After Britain voted last June to leave the European Union, Prime Minister Theresa May triggered Article 50, the Lisbon Treaty’s departure mechanism, on March 29.
If divorce terms are not settled by March 29, 2019, Britain will exit without a deal. European Council president Donald Tusk says “there is no time to lose”.
Despite her election setback, May will oversee Britain’s strategy once formal talks begin on Monday. The negotiations will be tough and tortuous, and probably nasty. May must, however, stick to her guns, as the deal she secures will define Britain’s future.
Many Europeans, given the huge problems caused by open borders, the euro zone and the democratic deficit, now openly praise Brexit. Some in Europe will undoubtedly want to punish Britain for its audacity, and to deter others. The EU, traditionally intolerant of dissent, will play hardball in the talks.
Former Greek finance minister Yanis Varoufakis has described how, after Greece’s anti-austerity Syriza government won a huge electoral mandate in 2015, the EU ruthlessly clamped down. Its central bank cut off emergency liquidity for private banks, bringing Greece to its knees. Syriza was forced to capitulate to EU demands, causing untold misery to ordinary Greeks and an unemployment rate of 23.5 per cent.
The EU cannot bully the UK in the same way, but Varoufakis nonetheless warns Britain against the EU’s negotiating net. He predicts a campaign of attrition by the EU, exploiting Britain’s political divisions. Although Varoufakis advises May “to avoid negotiation at all costs”, she must talk to the EU in good faith, while making clear Britain will not cave in to threats.
The European Commission claims Britain may have to pay as much as £85 billion (HK$845 billion) to leave the union. This is a bluff. The Institute of Chartered Accountants of England and Wales has found that, taking into account rebates owed to the UK and the realisation of Britain’s investment in the European Investment Bank, the Brexit charge could be about £15 billion. Even this could not be legally enforced.
The EU, however, is desperate for British cash, and for good reason. It is hugely expensive, and wasteful.
Apart from its more than 32,000 civil servants, the EU is now expanding its fledgling foreign service, with offices around the world. The patience of European taxpayers will snap at some point but, in the meantime, the UK must not be held to ransom.
Moreover, Britain is not, as some suggest, dependent on EU trade. British exports to the EU have been falling since the euro zone was formed and now only account for 12 per cent of Britain’s economy.
The EU states, however, need to sell their products to Britain, and this will not change. The EU had a £60 billion trade surplus with the UK in 2015, and if it imposed tariffs it would be shooting itself in the foot.
The terror attacks in London and Manchester have highlighted the urgent need for the UK to secure its borders and control who enters, impossible under Europe’s open borders policy. Mass EU immigration has also placed huge strains on housing, social services and schools, and gravely affected the quality of life of ordinary Britons. If Brussels tries to prevent May from reducing immigration to manageable levels, she must be prepared to walk away. She should, however, seek the greatest possible access to the single market, through a new free-trade agreement.
If the EU tries intimidation, May must point out that they rely on British markets, intelligence and armed forces, and that everyone will benefit from an amicable separation. Britain, on course to be Europe’s largest economy by 2030, has always looked outwards, and its future lies in exploiting emerging markets.
At least 14 countries, including Australia, Brazil, China and India, want free-trade agreements with the UK. Once EU red tape is cut, the financial sector could save £12 billion a year, and it will be possible to export to millions more customers from the rising economies.
Although the prospect of breaking away from a dysfunctional political union is exhilarating, the price of separation must still be right. If the EU insists on intolerable terms, May must call it quits. The EU should understand that, if pushed, Britain has the determination and strength to go it alone.
Grenville Cross SC was a backer of Vote Leave