Midnight on January 31, Boris Johnson may exult: he will have succeeded where his predecessor Theresa May failed, by officially removing the United Kingdom from the European Union (EU). But, behind the symbol, did the former spearhead of the "Leave" campaign really win his bet?
One can legitimately doubt it, as the divorce agreement signed between London and Brussels appears to be the fruit of a painful compromise, in which the most radical brexiters had to mourn many of their dreams and their promises.
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Movement of people and immigration
Compromise found
What the brexiters wanted: They wanted to regain control of their migration policy by leaving the area of free movement of people, which until then allowed any European citizen to settle freely in the United Kingdom. Brexiters, however, wanted to keep the possibility for the British to travel, study and work in the rest of the EU, and vice versa.
What was decided: At the end of the transition period, London will leave the European area of free movement and promises to implement a more restrictive migration policy, based on the skills of workers, rather than on their origin. Ultimately, Europeans (workers or students) will therefore be treated like any other immigrant: they will still be able to settle across the Channel, but by completing the immigration formalities.
On the other hand, significant facilities have been granted to Europeans already settled in the United Kingdom before Brexit, and to British people living in Europe: with small administrative procedures, most of them will be able to obtain permanent resident status for a period unlimited, and keep their existing rights. Europeans will also be able to continue visa-free travel to the UK for short tourist stays, as will the British who may be visiting EU countries.
The financial contribution to the European Union
Lost bet
What the brexiters wanted: Leaving the EU, brexiters thought they could save a lot of money. In particular, they promised to redirect the roughly 10 billion euros the UK pays Europe every year to national priorities, such as funding the health care system.
What was decided : London will not immediately stop contributing. The British have had to agree to continue funding the European budget until the end of the transition period, scheduled for the end of 2020. They will also have to pay a "check" of around 36 billion euros, as the balance of any account.
The United Kingdom could also continue to finance certain European programs (research, education, culture, etc.) to continue to benefit from them.
Access to the European market
Uncertain future
What the brexiters wanted: Many proponents of leaving the EU saw Brexit as an opportunity to "break free" from certain European fiscal, social and environmental rules, so that the UK regains its "freedom to innovate" without being hampered by the "Brussels directives". Delivered from the monopoly of the European Commission, the only institution authorized to negotiate free trade agreements since 2008, they dreamed of signing trade agreements favorable to British interests with partners all over the world, to boost their exports.
The greediest brexiters wanted both "Regain control" of their borders and maintain free access to the Single Market of the Twenty-Seven.
What was decided: In accordance with the wishes of the brexiters, the United Kingdom is going to leave the European customs union and the single market well … but the break will not be so clear when we look at the details.
First, the release will not take place on the 1stst February: it was pushed back to the end of the post-Brexit "transition period", which is supposed to give London and Brussels time to negotiate a new commercial partnership – that is to say, at best for the 1st January 2021.
However, the degree of "freedom" which the United Kingdom will enjoy in the long term will depend precisely on the outlines of this agreement on the "future relationship", which is still far from being concluded:
- if the British choose a Norwegian-style deal, they will have privileged access to the European market, without customs barriers. But, in return, they will have to give up their "freedom" and remain broadly aligned with most European standards (without being able to participate in their development);
- if they opt instead for the “WTO model” (World Trade Organization), the British will be freed from most European constraints: they will be able to compete with the EU with lower standards in social or environmental matters… at the cost restricted access to the European market and possible trade sanctions.
An important detail remains: the status of Northern Ireland, which has given Brexit negotiators a headache until the last second. To avoid the return of a border with the Republic of Ireland, Boris Johnson was forced to accept that the province remains aligned with European standards, subject to controls by European customs officials and the EU VAT system.
However, thanks to a complex legal acrobatics and a tolerance of Europeans, Northern Ireland will still remain in the same economic block as the rest of the United Kingdom, and will therefore be able to benefit from the future trade agreements negotiated by London with partners outside, like the United States.
