Post Brexit Era & its Implication on UK’s Economy and Politics

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Abstract

     On June 23, 2016, UK’s citizens, by a margin of 52% to 48%, voted in favor of their country’s exit the 28- member EU after 43 years of membership. Major voter issues included immigration, closed borders and globalization. The vote for Brexit reflected deep changes in society and the cleavage in British politics which ultimately resulted in the reconfiguration of British public opinion. The referendum turnout was the highest ever since the 1992 general election, with more than 30 million people voting. England voted strongly in favor of leaving by 53.4 to 46.6%, as did Wales. Scotland   and   Northern   Ireland, however,   supported   remaining   in   the   Union   by   62 %   and 55.8% respectively. These results shocked the international community and raised questions about UK’s future outside the Western camp.

    After three years of political turmoil, the UK left the EU on January 31, 2020 and it embarked on into a transition period extending to December 2020. Trade talks with the union started in March 2,  2020, in order to refashion the future relationship between the two parties and to elaborate a free trade agreement in favor of UK’s economy in very challenging period of transition.

Introduction

     Since World War II, no developed country has decided to leave a major international institution as the EU. However, the UK did and it left the EU on Friday, January 31, 2020 under a revised divorce agreement deal consisting of a Withdrawal Agreement accompanied by a Political Declaration on future ties with the bloc and its Member States. Both sides face huge challenges concerning the future relationships before the end of the transition period in December 2020. The UK is torn between its desire for independence and sovereignty and the need to retain access to European markets. The negotiations’ timeline is very challenging and if no deal could be reached that would be very costly in terms of economy due to major implications in areas such as agriculture, trade and employment.

Any “hard Brexit” options can be expected to cause a significant loss of growth by elevating UK’s poverty rate to 4.9 % by 2029. However, the political challenges of the withdrawal are just as important as economic ones. By virtue of its EU membership, The UK is party to many treaties about defence and foreign policy. Moreover, the significant role played by the UK in the Middle East would be limited as a result of the withdrawal which narrows UK and EU partnership down and might also have implications on Cyprus and Gibraltar territories being out of British sovereignty.

    In addition to specific repercussions for devolved legislatures with regard to EU regional funding, Brexit has been described by the Scottish First Minister Alex Salmond as “the wrong move and is taking us down the wrong path” (House of Commons Library). Therefore, Scotland witnessed renewed calls for independence and rejoining the EU. So, this study examines the different issues related to UK’s future outside the EU by emphasizing political dimensions such as the diminishment of UK’s leverage in the international arena and the possibility of the Anglosphere’s rebirth as an alternative to UK membership of the EU which Brexiteershave called for after 2016 referendum.

Statement of the Problem

The decision of the UK to break from the EU after long decades of cooperation and interdependence was by all accounts a historic event due to the profound implications and repercussions that the separation between the two entities would entail in the field of economy and politics. Accordingly, we will review a series of different models of possible future relationships between the two parties, asking: what would the UK’s divorce from the EU entail in terms of economy and politics? Will Britain be able to conclude a trade agreement that serves its interests in a very critical transition period? Which economic scenario will be applied in case no deal is achieved?

1-Terminology

• Brexit

    The term Brexit is a combination of ‘Britain’ and ‘exit’. It refers to the withdrawal of the United Kingdom from the European Union. On June 23, 2016, the citizens of the United Kingdom; England, Scotland, Wales and Northern Ireland took part in a historic referendum to express their opinion regarding the question of whether the United Kingdom should remain a member of the EU or it should leave it. This vote commonly referred to as “Brexit”[1].Overseeing negotiationsto leave the EU and establishing the future relationship were entrusted to the Department for Exiting the European Union (DExEU) which was a ministerial department from 14 July 2016 to 31 January 2020. It was charged for[2]:

-Achieving the best possible outcome for the UK’s departure from the EU;

-Building a new ambitious, deep and special future partnership between the UK and the EU;

-Engaging with Parliament, Member States and interested parties at home and abroad to shape a successful exit from the EU.

1-2 European Union (EU)

    The European Union (EU) is an economic and political union of 28 European countries (commonly known as EU28). In 1957, Belgium, France, Italy, Luxembourg, the Netherlands and West Germany signed the Treaty of Rome which led to the establishment of the European Communities (EC)[3], and in 1993, MaastrichtTreaty led to the establishment of the EU introducing the concept of European Citizenship. The Treaty of Lisbon2009was the latest major amendment which includes provisions concerning the withdrawalof a Member State.The union comprises six institutions: European Union Council, European Court of Justice, European Central Bank, European Commission, European Court of Auditors, and European Parliament[4].  To facilitate the development of the single market, the EU follows a standardized set of obligatory laws such asfree passage of capital, goods, services, and people.

2-Brexit Background

The UK applied to join the EEC in 1961, but this application was vetoed twice in the 1960s by former French President Charles De Gaulle who argued that a number of aspects of Britain’s economy had made it incompatible with Europeaneconomies^[5].  In January 1972, the PM Edward Heath signed the Treaty of Accession, which was followed by ratification of European Communities Act by UK Parliament. On January 1973 the UK’s membership was validated in the European Communities[6], and only two years after, Britain witnessed calls for exiting the EU.

2-1 The First National Referendum (1975)

   In 1975, the Labor Party government held the first national referendum on issue of UK continuing in the EEC. At that time, there was political disagreement among the ranks of the Labor Party over the issue between pro and anti-European, and 7 out of 23 cabinet members voted in favor of departure from EEC.  The public referendum was held on June 5, 1975 and the voters were asked to vote yes or no to the question “Do you think UK should stay in the European Economic Community?” All the regions,With the exception of Shetland Islands and Outer Hebrides, voted with yes with the 67.2% turnout in favor of continuing EEC membership[7].

