Britain and the European Union have begun their historic march toward separation, a process that will reshape Europe and reverberate around the world.
British Prime Minister Theresa May fired the Brexit starting gun on Wednesday, formally invoking the EU exit mechanism and launching a two-year period to negotiate the terms of the breakup. Ms. May told Parliament that leaving the EU offered Britain an opportunity to fashion the country’s future – economically, politically and culturally.
“I want this United Kingdom to emerge from this period of change stronger, fairer, more united and more outward-looking than ever before,” she said. “I want us to be a truly global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too.”
For Ms. May, once Britain is unshackled from the EU, it will be free to negotiate its own trade deals and develop into a trading power that can draw on its ties in Europe, North America and Asia. She believes this leverage, along with the country’s status as a nuclear power and its position on the UN Security Council, will give Britain a bold new direction. It’s an ambitious agenda but it has already run up against the realities of negotiating with a much larger counterpart, the EU, which has the upper hand in the talks and is desperate to protect its own interests.
Ms. May is also facing some shrewd negotiators and the unbending terms of German Chancellor Angela Merkel, who refuses to make Britain’s transition easy.
There have been some vague threats from Ms. May, including suggestions that if Britain doesn’t get a good deal with the EU, the U.K. will become a low-tax, low-regulation haven and lure businesses away from Europe. And on Wednesday, Ms. May said security would be threatened if both sides failed to strike a deal, a not-so-subtle reference to the terrorist attack in London last week that killed five people and injured 50 others.
“Europe’s security is more fragile today than at any time since the end of the Cold War. Weakening our co-operation for the prosperity and protection of our citizens would be a costly mistake,” she said.
And at home, the U.K. is far from united. The Scottish government has been a fierce opponent of Brexit and it is pushing to hold a referendum on independence within two years. There’s trouble in Northern Ireland as well where the government has collapsed just as fears grow that Brexit will lead to a return of a hard border with Ireland, damaging both economies. Wales is leery of Brexit too and the British economy is showing signs of softening.
The EU has also poured cold water on Ms. May’s plans to use the two-year timetable to negotiate a separation agreement and a comprehensive trade deal. Ms. May has been adamant for months that Britain would sign a trade deal with the EU as part of the exit negotiations, seeing it as a way to protect the country’s primary trade route, particularly in financial services.
There have been concerns in London that once Britain is outside the EU, banks and other financial institutions will lose so-called passport privileges which allow them to register in London and offer services across the EU. Several banks have already said they will move thousands of staff if those privileges are lost.
There has already been one financial casualty linked to Brexit: The $34-billion merger of the London Stock Exchange and Germany’s Deutsche Boerse died Wednesday amid opposition in the EU that contended the merged entity simply couldn’t function properly after Brexit.
EU negotiators said Wednesday that the trade talks will not be done in parallel with the exit talks, and that Britain will have to negotiate its withdrawal first and then discuss a trade deal, potentially adding years to the process. The EU also said it will be seeking payment from Britain for a variety of obligations such as pension contributions. Some experts have pegged that at as much as €60-billion, or $86-billion.
“Only when these questions are cleared up can we subsequently, but hopefully soon, talk about our future relationship,” said Ms. Merkel in a quick shoot-down of Ms. May.
The EU has also warned Britain about negotiating trade deals with other countries as long as it remains a member of the union. The EU negotiates all trade treaties on behalf of the bloc, meaning Britain cannot strike out on its own until after it has left. In a resolution, the European Parliament reiterated that stance, saying that “it would be contrary to union law for the United Kingdom to begin, in advance of its withdrawal, negotiations on possible trade agreements with third countries.”
Guy Verhofstadt, the lead negotiator for the European Parliament, indicated that the overall objective of the talks, from the EU’s perspective, will be to make sure other EU countries understand the benefits of being a member. “Naturally, it will never, outside the union, be better than inside the union,” he said. “That is not a question of revenge, that is a question of logic of the European Union, of the European treaties, of the European project.”
He also shot back at Ms. May’s suggestion that security could suffer if both sides don’t reach a deal. “I think the security of our citizens is far too important to start a trade-off from one to the other. From our point of view, both are absolutely necessary,” he said.
Mr. Verhofstadt did offer one concession to Britain. He said Ms. May could change her mind and withdraw the request to leave. But that would only come after agreement from the other EU members. He also noted that any final deal must be approved by the European Parliament and each of the 27 remaining members, a daunting task known all too well in Canada. The Canada-EU trade deal has taken seven years to finalize and has yet to be ratified.
For all the tough talk, EU officials have worries of their own. Ever since the collapse of the Soviet Union in the 1990s, the EU has been expanding rapidly, adding country after country. Now it confronts the departure of a key member, and one that contributes roughly 12 per cent of its annual budget. And Brexit comes as the EU is still reeling from the financial crisis in Greece, the refugee influx across southern Europe and sluggish economic growth. Part of the challenge for EU negotiators in the Brexit talks will be to make sure other EU members don’t follow suit.
That was the message communicated on Wednesday by Donald Tusk, the president of the European Council which represents the leaders of EU member countries. Mr. Tusk expressed his sadness at Britain’s departure but he said it was also an opportunity for the remaining 27 countries. “I will not pretend that I am happy today,” he said. “But paradoxically there is something positive in Brexit. Brexit has made us, the community of 27, more determined and more united than before.”
He added that he’ll be convening a meeting of EU leaders at the end of April to plot a strategy and the first face-to-face discussions with Britain will likely follow in May or June.
As he closed his remarks, Mr. Tusk couldn’t hide his disappointment at receiving Ms. May’s letter invoking the EU’s exit provision, known as Article 50 of the Lisbon Treaty. “What can I add to this?” he told reporters holding up a copy of Ms. May’s six-page letter. “We already miss you. Thank you and goodbye.”Report Typo/Error