Opinion

Britain faces a triple contradiction

If Boris Johnson can negotiate agreements that are better than the EU system, it would be a serious challenge for the 27

By: Date: January 30, 2020 Topic: European Macroeconomics & Governance

Le Monde logo

This opinion piece was originally published in Le Monde.

This piece forms part of Bruegel’s ongoing work in EU3D, a research project that examines differentiation in the European political order. The EU3D project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 822419.

 

He was believed to be an entertainer, he turned out to be a political strategist. Thanks to a crushing victory last December, where he managed to remove the Labour party from its working-class strongholds, Boris Johnson ‘got Brexit done’. The United Kingdom will, however, remain subject to EU rules until the end of the year. On 1st January 2021, its privileged access to the EU internal market will end in the absence of a new partnership agreement which is yet to be negotiated or an extension of the transition which Johnson does not even want to hear the word of.

For the past three years, the various options available to London have repeatedly been assessed, notably the so-called Canadian option (a free trade agreement for goods, a partial opening of service markets) and the Norwegian option (a full participation in the European market, in exchange for regulatory alignment and a contribution to the budget). But Sajid Javid, the Chancellor of the Exchequer, has recently put it bluntly: the UK will have its own trade and regulatory policies. It will not be a follower.

A new conflict with the 27 is thus around the corner. On January 8, in London, Ursula von der Leyen warned that the condition for a free trade agreement without tariffs or quotas is broad regulatory alignment. The more the UK diverges from the EU, the more its market access will be restricted.

The British position is unsurprising: it would be paradoxical, after having decided to “take back control”, as the Brexiteers proclaimed, not to make use of this freedom. But Johnson faces a triple contradiction.

The first is geopolitical. If London could have hoped to negotiate a host of free trade agreements in the pre-2016 multilateral world, it will be much more difficult in the new Trumpian transactional world. Today, the most important thing is strength. A market of 66 million inhabitants (against 450 for the 27 EU countries) does not translate to much muscle.

The second contradiction is economic. The British economy’s best asset is not the production of goods, for which the UK records a heavy deficit vis-à-vis the Union, but services, for which it posts a surplus. The exchange of services requires a harmonised regulatory framework. A combination of free trade in goods and segmentation of the service markets would cost to British consulting or financial engineering firms far more than to German machine tool builders.

The third contradiction is social. By raising the minimum wage 6% and by declaring a preference for skills, Johnson rejected deregulation of the labour market. To do otherwise would be to compromise his political victories. And it is hard to imagine the UK undercutting the EU’s environmental or health standards, for which the preferences of British consumers are very close to those of their continental neighbours.

London’s room for manoeuvre is narrow. Johnson can bet on regulatory competition in finance, artificial intelligence or biotech, and rely on subsidies to reach his industrial policy goals. But this will not be without cost. The greater the divergence with the 27, the longer and more difficult it will be to negotiate an agreement and the more restrictive the EU will be in terms of access to its market.

This does not necessarily put Johnson in a corner. The weakness of the EU lies in its cumbersome procedures and the inertia of its legislation, which results from multiple compromises between competing interests. Take the EU budget, it has priorities that have little to do with those of the EU, which gets perpetuated from one cycle to the next because everyone is fighting to preserve its cherished spending items. Or consider the inability of the European Commission to present a financing plan commensurate to its climate ambitions. Both examples illustrate a sad logic of entitlement.

So where can Johnson go now? Certainly not “Singapore on Thames”, the illusion of a free-market paradise for which there is no political basis. He can, however, build an agile regulatory system able to foster innovation and steer it more efficiently than his counterparts in Brussels. Johnson could create a system that, far from contradicting that of the EU, is actually ahead of it.

If he succeeds, it would present a serious challenge for the 27. But it will also ultimately be beneficial because what the EU needs is not a Britain that drifts away, or isolates itself and fails. The EU needs a partner whose competition wakes up the continent. It’s a challenge that forces the EU to tackle the problem of differentiated integration head-on, instead of cementing a sometimes artificial unity built around the defence of the status quo.

The bet is far from won, both on the British and on the EU side. Most likely, Brexit will end up just another chapter in the story of Europe’s decline. But let’s not stop dreaming. Since the EU and the UK are now condemned to cohabit, let try to us do it productively. An intelligent partner and competitor is the best thing that can happen to the continent.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read about event More on this topic
 

Upcoming Event

May
26
12:00

Conference on the Future of Europe: Vehicle for reform versus forum for reflection?