2-2 The Left Behind & the United Kingdom Independent Party (UKIP)

By the 1990s, Britain witnessed a radical change in class structure. New Labor Party under the leadership of Tony Blair sought to attract the middle class and university educated professionals. However, the party failed to recruit the white working class whose gradually lost faith in both Labor and Conservative Party to represent them[8]. These white working-class voters commonly referred to as “the left behind” would go later on to vote for Brexit.[9]As the referendum date approaches, the left behind were able to form the nucleus of a new political movement especiallywith the arrival of the UKIP that campaigned to reduce migration flows and leaving EU.

 By thetime of the EU referendum, immigration had been at the top of the political agendaand the UKIP became the primary vehicle for public opposition to EU membership, mass immigration^[10]after wining 2014 European Parliament electionswith 4 million votes (13% of the national vote). By 2015, under Nigel Farage leadership, the UKIP had become the most successful party in English politics through its manifesto which claimed that EU membership cost Britain £350 million per week, enough to build a fully-staffed NHS hospital every week, and that voters should reject the possible future flows of migration that could come from states such as Albania, Macedonia, Serbia, and Turkey[11].

2-3 EU Referendum Act 2015 & triggering Article 50

   The UK Parliament passed the European Union Referendum Act 2015 to facilitate the holding of referendum on the continuation of EU membership. It was presented by Phillip Hammond (Secretary of State for Foreign and Commonwealth Affairs) to the House of Commons on May 28, 2015[12]. On June 9, 2015 the act was ratified by the House of Commons, then by the House of Lords on December 14, 2015 and received the Royal Assent on December 17, 2015. Finally, the referendum was held on June 23, 2016 and the nation voted 51.9% to 48.1 in the favor of exiting EU[13].

    Based on 2016 referendum results, the Article 50 TEU, regulating the withdrawal of a Member State from the EU, had only been invoked by former Prime Minister Theresa May on March 29, 2017 and she agreed a deal with the EU concerning the divorce bill.[14]After it was voted down three times, PM May resigned and the deadline of the UK’s departure was extended to October 31, 2019. Her successor PM Boris Johnson negotiated changes to the withdrawal agreement and he was able to get his own deal through Parliament after winning December’s, 12, 2019 general elections with 80% majority the House of Commons. This brought to an end more than three years of political wrangling, unleashed by the 2016 referendum.  Article 50 includes specific measures that should be followed by the seceding country[15]:

• Negotiations would involve the 27 remaining Member States, the Commission and the UK;
• The UK would need to negotiate a withdrawal and post-exit arrangement with the EU within two years, then the negotiation period can be extended only by unanimous agreement among the 27 Members States ;
• The EU treaties continue to apply to the UK until a withdrawal agreement has entered into force or at the end of the transition period.

      The analysis of these procedures leads to the conclusion that the UK will be at the mercy of EU Member States voting to extend the negotiation period. And if it does not reach a new deal during the transition period, this means it falls into the WTO’s Most Favored Nation rules, which represents the worst-case scenario to UK’s economy.

3-The UK –EU Divorce

     The UK formally left the EU on January 31^th, 2020 at 11p.m. witha withdrawal.  As a result of that, it entered a transition period extending up until December, 31, 2020. During this period, the UK will effectively remain in the EU’s customs union and single market, but it will be outside the political institutions and there will be no British members of the European Parliament.

3-1 Withdrawal Agreement Bill

   The UK and EU have reached an agreement at European Council on October 17, 2019. The Agreement set out the arrangements for the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and from the European Atomic Energy Community (EURATOM)[16].The Withdrawal Agreement Bill was passed to the House of Lords on January 22. It was signedby PM Boris Johnson on January 24, 2020, and approved by the European Parliament on January 29. Under the ratified withdrawal agreement, the financial settlement, citizens’ rights and Northern Ireland-Ireland border will be protected whatever the outcome of negotiations on future ties.

3-1-1 Judicial Framework

The Withdrawal Agreement Bill is based on[17]:

• The European Union (Withdrawal) Act and Common Frameworks, 2019.

    The Withdrawal Act contains transitional arrangements concerning the future relations with the EU, and the UK’s commitments and disengagements as shown below:

-Disengagement of UK from the EU budget;

-Decision on the “acquired rights” of British nationals resident in other Member States;

-Preparing for the exit of British members from the European Parliament, the European

Court of Justice, the Economic and Social Committee…;

-Winding down UK military involvement from common security and defence policy missions;

-Establishing new forms of frontier control in Northern Ireland and Gibraltar;

-Disentangling the UK from international treaties signed by the EU.

3-1-2 Political Framework

   The Withdrawal Agreement Bill has a political framework which is related to the Political Declaration and a set of paper policies as follow:

• Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom.

  This declaration establishes the parameters of an ambitious, broad, deep and flexible partnership across trade and economic cooperation, law enforcement and criminal justice, foreign policy, security and defence. The new arrangements ensure that the whole of the United Kingdom will be a single customs territory with control of its independent trade policy. It also ensures the sovereignty of the United Kingdom, the protection of its internal market, and the ending of free movement of people between the Union and the UK. The Political Declaration also allows for additional agreements such as: aviation, civil nuclear and fisheries[18].

• The New Ireland/Northern Ireland Protocol and the Political Declaration on the Future Relationship.

   As the UK’s withdrawal from the EU have important implications for Northern Ireland and Ireland, the UK believes that there are four broad areas to maintain the peace process in Northern Ireland through negotiating an agreement with the EU that respects[19]:

-Upholding the Belfast ‘Good Friday’ Agreement in all its parts;

-Maintaining the Common Travel Area (CTA) and associated rights;

-Avoiding a hard border for the movement of goods;

-Aiming to preserve North-South and East-West cooperation, including energy.

