There was a tangible sense of relief across Britain and the European Union after it was announced last Friday in Brussels that a settlement had been reached on Brexit.
Instead of economic chaos and mutual recriminations stretching perhaps for decades, the United Kingdom’s exit from the European Union can now look forward to a measure of orderliness and a somewhat less wrenching disentanglement from the regulatory clutches of the Continent.
The negotiations were described by Jean-Claude Juncker, the European Commission president, as “difficult,” but that the breakthrough was made possible by “willingness to compromise” on both sides.
Juncker didn’t say that willingness was equal on both sides, though, and some think that the U.K. did most of the compromising. According to the agreement, Britain will honor its financial obligations to the EU — a €40bn to €60bn pay-to-not-play fee — and guarantee the right of EU citizens residing in the U.K. to “go on living their lives as before,” thus settling two of the thornier issues.
The touchy question of Ireland was handled with very soft gloves on. The Republic of Ireland in the south has been wary, to say the least, that Brexit will mean Northern Ireland pulling out of the EU and leaving the south at a disadvantage, deprived of the free-trade arrangement currently in place with the north. Instead, they would return to a “hard border” between the two Irelands, with police, customs, the whole dreary pre-EU dystopia.
To propitiate the Irish, Prime Minister Theresa May inserted guarantees in the agreement that the “soft border” would continue, with regulations to remain more or less the same in key areas such as food, animal welfare, medicines and product safety.
So much for the good news. People began to take in their breath again, however, when some of the bad news began to emerge in the days since that jolly signing breakfast conducted by May and Juncker in Brussels.
To begin with, this was only the end of Phase I of Brexit, which EU leaders will need to formally ratify at a summit in the coming days. They must determine that the draft agreement represents “sufficient progress” to start Phase II, which will define the post-Brexit trading relationship between the EU and U.K. Otherwise, back to Phase I.
“We all know breaking up is hard, but breaking up and building a new relationship is harder,” said Donald Tusk, European Council president. “The most difficult challenge is still ahead.”
Britain’s Brexit secretary David Davis said on Sunday that the agreement was merely a “statement of intent” rather than something legally enforceable. The reference was to a clause ensuring “full regulatory alignment” of Ireland with the EU. The text says if the parties fail to work out a new relationship, the U.K. will maintain “full alignment” with EU rules, which underpin trade across the Irish border.
Davis let it be known that this artful formulation was “meaningless.”
The sound of fists thumping desktops could be heard clear across the Irish Sea. The Irish deputy prime minister, Simon Coveney, immediately shot back that commitments relating to Ireland would be “upheld in all circumstances, irrespective of the nature of any future agreement between the EU and U.K.” Similar thumping noises were heard from Brussels.
Why should all this be so breathtaking for Americans, for whom the EU is just another set of initials in faraway Europe where they don’t like us anyway?
The answer is that if Brexit goes wrong, residents in the Old World won’t be the only ones to suffer. New Worlders will feel pain too.
The U.K., for all its woes, is still the fifth-largest economy in the world and one of the United States’ biggest trading partners; the Atlantic Ocean does not insulate us from the ups and downs of the British economy. When Brexit won the referendum in 2016, the pound dropped to 30-year lows and British stocks plummeted. Wall Street lost over 500 points right after the opening bell the next morning.
One of the reasons for this transatlantic empathy is that many major companies are liable to move their operations from Britain to Germany or France in order to avoid the turbulence of Brexit. That could lead to unemployment and a recession there, with similar consequences here.
It will also force the U.S. to make new trading deals with the EU, shunting the U.K. to the “back of the queue.” This would inevitably put a crimp in the special relationship with Britain, to the regret of both sides.
There are also some pluses to the rough going in Brexit negotiations. One of the fears about Brexit is the domino effect — other countries, like Greece and even the Netherlands and France, making their own exits now that they see it can be done. The dominoes are presumably less eager to fall now that they see how hard Brexit has been.
And another Brexit dividend: A weaker pound will mean a much cheaper trip to see Big Ben and Buckingham Palace, as the dollar will be worth more. American tourists will be especially welcome, since the EU tourists, currently accounting for about 70 percent of travelers to the U.K., will likely dwindle once the visa-free benefit of EU membership is gone and they have to endure the visa process to see those British sights.
Stay tuned for Phase II.