Brexit: So close, yet so far…

Despite current difficulties, the UK and the EU will, in the long run, forge closer economic and security ties, predicts Charles Grant.

Five years have passed since the British voted 52-48 to leave the EU. Since then the CER has published 174 papers – long and short – on Brexit. Looking back at them, we have a pretty good track record of getting things right.

From the start we foresaw a Canada-style free trade agreement (FTA) rather than a closer economic relationship. And we were always optimistic that deals would be done, on both the Withdrawal Agreement and the subsequent Trade and Cooperation Agreement (TCA).

In 2017, I wrote an article setting out ten predictions for the Brexit negotiations. All of them turned out to be correct, with the partial exception of what I wrote about the Irish border.

I was right that it would prove the most difficult issue to resolve – but I failed to foresee the border in the Irish Sea that the Northern Ireland Protocol has created.

I could not imagine that a Conservative government would require the unionists to swallow such unpleasant medicine.

But what we perhaps underestimated is how speedily – after the new treaties were signed – the UK-EU relationship would turn sour.

There is currently a serious lack of trust on both sides. Many of the difficulties stem from the UK government’s cavalier attitude to the treaties it has agreed with the EU.

But though the UK chose a hard model of Brexit – a Canada-style FTA – the EU ensured the details of the agreement have made Brexit more uncomfortable for the British than it needed to be.

This was partly due to the understandable view, held strongly in France, that Brexit had to be seen to hurt, pour décourager les autres.

But above all, the EU’s hard line was driven by the strong desire to protect the integrity of its single market against the possibility of unfair British competition.

Though this stance was not unreasonable per se, the EU may have been tougher than it needed to be. A Brexit-weakened UK economy is not really such a great threat to the EU.

In any case, if the UK does provide some strong competition in certain sectors, then that is all well and good. The EU should welcome a competitive neighbour on its doorstep, spurring it to improve its own performance.

In the short term, the priority must be to reach an agreement on how to apply the Northern Ireland Protocol.

The UK needs to show that it is serious about implementing the necessary controls on goods crossing the Irish Sea. The EU needs to interpret that document with the maximum possible flexibility.

Once it is reassured on the protocol, the EU is likely to become more accommodating on a series of other issues, such as financial services and the rules governing electricity interconnectors, where the UK needs the EU’s goodwill.

In the long run we can hope for a closer UK-EU relationship. Future governments – whether Conservative or Labour – are unlikely to follow the extreme position of the current one, which unabashedly prioritises sovereignty over the economic benefits of retaining ties.

Future governments are more likely to listen to the voice of business, and to consider the case for a close partnership with the EU on foreign and defence policy, so as to maximise Western unity in the face of hostile threats.

It remains my view that in the long term the UK and the EU will forge a closer economic and security relationship, because it is in both their interests to do so.

Charles Grant is director of the Centre for European Reform.