• Foreign Policy, Defence and Development.

    This paper emphasizes the common goal of a safe and secure world that is shared between the UK and EU’s Member States. It also stresses the UK’s intention to remain a committed partner and ally to its friends across the continent because UK and EU citizens face the same threats. The UK and the EU should remain close partners in foreign policy issues, and this could be done through regular dialogue and specific cooperation. This could include cooperation on sanctions listings by sharing information and aligning policy where appropriate[20].

• Security, Law enforcement and Criminal Justice: a future partnership paper.

  This paper outlines the mutual interest of new arrangements that enable both parties to sustain cooperation across a wide range of structures and measures, reflecting the importance of the extensive collaboration that currently exists. These arrangements should be based on a commitment to[21]:

-Building on the strong foundation of existing cooperation against shared threats;

-Cooperating across a range of measures to avoid operational gaps for law enforcement and judicial authorities in the UK and the EU;

-Assist one another when needed, especially in terrorist attack case.

3-1-3 Content & Scope of the Agreement

 The Withdrawal Agreement Bill includes many proposals which cover many areas as follow:

v Investment

    Starting from January 1, 2021, UK service providers and businesses will no longer benefit from EU Treaty Freedoms and will be subject to the national laws of each EEA state.

• Scottish fishing

   The flagship Fisheries Bill which was introduced into Parliament on January 29^th, 2020 included new powers new funding powers enabling the Scottish Government to provide financial support instead of what was funded by the EU’s Maritime and Fisheries Fund.

• Future Immigration System

   Leaving the EU implies checks and restrictions of the number of people who come to the UK from Europe.[22]

• the European Court of Justice (ECJ)

   The Court of Justice of the European Union shall continue to have jurisdiction in any proceedings brought by or against the UK before the end of the transition period[23].

• Access to Networks and Databases

   At the end of the transition period, the UK shall cease to be entitled to access any information system and any database established on the basis of Union law.[24]

• EURATOM

    At the end of the transition period, the UK shall have responsibility for ensuring that special fissile materials covered by the EURATOM Treaty are handled in accordance with relevant and applicable international treaties on nuclear safety and non-proliferation[25].

• Northern Ireland and Ireland

    The UK and Irish government have commitments to maintain the Common Travel Area (CTA) from January 1, 2021. CTA arrangements mean full protection and maintenance of the status quo for all journeys for individuals between the UK and Ireland.[26]

• Law Enforcement and Criminal Justice

   The European Arrest Warrant (EAW) is a mechanism whereby individuals wanted in relation to significant crimes are extradited between EU Member States to face prosecution or to serve a prison sentence. Despite its withdrawal, the UK will continue to share common objectives in this area, in particular the fight against terrorism and international crime[27].

• Foreign Policy and Defence

    The UK will maintain strong alliances with EU Member States, alongside partners beyond Europe, including the US, the Indo-Pacific, the Middle East, and Africa. The UK will also continue to ensure that NATO remains the cornerstone of its defence policies and strategies.[28]

3-2 The Transition Period

3-2-1 Transition Period Timeline

    On February 1, 2020, a transition period came into force under the terms of the exit deal and it is scheduled to December 31, 2020. This period (11months) could be extended to two years if both parties wanted. During it, the UK will continue to follow all of the EU’s rules including free movement[29]. After the end of the transition period, the UK will leave the single market and customs union if, in meanwhile, no new agreement could be realized. The European leaders have repeatedly warning that the timetable is extremely challenging to achieve a comprehensive trade deal in 11 months.

 

Figure N’04: Brexit Timelin

Source: BBC

                                                                           During the transition period, the UK will be treated as a Member State for the purposes of EU international agreements with third countries. As a result, the UKand EEA EFTA States (Norway, Iceland and Liechtenstein) have signed the EEA EFTA Separation Agreement on January 29, 2020 which protects the rights of 17,000 UK nationals and 15,000 EEA EFTA nationals, ensuring that at the end of this period they will be able to enjoy broadly the same rights as they do now[30].

3-2-2 Negotiations’ Priorities

     In its negotiations with the EU, the UK’s government will be acting on behalf of the UK Crown Dependencies and Overseas Territories to see a future relationship based on friendly cooperation between sovereign equals.  The question for the rest of 2020 is whether the UK and the EU can agree a deeper trading relationship on the lines of the free trade agreement, or it will be based simply on the Withdrawal Agreement deal agreed in October 2019.

• UK’s Priorities

   On March 2, 2020, negotiations started with 10 rounds of meetings between the EU and the UK, once every two or three weeks until Jun. Talks will alternate between Brussels and London, with more than 200 officials from both sides. The UK government wants a Comprehensive Free Trade Agreement similar to the one the EU struck with Canadawith extra agreements covering substantially fisheries, internal security and civil nuclear cooperation.[31]

• The Comprehensive Free Trade Agreement (CFTA)

   The Agreementshould be on the lines of the FTAs already agreed by the EU with Canadasupplemented by a range of other international agreements covering, principally, fisheries, law enforcement and judicial cooperation, transport, and energy. All these agreements should have their own appropriate governance arrangements with no role for the Court of Justice as follows[32]:

• Trade Remedies &Technical Barriers to Trade (TBT)

 The UK and the EU should reaffirm their rights and obligations with regard to trade remedies, as set out under the WTO Anti-Dumping Agreement and the WTO TBT Agreement.   It should also provide for streamlined customs arrangements covering all trade in goods, in order to smooth trade between the parties draw on the WTO Trade Facilitation Agreement and the World Customs Organization (WCO).

• Agreement on Fisheries

   The UK is ready to consider an agreement on fisheries that reflects the fact that it will be an independent coastal stateand the associated rights that come with thisat the end of 2020.