At this policy dialogue organised by the research project EU3D, panellists will discuss different options and what they may entail while revisiting the debates on the future of Europe at national and EU-level that have been conducted thus far and their patterns, including preliminary findings on national parliamentary debates.

Speakers: Sergio Fabbrini, John Erik Fossum, Magdalena Góra, Vivien Schmidt, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Past Event

Past Event

Covid-19 and the geopolitics of the Balkans

How have China, Russia, Turkey and others stepped up their activities in the Balkans at a time when the prospect of enlargement is diminished?

Speakers: Michael Leigh, Pierre Mirel, Aleksandra Tomanić, Justyna Szczudlik and Catherine Wendt Topic: Global Economics & Governance Date: April 29, 2021
Read article More on this topic
 

Opinion

The ECB needs political guidance on secondary objectives

While EU Treaties clearly stipulate that the ECB “shall support the general objectives of the European Union”, it is not appropriate to simply stand by, wishing that the ECB will use its discretionary power to act on them. Political institutions of the EU should prioritise the secondary goals to legitimise the ECB’s action.

By: Pervenche Béres, Grégory Claeys, Nik de Boer, Panicos O. Demetriades, Sebastian Diessner, Stanislas Jourdan, Jens van ‘t Klooster and Vivien Schmidt Topic: European Macroeconomics & Governance Date: April 22, 2021
Read article More by this author
 

Opinion

We need more bias in artificial intelligence

What makes one vision more desirable than another is not its neutrality, but whether it can better serve one’s goals in the context of where those goals are being pursued.

By: Mario Mariniello Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: April 21, 2021
Read article
 

Blog Post

Urgent reform of the EU resolution framework is needed

In this blog, the authors argue that two aspects of the European resolution framework are particularly in need of reform – the bail-in regime and the resolution mechanism for cross-border banks – and propose a reform of both.

By: Mathias Dewatripont, Lucrezia Reichlin and André Sapir Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: April 16, 2021
Read article More on this topic More by this author
 

Opinion

More Europe or less Europe?

Europe is often a ship with multiple captains. The boat moves forward in calm seas, but when the slightest wind puts it off course, it is not easy to steer that boat. It is not so much a question of more Europe rather than less, but of achieving ‘one Europe’. A ‘more-or-less Europe’ is an invitation to go nowhere.

By: Maria Demertzis Topic: European Macroeconomics & Governance Date: April 14, 2021
Read article More on this topic More by this author
 

Opinion

Letter: ‘Strategic autonomy’ is now an EU catchphrase

Strategic autonomy should not be an illusionary search for independence, but rather a strategic management of interdependence, based on diversification of supply chains.

By: Simone Tagliapietra Topic: European Macroeconomics & Governance Date: March 24, 2021
Read article More on this topic More by this author
 

Blog Post

New EU insolvency rules could underpin business rescue in the COVID-19 aftermath

Corporate bankruptcies are set to rise in the context of COVID-19. EU countries should speed up adoption of recent insolvency reforms and, in addition, offer consistent treatment to restructuring finance.

By: Alexander Lehmann Topic: Finance & Financial Regulation Date: March 24, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

Keeping momentum on good governance

Transparency, human rights and good governance: a conversation with Katalin Cseh MEP

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: March 17, 2021
Read article More on this topic More by this author
 

Blog Post

Financial services: The Brexit dust begins to settle

The phase of greatest Brexit-related uncertainty for the European financial sector ended on 1 January. Although too early to discern more than the broadest contours of the future landscape, it is increasingly apparent that London will be less dominant than before.

By: Nicolas Véron Topic: Finance & Financial Regulation Date: March 11, 2021
Read article More on this topic More by this author
 

Blog Post

The double irony of the new UK-EU trade relationship

The Trade and Cooperation Agreement signed between the European Union and the United Kingdom goes against six decades of UK efforts to avoid being economically disadvantaged in Europe. Tracking the evolution of the EU-UK relationship over the last 60 years can help in understanding this.

By: André Sapir Topic: European Macroeconomics & Governance Date: January 12, 2021
Read article Download PDF More by this author
 

Parliamentary Testimony

European Parliament

New life for an old framework: redesigning the European Union's expenditure and golden fiscal rules

Testimony before the European Parliament on the subject of EU fiscal policies.

By: Zsolt Darvas Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: November 17, 2020
Load more posts