should be avoided.

Most importantly, Brussels needs to sit down for an amicable conversation with London. It is true that being tough is reasonable, if Brussels wants to warn other members not to follow in the steps of the UK. However, Brussels and London need to consider carefully how to deal with one another for they must live under the same roof, even though they are getting divorced. As a Chinese saying goes, neighbours can relocate but a neighbouring country cannot. The teams should conduct such negotiations behind closed doors, in order to avoid a vicious chain reaction among the media, markets, rating agencies, opinion leaders and the public.

Of course, if the two sides could consider separation and a remarriage at the same time, that could decrease much of the unnecessary side-effects for the rest of the world. Since the 2008-09 financial and debt crisis, which originated in the United States and Europe, the world has experienced repeated shocks and growing uncertainties. It is time for British and EU politicians to show their competence, wisdom and flexibility and limit the shocks and uncertainties of Brexit by talking amicably about what comes next.

Brussels should have enough confidence to let the UK go with the minimum of fuss. The reality is that a smooth transition and a return to as close to normal business is in everyone’s best interest, including the UK’s, the EU’s and the rest of the world.

A recent European Parliament survey found that 57% of Europeans say EU membership is a good thing. This percentage is almost as high as it was in 2007, before the 2008 global financial crisis eroded Europeans’ trust in the integrative machinery. But the Brexit process could again test the trust of Europeans in the EU project. It took eight years for the EU and Canada to finalise a free trade agreement and it is unlikely that London and Brussels can forge a new trade and investment relationship overnight. A vacuum will be damaging and it is the responsibility of politicians on both sides to ensure this does not happen.

The UK should leave the EU in two years’ time as its voters decided, but it makes sense to ensure that as few new barriers are erected between the EU and the UK as possible. In dealing with Brexit and its consequences, pragmatism equals vision, especially when dealing with the lives of ordinary families.

This article was first published in Europe’s World print issue number 35. Read more on the issue and order your copy here.