• Law Enforcement and Judicial Cooperation

  The UK stands ready to discuss a separate agreement, with its own appropriate governance mechanism, on law enforcement and judicial cooperation, which must not constrain the autonomy of the UK’s legal system in any way.

• Nuclear Cooperation Agreement

   The UK and EURATOM should conclude a Nuclear Cooperation Agreement (NCA) for cooperation on civil nuclear matters and maintaining the parties’ commitments to non-proliferation.

• Participation in Union Programs

     The UK will consider a relationship in line with non-EU Member State participation with different programs, especially PEACE PLUS program as part of the UK’s unwavering commitment to uphold the hard-won peace in Northern Ireland.

• EU’s Priorities

   The main objective outlined in the EU’s negotiating goals is to secure a deal,covering all aspects of future relations:trade,fisheries,foreign policy, security co-operation, and development in a single arbitration panel.The EU is insisting that such “generous” access to a market of 350 million people comes only on condition that the UK operates a “level playingfield”[33].

• Disputed Points

      The two sides have entered the negotiations with opposing positions on a number of critical areas. David Frost, the UK’s chief negotiator, has emphasized Britain’s determination to escape the EU’s regulatory orbit and assert its sovereign rights. However, Michel Barnier, the EU’s chief negotiator, warned of “very, very difficult” areas of disagreement with the UK after the first round of negotiations ended in Brussels including[34]:

o          The Level Playing Field

      Both sides want a free-trade agreement with zero tariffs and zero quotas. The EU says “zero-zero” is only available if the UK follows EU rules on state aid, social and employment law, environmental standards and tax. The UK government states that it will not agree to any alignment with the EU.

o          Fisheries

   Unless a mutually satisfactory agreement is found, the EU could block British fishers from selling their produce into the European market. However, the UK rejects the EU’s “relative stability” principle within the Common Fisheries Policy, which sets national shares based on the patterns of catch of the early 1970s.

o          The European Court of Justice

    If there is a dispute about any interpretation of EU law, only the ECJwould be able to answer the question, yet the UK government favors appropriate governance arrangements.

o          Security

 A non-EU country cannot expect the close-knit arrangement of an EU Member State, and if the UK chose to quit the European Convention on Human Rights, the Crime Fighting Agreement would end immediately. However, the UK is neither seeking to join the EU Police Agency Europol, nor EU Law Enforcement Agency but wants to work with both.

o          Foreign Policy and Defence

   Brussels invites the UK to join its missions and operations on a case-by-case basis, but the UK merely suggests “friendly dialogue and cooperation” not an institutionalized relationship claiming its prominence in terms of intelligence and defence spending.[35]

4-Post-Brexit Repercussions

   Leaving the EU membership will affect the most vital sectors in the UK, especially economic and political sectors.

4-1 Economic Repercussions

    Brexit will heavily impact the UK economy in various areas and at varying degrees. The Economist Intelligence Unit (EIU) of the Economist Magazine (London) published a report that concluded that the decision by the UK to leave the EU would have profound economic consequences for both the UK and the EU.[36]

• Trade

The UK is a service-based economy with the service sector making up almost 80% of its economy. The EU is one of its biggest partners with 36% of total UK service exports going to the EU[37].  The EU is the destina­tion of 44% of UK exports and 60% of total UK trade is covered by EU membership. After Brexit referendum, the UK has dropped from the top to the bottom of the league table in terms of economic growth among the G7, group of major advanced economies[38].

• Foreign Direct Investment(FDI)

    The UK is the leading EU desti­nation for FDI because it combines a relatively flexible labor market with barrier-free access to the EU Single Market (free access to 500 million customers).Outside of the EU, the UK will most likely lose full access to the Single Market, making it a less attractive destina­tion for companies in terms of investment[39].

• Stock markets and currencies

   In the aftermath of the Brexit referendum, both the London Stock Exchange FTSE100 index (5% decline) and US Dow Jones Industrial Average (450 points decline) showed violent fluctuations described as world-wide stock market crash by the experts. More importantly, Brexit vote caused the deterioration of sterling which raises the price of imports, and increase inflation by 1.7 percentage points.[40]

• Agriculture and Fisheries

    Agriculture and fishing make up a very small share of the UK economy just 0.6% respectively, but these industries are crucial to some communities, and could be significantly affected by Brexit. Breaking from the EU would mean departure from the CAP which would entail drastic impacts and would probably reduce farm incomes, and consumers would face higher prices[41].

• Employment

Leaving the EU will negatively affect the GDP which means lower level of employment and loss of 3.3 million jobs EU citizens living permanently in UK, and 1.2 million British citizens living in different EU Member States[42].

• Loans

In May 2010, the European Financial StabilizationMechanism (EFSM) was established, against the backdrop of uncertainty about euro zone public finances, to provide loans to EU Member States in financial crises. It is not used independently, but forms part of a loans package, involving another EU facility (the European Financial Stability Facility) and the IMF. The UK’s budget share is around 12%, while the EFSM’s total lending will peak at €48.5bn, creating a contingent liability of around €6bn[43]. Leaving the EU deprives the UK from bailouts operations through the EFSM unless negotiations process includes it.

4-2 Political Repercussions

   UK’s exit from the EU will bring about political implications on areas such as; Foreign Policies, international standing and security.

4-2-1 Impacts of Brexit on UK’s International Clout

• Foreign Policies

   The UK plays a significant role in the MiddleEast, drawing upon a wide foreign policy experience. Most UK policies in the region are conducted with EU partnership such as sanctions regimes, terrorist designations and arms export control. For example, sanctions against Iran are based both on UNSC and EU level[44]. Although the US is the main actor in the region, it works in conjunction with UK, as it is demonstrated by experiences ranging from the invasion of Iraq and the occupation of Afghanistan as part of NATO’s International Security Assistance Force. UK withdrawal would engender dire consequences on the state’s foreign policy and diminish UK leverage on many international issues[45].

