The Brexit Europe Should Want

(Bloomberg Opinion) -- The European Union’s leaders never got around to framing a clear strategy to deal with Brexit, but an optimist might say it’s never too late. Let’s suppose they decided to try. What would a strictly self-interested plan look like?

It should be easy to rule out the least-good outcome. That would be a no-deal Brexit. Granted, if the U.K. crashed out of the union without a new trade agreement, the pain would be very much worse for Britain than for the EU. It’s also true that the resulting disruption would send a clear message to other countries about the foolishness of following the Brexit example.

Yet parts of Europe would also suffer serious disruption. Few of Europe’s economies are in a strong position to cope with a new economic shock. Regarding the need to discourage others, the U.K.’s political collapse has, you might think, already sounded a sufficiently clear warning. Bear in mind, as well, that exit would be vastly more difficult and therefore even less appealing for countries that, unlike Britain, have adopted the euro. The disciplinary benefits of a cliff-edge Brexit are overkill. They come at a potentially high cost, and aren’t needed.

A no-deal Brexit has another big drawback for Europe. The EU’s negotiators have insisted up to now that avoiding a new hard border between Ireland and Northern Ireland is essential. Hence the notorious backstop, which has blocked the negotiated withdrawal agreement in Britain’s parliament. But according to the EU’s own thinking, no deal would require a hard border, and the EU (unlike Britain) would presumably insist on putting one back. The only alternative would be customs-technology innovation of the kind the U.K. suggested in the first place, which the EU’s negotiators have brusquely dismissed as “magical thinking.”

Supposing the EU agreed that no deal was no good, would it ideally want to see Brexit cancelled altogether? Further indulging my fantasy of a competent self-interested EU, I think not. Britain has always been a bad fit in ambitious conceptions of Europe’s ever-closer union. True, many in Europe share Britain’s instinctive suspicion of a centralizing EU, moving by degrees toward a United States of Europe, and they’ve seen the U.K. as an ally in holding this back. But the euro changed this calculation radically.

The EU needs further integration to make a success of the single currency. The bare minimum is an EU fiscal instrument powerful enough to make a difference. In the end, the monetary union is likely to demand a comparably far-reaching fiscal union as well.

Further policy integration would widen Europe’s democratic deficit — the failure to hold EU policy-making adequately accountable to EU citizens. The euro means policy integration can’t be rolled back, so political integration will eventually need to roll forward. This is just as the early champions of the single currency intended, and in the end they will get their way. Otherwise, the euro experiment and with it the broader EU project will fail. Britain can’t be a good partner in this necessary further evolution of the EU.

A self-interested EU wouldn’t want the U.K. to crash out, but it also wouldn’t want Brexit simply cancelled. It would want the closest possible economic relationship with Britain, and the warmest possible partnership in international relations, defense and security matters — but it would want Britain to have no say the union’s future political integration.

The pre-referendum negotiations with Prime Minister David Cameron could have led in this direction. In effect, Britain, outside the euro area, was already less than a full member of the EU. This status could have been more thoroughly defined, and recognized as an alternative form of membership — not as an anomaly to be remedied at some later date and denied to other countries. In due course, formal associate membership could have been offered to others (such as Switzerland and Turkey), solving a range of other problems.

The main feature of the associate-member approach would be a symmetric arrangement of rights and responsibilities. For instance, an associate member would expect votes on the areas of EU integration in which it had agreed to participate, and would be subject to EU law in those areas. The jurisdiction of the European Court of Justice would extend to associate members in those areas, but only those areas, and associate members would be represented on the court when it adjudicated those cases.

Associate members might be required to accept constraints on their ability to regulate immigration from the rest of the EU, without having to assent to “free movement.” That could be deemed part of the EU’s political project, inessential for economic integration and free trade in goods, services and capital. Citizens of full members of the EU would be EU citizens, as now; citizens of associate members would not be. Full members of the EU would adopt the euro and together design the further political integration it demands; associate members would not. And so on.

At this point you might think, that sounds pretty attractive — which is a problem, because other countries would want the same deal. Only in the EU would the prospective popularity of an idea count as a drawback. Why deny countries, including potential new members, a deal that serves everybody’s interests? The EU gets a wider and less discontented membership for its economic sphere, plus enhanced capacity to achieve ever closer political union for those that want it. What’s not to like?

Up to now, the EU has accepted a so-called multi-speed Europe, tolerating an array of exceptions and special cases, but always reluctantly or as a temporary expedient. The underlying philosophy hasn’t deviated from eventual convergence on ever-closer union. The facts might say otherwise, but the doctrine insists that you’re either in or out. There’s no half way. That’s why, when Cameron tried to renegotiate Britain’s terms of membership for the umpteenth time, the EU’s leaders decided they’d had enough. They drew the line, but without thinking through the consequences.

A self-interested EU would offer Britain continued membership on associate terms, and design that status as a permanent dispensation likely to appeal to others. Britain would apply EU law on economic matters, but participate in making that law. It would not regain full control of its borders — but it would regain some. The EU would dethrone free movement as a purportedly indivisible freedom, keep Britain in the single market and let it vote on the rules.

In case you’re wondering, none of this is going to happen. So far as Brexit is concerned, seemingly uncrossable red lines on both sides would need to be crossed — but that’s the least of it. The details would take years to thrash out, and it would have to be an EU-wide negotiation leading to a new constitutional treaty, requiring in turn unanimous assent. The prize would be huge — not least for the EU itself. But the union today lacks the institutional and political capacity for back-to-basics thinking and fundamental constitutional reform.

So yes, in principle, Europe could offer Britain the prospect of associate membership on new terms. Yes, Britain could respond by revoking Article 50, so that negotiations on the new status were conducted with zero disruption and for however long they took. And yes, consensus might form both within Britain and the EU as a whole that a new kind of membership combining maximum economic integration with more limited political and constitutional integration could work.

It’s hard to say how the Brexit mess will end, but safe to predict it won’t be like this. The outcome I’ve described is the one Europe should want, and one it could strive for, given the will — but Europe’s leaders aren’t even asking the question.

To contact the editor responsible for this story: Max Berley at mberley@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Clive Crook is a Bloomberg Opinion columnist and writes editorials on economics, finance and politics. He was chief Washington commentator for the Financial Times, a correspondent and editor for the Economist and a senior editor at the Atlantic.

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