It’s Europe That Really Wins the Brexit Brinkmanship

(Bloomberg) -- Early in the morning of June 24, 2016, as the U.K. awoke to the news that a majority had voted to quit the European Union, leading “Leave” campaigner Nigel Farage hailed what he said would “go down in history as our independence day.”

Two-and-a-half years later, the terms of the exit deal struck with the EU make clear that Britain will remain tethered to the bloc for the foreseeable future. And rather than a knock-out blow to undermine the European project, Brexit has only served to galvanize the EU and its 27 remaining governments. The British side couldn’t even unite its top ministers.

After winning backing from her cabinet on Wednesday following a marathon meeting, Prime Minister Theresa May was confronted with the resignation of her Brexit secretary the morning after. She’s now fighting to keep her job against an emboldened opposition and a group of rebels within her own ranks.

To even have come this far represents some sort of victory over May’s many detractors, but set against the outcome for the EU it shows just how Britain spectacularly misread Europe.

It’s Europe That Really Wins the Brexit Brinkmanship

By convincing the U.K. to remain in a customs union, chief Brexit negotiator Michel Barnier ensures that Britain must play by the EU’s rules. As some prominent opponents to May’s agreement put it, Britain will be a vassal state of Brussels, let alone taking back control.

In his resignation statement on Thursday, Brexit Secretary Dominic Raab said he couldn’t support the terms of the agreement and reconcile it with the promises made to the country. He had only been in the job since July after his predecessor quit. 

“The way Brexit was sold was always a myth, it was never even remotely credible,” said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington. “The EU has brought Brexiteers back to reality.”

In the febrile aftermath of the referendum, the establishment that had campaigned to remain was stunned by the electorate’s defiance. Prime Minister David Cameron announced his intention to resign that same day, while Donald Trump predicted “a little Brexit” in the upcoming U.S. presidential election.

As we now know, “Leave” campaigners were arguably even more caught out, since they had no plan for what to do next. But having been on the right side of “the will of the people,” the opportunities seemed endless.

It’s Europe That Really Wins the Brexit Brinkmanship

Farage, whose anti-immigration U.K. Independence Party was part of the first wave of populist backlashes in Europe, predicted that the Netherlands, Denmark, Sweden and Austria were set to follow Britain out the door.

Boris Johnson, the “Leave” totem who was appointed foreign secretary in May’s cabinet only to resign over the way the talks were going, said the British people had “spoken up for democracy, in Britain and across Europe.”

Only the rest of Europe wanted nothing to do with it. Not one of the 27 has copied the U.K.’s playbook and made for the EU exit. As the talks dragged on, and the U.K. turned inexorably inward, polls in the rest of the bloc showed support for the EU rising. Indeed, a Eurobarometer survey published in May found support for the bloc was at its highest in 35 years.

British attempts to pick off individual states during the negotiations failed, with governments rallying behind Barnier, sometimes to the surprise of the EU as well as Britain. The constant drip feed of bad news for the U.K. economy served as a warning to copycats.

Hotel California

That’s not to say all is rosy in the EU. While Brexit was no rallying cry, it helped flush out a lot of the disillusionment over the European integration project. Italy is straining at the bloc’s budget constraints.

Nationalist governments in Poland and Hungary have clashed with Brussels over its perceived meddling in domestic judicial and environmental affairs even while the EU effectively bankrolls their economies. Sweden is in political limbo after a far-right, EU-skeptic party placed third in September elections. But even for the problem children, the question is more one of reforming the EU than leaving it.

“In principle, of course it would be possible to leave the EU, if you would be ready to face all of the implications and consequences,” said Josef Janning, a senior policy fellow and head of the European Council on Foreign Relations office in Berlin. But in practice a “web of hundreds of agreements” makes member states highly interdependent, he said.

“That’s the Hotel California element of it,” said Janning. “It isn’t just joining a club, it is a whole mode of organizing your economic and political life, in particular when it comes to anything that has to do with crossing the border.”

It’s Europe That Really Wins the Brexit Brinkmanship

Nowhere has the intractable nature of an exit been more apparent than in the contortions over avoiding the reintroduction of a policed border between the U.K. territory of Northern Ireland and the Republic of Ireland, an EU member. The issue of the border barely featured in the Brexit campaign, but came to dominate the negotiations.

May was caught between appeasing the Northern Irish party she depended on for a parliamentary majority and Barnier’s insistence on a contingency plan for when the transition period after Britain’s departure ends. In the event, it looks like there will be no way for the U.K. to unilaterally ditch that backstop arrangement, according to the deal on the table.

“When you have a withdrawal agreement with a built-in transition period and it’s not clear what comes after, you have another cliff edge,” said Kirkegaard. “So you are going to go through all of this again, except this time the U.K. will be out of the EU so the rest of the EU will care even less.”

A core issue at the heart of the U.K.’s negotiating difficulties has been the irreconcilable nature of its demands: preferential access to the EU market of some 450 million consumers without accepting the immigration implied by the bloc’s four freedoms: movement of people, capital, goods and services. Political leaders from Berlin to Dublin dismissed London’s stance as “cherry-picking.”

It’s Europe That Really Wins the Brexit Brinkmanship

The U.K. ended up paying for the disengagement by successive British governments. It mistook Chancellor Angela Merkel as an ally who would side with London over Brussels, failing to appreciate that Germany and many member states regard the bloc as the guarantor of European security as well as prosperity. As Janning put it, “the EU to us is not foreign.”

A watershed moment that hobbled the U.K. negotiating team from the outset was the resignation of Ivan Rogers, the U.K. envoy to the EU and one of few British officials with an understanding of how the bloc works. He quit citing “muddled thinking” in London.

That left an unprepared British team with contradictory instructions to face a European civil service with long experience of detailed negotiations in crisis situations. Trade deals are the EU’s bread and butter, and one area along with antitrust issues where the bloc punches its global weight. In trade, size matters, and the U.K. is negotiating with an economic power more than five times greater than itself.

Brexit campaigner Farage’s hopeful proclamation in 2016 was that it “brings down this failed project.” Now he’s left railing against what he called “the worst deal in history.”

©2018 Bloomberg L.P.