• International Standing

   The UK has a rich history of being a central actor in the international arena; it is a member of the G7, G20, NATO and a permanent member of the UN Security Council. A recent Chatham House report contends that in recent years the UK has three major channels for internationalinfluence: the EU, UK’s economic and security partnerships with the USA, and other key bilateral and institutional relationships[46]. The EU allows the UK to leverage the world’s biggest single market to secure the UK’s economic interests. Leaving the EU would make more permanent the UK’s diminished influence in the global order.

• Security & Defence

    Depending on what type of agreement it could negotiate with the EU, the UK would lose access to the 2004 European Arrest Warrant, the European Criminal Records Information System, the 2005 EU Counter-Terrorism Strategy, the Schengen Information System II and the Prum Decisions relating to fingerprints and DNA databases 2017. Therefore, the UK’s ability to influence the external world is decreasing due to structural and long-term changes at the same time as it faces substantial security challenges from “a more assertive Russia”.[47]

• British Overseas Territories

    The British Overseas Territories (OTs) are a set of largely self-governing territories from the Atlantic to the Pacific, the Antarctic to the Caribbean. These territories are not part of the UK and each has its own constitution, yet the UK has an obligation under article 73 of the United Nations Charter to provide for the wellbeing of their inhabitants.[48] OTs are associated with the EU under Part VI of the TFEU and the detailed rules and procedures of association are set out in the Overseas Association Decision (OAD) which lists over 20 Overseas Countries and Territories associated with the EU[49].

• The British Military Bases on Cyprus (SBAs)

     Under Article 1 of the treaty of establishment of Cyprus Republic in 1960, SBAs, known as the Sovereign Base Areas of Akrotiri and Dhekelia, enjoy a privileged only comparable to the United States’ rights in the Panama Canal and the Guantanamo base in Cuba.[50] When the UK joined the EC in 1974, it specifically exempted these territories from EC jurisdiction, so did Cyprus when joined 40 years later.[51] During the Cold War, Cyprus was a key part of the NATO security mechanism against the Soviet Union and it became part of the US Middle East strategy towards the so-called rogue states and oil supplies[52].  In January 2014, the UK government has offered to return Cyprus about half of the territories that have nothing to do with military operations. The border between the bases and Cypriot territory will constitute an external border of the EU; consequently, post Brexit arrangements required to revise the status of this area.

• Gibraltar/Spain

Gibraltar is self-governing territory in all matters except foreign policy and defence. It is strategically important, standing only 12 miles from the north coast of Africa, including a UK military base, a port and airstrip[53]. Its population about 32,000, voted by 96% to remain in the EU, in the 2016 referendum. Although the UK’s administration of the territory for more than 300 years, Spain claims Gibraltar as sovereign territory and recently, the EU gave Madrid the power to exclude the British overseas territory from any trade deal struck with Brussels.[54]Consequently, in case of no deal between the UK and EU, no agreement may be applied to the Gibraltar without the approval of Spain, which gives the latter an effective veto over this territory which witnesses the movement of 12.000 workers every day.[55]

4-2-2 Impacts of Brexit on UK’s Devolved Legislatures

   The three devolved legislature; Scotland, Wales and Northern Ireland are directly affected by UK’s departure from the EU in varying degrees.

• Scotland

UK withdrawal may lead to separatist tendency at the level of Scotland especially when we know that 61% Scots think that an independent Scotland should be a member of the EU. Scotland’s future relationship with the EU has formed a key component of the debate ahead of the independence referendum.The Scottish Government taking the view that Scotland would negotiate its membership of the EU from a position as part of the UK. Pro Unionists have emphasized that a vote for independence would bring uncertainty both in terms of[56]:

• whether an independent Scotland would be an automatic member of the EU or would have to reapply;
• What the terms of that membership would be, with issues such as the UK’s opt-out from the Schengen free travel area and the Euro, and how these would apply to Scotland.
• Wales

   Wales could be heavily affected by the UK exit because it has access to considerable funding opportunities from the EU. For instance, Wales currently receives around 1.9 billion £ from EU Structural Funds for Cohesion Policy, and 350 billion £ from the CAP support to farmers, in addition to 340 £ million for its rural development plan[57].

• Northern Ireland

   Northern Ireland is the only region of the UK to share a land border with another EU Member State, and UK withdrawal would mean that an external border of the EU would run through the island of Ireland. The latter joined the EC in January 1973 and this common membership facilitated the development of improved relations to resolve the conflict in Northern Ireland. As a result, Brexit might cause the emergence of a significant strain inUK-Ireland relations following the withdrawal, with possible implications for Anglo-Irish co-operation in dealing with cross-border crime and terrorist activity[58].

5-Alternatives to EU Membership: Scenarios & Implications

   There are many options for the UK to compensate its withdrawal from the EU, but each option presents a set of challenges. So, can the UK conclude an appropriate trade formula in the light of a very short transition period, or will it end without agreement?

5-1 Reached Deal Case

• Canada Model (CETA)

 On October, 30, 2016, the Comprehensive Economic and Trade Agreement were signed between the EU and Canada. It included the removal of customs duties, ending restrictions on access to public contracts. Opening up the services market, preventing illegal copying of EU innovations and keeping restrictions on sensitive agricultural products such as poultry, eggs, beef and cheese[59].

