When Theresa May arrived in Florence last week for a major speech on Brexit, she intended to turn the page on messy divorce talks and look ahead to a new phase addressing the future UK-EU trade relationship. To show her seriousness, May struck a conciliatory tone, indicating her support for a two-year transition period and suggesting a compromise on the vexing citizens’ rights issue that would allow EU nationals’ rights to be enforced in British courts. Those moves were denounced as a “Brexit betrayal” by hardline Leavers, but they were clearly intended as an olive branch to Brussels to start negotiations toward a favorable trade deal.
Alas for May, the EU’s response is in, and it leaves something to be desired. The message? Thanks for the speech, but concede some more and then we’ll talk trade. Bloomberg:
European Union chief Brexit negotiator Michel Barnier said it could take months before the divorce talks can move on to trade, in a blow to Theresa May’s hopes for faster progress.
The fourth round of talks, while more positive in tone, failed to deliver the breakthrough that’s needed for negotiations to start on the trade deal that the U.K. desperately wants. Barnier said Britain still hasn’t set out what it thinks the country owes the bloc when it leaves and there’s still no agreement on the role of the European Court of Justice — one of the most contentious issues for both sides.
“It’s positive that Theresa May’s speech made it possible to unblock the situation to some extent and give a new dynamic,” Barnier told a news conference with Brexit Secretary David Davis in Brussels on Thursday. “But we are far from the stage, and it will take weeks or maybe even months, where we will be able to say yes there has been sufficient progress on the principles for the orderly withdrawal.”
Brussels is evidently stalling for time to extract further concessions on two major issues: namely, the amount of the Brexit bill that London owes Brussels and the jurisdiction of European courts over their UK-based nationals. It seems clearer than ever, however, that Brussels has the leverage here and London does not. Hobbled by her electoral shellacking in June and by dissension within her cabinet, May has little credibility with her European interlocutors. And they seem intent on pressing home their advantage.
And it’s not just the Europeans who are complicating May’s Brexit stance these days. On Thursday, a top British business confederation and trade union came together in an unusual joint statement urging May to end “15 months of human poker” and unequivocally guarantee the rights of the 4 million EU nationals residing in the UK. That will be music to the ears of many in Brussels, who reject the compromise May offered at Florence and want to see continued jurisdiction for the European Court of Justice after Brexit.
Opposite pressures, meanwhile, are coming from within May’s own government. Foreign Secretary Boris Johnson continues to lead the charge for a hard Brexit, publicly contradicting May’s position on the two-year transition period and urging a much more dramatic economic break with Brussels. Such prominent displays of disunion from Brexiteers are unlikely to steer May toward their position, but they do undermine her authority.
All of these countervailing pressures would be challenging enough for the beleaguered Prime Minister. To complicate matters further, she may have just been pulled into a major trade dispute with the United States—one that has ominous implications for British trade after Brexit.
The dispute revolves around Bombardier, a Canadian aircraft maker with major operations in Northern Ireland, which was recently threatened with a 219% tariff by the Trump Commerce Department after a complaint from Boeing. That measure could put over 4,000 British citizens out of work, and it has triggered a swift backlash in the UK. As Simon Tilford argues in The Guardian, the controversy also weakens London’s arguments that a post-Brexit UK will enjoy a privileged trade relationship with Washington:
The US has never resorted to such heavy-handed tactics with Airbus and the EU as it now has with Canada’s Bombardier, placing thousands of jobs at the firm’s Northern Ireland factory in doubt. And for good reason: the US would have too much to lose from such action. The EU is a big market with a powerful trade authority, and US producers are too dependent on the EU market for the US to risk retaliation. This case gives us a real taste of how the UK will be treated in negotiations over a US-UK trade deal post-Brexit, and how vulnerable the country will be.
As Tilford points out, the problem is fundamentally one of economic leverage: the UK will have less of it after Brexit, and larger markets like the U.S. will not fear the consequences of retaliation as they would with the EU market as a whole. This is an inconvenient truth for hardliners like Johnson, who have argued that a clean break from Europe’s commercial constraints would empower the UK to make strong bilateral deals—especially with the United States—that make up for the losses from leaving the single market.
The Bombardier saga is just one example of how the UK could be left more vulnerable to trade threats after Brexit. And it helps to explain why May is so eager to clarify the details of a future EU trade deal: ideally, one that would allow extensive access to the single market without the burdens that it imposes. But it’s difficult to see how that circle can be squared. Brussels will not allow the UK to leave the single market without serious consequences, and it is has been slow to take May up on her calls for a bespoke trade arrangement.
The way things are going, then, Brexit promises neither “splendid isolation” (as ideologues like Johnson may hope for) nor a “best of both worlds” scenario (as pragmatists like May are seeking). Rather, the future portends a messy compromise that preserves some EU jurisdiction where the Leavers resent it, while losing some key economic benefits that the Remainers hope to keep. And as things stand now, the EU is holding all the cards.