Brexit: why Northern Ireland poses so many problems
The European Union is an economic area without internal borders. By leaving it, the United Kingdom must re-establish borders with its neighbors, including between its province of Northern Ireland and the Republic of Ireland (an independent state member of the EU). Free movement and the absence of a border between the south and the north of Ireland is an important achievement of the Good Friday Peace Accords, which ended the civil war in 1998.
The apparent contradiction between these two objectives has singularly complicated the conclusion of Brexit. It is on this question that the "deal" of Theresa May, which foresaw a convoluted mechanism called "backstop", failed.
Boris Johnson's deal gives Northern Ireland hybrid status from 2021, straddling the UK and the EU. This arrangement may be challenged by the Northern Irish parliament every four years. But contrary to what Theresa May's text implied, the UK no longer runs the risk of being "locked in" to the European single market indefinitely due to a Northern Irish blockage.
The future of the London "City"
Compromise found
What the brexiters wanted: London is one of the top financial centers in the world. Brexiters wanted the City to break away from certain EU rules, which they saw as too burdensome, too costly for financial players, and likely to cut their competitiveness against other international financial centers.
What was decided: With Brexit, British financial institutions will lose their "financial passport", which allowed them to exercise without restriction in European space. Instead, they will operate with a system known as "equivalence", similar to that applicable to their American or Japanese counterparts. This will allow them to continue working with European customers, but under several conditions.
Not only does this statute exclude certain financial services, but it is above all revocable and modifiable at any time: the EU will be able to terminate it if it considers that London is not respecting minimum rules in terms of financial stability or the fight against money laundering money, for example (she already did it for other partners in the summer of 2019). In Brussels, this new status is believed to be the best that London could have hoped for in the agreement, even if some brexiters were more ambitious.
The City will indeed mechanically lose part of its European activity. The British "neobank" Revolut had for example anticipated, by setting up an entity in Lithuania to be able to continue to exercise freely in the EU after Brexit, while filing an application for a monetary license in Ireland. Brexiters however believe they can offset this bad news by entering into agreements with other non-EU countries to develop their financial services there.
Uncertain future
What the brexiters wanted: Supporters of leaving the EU saw Brexit as an opportunity to rejuvenate an industry that made billions of pounds, drawing inspiration from Iceland. Leaving the EU would keep full control over British fishing waters – which the UK had previously shared with European fishermen – and blow up EU fishing quotas. However, they had to avoid the EU imposing too high tariffs on them to export their production.
What was decided: The problem has been pushed back to the agreement on the “future relationship” between London and the EU, which will have to be negotiated before the end of 2020. Meanwhile, European fishermen keep access to British waters, and no rights to Customs is not yet in force.
The EU has, however, threatened to impose prohibitive tariffs on fishery products if London closed access to its waters or chose the path of social dumping. This could pose a major problem for fishermen across the Channel, who today export 80% of their production to the EU.
Compromise found
What the brexiters wanted: They wanted to regain their complete independence vis-à-vis European law and the court which verifies its application, the European Court of Justice (CJEU), considered too interventionist.
What was decided: The United Kingdom will indeed leave the jurisdiction of the CJEU, but not when it leaves the EU on January 31, as the "hard brexiters" demanded. The country had to agree to remain under the jurisdiction of the Court until the end of the transitional period, that is, at least until the end of 2020.
For the rest, the Europeans obtained that, for all disputes relating to European law, the pre-eminence of the CJEU should be maintained. Any disputes not directly related to European law will be decided by a panel of arbitrators independent of the European jurisdictional system.
What will happen to the decisions taken for decades by the CJEU, which have prevailed until now over national law, for example in the area of labor law? While Theresa May planned to firmly anchor this case law in British law, Boris Johnson decided to distance himself from this cumbersome legacy: he gave all British courts the power to challenge CJEU case law – despite the fierce opposition from the Lords and many jurists, who fear unraveling the social advances pushed by the European court.
Correction, January 27, 2020: an inaccuracy on Revolut has been corrected.