• The Norway Model ( EEA )

    Norway model offers full access to the single market including services. Moreover, under EEC agreement, UK would retain control over trade, customs, VAT regime and foreign policy, in addition to the possibility of establishment of supplementary agreements related to justice and Home affairs policies.[60]

• The Switzerland Model

   Switzerland is part of EFTA and Schengen agreement, but it is outside the EU Customs Union, so it has limited access to the single market. This option is problematic for the UK because it would be part of the free movement of goods and persons, but not of services.[61]

5-2 No deal Case

• World Trade Organization model (WTO)

The WTO agreements are legal texts covering a wide range of activities suchas: agriculture, textiles, banking, industrial standards… These agreements are based on the principles of Most Favored Nation (MFN), and National Treatment. If no alternative agreement is reached within the specified time, UK would automatically fall into the WTO regime. As such, UK would enjoy access to the EU as other members of WTO, but it would it would raise practical issues with regard to the UK-Ireland border[62]. The UK’s strategy for the Irish border stresses no tariffs on Irish goods going to Northern Ireland, but high tariffsfor products entering Great Britain. Consequently, this differential treatment of trade may not comply with WTO laws.

• The Anglosphere

   The Anglosphere is defined by James C Bennett[63] as an English-speaking countries such as the US, Canada, Australia, New Zealand, India, Ireland, the Caribbean and the Pacific islands which are characterized by English language, Common Law, individualism, democracy, and a strong civil society[64]. Its aim is to establish deeper ties in trade, defence, free movement of peoples, and scientific cooperation and to protect the English-speaking nations that enjoy common values from external threats and internal fantasies[65]. Following the Brexit referendum, a number of Commonwealth countries, including Australia, India and New Zealand, have expressed interest in trade talks. However, most of the proponents of the Anglosphere are divided into two categories: those who favor ‘Crown countries’ that comprise of Canada, Australia, New Zealand and the UK (CANZUK) and those who favor a new Anglo-American alliance re-asserting its global dominance[66].

If we analyze the cost-benefit of all previous scenarios, we can say that the most beneficial ones among them are: the Norway model and the Canada model. They enable Britain to access to the single market without trade barriers, in addition to the possibility of establishment of supplementary agreements related to varying areas.Nevertheless, the remaining options raise many problems, for instance, the Swiss scenario excludes the free movement of services whereas 80% of the UK’s economy is based on service sector.The WHO scenario, which is the most anticipated one, would end the strong economic ties between the UK and the EU.

Finally, although the Anglosphere community shared heritage and traditional ties which might replace the European Union in terms of trade and security cooperation, but when it comes to national interests and balance of powers, the data changes and take a different turn, as the former British Prime Minister Palmerston stated in front of the House of Commons on March 1, 1848: “We have no eternal allies and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow” (Oxford Essential Quotations, 4 Ed.). 

Conclusion

   British exit from the EU will inevitably entail large economic and political costs. It will reduce the UK’s standing in the world and its clout in the international arena. Moreover, UK’s exit from the EU threatens the European ideal and puts to question the supranational democracy. None of the previous alternative scenarios presents itself as more advantageous compared to EU membership especially in case of no deal. Therefore, the economic and political impact would be much more severe and highly.

  Many critics of Brexit argue that negotiations over future ties risk being much more complicated and harder to resolve in 11 months, however, negotiations with the union usually take years as was the case of Canada. Failure to secure a trade deal which is the most anticipated scenario will negatively affect trade relations between the UK and the EU.  As a result, some researchers perceive Brexit as a risky adventure for the UK that may result in its isolation and weakening. On the other hand, others perceive it as beneficial to the Anglosphere relationship. It may realize a British free-trade deal with Australia, Canada and New Zealand which also risks the contradiction of national interests. However, the issueremains open for further analysis and interpretations and only the upcoming negotiations will provide us with a clearer vision.

Glossary

• Acquired/Vested Rights

   The withdrawal agreement is likely to cover many individual rights. But if there are areas not covered by a withdrawal agreement, or if the UK leaves without an agreement, would British citizens and businesses in Europe – and European citizens and businesses in the UK – be able to rely on any ‘acquired rights’, either under EU law or general international law.

• Cherry Picking

   A UK’s approach by which the country is trying to retain all the benefits of European Union membership without the obligations, including payments to the EU budget, accepting jurisdiction of the European Court of Justice and accepting the free of movement of people.

• Disorderly Brexit

   A term used by the Bank of England to describe what could have happened if the UK left the EU with no deal. The Bank warned that food prices could rise and the economy could be founder into recession.

• Divorce Bill

     The UK agrees to pay money to the EU as part of a Brexit deal. It was based on UK’s share of EU budgets up to 2020.The Office for Budget Responsibility (OBR) estimates that the bill is now around £30bn. Some of that money has been paid as part of the UK’s normal membership contributions already.

• Hard Brexit

    A hard Brexitor Clean break Brexit means that the existing ties between the UK and the EU were retained. Therefore, the UK would give up membership of the EU’s single market and its customs union, instead setting up its own trade deals and rules. Outside of the EU, the UK would no longer be subject to ECJ jurisdiction, EU social and employment policies and theoretically only firms exporting to the EU would need to comply with EU regulation.

• Level Playing Field

   A set of rules that EU countries need to follow when it comes to areas such as: workers’ rights, state aid and competition policy… to ensure that no EU country has an unfair advantage over another. They are enforced by the European Commission and the European Court of Justice. However, Mr. Johnson wants to have the option to diverge from all these rules in the future.

• Soft Brexit

   It refers to leaving the EU but staying as closely aligned to it as possible, which could mean keeping the UK in the single market or the customs union or both. It could involve the maintenance of free movement of people.

