Bruegel’s Brexit alternative has some appeal, but for the UK it could still be no third way and the highway

At the end of August, Bruegel, the influential economics think tank in Brussels, outlined a vision for a future EU-UK relationship called the “Continental Partnership” (CP). In essence the CP would entail a Norway-like arrangement for the UK, but with two key differences: instead of having no forum to express its views on draft EU legislation, the UK (and other countries signing up to the CP) would be consulted and could propose amendments in a “CP council” although the decision would still be made by the EU alone (through the current legislative process involving both the Council and the European Parliament). The other suggested difference is that non-EU CP countries could opt out from the full freedom of movement for EU citizens but would have to grant some – yet to be defined but narrower – temporary labour mobility. The UK would thus remain part of the core single market and also be bound by the EU Courts on single market matters, while paying into the EU budget. But it would not be party to the more political aspects of the EU, such as a common asylum and migration policy, cooperation in the areas of justice and home affairs, the Schengen system and a common force for the protection of its external borders.

So what should one make of this proposal in the aftermath of Theresa May’s recent party conference speech in Birmingham and the firm reactions to it by EU-27?

Let’s recall that the authors of the Bruegel paper are motivated by the desire to find an arrangement which would secure the UK’s continued participation in Europe’s “deeply integrated market” as they put it and which they feel must be preserved, while accommodating the British concern about uncontrolled immigration. Contrary to the line peddled by many EU leaders, the (political) economists at Bruegel stress that free movement of EU citizens is not a necessary ingredient of the single market – a certain degree of labour mobility, by contrast, is. They rightly emphasise that in times when Europe faces new external threats and risks being marginalised by new, rising powers, it should be the shared interest on both sides of the Channel to stick together as closely as possible. Finally, they see a Continental Partnership starting out with the UK as the core of a potentially bigger “outer ring” of European countries, sharing the benefits of economic integration but not part of the EU’s monetary union or its more political aspects. The CP, they believe, could thus become a magnet for countries such as Norway and Switzerland or even Ukraine and Turkey, both strategically important neighbours of the EU who are unlikely to become full members any time soon. (On this point I differ: Whilst the UK is a highly developed economy, the latter two countries won’t be, for years to come, ready to join a single market without restrictions to the flow of goods and services; they will require specific, tailored arrangements instead.)

But back to the question of Bruegel’s blueprint and whether it could be a viable prospect for both the UK and the EU.

While the underlying concept of this Partnership may appear sensible, pragmatic and forward-looking, Bruegel leaves a number of important questions “for political debate.” – e.g. to what extent the UK would still have its trade policy conducted by the EU, or whether EU competition and state aid rules would still be applied to the UK by the Commission. Moreover, the UK government would have to endorse a deal which would mean the country becomes a rule-taker instead of rule-maker for the many regulations that underpin the single market, something British politicians appear to refuse And even though it would be limited to the legislation pertaining to the single market (a very broad range, in effect, from common standards for machines to harmonised consumer protection rules), the UK would still have to abide by the judgments of the European courts – a perennial bogeyman in Britain today.

The EU, for its part, might look upon the two concessions to Britain as setting a dangerous precedent, and likely to excite others such as the Netherlands and Denmark, who would be minded to also “repatriate” some competences from Brussels.

Bruegel openly advocates a model for a two-speed Europe, portraying it as preferable to a one-speed EU-27, convulsed with infighting and power struggles. The concept seems to make sense – but the Member States appear unwilling to condone it and – for the time being at least – are determined to keep the EU-27 together as one bloc.

Their hardline stance might also be explained by the wish of (most) remaining Member States to keep the UK inside the tent. For that option to remain on the table, the choice for Britain must be between a “hard” Brexit or no Brexit (as expressed by EU Council President Donald Tusk). Either you leave and face all the consequences, or you stay and enjoy all the benefits; there won’t be a third option because it could let the genie out of the bottle.

So is it a polite “au revoir” to the “Continental Partnership” and time the UK prepared for life as just an ordinary “third country”? Who knows. – after all we are still in the early chapters of what is likely to be a long read. For now, however, there isn’t much cause for optimism for anyone preferring a third way.

 

* Michael Tscherny is a partner at gplus europe.