List of Abbreviations and Acronyms

Abbreviations and Acronyms	Full form
UK	United Kingdom
EU	European Union
PM	Prime Minister
EC	European Communities (the EEC, ECSC and Euratom)
EEA	European Economic Area
EEC	European Economic Community
EFTA	European Free Trade Association
CTA	Common Trade Area
Euratom	European Atomic Energy Community
NATO	North Atlantic Treaty Organization
DExEU	Department for Exiting the European Union
OBR	Office for Budget Responsibility
EIU	Economist Intelligence Unit
CAP	Common Agricultural Policy
CXT	Common ExternalTariff
NTB	Non-Tariff Barrier
CTF	Customs and Trade Facilitation
EFSM	European Financial Stabilization Mechanism
FDI	Foreign Direct Investment
TEU	Treaty on European Union
TTIP	Transatlantic Trade and Investment Partnership
TRIPS	Agreement on Trade-Related Aspects of Intellectual Property Rights
MFN	Most Favored Nation
NCA	Nuclear Cooperation Agreement
OSCE	Organization for Security and Co-operation in Europe
WTO	World Trade Organization
WCO	World Customs Organization
OECD	Organization for Economic Co-operation and Development
OAD	Overseas Association Decision
GDP	Goss Domestic Product
EAW	European Arrest Warrant
CANZUK	Canada, Australia, New Zealand and the UK
OTs	British Overseas Territories

Sources and References

1-Sources

-The European Union (Withdrawal) Act and Common Frameworks, 26 June 2019 to 25 September 2019.

-Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, 19 October 2019.

-Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom, 19 October 2019.

-The New Ireland/Northern Ireland Protocol and the Political Declaration on the Future Relationship, 18 October 2019.

-The Future Relationship between the UK and the EU, Written statement to Parliament, Published, 3 February 2020

-Foreign Policy, Defence and Development, a Future Partnership Paper.

-Security, Law enforcement and Criminal Justice: a future partnership paper.

-House of Commons Library, Leaving the EU, Research Paper 13/42, 1 July 2013.

-House of Commons, Foreign Affairs Committee, Global Britain and the British Overseas Territories: Resetting the relationship, Fifteenth Report of Session 2017–19, 13 February 2019.

-House of Lords, Brexit: Overseas Territories, 13 September 2017. ww.parliament.uk/lords

-Prime Minister, the Future Relationship between the United Kingdom and the European Union, Crown copyright, 2018.

2-References

• E-Books

-BrigadierHarrison, Andrew, Brexit and Anglo-Australian Defense Policy: Back to the future?Indo-PacificPapers, Commonwealth of Australia, 2016.http://www.defence.gov.au

– Bowers, Paul et al,  Brexit: some Legal and Constitutional Issues and Alternatives to EU membership, UK: House of Commons Library, Briefing paper, Number 07214, 28 July 2016.

-Gardiner, Walt and Shields, Dennis A., Brexit – Implications of the UK’s Decision to Leave the European Union, Economy Report,  Office of Regulatory Policy Agricultural, July 5, 2016.

-Gremades, Miguel Tell, and Novak, Petr, Brexit and the European Union: general institutional and legal considerations, Study for AFCO committee, European Parliament, January 2017.

-Joseph Rountree Foundation, the Impact of Brexit on Poverty in the UK,UK: Cambridge Econometrics, September, 2018, 16. www.neweconomicthinking.org

-Ries, Charles P. et al, After Brexit ;Alternate forms of Brexit and their Implications for the United Kingdom, the European Union and the United states, RAND Europe Corporation, 2017. www.rand.org/t/RR2200

-Tetlow, Gemma, Stojanovic, Alex, Understanding the Economic Impact of Brexit, UK: Institute for Government, October 2018.instituteforgovernment.org.uk

-Wellings, Ben, English Nationalism, Brexit and the Anglosphere Wider Still and Wider, Manchester University Press May 2019.

• Articles

-Goodwin, Matthew J., “Brexit: Causes & Consequences”, Recent JEF Activity • Analysis on Rising Global Risk, Japan SPOTLIGHT • November / December 2017.

-Haider, et al, “Brexit: A Review of Impact on Future of United Kingdom outside the European Union”,International Journal of Modern Research in Management, (IMR-IJMRM) Volume 1, Issue 1 (May – June 2017).

-László, Andor, “the Economic and Social Consequences of Brexit” · York, Festival of Ideas, IMK Senior Research Fellow, June 16th 2016.

-Mycock, Andrew, and Welling, Ben, “the UK after Brexit can and will the Anglosphere replace the EU”?Foundation Great Debate Paper No. 19/02 2019.

-Stergiou, Andreas, “the Exceptional Case of the British Military Bases on Cyprus”, Middle Eastern Studies, Vol. 51, No. 2, February 2015.

• Websites

– Begg, Jain and Mushövel, Fabian, the Economic impact of Brexit: Jobs, Growth and the Public Finances, European Institute, London School of Economics. http://www.lse.ac.uk

-Brexit: UK to decide on Gibraltar-EU travel deal, https://www.bbc.co.uk

-European Movement International, the Consequences of British Exit from the European Union, www.europeanmovement.eu

-Future EU-UK Partnership: Question and Answers on the negotiating directives, https://ec.europa.eu/commission

-Poptcheva, Eva-Maria, Article 50 TEU: Withdrawal of a Member State from the EU, European Parliament Research Service EPRS, February 2016 https://www.europarl.europa.eu

-UK government: https://www.gov.uk/government

-World Trade Organization: https://www.wto.org

[1]Matthew J. Goodwin, “Brexit: Causes & Consequences,”Recent JEF Activity, SPOTLIGHT,Japan, November/ December, 2017, 59.

[2] https://www.gov.uk/government

[3] Syed ZaidiHaider  et al, “Brexit: a Review of Impact on Future of United Kingdom outside the European Union”,International Journal of Modern Research in Management, Volume 1, Issue 1 May – June 2017, 16-17  https://www.researchgate.net

[4] I bid.,18.

[5]Miguel Tell Gremades, Petr Novak, Brexit and the European Union: general institutional and legal considerations, Study for AFCO committee, European Parliament, January, 2017, 5.

[6]Haider  et al, op.cit., 14.

[7] Miguel Tell Gremades, Petr Novak, op.cit., 7.

[8]Matthew J. Goodwin, op.cit., 60.

[9]Ibid.,62.

[10]Haider et al, op.cit., 15.

[11] Miguel Tell Gremades, Petr Novak, op.cit., 5-6.

[12]Miguel Tell Gremades, Petr Novak, op.cit.,8.

[13]Walt Gardiner and Dennis A. Shields, BREXIT – Implication of the UK’s Decision to Leave the European Union, Economic Report,  Office of Regulatory Policy, July 5, 2016,1.

[14]Department for Exiting the European Union, https://www.gov.uk/government.

[15]Eva-Maria Poptcheva, Article 50 TEU :Withdrawal of a Member State from the EU, European Parliament Research Service EPRS, February 2016, 2.

[16] Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, 19 October 2019, Art. 1.

[17]The European Union (Withdrawal) Act and Common Frameworks, from June 26, 2019 to September 25, 2019.

[18]Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom on October 19, 2019.

[19]The New Ireland/Northern Ireland Protocol and the Political Declaration on the Future Relationship on October18, 2019.

[20]Foreign Policy, Defence and Development: a Future Partnership Paper.

[21]Security, Law enforcement and Criminal Justice: a future partnership paper.

[22] Agreement on the withdrawal of the United Kingdom, op.cit., Art., 14.

[23]Ibid.,Art., 86.

[24] Agreement on the withdrawal of the United Kingdom, op.cit., Art.,8.

[25] Ibid., Art., 80

[26]Position Paper by the United Kingdom. https://www.gov.uk/government

[27]Security, Law enforcement and Criminal Justice: a future partnership paper. https://www.gov.uk/government

[28] Foreign Policy, Defence and Development, a Future Partnership Paper. https://www.gov.uk/government

[29]Department for Exiting the European Union, op.cit.

[30] https://www.gov.uk/government

[31]The Future Relationship between the UK and the EU, Written statement to Parliament, Published 3 February 2020, 4.

[32]The Future Relationship between the UK and the EU, op-cit., 6-7.

[33]Future EU-UK Partnership: Question and Answers on the Negotiating Directives, https://ec.europa.eu/commission

[34]Future EU-UK Partnership: Question and Answers on the Negotiating Directives, op-cit.

[35]Brexit: what are the key flashpoints as EU-UK trade talks begin? ttps://www.theguardian.com/politics/2020

[36]Walt Gardiner and Dennis A. Shields,op.cit., 3.

[37] Gemma Tetlow, Alex Stojanovic, Understanding the Economic Impact of Brexit, Institute for Government,October 2018, 12. instituteforgovernment.org.uk.

[38]European Movement International, the Consequences of British Exit from the European Union, 2. www.europeanmovement.eu

[39]Joseph Rountree Foundation, the Impact of Brexit on Poverty in the UK, UK:Cambridge Econometrics, ,September, 2018), 16. www.neweconomicthinking.org

[40]LászlóAndor, the Economic and Social Consequence of Brexit, IMK Senior Research Fellow, June 16th 2016, 5.

[41] Joseph Rountree Foundation, op.cit., 21.

[42] Iain Begg and Fabian Mushövel, the Economic impact of Brexit: Jobs, Growth and the Public Finances, London: European Institute, London School of Economics, 3.

[43] House of Commons Library, Leaving the EU, Research Paper 13/42, July 2013, 39.

[44]House of Commons Library, op.cit.,81-82.

[45]Ibid.,83.

[46] European Movement International, op.cit., 9.

[47] Prime Minister, the Future Relationship between the United Kingdom and the European Union, Crown copyright, 2018, www.gov.uk/government/publications55-56.

[48]House of Commons, Foreign Affairs Committee, Global Britain and the British Overseas Territories: Resetting the relationship, Fifteenth Report of Session 2017–19, 13 February 2019, 3.

[49] House of Lords, Brexit: Overseas Territories, 13 September 2017, 2.  www.parliament.uk/lords

[50]AndreasStergiou, the Exceptional Case of the British Military Bases on Cyprus, Middle Eastern Studies, Vol. 51, No. 2, February 2015, 285.   http://dx.doi.org

[51] Charles P. Ries et al, op.cit., 15.

[52]AndreaStergiou, op.cit., 289.

[53]Brexit: UK to decide on Gibraltar-EU travel deal, https://www.bbc.co.uk

[54] Charles P. Ries et al, op.cit.,77.

[55]Charles P. Ries et al, op.cit., 79.

[56] Ibid.,16.

[57]Charles P. Ries et al, op.cit., 94.

[58]House of Commons Library, op.cit., 97- 98.

[59]Ibid., 33-34.

[60] Paul Bowers et al, op.cit. 27-28.

[61]Miguel Tell Gremades, PetrNovak,op.cit., 30-31.

[62]https://www.wto.org

[63]US businessman, journalist and Anglosphere theorist.

[64]Paul Bowers et al, op.cit., 33.

[65]Brigadier Andrew Harrison, Brexit and Anglo-Australian Defense Policy: Back to the future? Indo-PacificPapers, Commonwealth of Australia, 2016, 18.  http://www.defence.gov.au

[66] Andrew Mycock, Ben Wellings, the UK after Brexit can and will the Anglosphere Replace the EU? Foundation Great Debate Paper No. 19/02 2019, 9-10.